Grants to Non-Government Schools

Tabled: 9 March 2016

Auditor-General's comments

Dr Peter Frost

Acting Auditor-General

Audit team

Chris Sheard—Engagement Leader

Andrew Evans—Team Leader

Karen Ellingford, Teri Lim, Jason Cullen, Anna Cooshna—Team members

Engagement Quality Control Reviewer

Ray Winn

In 2016, the Victorian Government will provide an estimated $676 million in financial assistance to non-government schools which provide education to more than a third of Victorian school children. This audit assessed the use of state government grants in 2014—the most recent year which could be completely examined—when the state provided over $640 million in grants to the non‑government school sector.

State recurrent grants make up the bulk of state government grants to non-government schools, at over $624 million in 2014, and the vast majority of these funds are 'untagged'. Schools must use grants to meet the general recurrent costs of providing education programs and must not use funds for capital expenditure, but they determine how the funds are spent. While funding agreements outline that the state respects the independence of non-government schools and systems who determine their own priorities, taxpayers, parents of students at non-government schools and the broader community are entitled to expect that funds are used transparently and that the Department of Education & Training (DET), non-government schools and their system administrators are effectively and efficiently managing the use of grants.

The Catholic Education Commission Victoria (CECV) reallocates over $400 million in recurrent grants to Catholic schools using its own methodology. This results in a significantly different allocation to individual schools when compared to DET's allocation—some schools receive substantially more and some substantially less. All other non-government schools receive recurrent grants as allocated by DET. The department has very limited visibility of CECV's methodology and the revised allocations provided to Catholic schools, and I have recommended it clarify any conditions and reporting associated with reallocating recurrent grants.

My audit found that there is limited assurance that grants are used for their intended purpose or are achieving intended outcomes. There are significant weaknesses in DET's funding agreements with system authorities and non-government schools, and its management of grants has been poor. There has been limited oversight of the non-government school sector by DET, and this has resulted in a lack of transparency and accountability for the use of state government grants.

DET acknowledges and accepts the need to improve arrangements and accountability for the use of state government grants. The department has begun to address some of the identified issues through the development of interim arrangements with the non-government sector for the 2016 year, including having clearer objectives and expected outcomes from state recurrent grants and a greater focus on strengthened reporting and accountability requirements. It is critical that DET continues to work with the non-government school sector to further improve transparency and accountability as it develops arrangements for 2017 and beyond.

I have made a number of recommendations to DET focused on improving funding agreements, clarifying record keeping and reporting requirements, and strengthening its oversight and monitoring of the non-government school sector, to provide greater assurance that grants are used as intended. I am pleased that DET accepts all of my recommendations and that it has identified actions to address them.

I have made a further audit comment in relation to a number of matters raised by the CECV. Its response includes a series of assertions and inferences which comprehensively misrepresent the content of my report. The tenor of the CECV's response is also particularly troubling. In a section of the executive director's response to our proposed report, he had this to say:

'At the outset of this audit – before any substantive work had commenced – the former Auditor-General stated in the media, in relation to grants to non-government schools, that there is quite limited accountability coming back the other way as to what the money was used for, how it was used, and whether it was effective. VAGO has now produced a report to endorse these comments. It is hard not to conclude that the scope was intentionally designed to serve this purpose, given that a broader scope would have challenged many of VAGO's findings'.

The burden of the executive director's comments is clear enough—effectively, VAGO has conducted this audit in bad faith, that the scope of the audit has been rigged to align with comments made by the former Auditor-General, and that consequently, it seems, the evidence, the findings, the conclusions and recommendations were pre-ordained. These inferences are utterly without foundation or measure and as a commentary, it is quite unworthy of the administrative head of an important system of education.

Aside from citing a comment made by the former Auditor-General, the executive director has proffered no evidence to support his conclusions about this audit's apparently confected purpose. In this regard, rather than raise this fundamental issue at any point during the audit, he has chosen the very conclusion of the audit to impugn the integrity of this office. All Auditors-General are bound by the Audit Act 1994, and the Australian Auditing and Assurance Standards, which require audit findings and conclusions to be based on sufficient and appropriate evidence. Regrettably, there is nothing sufficient or appropriate about these intemperate observations of the executive director.

While this audit may not have been the one the CECV wanted, at its core are issues of accountability and transparency. Every citizen is entitled to transparency around the use of state government funds. The response from Independent Schools Victoria notably makes that very point, stating 'government and the public have the right to know how all government funding is being used'. DET itself acknowledges it has not adequately overseen the non-government school sector, but is now working to improve transparency.

CECV's suggestion that my report will be of little use to schooling in Victoria has already been belied by DET's agreement to implement my recommendations. These should provide significant improvements in accountability and transparency, and give all Victorians confidence that government funds provided to non-government schools are used efficiently and effectively. I will be monitoring DET's progress and revisit the issues identified in this report.

Finally, I would like to thank the staff from DET, system bodies and the selection of non-government schools who participated in this audit.

Signature of Dr Peter Frost (Acting Auditor-General)

Dr Peter Frost

Acting Auditor-General

March 2015

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