Grants to Non-Government Schools

Tabled: 9 March 2016

1 Background

1.1 Introduction

Non-government schools are diverse in nature, serving a range of different communities. They may provide religious or values-based education, or be based on educational philosophies or different interpretations of mainstream education.

They provide education to around 334 000 Victorian children, which represents around 37 per cent of all Victorian students. Non-government schools operate in two ways—through system authorities that manage multiple schools, and as independent, non-systemic schools.

There are four system authorities in Victoria. The largest of these is the Catholic Education Commission Victoria (CECV), which acts for 493 Catholic schools in the state. The other system authorities are Lutheran Education Vic, NSW & Tas (LEVNT, overseeing 15 schools), Victorian Ecumenical System of Schools (VESS, overseeing 15 schools, although this increased to 16 schools from January 2016) and Adventist Schools Victoria (ASV, overseeing five schools). There are also currently 171 non-government schools that do not operate within one of the 'systems'. In the non-government school sector, and throughout this report, the schools are often described as being in one of two categories—'Catholic' and 'independent', where Lutheran, Ecumenical and Adventist schools are included in the 'independent' category along with independent, non-systemic schools.

There are two further organisations involved in distributing funding to schools. Independent Schools Victoria (ISV) is a membership-based organisation that receives and then distributes specific-purpose funding for targeted initiatives. The Victorian Independent Schools Block Grant Authority (VIS BGA) also receives and reallocates funding to schools for specific initiatives.

Non-government schools receive funds from a range of sources including the Australian and Victorian governments and student fees. The Victorian Government funds non-government schools through a range of non-competitive grants. In 2014, the state provided over $640 million in grants to the non-government school sector. This is a relatively minor share of government funding for non-government schools, with recurrent Australian Government grants over three times greater than state government grants.

1.2 Victorian non-government schools

In 2015, there were 700 non-government schools in Victoria (31.4 per cent of all schools in Victoria). Figure 1A shows the number of schools by type and sector as at February 2015.

Figure 1A
Size and structure of the Victorian school system, February 2015

School type

Government

Catholic

Independent

Total number of schools

Number of schools

Per cent

Number of schools

Per cent

Number of schools

Per cent

Primary

1 128

72.7

387

25.0

36

2.3

1 551

Primary and secondary

78

33.2

13

5.5

144

61.2

235

Secondary

238

70.0

86

25.3

15

4.7

340

Special

80

80.8

7

7.1

12

12.1

99

Language

4

100.0

0

0.0

0

0.0

4

Total

1 528

68.6

493

22.1

207

9.3

2 229

Source: Victorian Auditor-General's Office from the Department of Education & Training's February 2015 School Census.

In February 2015, there were 339 152 students enrolled at non‑government schools (37.1 per cent of all Victorian school students)—207 186 at Catholic schools and 131 966 at independent schools.

Figure 1B
Number of Victorian students by enrolment type, February 2015

School type

Government

Catholic

Independent

Total number of schools

Number of students

Per cent

Number of students

Per cent

Number of students

Per cent

Primary

340 844

67.3

111 233

22.0

54 661

10.8

506 738

Secondary

221 458

56.3

95 394

24.2

76 738

19.5

393 591

Special

12 076

91.5

559

4.2

566

4.3

13 201

Language

1 629

100.0

0

0.0

0

0.0

1 629

Total

576 007

62.9

207 186

22.6

131 965

14.4

915 159

Note: Total figures do not add due to rounding.

Source: Victorian Auditor-General's Office from the Department of Education & Training's February 2015 School Census.

1.3 Grants to non-government schools

1.3.1 State government funding for non-government schools

Figure 1C shows government recurrent funding to Victorian schools in 2012–13, by sector and funding source, from the most recent Productivity Commission report. The Victorian Government accounted for 86.7 per cent of total government funding to Victorian government schools, and 23.3 per cent of government funding to non‑government schools.

Figure 1C
Government recurrent funding to Victorian schools 2012–13 ($'000)

 

Australian Government

Victorian Government

Total

Government schools

1 011

6 580

7 590

Non-government schools

2 073

631

2 704

Source: Victorian Auditor-General's Office from the Productivity Commission's, Report on Government Services 2015.

Combined Victorian and Australian government funding for non‑government schools has increased by around $732 million (37.1 per cent) in real terms between 2003–04 and 2012–13. Victorian Government funding increased by 53.4 per cent while Australian Government funding increased by 32.8 per cent.

Types of Victorian Government grants to non-government schools are summarised in Figure 1D.

