The Financial Management of PMSA Schools. Should I be concerned?
Data is everywhere these days. We are drowning in it. So much data that we are given is meaningless without context. So much of what we are given isn’t relevant to us. And if we are honest, many of us really don’t have the skills to analyse the data we do get effectively most of the time.
But what about the data that we should be looking at and which is important to us? What can we do when we are not getting access to enough information?
I’ve found to my dismay recently that there is a real absence of any relevant financial information on the four PMSA schools, that is Brisbane Boys’ College, Clayfield College, Somerville House and Sunshine Coast Grammar School. Why is this the case? And why is the financial information on our schools important to stakeholders including current and future parents, past students and current and potential donors?
1. Why the lack of financial information by the PMSA?
If I really knew the answer to this question I wouldn’t have to write this blog.
If you browsed through the as yet unanswered queries on the PMSA facebook site (if you can’t see them due to the PMSA’s censorship, see the attachment to the Chesterman submission), you will see many queries asking for financial information relating to the schools. Further if you listened to the ABC Mornings broadcast on 27 October 2017 you would have heard the PMSA Chairman Mr Greg Adsett attempt to answer several queries about whether there is ongoing viability of all of the PMSA schools. I found this quite disturbing and it made me go searching for more information.
2. So what information is available?
At present the PMSA lodges an annual report with the ACNC (Australian Charities and Not for Profits Commission), which contains high level financial information about its operations, including the four schools it owns and operates. This annual report states that it also includes the financial information of the two childcare centres owned and operated by its wholly owned subsidiary, Grammar Early Learning Limited (trading as New Leaf Early Learning Centres). The figures published are rounded to the nearest thousand dollars.
Unfortunately, because of the consolidation of all six operations (seven if you include the cost centre of running the PMSA itself), it is impossible to ascertain basic information about any one of the schools or the cost of the PMSA Council and Corporate Office. What is the asset revaluation reserve attributed to Somerville House properties and assets? What is the cash flow from operating activities for Clayfield College? What is the level of fees paid by the parents of Brisbane Boys’ College that contribute to the administrative and executive costs of the PMSA? What does it cost to run the PMSA separate to the operation of the schools? What is the level of debt incurred in relation to the new pool at Sunshine Coast Grammar School? What is the basis for the going concern resolution, in the most recent financials, when the net current liabilities exceed net current assets by over $32 million.
The 2016 Annual Report by the PMSA (1 January 2016 to 31 December 2016) is required to be submitted to the ACNC within 6 months from the year end date, but instead was published on 16th October 2017. Interestingly it was signed on 22 May 2017. Maybe there was other information to review in late May or early June 2017 and the PMSA didn’t get around to lodging it until it was over three months overdue and almost six months after signing.
In any event, it clearly does not give sufficient information to ascertain the continued viability and sustainability of each of the school independent operations in the short, medium and long term.
It is interesting to note that in the submission by the Independent Schools Council of Australia to Treasury in 2013, the argument was made that reduced financial information could be supplied by independent schools to the ACNC on the basis that incorporated associations are required to submit financial information to their State or Territory register of associations, and a company limited by guarantee is required to submit financial information to the Australian Securities and Investments Commission.
Lamentably, this argument falls down when you have an organisation operating under the archaic governance structure of Letters Patent such as the PMSA. The PMSA is not required to submit financial information to any other regulatory body apart from the ACNC, and the concession to allow all information to be grouped is distinctly unhelpful for stakeholders.
Of course, financial information is provided to the Non-State Schools Accreditation Board (NSSAB) by independent schools operating in Queensland, but this information is not publicly searchable or available.
3. What about MySchools?
There is the financial information on the “MySchools” website. For a start, the most recent information available on this site relates to 2015, by now almost 24 months out of date.
Putting aside the issue of how current the information is, the MySchools website outlines the various categories of recurrent income, including Commonwealth and State government funding, fees and other parent contributions, and other sources of income (income from investments etc) per school.
The “deductions” noted include funds set aside for current and future capital projects, as well as current capital expenditure funded by way of Commonwealth and State Government Grants. The net figure is “net recurrent revenue”, which for Somerville House was $20,632 per student (2015).
My question is - how is this “net recurrent revenue per student” spent? How much goes on teachers’ remuneration, professional development, administration? Facilities maintenance and repair, borrowing costs and consumables? Let’s not forget, the PMSA administration costs?
While I appreciate the need to put aside some current year funds for future capital projects, aren’t current fee-paying parents more interested in where current fees are being spent this year? Operating as well as capital expenditure? Isn’t that the measure of efficiency we want to benchmark against?
