Not-For-Profit Guidelines for non-government schools

The NSW Minister for Education approved new Guidelines in December 2018 to replace the September 2015 Guidelines. As the Minister says in his Foreword, the intent of the Guidelines is to provide clear guidance to those operating independent schools in NSW about their obligations under the not-for-profit provisions of the Education Act 1990 (NSW). This is laudable but we do not believe the intent has been achieved in a document which appears to have been compiled hastily (check out the many spelling, grammatical and typographical errors) and which does not address significant issues.

However, there are some improvements in the new Guidelines. For example, in the key area of determining what is reasonable market value, the Guidelines now recognise that factors that could influence such value include the types of warranties provided (if any), installation costs and ongoing maintenance and parts, and relevant procurement standards. Indeed, having a good procurement policy is a vital document when seeking to demonstrate compliance with the not-for-profit provisions. We recently prepared such a policy for a school for this very purpose.

The section on Intellectual Property now includes a useful reminder to schools of the importance of registering some forms of intellectual property (for example, trademarks). We have assisted many schools to do this. Nevertheless, Guidelines do not give any particular guidance about the way in which schools can use their intellectual property (for example, by licensing others to use it) in ways which comply with the not-for-profit provisions.

Interestingly, the former Guidelines contained a substantial section about employee salaries, benefits and severance packages all of which has been omitted from the new Guidelines. That is not to say, of course, that paying employees to do work which is not for the operation of the school is now permissible. While the employee section has disappeared, the section dealing with consultancy and professional services has expanded. In particular, it is now suggested that examples of records that may assist to demonstrate compliance in this area might be evidence of adoption of the work by the school, records that demonstrate the need to engage consultants on a long-term basis or at higher than normal rates, and approved Board minutes. As lawyers, we are delighted that the Guidelines are keen to see evidence of our advice being followed.

Another section that has disappeared from the Guidelines is that dealing with community use of school assets and facilities. In the 2015 Guidelines, such use was acceptable in certain circumstances and schools were given a discretion to determine whether it was appropriate to charge a fee for any reasonable community use of a school asset or facility. The omission of this section from the new Guidelines suggests a more hard-line approach by the Government. The bottom line for schools is that any arrangement for the use of school assets and facilities should be at no less than reasonable market value.

It is unfortunate that the Minister has not taken the opportunity provided by the issue of the new Guidelines to deal with the National Redress Scheme. Under the old Guidelines, while it was not clear whether joining the Scheme and making payments under it would cause a school to operate for profit, there was at least an indication that there could be a good reason for making an ex-gratia payment. Given that there has been recent federal government and community pressure for institutions, including schools, to join the Scheme, one would think that the Minister would have been keen to make it quite clear that joining the Scheme would not cause a school to operate for profit. Instead, the 2018 Guidelines have a new section – Ex-Gratia Payments – which explicitly states that, as there is no admitted legal liability for making ex-gratia payments, they “generally” will not comply with the not-for-profit requirements. As it is not obligatory to join the Scheme, it seems quite arguable that doing so voluntarily and then making payments under the scheme amount to making ex-gratia payments which in turn could put the school’s government funding at risk. While the use of “generally” suggests that there could be exceptions, it is a great pity that the Minister did not deal explicitly with this matter.

There is much more in the 2018 Guidelines and those in schools in the NSW must become very familiar with them. Please contact %96%7C%92%C1%E0%B7c%BC%B6%D6%BA%8B for assistance in understanding the new Guidelines or if your school is subjected to an audit by the Department of Education.