Figure 1D
Victorian Government grants to non-government schools

Type of grant

Description

State recurrent grants (SRG)

The main form of grant that the Victorian Government provides non-government schools is the SRG. It is intended to provide funding for schools to meet the recurrent costs of providing education programs consistent with Victoria's education policies and goals. With the exception of money provided to support students with disabilities, the money is 'untagged' and schools must use it to meet the general recurrent costs of providing education programs, and not use it for capital expenditure. Payment of SRGs is based on annual enrolment data that schools provide to the Australian Government Department of Education & Training. It makes up the vast majority of state funding to non-government schools.

Students with disabilities grants

Students with disabilities grants are paid to non-government schools based on the proportion of students with disabilities. While this funding must be used to support students with disabilities, it does not need to be linked or allocated to individual students.

Special purpose or targeted grants

Special purpose or targeted grants are provided to schools to meet the additional costs of assisting groups of students with particular needs or to implement specific initiatives—for example, support services (visiting teachers, psychology or speech pathology services), suicide prevention, or interest subsidies. CECV distributes these grants to Catholic schools, and ISV and VIS BGA distribute them to all other non-government schools. Schools usually have to apply to receive special purpose grants. Some support programs are also delivered by CECV and ISV.

Facilitation and reward funding

The Facilitation and Reward Program for School Improvement was introduced in 2010 as part of the 2010–13 funding arrangements. The program was designed to widen and deepen the implementation of three National Partnership programs: Smarter Schools National Partnerships on Literacy and Numeracy, Improving Teacher Quality, and Low Socioeconomic School Communities. While Australian Government funding under the Facilitation and Reward Program was not recurrent, the Victorian Government has committed these funds for ongoing non-government school expenditure.

Capital funding

The Victorian Government has not provided capital funding for non-government schools in recent years. However, in the 2015–16 State Budget, the government allocated $120 million over four years for capital projects at non-government schools. This has not been assessed as part of this audit.

Source: Victorian Auditor-General's Office based on information from the Department of Education & Training.

1.3.2 Grant allocations to non-government schools

The total amount of SRGs paid by the Victorian Government to non-government schools between 2009 and 2014 is shown in Figure 1E. The Department of Education & Training (DET) determines these allocations using its Financial Assistance Model (FAM), which comprises core funding and equity funding. See Appendix A for further detail on FAM.

Nearly 60 per cent of SRG funding is equity funding. FAM recognises that SRG funding is not the major contributor of funds to non-government schools, and is therefore intended to target particular needs, based on the students at each school.

Figure 1E
State recurrent grants paid to each system authority and independent schools, 2009 to 2014

 

2009 ($)

2010 ($)

2011 ($)

2012 ($)

2013 ($)

2014 ($)

CECV

287 522 003

308 198 282

399 113 914

412 676 650

419 050 026

430 813 271

Ecumenical

14 973 134

15 899 747

16 960 219

16 975 535

17 503 404

17 750 893

Lutheran

5 172 148

5 689 299

7 061 934

7 620 999

8 062 409

8 556 171

Seventh-day Adventist

3 045 300

3 336 680

4 285 894

4 310 258

4 468 999

5 531 374

Independent schools

109 421 096

120 235 223

148 023 076

151 214 039

153 593 096

161 764 717

Total

420 133 682

453 359 234

575 445 039

592 797 482

602 677 936

624 416 428

Note: CECV and independent schools figures include students with disabilities funding paid in addition to SRGs. Total figures do not add due to rounding.

Source: Victorian Auditor-General's Office based on information from the Department of Education & Training.

Figure 1F shows the allocation of special purpose and other specific grants for 2009 to 2014. Note that in 2014, some categories of grants were combined.

Figure 1F
Special purpose grants, 2009 to 2014

 

2009 ($)

2010 ($)

2011 ($)

2012 ($)

2013 ($)

2014 ($)

Independent Schools Victoria

Suicide prevention

308 333

308 333

308 333

308 333

308 333

 

Support services

965 070

984 372

1 006 520

1 034 199

1 060 055

 

Suicide prevention and support services

         

1 390 829

Facilitation program

 

960 000

960 000

960 000

960 000

960 000

Reward program

   

1 280 000

1 280 000

1 280 000

1 280 000

Victorian Independent Schools Block Grant Authority

Interest subsidy scheme

217 778

217 778

217 778

217 778

217 778

221 351

Catholic Education Commission of Victoria

Suicide prevention

891 667

891 667

891 667

891 667

891 667

 

Support services

4 887 227

4 984 972

5 097 134

5 237 305

5 368 238

 

Suicide prevention, support services and interest subsidy

         

7 055 977

Interest subsidy scheme

682 221

682 221

682 221

682 221

682 221

 

Facilitation program

 

2 040 000

2 040 000

2 040 000

2 040 000

2 040 000

Reward program

   

2 720 000

2 720 000

2 720 000

2 720 000

Total

7 952 298

11 069 344

15 203 654

15 371 505

15 528 293

15 668 157

Note: Total figures do not add up due to rounding.

Source: Victorian Auditor-General's Office based on information from the Department of Education & Training.

