Non-government school not for profit funding regulation

Lyn Kirkby: Good afternoon, everyone. We're just giving it another minute or so, as people are still jumping in. We'll start off shortly. The numbers seem to have stopped increasing at a place, so I think we'll make a start. Can I just get an indication I can be heard?

Yes. Excellent. Thank you very much. Look, good afternoon, everyone and welcome to our Updates to the NSW Non-government Schools Not For Profit Guidelines Webinar. Thank you for taking time to join us today. My name is Lyn Kirkby and I'm the Executive Director of School and Teaching Standards at NESA. And joining me today are Tom Alegounarias, who's the Chair of the Non-Governments School Not-for-profit Advisory Committee, and previously the Independent Reviewer of the Section 83C function, along with Natalie Stott, the Director here at NESA of the Regulation of Non-Government Schools Funding.

We'll be talking through the changes with you and how they apply in practice.

We know that Section 83C reforms are important to schools and today's session is focused on providing clarity, reassurance and practical support.

I begin by today acknowledging the land of the Gadigal people of the Eora Nation, the Traditional Custodians of the lands from which I'm joining today. I pay my respects to elders past, present and emerging and extend that respect to all Aboriginal and Torres Strait Islander peoples here with us today.

This land was never ceded, and we honour the enduring connection to country that has existed for thousands of generations.

So today we'll be covering NESA's role and obviously the function here is relatively new to NESA having moved across from the department just over a year ago. We'll be looking at the role of the Not-for-profit Advisory Committee and also the summary of recent updates, what's changed and why it matters for schools. These are really important things for you to get your head around, so I'm sure that they'll provide value for you. The role of the Committee, obviously, will be talked through by Tom, who's joining us as the Chair, and then Nat will join us to talk more about the updated Guidelines and the amendments to the Education Regulation and what that means in practice for proprietors and for schools. We won't be hosting Q&A as part of today's webinar. Where there's any information provided that leads to questions or particular clarification for you. You're encouraged to email those questions to our enquiries address, which is NGS 83C Enquiries with an E at nesa.nsw.edu.au. I'm sure you'd all have that in your favourites, but we will provide contact details again at the end of the webinar.

Today's webinar focuses on the updated Not For Profit Guidelines and related amendments to the Education Regulation. These changes sit within the Government's broader 83C reform work and have been informed by engagement with schools and stakeholders. The updates are intended to make the not for profit requirements clearer and more practical, particularly where schools have sought greater certainty about how the requirements apply in practice. Overall, the changes aim to support and simplify compliance while maintaining the integrity of public funding.

NESA supports the Minister for Education and Early Learning in regulating the not for profit requirements under Part 7, Division 3 of the Education Act 1990 by carrying out a number of delegated functions, advising on regulatory policy and decision-making, undertaking preliminary assessment of matters and monitoring compliance and providing guidance and support to schools to promote compliance with the requirements. We work with schools through guidance and advice first, supported by proportionate regulatory tools where escalation is necessary. This matters because it protects the integrity of public funding, provides clarity for schools and maintains confidence in how the system operates.

I'll now hand over to Tom, who's going to take us through the recent reforms and the role of the Non-Government Schools Not-for-profit Advisory Committee. Thanks so much, Tom, over to you.

Tom Alegounarias: Thanks, Lyn. I think the first thing I want to say is to thank and recognise the work of Lyn, Nat and the team in bringing all this into practice. The review was, as that slide indicates, some time ago now. And there were a range of recommendations and an effect that we were after from the amalgam of recommendations, which was to bring forward confidence and a predictability in the judgments being made with regard to not for profit.

