A “recognised education and care program” is defined in Clause 10B(3) as including long day care, out of school hours care and preschool programs.

Under Clause 10B(3), the following definitions are provided:  

• long day care means a service providing care, including a preschool program, for children less than 6 years of age.
• out of school hours care means care, play and learning for school children delivered before and after school, during school holidays and on pupil free days.
• preschool program has the same meaning as in the Children (Education and Care Services) National Law (NSW)

Section 9.2 of the Not-for-Profit Guidelines (March 2024) (NFP Guidelines) notes that the definition of ‘recognised education and care programs’ in Clause 10B is not exhaustive and that the Minister also considers that play groups and transition to school programs are types of recognised education and care programs for the purposes of Clause 10B.

If a proprietor wishes to use a non-government school’s assets and/or income to provide a recognised education and care program, and to have the protection of Clause 10B, the proprietor of a non-government school must:

• operate the recognised education and care program itself (Clause 10B does not apply to situations where a third-party or related entity is delivering the recognised education and care program);
  
• provide the recognised education and care program for children who attend the school or for children who meet criteria specified in the NFP Guidelines (under section 9.2);
  
• not use financial assistance provided by the Minister under Part 7, Division 3 of the Act to provide the recognised education and care program;
  
• make sure that all payments made by the non-government school to a related entity or other person or body for property, goods or services are:
  • at no more than reasonable market value;
  • required for the operation of the school or a recognised education and care program; and
    
  • not made in circumstances the Minister considers to be unreasonable, having regard to the fact that financial assistance is provided to or for the benefit of the school by the Minister.
    
• use any income arising from the operation of a recognised education and care program only for the operation of a recognised education and care program, or the operation of the school.
  

JEREMY KURUCZ: My name is Jeremy Kurucz. I’m the Executive Director of Reform and External Relations in the New South Wales Education Department. And this afternoon I'm joined with Natalie Stott who's the Acting Director of the Non-Government Schools Unit. You will see on the slide that we were also to be joined by Carolyn Walsh who is the Chair of our Non-Government Schools Not-For-Profit Advisory Committee. I don't think it'd be a webinar organised by the public service without some sort of tech fail and unfortunately, today our tech fail is that Carolyn is out there in the universe with you all but can't get on screen or off mute. So unfortunately, Carolyn is out there with you all but can't speak or be seen as part of today's session. So I've got the privilege of also talking to a couple of things that Carolyn was going to be here to talk to you with all of you today.

So, I'd just like to begin formally by acknowledging that regardless of where we are in New South Wales, we're on Aboriginal land. I'm on Gadigal land this afternoon and I pay my respects to elders past, present and emerging, and extend that respect to any Aboriginal and Torres Strait Islander people here today. And also extend my respect to Aboriginal students across non-government schools this afternoon as well.

So what Carolyn was gonna do upfront was just give you a bit of a refresher in terms of the role of the Non-Government Schools Not-For-profit Advisory Committee. It was wonderful to have Carolyn's commitments to make this session today and I know she's out there watching on as well. So, as you know, the Minister for Education and Early Learning has an obligation under the Education Act not to fund a non-government school that operates for profit.

Operating not-for-profit has a particular meaning under the Act. It means that all the assets and all the income of a school are used for the operation of the school. It also means that payments made by schools for property, goods or services have to be not more than reasonable market value, required for the operation of the school, and not unreasonable in the circumstances. Lastly, it means that members of a non-government school's governing body can't be paid for their role on the governing body unless it's as a reimbursement for a payment made by the person in connection with the operation of the school. And if a minister determines that a school is operating for profit, depending on the circumstances, the Minister may have a number of options available to respond to that, including ceasing funding, reducing, suspending, or making funding subject to conditions, and recovering funding that was paid to a school when they operated for profit or were a non-compliant school.

Now the Advisory Committee's role is set out under the Act and some of its key functions are to provide recommendations and advice to the Minister in exercising her functions under the Act and those functions are those which I just talked through then. So, the Committee makes recommendations about for profit and non-compliance declarations about reducing, suspending or imposing conditions on financial assistance and providing advice to the Minister on the publication of guidelines, including the ones that we're here to talk to you about today. And the Committee is made up of representative members from several sectors, including The Association of Independent Schools New South Wales, Catholic Schools New South Wales, NESA and the Department of Education. And Carolyn Walsh is the Chair of that committee.

So I wanted to turn to the context of why we are here meeting and speaking with you all today. And again, thanks very much for the generosity of your time. So we know that most non-government schools already offer education and care services like out of school hours care, preschool services, and long day care services. And while there was information about operating these services in the previous Not-For-Profit Guidelines, we received feedback from non-government schools and other stakeholders that more clarity was needed on how non-government schools could use their income and assets to provide these services.