1.3.3 Funding instruments

There are several key documents that govern the purpose and use of grants to non-government schools. These need to be read together, particularly the Victorian Government Financial Assistance for Non-Government Schools 2010–2013 Guidelines and the Victorian Non-Government Schools Funding Agreement 2010–2013. The funding agreement was extended for one year in 2014 and again in 2015. A new 2016 memorandum of understanding (MoU), funding agreement and guidelines have recently been developed. These are discussed in Section 2.6. However, the 2010–13 MOI, funding agreement and guidelines were in place for all activities examined during this audit.

Memorandums of understanding covering 2010 to 2013

The broad terms of the funding agreement and the wider partnership between the Victorian Government and non-government schools are set out in two MoUs, signed in 2009 by the then Premier of Victoria and the heads of two of the Victorian non-government school bodies (ISV and CECV).

Victorian Government Financial Assistance for Non-Government Schools 2010–2013 Guidelines

The Victorian Government Financial Assistance for Non-Government Schools 2010–13 Guidelines outlines the policies, procedures and accountabilities associated with funding provided by the Victorian Government to non-government schools.

Victorian Government and Non-Government Schools Funding Agreement 2010–2013

The Victorian Government and Non-Government Schools Funding Agreement 2010–2013 was signed by the former Department of Education and Early Childhood Development (DEECD) and the heads of the four Victorian non-government school system authorities and individual independent, non-systemic schools. It implements the funding arrangement between the state and non-government schools and sets out the conditions that apply. This funding agreement applies to SRGs and Facilitation and Rewards Program payments only.

For special purpose grants there is, as of 2014:

  • a separate funding agreement between the former DEECD and CECV, for all three special purpose grant programs
  • separate funding agreement between the former DEECD and ISV for the support services and suicide prevention programs, and a separate funding agreement with the VIS BGA for the interest subsidy scheme.

1.3.4 Grant allocation mechanisms

For Catholic, Lutheran, Ecumenical and Seventh-day Adventist schools, DET provides SRG funding through the respective system authorities. For independent, non-systemic schools, DET provides SRG funding directly. The flow of SRG funding from DET to non-government schools is shown in Figure 1G.

Figure 1G
Funding flow for state recurrent grants to non-government schools

Figure 1G is an organisational chart showing the funding flow for state recurrent grants from DET to non-government schools

Source: Victorian Auditor-General's Office.

As shown in Figure 1H, for special purpose grants, funding for Catholic schools is provided through CECV, while funding for all other non-government schools is provided through ISV.

Figure 1H
Funding flow for special purpose grants to non-government schools

Figure 1H is an organisational chart showing the funding flow  for special purpose grants from DET to non-government schools

Source: Victorian Auditor-General's Office.

1.3.5 Education and Training Reform Amendment (Funding of Non-Government Schools) Act 2015

The Education and Training Reform Amendment (Funding of Non-Government Schools) Act 2015 (the Act) specifies the minimum amount of funding to be provided to non-government schools. It amounts to 25 per cent of the cost of educating a government school student.

The Act aims to ensure that growth in per-student state funding for government schools will also flow through to growth in state funding for non-government schools. The cost of educating a government school student is calculated based on a 'basket of goods' that specifies the particular recurrent lines on which the 25 per cent is applied. The basket is designed to capture the funding that is directly related to the cost of instruction of students in government schools.

The Act also sets up new mechanisms for accountability and reporting, such as:

  • imposing reasonable funding conditions on non-government schools
  • requiring non-government schools and system authorities to report on the application of funding.

It is too early to assess whether these new accountability mechanisms will be effective, as they came into operation on 1 July 2015.

The Act also provides for the establishment of a new School Policy and Funding Advisory Council. The function of the council is to advise the Minister for Education about regulatory, policy and funding issues that affect government and non-government schools. The council was established in August 2015 and consists of the following members appointed by the minister:

  • the Secretary of DET who is the chair of the council
  • a representative of CECV nominated by CECV
  • a representative of ISV nominated by ISV
  • Representative of government schools who is employed by DET.

1.4 Key entities involved in grants to non-government schools

1.4.1 Department of Education & Training

DET leads the delivery of education and development services to children, young people and adults, both directly through government schools and indirectly through the regulation and funding of early childhood services, non-government schools and training programs. It also implements Victorian Government policy on early childhood services, school education and training and higher education services. DET manages Victorian government schools and drives improvement in primary and secondary government education.

Grants to non-government schools are administered by DET, which represents the government in the funding agreements and determines grant amounts. It is responsible for all aspects of managing grants to non-government schools.