First, one of the first parts was just, in a sense, a common sense issue of bringing the function into the office of NESA, which is the school regulatory body, which I'm pleased to say everyone could see the clarity of that position. An important part of the work that the team did extremely well with the range of advice was to develop a set of regulations that made clear and brought out of the grey space and into black and white that some activities done within the normal way that schools operate, were not transgressions, non-compliance of the legislation. So that is clear. And the final part that this webinar is addressing is guidelines that assist to further that clarity and crystallise schools’ expectations and predictability. And that's what we're doing now. And as I say, the team's done a great job and we're very pleased for that. And we hope you find that to be the case as well.

Next slide. Okay, look, it's the Committee, you probably all know, it's a statutory authority that does this work. The Committee is established by legislation. Its role is to advise the Minister on compliance and non-compliance. And in that, since they have an overview of the policy direction and the culture of implementation as well.

The between the lines here is that what we have been doing and or consciously trying to cultivate is an idea that the Committee does see itself as representing your interests as well, because your interests, and Lyn has alluded to this, are embedded in schools generally complying with the not for profit. Everyone agrees that this is a requirement. And so, the Committee's work is on behalf of schools and the Minister in advising the Minister. So that's how we see that work, because we all have an interest in complying in the sector being seen to be consistently complying with the not for profit requirements. It's a key role of the Committee and it sets a tone and it oversees the processes and I have to say in the short period that I've been chairing, it's been a comfortable and common cause work with the office and NESA. So, we're pleased with the way we're working. There's not much different really. There's nothing different that I can think of the top of my head between the formal role of the Committee previously and the role of the Committee now. But there is an emphasis on allowing the office flexibility to be responsive to the needs of schools. There is an emphasis on recognising the complexities and unpredictability and sometimes the lack of clarity of everyday events in schools and the officers being able to respond to that in a way that recognises both those complexities that schools operate under and the pretty much immovable and appropriately immovable requirement them schools do operate in a not for profit way if they are to receive public funding. So that tone of flexibility for officers to be able to do their job in a way that meets the needs of schools is an emphasis that we're adopting.

So that should be reflected in the Guidelines. The Guidelines, we hope, the changes you'll see, and we've worked with the office, have done a great job. The Committee's been very closely involved in emphasising the black letter, the clarity of expectations, to make it as simple and direct as possible. It's, as you see, the purposes of the Guidelines is to engage schools and to support schools. And the school's role is, of course, to comply as the regulations and the legislation and the Guidelines are direct or prescribed.

But I want to emphasise this, that... Our intention in the Guidelines is to indicate to schools that the office doesn't create a not for profit environment. The office is not directly responsible for not for profit, the school is. The school is responsible for assuring its own processes for maintaining a not for profit environment. The office is there to ensure or to assure confidence and the predictability of what that means. And it should be a simple thing. It is a common sense thing and the Guidelines have attempted that common sense sort of approach. But the school is responsible, the officers then an assurance processes, a process beyond that in doing that.

The office is, and the Guidelines suggest, a responsiveness and a flexibility and that sometimes there are grey spaces that need to be clarified and the office is there to support that clarification.

But ultimately, the purposes of the Guidelines are also to be clear that clearly wilful non-compliance is not appropriate, but also a lack of effective management and governance that results in consistent transgression or inappropriate substantial transgression is not allowable. And that there's a public interest, and as I said at the beginning, a school sector interest to assure processes, that means it doesn't occur.

So we're all on a common agenda and the Committee operates on the basis that it represents your interests in assuring compliance with the legislation and the office is given the flexibility to be responsive to your needs because we recognise the complexity that's there for schools and we hope and the general view so far has been that the Guidelines and the adjustments in the way they've been presented reflects that sort of emphasis. Thank you very much.

I think it's Nat or is it back to you Lyn? Sorry.

Natalie Stott: It's over to me, Tom, but thank you very much for that. That was great. And thank you to everyone for joining us this afternoon. Before we move into discussing the new guidelines, I'd like to invite you to take a poll which asks whether you've had an opportunity to read the new regulations or the Guidelines. It's completely anonymous, so please feel free to put your responses in.