Consequently, and to ensure non-government schools were given the right level of regulatory clarity and protections, it was determined that a regulation should be made, which made it clearer that non-government schools can use their income and assets to provide recognised education and care programs in certain circumstances without operating for profit. And this new regulation was also needed to support the New South Wales Government's commitment of $60 million to build or upgrade at least 50 new non-government preschools. And the Advisory Committee played a key role in the development of the regulation and associated guidelines. And it's great to see schools now engaging with the new regulation and the questions that are coming through to the Non-Government Schools Unit in relation to it.

The Advisory Committee is gonna continue to work closely with the department to enhance your understanding of the new regulation and its associated guidelines.

As part of talking to you today, we just want to give you a bit of a scene setting in terms of how the new regulation relates to the aspects that I just talked through earlier with respect to the Minister's responsibilities. So the Act states that regulations can be made which allow non-government schools and their proprietors to use their income and assets in certain ways or to make certain payments without being at risk of operating for profit. The new regulation was made through this provision to clarify that non-government schools will not operate for profit if they use school income and assets to provide recognised education and care programs in accordance with the new regulation.

So, onto the regulation itself. On the 1st of March 2024, a new education regulation was updated with a new regulation, clause 10B, which permits non-government schools to use certain types of school income and assets to deliver recognised education and care programs for current learners and future learners without operating for profit. When we talk about education and care programs or recognised education and care programs, we're referring to preschools, to OOSHC services, long day care services, as well as playgroups and transition to school programs. And these are also mentioned in the Not-For-Profit Guidelines. Preschools, OOSHC services and long day care are also all defined for clarity in clause 10B. As you can see in this slide, the regulation also sets out that financial assistance provided by the Minister for the school can't be used for recognised education and care programs. You'll also see that school payments for property, goods or services for that recognised education and care program need to not be above reasonable market value, they must be required for the operation of the recognised education and care program, and they must not be unreasonable in the circumstances. And you may notice this part of the regulation is consistent with other aspects of the Act as well. And lastly, the regulation specifies that any income received from operating the recognised education and care program has to be used for the school's operation or for the operation of that recognised education and care program.

So, moving on, as mentioned in the last slide, in order for a school to have the protection of the regulation, the recognised education and care program needs to be provided for children who attend the school and/or to children who meet criteria that we specify in the new Not-For-Profit Guidelines. And section 9.2 of the Not-For-Profit Guidelines set out these criteria. Broadly speaking, the criteria that are articulated in the guidelines aim to ensure that the recognised education and care program is delivered mainly for children and future learners of the school, but with some allowable exceptions, including for instance, in regional and rural areas. Now we thought the best way of talking you through this and kind of talking you through how the regulation works was to take you through some case study examples today. So, Natalie and I are now gonna take you through a couple of case studies just to give you some illustrative examples of how the new regulation works in context.

NATALIE STOTT: Thanks Jeremy. Before we get started, I just wanted to give a little bit of background to these case studies. So, first of all, the purpose of these case studies is really to illustrate circumstances where schools will have the protection of the regulation. Where the regulation doesn't apply, it doesn't mean that a school is operating for profit, it simply means that the use of income and assets for that school are gonna be considered through the lens of the 83C requirements instead, and we do have one example here that talks to that.

As we always say, we wanna preface any discussions around particular use of income and assets by saying when you're considering your particular use of income and assets, it's really important that you seek and be guided by your own independent legal advice in those situations. I also wanted to mention that these case studies are gonna be published on the website, so don't feel the need to madly scribble down the situations and you know whether or not that aligns with what you're doing in your particular school or with your particular recognised education and care program. They're gonna be up on the website shortly for you to use and refer to when you're considering what you're doing. And the last thing I wanted to say before we get started is for each of these case studies, we're gonna assume a few things, with the exception of one of the case studies, which I'll touch on a bit later. Those things are that in each of these circumstances the service is being used-- excuse me, the service is using the income and assets of the school but not the financial assistance that's provided by the Minister under the Act, that the school is making payments for property goods and services towards these education and care programs that's not above reasonable market value, that's required for the operation of the school or the recognised education and care program, and isn't unreasonable in the circumstances. And lastly, that any income that arises from the operation of these education and care programs is being used for the operation of a recognised education and care program or the operation of the school. So with no further ado, we'll kick into the first case study.

JEREMY KURUCZ: Thanks very much Nat. So, we're gonna talk now about an OOSHC service in a rural area attended by children who attend that OOSHC service but do not attend the school.

