Part D5: Appendix – Common transactions and areas of operation – Operational expenditures and financial governance
D5.1 Equipment
Proprietors/schools purchase equipment required for the operation of the school. Common examples include machinery or classroom equipment (such as computers or audio-visual equipment).
In order to remain eligible for NSW funding, the equipment must be required for the operation of the school. Any payments for the equipment must be at no more than reasonable market value (see B2) and not be unreasonable having regard to the fact that NSW funding is provided to or for the benefit of the school (see B3).
- Copies of quotes, tax invoices, and/or written contracts relating to the supply of goods.
- Procurement and/or tender documentation.
- Business records that document prior approval to purchase the equipment (where it requires governing body consideration) and other financial records and reports.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
D5.2 Salaries
Schools set salaries following an assessment of the labour market context and often in accordance with relevant industrial and/or enterprise agreements. Schools may also pay a remuneration package for executive remuneration.
For a school to comply with the not for profit requirements the payment of each salary or remuneration package must be:
- required for the operation of the school
- be at no more than reasonable market value
- not be unreasonable in the circumstances having regard to the fact that financial assistance is provided to or for the benefit of the school.
Reasonable market value in the context of salaries/remuneration packages may be influenced by a range of factors (see B2). Each circumstance should be assessed on its facts and supported by appropriate documentation.
- Clearly defined and documented contracts of employment.
- Documentation in the employment contract of any specific payments associated with the achievement of key performance indicators or targets, including clear criteria for ascertaining whether the key performance indicators or targets have been achieved.
- Records (including decisions, rationale and evaluation of costs) that clearly explain how the school has determined that the relevant salary. If relevant, schools may also wish to make records evidencing a clear rationale for any performance-based component of the salary and, in particular, how it meets the not for profit requirements.
- Industrial Awards and/or Enterprise Agreements.
- School Human Resources (HR) policies and procedures.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
D5.3 Consultancy and professional services
Schools may engage consultants and other professionals from time to time to provide specialist advice and/or services for school projects or operations.
In order to remain eligible for NSW financial assistance, engagements and any payments towards consultancy and professional services must be required for the operation of the school, be at no more than reasonable market value, and not be unreasonable having regard to the fact that funding is provided to or for the benefit of the school.
Schools should take care when purchasing consultancy and professional services from a related party to ensure that these transactions are made at arm’s length as they can often pose a higher risk of for profit activity. Any purchases that involve related parties must be carefully considered and transparently documented.
- A copy of the services agreement or contract detailing the nature of professional services provided by consultants or experts to the school.
- Appropriate evidence that any professional services paid for were received, such as copies of any reports or documents produced by the relevant consultant or expert.
- Records (including procurement records) that demonstrate the need to engage consultants/professional services.
- Documentation that conflicts of interest and any related party relationships have been appropriately identified and managed.
- Records that demonstrate decision making by the appropriate authority of the school, and may include records that illustrate decision making such/node/111280 as consultancy, professional learning, governing body minutes and reports.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
D5.4 Shared services
A shared services agreement is an agreement under which multiple schools (or one or more schools and other non-school related entities) receive services from a single service provider.
Schools may enter into shared services agreements and remain eligible for NSW funding provided that all payments made by individual schools under the agreement are for services that are required for the operation of that individual school, are at no more than reasonable market value and are not unreasonable in the circumstances having regard to the fact that financial assistance is provided to or for the benefit of the school.
The following matters are considered in determining whether a shared services agreement complies with the not for profit requirements:
- terms are flexible, so that each individual school only pays for the services it requires for its operation
- the agreement is well-documented and clearly identifies the services to be delivered and costs (noting there are some circumstances in which the need for the service is periodic, and this will be taken into account)
- the agreement includes a provision for itemised billing for each school participating in the shared services agreement
- the school or schools are not subsidising services provided to any other organisation
- payments for services made by each school are at no more than reasonable market value
- for schools approved to be funded through an approved system authority in NSW, whether the approach to managing and allocating shared services costs across member schools is transparent, fair, and consistent with the not for profit requirements.
- Shared service agreements with clearly documented terms.
- Records (including procurement records) that demonstrate the need for the services.
- Records that demonstrate decision making, such as governing body minutes and reports.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
D5.5 School related travel
Proprietors/schools can pay for travel expenses that are required for the operation of the school and remain eligible for NSW funding. This may include travel expenses incurred by governing body members, volunteers, teachers or other employees as a result of their attendance at excursions, sports events, training and similar events relevant to their position and responsibilities. Under no circumstances should school funds be used for personal travel.
Reimbursement for reasonable travel costs incurred by employees whilst performing their duties could also be specified in individual employment contracts.
Travel expenditure must not be unreasonable in the circumstances having regard to the fact that financial assistance is provided to or for the benefit of the school by the Minister.
- Appropriate evidence that all travel expenses paid for by the school were required for the operation of the school and not personal in nature.
- Policies and procedures for the payment of school-related travel expenses appropriate within the context of the school.
- Receipts for all purchases by school governing body members who have been reimbursed by the school.
- Appropriate evidence that all travel expenses paid for by the school were approved by the school principal or another person with authority for the school.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
D5.6 Compensation, settlements and one-off payments
Compensation and Settlements
From time to time proprietors make payments to individuals in the context of pending or actual litigation alleging breaches of their obligations under contract, statute or common law. Examples include payments to settle a public liability claim or an employment related dispute.
Generally, these payments will be considered for the operation of the school where the litigation arises from the school’s operations or responsibilities as a proprietor and the payments are consistent with any professional or legal advice or orders given by a relevant tribunal (e.g. Fair Work Commission) or Court (where applicable).
Pending litigation can include the threat of litigation, however, any resulting payment must be supported by clear documentation to demonstrate a professional assessment of the threat and the reasons for compensation or other payment.
- Appropriate legal documentation (and/or professional documentation in the case of pending litigation) supporting any compensation or settlement payments made by the proprietor or school (such as a copy of a deed of settlement).
- Appropriate records detailing the reasons or special circumstances for any compensation or other payments made by the school or proprietor including how the payment is for the operation of the school.
- Policies and procedures, including appropriate delegations and segregation of duties, to support any routine compensation or other payments made by the proprietor or the school.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
Other one-off payments to individuals
Schools should exercise caution when considering making other one-off payments when there is no legal liability or obligation or where the payment is based solely on a perceived moral or social obligation (e.g. a retirement gift). This includes bonus payments, which should only be made where they are clearly linked to performance, based on objective and transparent criteria documented in established and transparent policies and procedures of the school, and consistent with reasonable market practices.
The school should assess each proposed payment on its facts to make sure the payment is required for the operation of the school and is not a payment for property, goods or services that is unreasonable having regard to the fact that financial assistance is provided to the school by the Minister. Appropriate supporting documentation should be kept.
- Clearly defined and documented contracts of employment.
- Documentation in the employment contract of any specific payments associated with the achievement of key performance indicators or targets, including clear criteria for ascertaining whether the key performance indicators or targets have been achieved.
- Records (including decisions and rationale) that clearly explain how the school has determined that the relevant payment is required for the operation of the school and is not unreasonable in the circumstances. If relevant, schools may also wish to make records evidencing a clear rationale for any performance-based component of the salary and, in particular, how it meets the requirements of Section 83C of the Education Act.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
D5.7 Insurance
Schools may wish to obtain insurance related to the operation of the school, for instance, public liability insurance or directors’ and officers’ insurance.
In order to remain eligible for NSW funding, such insurance must be required for the operation of the school, be at no more than reasonable market value, and not be unreasonable having regard to the fact that financial assistance is provided to or for the benefit of the school by the Minister.
- Copies of insurance policies and payment records.
- Periodic review by an independent broker of appropriate insurance cover and up-to-date copies of insurance policies and statement of coverage.
- Adequate recording of governing body minutes, including rationale and approvals.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
D5.8 Foundations, school parent associations and ex-student associations
Many non-government schools have associated foundations, school parent associations and/or ex-student associations that are established for the operation of the school.
Where it can be demonstrated that the foundation or associations activities are for the operation of the school (including that any income received from these organisations is used for the operation of the school), then generally speaking the reasonable use of school income or assets to support these organisations will comply with the not for profit requirements (e.g. paying school staff to carry out work for the foundation). Schools must demonstrate how any payments for these organisations are not above reasonable market value (see B2) and is not in any other way unreasonable in the circumstances having regard to the fact that financial assistance is provided to or for the benefit of the school by the Minister (see B3).
- Written agreements outlining the relationship between the school and the organisation (e.g. roles, expectations, use of resources).
- Records showing the purpose of the organisation and how it aligns with the operation of the school (e.g. constitution, mission statements).
- Evidence of how the school assets or income are used to support the organisation (e.g. staffing, office space, materials).
- Annual financial reports or summaries from the organisation to demonstrate alignment with school purposes.
- Documentation that conflicts of interest and any related party relationships have been appropriately identified and managed.
Note: This list is only a guide. It is not intended to be exhaustive or prescriptive. For further detail read our section on Records to demonstrate compliance.
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