You should see a pop-up window in the middle of your screen right now. It didn't appear. You just need to chat the chat or the poll icon at the top of the meeting window. And the question we're asking is, which of the following have you had the opportunity to read? The updated guidelines, the new regulations, the amendments to the Education Regulation, the updated information on NESA's website, combination of these things, or you haven't had a chance yet, but you will soon. Once you have selected your answer, you'll just need to click the submit vote button at the bottom there.

Yeah. Okay, give about a minute, but I can start to see some of the responses coming through. It's not looking like it's shifting too much, the sort of bars, so I will... take that as the poll being answered now. So, we're kind of sitting at about a third have looked at the Guidelines, about a third have read a combination of materials, and we're at about a third of people who haven't had a chance to engage in the new materials yet, but will soon, which is really great. Thank you very much for taking the time to complete that poll. All right.

So, what is included in the updated Not For Profit Guidelines for non-government schools and what's their purpose or function? Well, the Guidelines bring together in one place practical guidance on how the not for profit requirements under Section 83C of the Act and the new regulations, excuse me, are applied. They explain in plain English what it means for a non-government school to not operate for profit as a condition of receiving financial assistance. And they set out key concepts and principles that underpin the not for profit requirements that clarify roles and responsibilities and help schools to understand how they can demonstrate compliance when carrying out day-to-day activities.

Importantly, they're guidance only. They sit alongside the Act and the Education Regulation, and they don't predetermine outcomes or remove the need to consider each matter on a case-by-case basis where compliance issues do arise. Overall, they support good governance in schools, compliance, and confidence in applying these requirements.

Before turning to the Guidelines, I wanted to briefly highlight the new regulations that came into effect in December 2025, and they are the result of the recommendations of the Section 83C review and feedback from key stakeholders across the sector.

The new regulations really fall into two broad categories. So, the first category deals with what counts as acceptable use of school income and assets and payments, or in other words, the things that won't be considered for profit activity when a school is operating. There are 6 new regulations and there's one amended regulation in this group.

So, the amended regulation is to allow schools to now make payments under their own local redress scheme for victims of child sex abuse and also to make direct payments to victims without being considered to operate for profit. The new regulations allow schools to enter into joint use arrangements or to develop assets for schools on land owned by other entities, including making payments to those arrangements for future use. Schools are now also able to lend their assets out to community groups at no cost or below reasonable market value. They can donate redundant or fully depreciated equipment at no cost and cover reasonable costs of transporting that equipment to its new home. They can use their assets to undertake charitable fundraising activities. And they can also raise money and then donate that money to charity without risk of operating for profit.

The second category of regulations introduces a new compliance pathway to address conduct that breaches a school's obligation not to operate for profit, and that's that little box at the bottom of the screen you'll see there that's red. So, under this pathway where a breach is identified, a school may be directed to take specific action to address the for profit conduct. These directions are issued by NESA under delegation from the Minister, following advice from the Advisory Committee. And the pathway is really intended to support a more timely and proportionate regulatory response, particularly where the issues that are raised are minor and they can be fixed by the School. The aim is to address issues earlier, support compliance, and avoid unnecessary escalation wherever possible.

So, what's new?

I'd like to take you now through the Guidelines. So, to give an overview of what's new and where there is expanded content, the first thing that you'll notice if you've had a chance to have a look at the Guidelines is they are now formatted in a style that's more aligned with the other NESA manuals for non-government schools. The structure is also now more user friendly with distinct parts covering roles and responsibilities, that's Part A, the not for profit requirements at Part B, regulatory approach at Part C, common transactions at D and useful links and definitions at Part E.