NATALIE STOTT: Thank you. So, in this case study, as Jeremy pointed out, we've got an onsite out of school hours care, an OOSHC program, and it's being operated by the non-government school's proprietor. It's the only service in the geographical vicinity of a rural area. Students of the school are using that service but also students at nearby public schools and nearby non-government schools are also accessing that service. So, in this case, the school will have the protections of the regulation, meaning that it won't be operating for profit. And this is because the service is being provided for children who attend the school and also it meets the criteria that's set out under the guidelines of children who do not attend the school under the circumstances where there are no other recognised education and care programs in the geographical vicinity.

JEREMY KURUCZ: Great.

NATALIE STOTT: Next one.

JEREMY KURUCZ: Thanks very much Nat. Next one. Um… preschool where a… Actually, excuse me. Apologies. A long day care service where some children do not go on to attend the school.

NATALIE STOTT: Thank you. So this is a situation where we've got a non-government school's proprietor operating a long day care service. It's got clear connections to the primary school. The children attending the long day care centre are likely to attend the connected primary school at the time of enrolment. But there are a number of families that decide not to send their kids onto that connected primary school. So in this case study again, the school will have the protections of the regulation. It won't be operating for profit. And this is because the service is a recognised education and care program, it meets the criteria set out in the guidelines of being for children who are likely to attend the school. And importantly, this criteria recognises that there are gonna be children who at the time of enrolment were likely to attend the school but they don't go on to attend the school. And that is in our guidelines under section 9.2.

JEREMY KURUCZ: Great. Thanks very much, Nat. Preschool where children will not attend because of the school's eligibility criteria.

NATALIE STOTT: Brilliant, thank you. So here we've got a non-government school's proprietor operating a preschool. It's at an all-girls primary school which has clear connections to the school. Now there are a small number of boys that attend that school and for obvious reasons, they are not gonna be eligible to go onto the school. In this situation again, the protection of clause B is there. The school won't be operating for profit. And that is because most of the children attending the service are likely to go on to attend the school and the boys that attend the service meet the criteria that are set out in the guidelines that say that the service is for children who will not go on to attend the school by virtue of the school's eligibility criteria.

JEREMY KURUCZ: Great. Thanks very much Nat. Our fourth of five case studies. So next one is an OOSHC service provided by a third-party provider.

NATALIE STOTT: Thanks Jeremy. So, this is now a situation I should state where the school will not have the protection of the regulation. We've got an OOSHC service that's being offered on site at a school, but a third-party company is operating the OOSHC service as opposed to the school actually operating the OOSHC service, or I should say the school's proprietor actually operating the OOSHC service. Now because regulation clause 10B only deals with situations where a school is using their income and assets to provide the recognised education and care program, sorry, emphasis added there purposefully. This is not a situation that's gonna have that protection, it's being provided by the third-party. It does not mean that that school is operating for profit. All it means is that instead of looking to the regulation to how that service is being provided, we're simply looking through the lens of the 83C not-for-profit requirements under the Act. So that's where the difference really lies. So, when schools are providing services using third-party providers, it's a really good idea to use the guidelines and the information contained in those guidelines which talk to things like, you know, operating when services with related parties, how to make sure you're getting reasonable market value for your services around leasing school income and assets, or operating shared or joint use of services.

JEREMY KURUCZ: Great, thanks Nat. And lucky last case study. We've got a higher number of enrolments at a long day care than places available at a school's kindergarten.

NATALIE STOTT: Thank you very much. So this is, as Jeremy mentioned, we've got a long day care centre here where we've got 60 children attending the service. But there's only one kindergarten class at the school that accommodates 25 students. It's being operated by the school's proprietor, and it's got clear connections to the school. So in this case study, whether or not the school will have the protections of the regulation is gonna depend on the facts and circumstances of what's happening in the particular case. In order for the regulation to be engaged and for the school to have the protections of the regulation, the service would need to be being provided for children who meet the criteria in the guidelines. And when considering whether the children meet those criteria. So, the criteria around children being likely to attend the school, et cetera, the Minister's gonna have regard to that really objective evidence that demonstrates there's a connection between the school and the service. So, the Minister will be considering things like the documents that outline the nature of the connection between the program and the school. Any kind of, you know, physical connections, the school's on site, it's co-located, it's, you know, around the corner. Sorry, it's next to the school. There's connective activities there that help to familiarise the future learners of the school with the new school. You know, they've got transition to school programs, they, you know, have a playground that they jointly use, et cetera, et cetera. And also, the eligibility requirements of the early learning service and that those are sort of matched up with the eligibility requirements of the school.