Even more importantly, are fees paid to one of the PMSA schools being directed to facilities, costs and projects at that school or are they in fact being used to pay for projects, facilities and costs at one or more of the other schools? I would imagine this is particularly important to parents at the highest fee-paying schools (Somerville House and Brisbane Boys’ College).
4. So why isn’t more disclosed?
So why isn’t this information available? At the very least you would think it would be useful as a marketing tool to benchmark it against other high performing schools.
It is clear from the Education (Accreditation of Non-state Schools) Act 2001 (Qld) and the Australian Education Act 2013 (Cth) that significant financial information is provided to the granting bodies of both levels of government.
So the information is in existence, it is collated, and it is verified. Just not published. And not available to stakeholders or school council members, whose multiple requests have been met with blanket refusals by the PMSA hiding behind the veil of legalities such as ‘commercial-in-confidence’.
While I understand the need for some information to be kept commercial-in-confidence, many other large public and community organisations publish similar information to the public and their stakeholders. They are able to preserve confidentiality and commercial-in-confidence information by the use of benchmarking, percentages, ranges, graphs and summaries. I’m not asking for each teacher’s salary or even teachers’ salary per department, but I am interested and invested enough in at least one of the schools to ask the question “What do my fees pay for?”, particularly given the large volume of research that links student outcomes to funding of specific items such as teacher professional development and support.
Further, there are many independent schools in Brisbane who do publish this information in a public format, including St Aidans, Churchie, Cannon Hill Anglican College, and schools belonging to larger religious groups (Lourdes Hill, All Hallows), to name but a few.
5. What information is available is concerning
So why is the PMSA consolidated annual report not satisfying stakeholders. In my view, it asks more questions than it answers.
In the 2016 year, current liabilities exceeded current assets by approximately $32 million. The PMSA stated that this technical insolvency is managed by the expectation that loans will be renewed with external lenders, and this obviously has happened as the PMSA is still in existence post 31 December 2016.
But how sustainable are these revenues if they are lost due to decreasing enrolments? What if the donors are concerned about confidentiality of data? What if donors are concerned about whether the school to which they donate is the ultimate recipient of their donated funds? What if current and future parents choose not to continue their child’s education at a PMSA school?
As noted in the PMSA 2016 Annual Report “Our schools are increasingly reliant upon tuition fees and levies and the donations raised by those school support bodies, as together these sources account for 70% of our total revenue”.
How liquid are the financial investments supporting some of the current assets if there is a dramatic or unexpected decrease in tuition fees and donations? It seemed that borrowings increased in 2016 and there was also a net cash outflow position. What if as a result of a downturn there is a breach of lending covenants? Are the revaluation reserves, almost at 60% of net equity in 2016, still relevant and have there been any asset impairments?
Ultimately, what impact will the perception of new Principals have on tuition fees and enrolments? With BBC welcoming new executive staff including a new Principal, and Somerville potentially doing the same in 2018, will the experience mirror that of Clayfield College? Will the ship be too slow to steer back on course?
6. Why not exceed the basis minimum requirement of financial reporting
In Queensland, all schools are required to publish an annual report. The only financial information required to be published is expenditure on teacher professional development. However, the policy and guidelines do state that schools (including non-state schools) should “include any other information that may be of interest to parents and the community”.
However, in New South Wales, schools, including non-state schools, are required to provide summary financial information including:
income from all sources including Commonwealth and State grants and subsidies and all private income including fees and donations; and
expenditure on all purposes including teaching and learning, administration and financing (ie borrowing costs, depreciation etc).
The policy in NSW states that financial information may be in graphical forms such as pie charts:
“provided that each segment of the graphic represents specific dollar amounts aggregated from the financial information that each school provides annually to the Commonwealth. Where schools use a graphical representation, the overall financial position of the school must be organised according to the areas covered by the Commonwealth Questionnaire as follows:
Graphic one – recurrent/capital income, with segments detailing percentages derived from
fees and private income
State recurrent grants
Commonwealth recurrent grants
government capital grants
other capital income
Graphic two – recurrent/capital expenditure, showing percentages spent on
salaries, allowances and related expenses
non-salary expenses
capital expenditure.”
This level of reporting would ensure that the key stakeholders of our schools are well informed enough to understand whether or not the PMSA is doing an acceptable job of managing our schools - which should be the right of every parent and donor that invests at the significant levels that they do, often at great personal sacrifice. Beyond PMSA doesn’t think that it too much to ask, but clearly the PMSA don’t have sufficient confidence in their track record of financial management to do so. We expect that the standard tiresome response that it is all “confidential information” will be rolled out yet again.
