Insights

In brief - Schools not immune to financial difficulties

Escalating debt levels due to blowout of operational costs and unpaid school fees can threaten the viability of schools. Establishing a nationwide regulator would allow greater scrutiny of the financial position of schools.

Financial management of schools impacting on education of children

Victoria has recently seen a worrying pattern of schools acquiring high levels of debt, leaving them with no option but to go into administration and close their doors to students. In Victoria over the last six months alone, three schools have gone into administration.

While the reasons behind the decisions to go into administration have been different, strictly speaking, no one problem is the sole cause of the financial difficulty. Evidently problems in the financial management and feasibility of schools are impacting upon the education of children.

Board of directors and management of schools responsible for finances

Schools receive the bulk of their funding from governments. Part of the funding is then generated by the schools themselves from school fees, donations and fundraising. Over time, there has been a shift in the way a school's financial position is managed.

Schools have become business enterprises and schools are now big businesses. The responsibility for the debt and money owed to the school rests with the school's board of directors and management, with business managers and accountants often forming part of a school's staff.

The idea is to strike a balance: to find the best way to educate Australian children within a cost effective system. This is a difficult task and it may not always be possible. As the cost of running a school increases, escalating debt levels and the ability of schools to furnish these debt levels become problematic in circumstances where operational costs blow out and unpaid school fees become tricky to manage.

Establishing a nationwide regulator would protect our education system

Last year, an Australian government consultation paper suggested that a nationwide regulator for non-profit schools would allow for greater scrutiny of a school's financial position. Although it is unusual for schools to collapse, it is apparent schools are certainly are not immune to financial pressure.

Any regulator set up to scrutinise a school's financial position should be extended to all schools, both government and non-government. This would protect Australia's education system, give due respect to the decades of fundraising and support local families have poured into their school in the past and safeguard the education of the generations of children of the future.

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​