In addition to the clearer structure, Part A, ‘Roles and responsibilities’ and Part C, are new sections, so you won't find those in previous versions of the Guidelines. So, under Part A, you will find guidance on the roles and responsibilities of schools and proprietors, the Minister for Education and Early Learning, the Advisory Committee and NESA. Part B, which covers the ‘Not for profit requirements’ has been strengthened to provide clear explanations of the different elements of the legislative requirements under Section 83C and the regulations. So, there's now new guidance that non-government schools will often operate with an educational purpose and that income and assets and payments that are made that fulfil this purpose and that benefit the education of students at the school is generally regarded as being for the operation of the school.

There's also clearer guidance for funded systems of schools, recognising how these arrangements at the system level interact with the requirements of an individual school under Section 83C. There's content now in there that explains what is meant by the term required for the operation of the school, which explains that it hasn't got a narrow definition, but rather it means payments for property goods or services to meet a school's operational needs and to educate the students at the school. There's also expanded guidance on how schools can demonstrate payments are not above reasonable market value, and that's now separated out into information related to payments for property and then information that's relevant to payments for other property goods or services, sorry, other property, excuse me, other goods or services. Overall, the changes to Part B are really about giving schools clear information on the requirements and how they're assessed so schools can confidently apply them within their own contexts rather.

The Guidelines now include a new part, Part C, which for the first time sets out the compliance processes end to end. It explains how the Minister,  the Advisory Committee and NESA applies a risk-based and proportionate, procedurally fair approach to compliance. The inclusion of this content means there aren't any surprises for schools. You understand up front what an audit is and how that process works, what directions involve, what to expect at each stage of the process. The Guidelines also clearly explain a school's right to respond and also options available to seek external and external review of certain decisions.

So, what has been updated? I'd now like to switch over to content in the Guidelines that's been expanded or updated. So, this isn't new content, this is where we've added a bit more into the Guidelines. The bulk of these updates you'll find in Part D under ‘Common transactions and areas of operation’ which captures really that everyday application of the 83C requirements. In this part, schools will find expanded guidance on the following common areas of operation and transactions. On buying property that is intended to be used for schools at a later stage, leasing canteens and similar on-site services, acknowledging that some reasonable subsidisation of those services is okay given that they provide a non-financial benefit to schools by having those services available on site.

There is updated information on schools operating trusts, updated information on loaning to other entities provided those loan arrangements are demonstrated to be for the operation of the school. Investing school income, there's updated information on salaries, acknowledging that salaries are set following an assessment of labour market context and often in accordance with relevant industrial instruments and or enterprise agreements.

On shared services, with advice included for systems of schools on compensation settlements and one of payments, recognising that pending litigation can also include the threat of litigation. On insurance, which also includes advice on directors’ insurances and how schools can demonstrate compliance when paying for those.

And on foundations, parents associations and on ex-students associations. So overall, this expanded content is really about addressing common questions and scenarios and giving schools clear information and support around governance and decision making in those areas.

Lastly, I want to just note that we have added additional content in relation to school use and income and asset use for education and care programs under the Regulation Clause 10B. So, within that space, the changes here include that we've now got definitions of what is meant by a transition to school program and what is meant by playgroups. The eligibility criteria updates has been updated to include that programs should be designed and delivered for future learners of the school. So, it's really clarifying that the focus on the is on the intended purpose of the program and not just what ends up being delivered. There's clarification that subjective factors like where a parent intends to send their child in terms of schooling at the time of enrolling them in their education and care program isn't a factor that is considered in determining whether a child is likely to attend the school. There's updated advice on creation long daycare services that are provided for children of students at the school. And there's also updated advice on how schools can demonstrate 83C compliance when delivering education and care programs through third party providers as a genuine financial strategy to generate income for the operation of the school.

All right, I know that was a mouthful, so I now, I'm going to take an opportunity to run you through two case studies where these, some of these scenarios are applied in school settings. The first case study will focus on a school that wants to donate a piece of equipment and the second case study will focus on purchasing land for the future use of the school.

So, in our first case study, the school is considering donating a ride-on mower to another school. In this scenario, the school owns and operates the ride-on mower. It's 3 years old. They want to upgrade it and replace it with a larger mower. The mower is still in use by the school. It's not fully depreciated. Its asset still has value and it's in use.

