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

21 MARCH 2018

Proprietor Board Funding

Tony Harkins – Chair, Tiaki Manatu Bruce Macdonald – Director, Carmel College Auckland Limited

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

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

ATTENDANCE DUES

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

ATTENDANCE DUES / DEBT SERVICING

Parents Proprietor ACFL* (Auckland) Attendance Dues Debt Servicing NZCEO Proprietor A/Dues A/Dues A/Dues Debt Servicing Insurance Collection Costs

*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
• rder 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
• n 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

• f 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

Property Maintenance Grant Policy One Policy Two Government Funding Use of Funding

Minor maintenance (<$5,000)

• painting,
• minor replacement
• minor patching and

repairing

• minor site and

ground maintenance e.g.

• replacing small

section of broken pipe

• minor repairs to floor

coverings Major maintenance

• r capital replacement

(>$5,000)

• upgrade and

modernise existing land, buildings and associated facilities’

• ‘that part of the

maintenance not undertaken by the BOT’

• 10 yr property plan

New facilities

• r

New school ‘discretionary funding to provide new accommodation to support roll growth where there will be

• ffsetting savings to

the Crown in local area networks’

PROPERTY MAINTENANCE GRANT (PMG)

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

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

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

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
• ther 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
• pinion)
• 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 Proprietor Board 80% 20% 20%

(9 years later)

Catholic Education Trust Fund

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)

POLICY ONE FUNDING

Individual School Report School Profile Number 35 School Name Carmel College Max Roll Funding Roll Roll Used for Calc Funding for Year Maintenance % 1050 1033 1033 791,123.05 80% Ok Ok Ok Ok Total $ YTD Q1 Q2 Q3 Q4 Total Payment 197,780.76 197,780.76 - -

• Maintenance

158,224.61 158,224.61 - -

• GST from Retention

5,159.50 5,159.50 - -

• Retention Excluding GST

34,396.65 34,396.65 - -

• Proprietor Details

Number 7 Name Carmel College Auckland Ltd Who Funds Paid to Number 7 Who Funds Paid to Name Carmel College Auckland Ltd Bank ASB Bank limited Bank Account No. 12-3119-0058967-00 Name of Account Carmel College Auckland Ltd

Funding letter from MoE

Accounting for Policy One (example)

• Quarterly in advance, Proprietor receives $163,385 and $34,397 goes to NZCEO

(CETF)

• View as two transactions
• Proprietor receives $197,781 Policy One
• Proprietor advances $34,397 to CETF
• Because Policy One is funding – GST applicable
• Because advance to CETF is a loan – GST not applicable
• When returned (9 years later) no GST as repayment of loan

POLICY ONE FUNDING

POLICY TWO FUNDING

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

POLICY TWO FUNDING

• MOE contribution to the cost of new buildings
• Additional classrooms or a new school
• Two steps
• Approval in principle based on assessment criteria
• Allocation of funding MOE receive from Government
• Assessment criteria
• Current demand for enrolment in local area is over 85% of capacity
• Projected demand will go beyond 100% of local area capacity within 10 years
• Amount provided (if you get it!) - 85% of the funding provided for classrooms in state

schools

• Accounting treatment - Funding (net of GST) is recognised in revenue. Do not net

against cost of building

VOLUNTARY CONTRIBUTIONS

• All contributions by parents/caregivers, other than Attendance Dues, are voluntary

(Donations)

• Can be referred to as Development Contributions or Proprietor Contributions
• No regulatory constraints on what funds can be used for, but must be consistent

with intention stated to parents

• Deductible donations for parents therefore no GST payable by Proprietor
• Facilities above code (SPG) must be funded from voluntary donations (e.g. chapel)
• Special character

INTERNATIONAL STUDENTS

• International student fees are set at market price (e.g. CCAL ~$15,000 p.a.)
• Carmel BOT contributes to Proprietor from those fees
• Attendance Dues at level equivalent to local students (which goes to ACFL)
• Proprietor and Development Contributions also at equivalent level
• $400 p.a. per student in lieu of Policy One funding (which MoE does not provide

for International students)

WHAT TO WATCH

• What finance issues do I think about as director of a Proprietor
• Revenue
• Student numbers
• Collection rates of Parent Contributions
• Expenses
• Debt levels
• Do we spend enough on Special Character
• Regulatory obligations
• Split between PMG(BOT) and Policy One (Proprietor) spend
• Integrated vs non-integrated spend
• GST

FINANCIAL DELEGATIONS

Tony H Harki rkins -

• Budget and cash flow presented to Tiaki Manatῡ in February each year for approval.
• Variations to budget must be approved by Tiaki Manatῡ.
• Capital expenditure up to $100,000 approved by Tiaki Manatῡ as part of the annual budget,

requires no further approval so long as the commitment does not exceed $100,000 and the expenditure is incurred within the year covered by the budget.

• The limit of $25,000 applies and requires Shareholder approval for all capital expenditure that

has not been included in the annual budget and/or exceeds the approved budget for all of the five Mercy owned Colleges.

• All contractual agreements exceeding $100,000 whether or not they have been part of the

annual business plan and budget, that have commitments beyond the current year, require Shareholder approval.

• Any credit card limit in excess of $5,000, requires the pre-approval of the Shareholder.
• Funds are to be retained at all times with one of the following banks, BNZ, ANZ ASB and

Westpac, unless the Shareholder gives approval for funds to be invested in some other way.

• Policy One funding must be expensed in accordance with the guidelines published in the

Handbook for Boards of Trustees of New Zealand Catholic Integrated Schools.

• Policy One funds and expenses are to be separately recorded and audited each year as part of

the annual audit.

• Increases to Proprietor contributions must not exceed CPI unless approval has been granted by

Tiaki Manatῡ.

• Construction projects must be undertaken in accordance with the Tiaki Manatῡ Guidelines for

Capital Projects Handbook.

CLOSING

• Concluding comments - Tony Harkins

REFERENCE SOURCES

http://www.education.govt.nz/school/property/integrated-schools/ https://www.nzceo.org.nz/ https://www.nzceo.org.nz/wp-content/uploads/2017/05/BoT-handbook- 2016.pdf http://legislation.govt.nz/act/public/1975/0129/17.0/DLM437347.html http://tiakimanatu.org/tiaki-manatu/ https://property.education.govt.nz