1.4.2 Non-government school sector bodies

Catholic Education Commission of Victoria

The largest of the non-government school sector bodies is the CECV. Catholic education in Victoria is administered in two tiers—at the diocesan level, and at the state level. There are four dioceses of the Catholic Church in Victoria—Melbourne, Ballarat, Sale and Sandhurst. Catholic Education Offices in each diocese, acting on behalf of the bishops, have primary responsibility for overseeing schooling activities. However, the key body for school funding purposes is the CECV. The CECV is a public company limited by guarantee whose members comprise the four bishops of Victoria. Its roles include receiving government grants provided to Catholic systemic schools, and allocating, distributing, expending or appropriating grants to schools in accordance with government conditions.

Adventist Schools Victoria

ASV oversees the operation of five schools across eight campuses. All ASV schools are low fee, non-selective, coeducational day schools.

Lutheran Education Vic, NSW & Tas

LEVNT oversees 15 schools in Victoria and works with and for schools to:

  • encourage spiritual and professional growth of all within the school community
  • provide quality teaching and learning programs
  • provide support in governance and management
  • develop and support financial structures
  • facilitate communication between schools and the wider professional community.
Victorian Ecumenical System of Schools

VESS is a registered public company limited by guarantee. The board of directors, through its executive and executive officer, work together with all member schools to establish goals, define policy and establish working protocols.

Independent Schools Victoria

ISV is not a system authority managing schools, but a not-for-profit member association providing professional services and working to raise quality standards. ISV represents the interests of member schools to governments and the community on a wide range of issues.

ISV represents, promotes the interests of, and provides services to 210 member schools, educating more than 129 000 students.

Victorian Independent Schools Block Grant Authority

VIS BGA administers Australian and Victorian Government programs to improve educational outcomes for independent school students by providing funding to assist with developing school infrastructure. Established in 1989, VIS BGA's primary objective is to carry out the functions of a block grant authority, as described in theAustralian Education Act 2013 (Cth). The VIS BGA administers the Victorian Government's Interest Subsidy Schem for Non-Government Schools, which provides grants to assist in the repayment of borrowings undertaken to finance capital expenditure on buildings and curriculum related equipment.

1.4.3 Other agencies

Victorian Registration and Qualifications Authority

The Victorian Registration and Qualifications Authority (VRQA) is responsible for the registration and regulation of all Victorian schools. All schools must comply with the minimum standards and other requirements specified in the Education and Training Reform Act 2006 and the Education and Training Reform Regulations 2007.

The minimum standards for registration cover:

  • school governance—democratic principles, structure, probity, philosophy and not‑for-profit status
  • enrolment—student enrolment numbers, enrolment policy, register of enrolments
  • curriculum and student learning—curriculum framework,student learning outcomes,monitoring and reporting on students' performance
  • student welfare—care, safety and welfare of students, discipline,attendance monitoring,attendance register
  • staff employment—teacher registration requirements, compliance with the Working with Children Act 2005
  • school infrastructure—buildings, facilities and grounds and educational facilities.

Non-government schools are assessed against the standards and other requirements for school registration by VRQA. All schools are reviewed at least once every five years, and may be reviewed at any time.

School review bodies manage the registration and the monitoring and compliance of certain schools against the minimum standards and other requirements for registration. The VRQA has approved DET, CECV and ASV as review bodies for government schools, Catholic schools and Seventh-day Adventist schools, respectively. It has developed a self-assessment tool that allows independent schools to assess their own compliance with the standards and other requirements for school registration.

1.5 Audit objective and scope

The objective of the audit was to determine whether DET, non-government schools and their system administrators are effectively and efficiently managing and using grants.

The audit examined DET's administration of state recurrent and other grants to non-government schools. It also examined compliance with funding agreements and the use of funds by the four system authorities, other bodies and a selection of non-government schools.

The audit included:

  • Department of Education & Training
  • Adventist Schools Victoria
  • Catholic Education Commission of Victoria Ltd
  • Independent Schools Victoria
  • ISV Block Grant Authority
  • Lutheran Education Vic, NSW & Tas
  • Victorian System of Ecumenical Schools
  • as election of 22 non-government schools.

1.6 Audit method and cost

DET, non-government school system bodies and a sample of 22 non-government schools were key sources of information for this audit. The audit team gathered evidence by:

  • conducting interviews with and reviewing documents provided by DET and non-government system bodies
  • reviewing system authority systems and financial records related to state government grants
  • reviewing systems and process, and documentation for a sample of 22non‑government schools including financial and other records related to the use of state government grants.

The audit was conducted in accordance with section 15 of the Audit Act 1994 and the Australian Auditing and Assurance Standards. Pursuant to section 20(3) of the Audit Act 1994, unless otherwise indicated any persons named in this report are not the subject of adverse comment or opinion.

The total cost of the audit was $440 000.

1.7 Structure of the report

The report is structured as follows:

  • Part 2 examines the grants governance arrangements and oversight by DET
  • Part 3 examines the use of grants by system authorities and non-government schools.

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