So, I just really wanna set out here that the number of the places in the school's kindergarten is one factor but it's not considered in isolation and it's considered when there are many other factors around it. So, in and of itself, it's not a significant concern. It's really about how that early learning service is designed and delivered, and that that is done with a connection. The concept of the connection to the school.

JEREMY KURUCZ: Great, wonderful. Thanks very much for that, Nat.

NATALIE STOTT: No problems.

JEREMY KURUCZ: We've now had a number of questions sent in by schools over recent weeks that we wanted to address now. I would apologise because this was supposed to be between Carolyn, myself and Natalie. You're gonna hear a lot of talking from me in the next couple of minutes, so apologies. But Natalie, you're leading us through.

NATALIE STOTT: I am. I'm gonna whip us through these questions. So, our first question, Jeremy, is what services are considered recognised education and care programs?

JEREMY KURUCZ: Thanks very much, Natalie. So, the regulation states that long day care, out of school hours care, and preschools programs are recognised education and care programs. And a definition of these is given in the regulation.

The Not-For-Profit Guidelines also note that the definition of recognised education and care programs is not exhaustive, and that playgroups and transition to school programs are also types of recognised education and care programs. We received a question in the lead up to the webinar about whether creches are caught by the new regulation. So, whether or not the use of school assets or income to run a creche for the children of students will have the protection of clause 10B will depend on a number of factors which include whether the creche is operated by the school's proprietor as opposed to a third-party or related entity, whether the creche service meets the definition of a recognised education and care program in clause B, the fact that the school describes the service as a creche doesn't necessarily matter. What matters is the nature of the service that is actually being provided. For example, it is possible that the creche may meet the definition of a long day care which is described in the regulation as a service providing care, including a preschool program for a child less than six years of age. It also depends on whether the creche service is for either children who attend the school or children who meet the other criteria, as we just talked through by way of case studies. Whether any financial assistance is provided to the school by the Minister under the Act to operate that service, whether any of the payments are made above reasonable market value, and the other aspects that we talked to, and how the income generated from the creche is used in relation to the operation of the school and/or the creche. So, this one's a bit of a tricky one, a bit complex. We're gonna get some guidance up on the website for you, particularly in those circumstances where the new reg may or may not apply.

NATALIE STOTT: Thank you. Alright, moving on to our next question. Are we anticipating that there are gonna be further changes to the Guidelines?

JEREMY KURUCZ: Look, we don't have any current plans at this point to change the criteria in the guidelines. However, we acknowledge, as we just talked about in respect of creches even, that the new regulation and guidelines, as I said, they're new, there may be circumstances which require consideration of further amendments in the future. So please give us your feedback. The creche example is an excellent one. We're of course wanting to see how things progress and the types of matters and circumstances which come to the attention of the department and the committee over time, and we're really happy to consider further changes as well.

NATALIE STOTT: Thank you. Oh, excuse me. Alright, next question. How are schools expected to demonstrate reasonable market value for their recognised education and care programs? It's a good one.

JEREMY KURUCZ: Thanks very much, Natalie. So, the Minister's Not-For-Profit Guidelines provide some useful guidance on the concept of reasonable market value as it applies in school circumstances. You can find that information in section 8.2 of the guidelines. What is reasonable market value? That includes a definition of what reasonable market value is, guidance on the factors that may influence reasonable market value, and relevant policies and procedures that schools may keep to ensure they are getting the best value for money. Some simple approaches which may assist schools to demonstrate that they have not paid above reasonable market value include getting multiple quotes, using tendering processes where appropriate, establishing a list of preferred suppliers, and having suitable procurement and financial policies and procedures in place, including policies on conflicts of interests. But it is reasonable market value, and is contained in the guidelines, and as it generally applies to your school operations.

NATALIE STOTT: Thank you. Alright, our next question. I'm just having a look at the time. Yup, we've got time for a few more. Does the regulation put any obligations on children and parents, and what happens? This is a good one. What happens if a parent doesn't intend on sending their child to the school when they enrol their child in the service?

JEREMY KURUCZ: So, the regulation doesn't place obligations on a parent or a child attending a service. It's about the proprietor providing programs, those programs having a clear connection to the school, so that they are mainly intended for current and future learners at the school. So, when the Minister is looking at a particular matter, she'll have regard to objective matters that demonstrate how the service is connected to the school. That's documents that show the nature of the program, its connection to the school, policies and procedures that demonstrate this connection, the physical location of the service of the school, the eligibility requirements of the program as they relate to the school. