Proprietor Board Funding Tony Harkins Chair, Tiaki Manatu Bruce - PowerPoint PPT Presentation

Proprietor Board Funding Tony Harkins – Chair, Tiaki Manatu Bruce Macdonald – Director, Carmel College Auckland Limited 21 MARCH 2018

DISCLAIMER The information provided in this presentation is correct to the best knowledge of the presenters  As individual circumstances can vary and circumstances change over time, it is the  responsibility of the directors of each Proprietor company to ensure they are compliant with MoE funding guidelines  Accounting treatment  Tax treatment (i.e. GST) 

INTRODUCTION Reflection and Karakia – Richard Kerr Bell  Introduction – Tony Harkins  A brief history – financing integrated schools – Tony Harkins 

CONTENTS Introduction  Attendance Dues  Debt Servicing  Cost Reimbursements from ACFL  McAuley Trust Deposit /Loan agreements  Integrated Property  Property Management Grant (BOT)  Policy One Funding  Use of Policy One Funding  Policy One Audits  Catholic Education Trust Fund (CETF)  Policy Two Funding  Voluntary Contributions  International Students  Financial Delegations 

FUNDING SUMMARY Government Property Funding Maintenance Policy One Policy Two Grant Board of Proprietor Trustees Board Contributions Parent Voluntary Attendance Contributions Dues

ATTENDANCE DUES Government Operational Funding Policy One Policy Two Grant Board of Proprietor Trustees Board Contributions Parent Other Parent Attendance Contributions Dues

ATTENDANCE DUES / DEBT SERVICING Attendance Dues A/Dues A/Dues ACFL* Parents Proprietor (Auckland) Insurance A/Dues Collection Costs NZCEO Debt Servicing Debt Servicing Proprietor *In Wellington, parents pay A/Dues directly to Archdiocese of Wellington, who forward to NZCEO *In Christchurch, Villa Maria College collects and retains the attendance dues payable

ATTENDANCE DUES / DEBT SERVICING ATTENDANCE DUES Private Schools Conditional Integration Act 1975 (PSCIA)  Legally enforceable debt  Expenditure must relate to integrated land and buildings   ‘Such capital works ….replacing, improving or enlarging the school…. in order to maintain the school …at minimum standard ….for comparable State Schools’  Can be used to meet ‘debts, mortgages, liens or other charges associated with’ integrated land and buildings  Can be used to pay property insurance and collection costs NOT ‘deductible donations’ for parents and GST IS PAYABLE by Proprietor  Legal requirement to lodge A/Dues audited accounts with MoE each year (ACFL) 

ATTENDANCE DUES / DEBT SERVICING National Attendance Dues and Capital Indebtedness Sharing Scheme Collaborative utilisation of A/Dues  Auckland - schools participate as a collective managed by Auckland Common  Fund Limited (ACFL). Each proprietor is a shareholder in ACFL. ACFL reimburses Proprietors for property insurance and collection costs but  most of A/Dues go to the NZCEO (NADCISS) Wellington - parents pay attendance dues directly to Archdiocese of Wellington,  who pass this on to NZCEO. Christchurch, Villa Maria College collects and retains the attendance dues  payable

ATTENDANCE DUES / DEBT SERVICING DEBT SERVICING The concept  A Proprietor arranges bank debt to fund a building project  NZCEO accepts the project for funding  NZCEO provides the funds to help the Proprietor pay back the bank debt  Hence the term debt servicing  Debt servicing is provided over time – the principal amount approved plus interest  on that amount is provided over 25 years (to match the bank debt) It is like a house mortgage in reverse – you get the same amount each month  (quarterly for older ones) and the amount of interest slowly decreases and amount of principal slowly increases until whole principal is paid to Proprietor e.g. if you get $1.0m accepted for debt servicing you will receive $1.0m principal and  $1.4m interest (7.1%) over 25 years  Accounting  debt servicing recognised as revenue by Proprietor  no GST as already paid on the Attendance Dues 

ATTENDANCE DUES / DEBT SERVICING McAuley Trust Loans/Deposits Technical issue  What say the Proprietor is able to repay the bank debt off more quickly?  There is no debt to ‘service’ so a technical breach of the NADCISS  Loan and Deposit back (on mirrored terms)  Loan and Deposit both reduce over 25 years to match timing on the debt  servicing so that there is always debt on the Proprietor’s balance sheet

ATTENDANCE DUES / DEBT SERVICING Tony Harkins Who is Auckland Common Fund Limited (ACFL)?  How is it decided which Proprietor will receive Debt Servicing?  Financial assistance available from ACFL (Attendance Dues Scholarship) 

INTEGRATED PROPERTY Concept of ‘Integrated School Property (land and buildings)’  Equivalent to the space that a state school would have for the same student roll  Maximum entitlement of a school is calculated per the MoE School Property  Guide (SPG) from student roll (up to maximum roll) You can find your school SPG entitlement on https://property.education.govt.nz  Minimum standards require property to be safe and fit for use. Also require  cyclical 10 year Property Plan Key issue for proprietors  MoE will only integrate property up to the school’s School Property Guide (SPG)  entitlement. So some integrated schools may have both integrated and non- integrated property PMG, Policy One, Policy Two and A/Dues only be spent on integrated property  Voluntary donations must fund non-integrated property 

GOVERNMENT FUNDING Government Property Funding Maintenance Policy One Policy Two Grant Major maintenance Minor maintenance New facilities or capital replacement (<$5,000) or (>$5,000) -painting, New school -minor replacement -upgrade and -minor patching and ‘discretionary funding modernise existing repairing to provide new land, buildings and -minor site and accommodation to associated facilities’ ground maintenance support roll growth Use of Funding where there will be -‘that part of the e.g. offsetting savings to maintenance not -replacing small the Crown in local undertaken by the section of broken pipe area networks’ BOT’ -minor repairs to floor -10 yr property plan coverings

PROPERTY MAINTENANCE GRANT (PMG) Government Property Funding Maintenance Policy One Policy Two Grant Board of Proprietor Trustees Board Contributions Parent Voluntary Attendance Contributions Dues

PROPERTY MAINTENANCE GRANT (PMG) The Ministry of Education (MoE) provides funding to the board of trustees of  integrated schools to maintain their integrated school property, including buildings, furniture and equipment PMG funding is paid as part of a school’s operational funding  The funding is based on the amount of integrated school property  Key issues for Proprietors  When should a cost be paid from PMG (BOT) and when it should be paid from  Policy One (Proprietor)? $5,000 limit is guidance e.g. painting 

POLICY ONE FUNDING Government Operational Funding Policy One Policy Two Grant Board of Proprietor Trustees Board Contributions Parent Other Parent Attendance Contributions Dues

POLICY ONE FUNDING Funding received by integrated schools from the MoE for the up keep of premises based on  student numbers (up to maximum roll). Major maintenance and capital replacement (Equivalent of 5YA in state schools)  Integration Agreement  ’undertake the maintenance of the school premises not undertaken by the BOT’  Any surplus after major maintenance obligation meet, can be ‘applied to capital works or  other purposes directly related to the School’ or ‘Maintenance, capital works or other purposes directly related to any other integrated school.’ Can’t use to pay interest on loan to fund ‘major maintenance or capital replacement’ (legal  opinion) It is the responsibility of the Proprietor to maintain accounting records detailing Policy One  funding received and expended Quality vs Quantity -Relationship between Policy One (Quality) and Attendance Dues (Quantity)  Policy One Audits - Difficult to determine what is Policy One expenditure and what is not 

POLICY ONE FUNDING Policy One 20% 80% Catholic Proprietor Education Board Trust Fund 20% (9 years later)

POLICY ONE FUNDING Attendance Dues were not sufficient to fund required building works required by  integration agreement, so funding supplemented by establishment of Catholic Education Trust Fund (CETF) CETF has loaned substantial amounts to NZCEO (administrator of NADICSS) to meet  the debt servicing required Policy One funding is received quarterly in advance.  80% goes to the Proprietor  20% goes to CETF managed by NZCEO  The 20% is returned to Proprietor after 9 years  Proprietor’s CETF deposit earns interest which is capitalised (added to balance) each  year. Only occasion I have seen repayment of interest was for SNUP (School Network Upgrade Project)