So, in this case study, before taking any action, the school takes a moment to consider whether donating that ride-on mower will comply with the not for profit requirements of the Act. The school looks at the new regulations that allow schools to donate depreciated or redundant equipment at low or no cost and considers whether the mower fits within that category. However, because the mower is still in use and it hasn't been fully depreciated, it doesn't meet those requirements. So as a result, it can't donate the piece of equipment at no under market value under those provisions. And instead, the school turns back to 83C and then reassesses to determine how they can comply with donating that piece of equipment and realises that it would need to donate it at what is a reasonable market value and sell it at that amount.

As the Guidelines explain, the reasonable market value of a school asset depends on the circumstances. So, in some cases that might be less than an asset's book value, for example, where there is limited demand for that type of equipment.

What really matters in this case is that the school has taken reasonable steps to identify and use a market-based evaluation for disposing of that piece of equipment, that mower. Okay, our second scenario looks at a situation where a school is seeking to buy property to expand the school campus.

In this situation, the school's strategic plan identifies that it will require additional classroom space to meet its projected enrolment growths within the next 3 years. The school is located in a residential area and there are homes surrounding the property, so it's a bit landlocked.

One of the residential properties comes up for sale and the school would like to enter into a direct negotiation with the seller to buy that piece of land. The school is also considering whether they will lease the residential property in the interim before they're ready to begin construction on the new classrooms.

So, in this scenario, before taking any action, the school's governing body pauses to consider whether its plans comply with the not for profit requirements of Section 83C of the Act. They start by confirming that the purpose of buying the neighbouring property is to support the operation of the school. In this case, it's to meet its projected enrolment growth and provide additional classroom space in the upcoming years.

Before entering into negotiations, the school engages an independent professional valuer to obtain an objective assessment of the market value for the property, and this helps to ensure that any purchase is not above reasonable market value. With the independent valuation in hand, the school then proceeds to negotiate directly with the seller, within the assessed market range and ensures that the transaction is appropriately documented and approved through its governance processes. The governing body also considers the proposed interim leasing arrangements. It assesses whether leasing the property before construction begins is consistent with its 83C obligations, including whether the lease terms are not below reasonable market value and aligns with the school's expansion plans. Throughout the process, the school keeps clear records of the valuation, the decisions it's made in relation to the leasing and the purchase of the property, so it can demonstrate the steps it's taken where at arm's length and to ensure compliance with its obligations.

By approaching the acquisition in this way, the school is able to plan for future growth and manage its assets responsibly, while remaining compliant with its not for profit obligations.

So where can you find the Guidelines? Well, on this slide, you'll see a QR code. And if you take a picture of that, that will take you to the page on our website where the Not For Profit Guidelines are. There is a HTML version and a downloadable PDF version. So, you can use both.

We also have a number of resources to support non-government schools that you can find online. And again, we've got a QR code here that you can scan, which will take you to the relevant pages of the NESA website where you can find that information. So, the first code will take you to our website where the not for profit information is. The second code will take you to the page where the Not for Profit News is. So that's the termly newsletter that goes out to schools and is also online. The 3rd QR code will take you directly to the Guidelines and the 4th will take us to a Contact us page. So, if you have further enquiries, you can submit those through the form on that page or there is the email address that will take you straight which will take your enquiry straight to our team.

Thank you very much for joining us today. I want to just acknowledge Lyn and Tom's contribution to the webinar. Thank you both very much.

In the following weeks, this webinar will be available online for people to watch again or for others who haven't had an opportunity to join us today to watch it.

If you haven't already subscribed to our Not for Profit newsletter, the Not for Profit News, plug, plug, please do so. You will find the information there on how to subscribe to that. Or you can email the NGS 83C Enquiries inbox, which we can then link you in with our subscribers.

Thank you very much.