Section 83C update: Draft Regulatory Framework and new Not-for-profit Guidelines for Non-government Schools released for public consultation
Published on November 13, 2023 by Stephanie McLuckie and David Ford
To be eligible for financial assistance, a non-government school in NSW must not operate for profit, as defined in section 83C of the Education Act 1990 (NSW). This requires the income and assets of a school to only be used for the operation of the school. Further, any payments by the school for property, good or services must be for the operation of the school, for no more than reasonable market value and not be in any other way unreasonable in the circumstances.
Last year, the NSW Department of Education announced it was working to ‘develop an outcomes and risk-based regulatory framework’ for the not-for-profit requirements under the Act and it was also supporting a review of the current Not-For-Profit Guidelines for Non-Government Schools (2019). The purpose of the Guidelines is to assist non-government schools in NSW with meeting the not-for-profit requirements. The purpose of the review was to ensure that the current Guidelines continue to provide necessary guidance in line with the intention of the Act and the public interest.
In October 2022, a public discussion paper was released by the Department, with the purpose of facilitating engagement from stakeholders regarding the new regulatory framework and the revision of the Guidelines. A summary of the stakeholder feedback received by the Department is available here.
On 19 October 2023, the draft regulatory framework and the revised draft guidelines were made available to the public and the Department called for feedback from stakeholders on both of these documents.
The draft Guidelines are currently incomplete, as the Department is still awaiting a new Regulation under the Act that will govern the operation of onsite ancillary services (such as before and after school care) by schools and third parties. Therefore, the new Guidelines do not yet say anything yet about onsite ancillary services, as this section will be drafted to provide guidance that is consistent with the new Regulation.
Overall, the new Guidelines indicate that the Minister will take a case by case approach to potential breaches of section 83C and will consider a school’s conduct in its context, taking into account the school’s ‘particular circumstances’. In some respects, the draft Guidelines appear to provide more flexibility in the interpretation of section 83C, but as a result also provide less guidance to schools than was previously available. In our view, more flexibility will only lead to more risk for schools. We believe that for larger transactions, a school should be able to receive a ruling or preliminary indication from the Department as to whether any proposed activity is likely to breach section 83C. We consider that, if the Minister wishes to take a ‘case by case’ approach, the Guidelines should provide examples and case studies of conforming conduct (and non-conforming conduct) so a school is able to consider its circumstances in comparison to the stated examples.
We also consider that there are competing interests and messages at play here. For example, schools have generally been encouraged to provide facilities (when not required for the school’s use) to other schools and to community groups/not-for-profit entities. It would be helpful for the Department to clarify whether this use must be for market value if the school does not receive a benefit and provide further examples of non-financial benefits schools can take into account that will be considered reasonable. The draft Guidelines should also clarify if a school can take into account non-financial benefits made available for students, parents or other members of the school community from a ‘for-profit’ or commercial provider.
Stakeholders making submissions to the Department were asked to address the following two questions in as much detail as possible:
- Does the Regulatory Framework provide you with a transparent and sufficient understanding of the outcomes and risk-based approach to the oversight of financial assistance provided to or for the benefit of non-government schools under the Education Act 1990?
- Do the revised Not-For-Profit Guidelines assist non-government schools in understanding their obligations in relation to financial assistance provided to or for the benefit of non-government schools under the Education Act 1990?
Submission were open to stakeholders until Friday, 24 November 2023. Carroll & O’Dea Lawyers made submissions, which you can view here.
Please contact David Ford or Stephanie McLuckie if you have any questions about this review or about the operation of section 83C.
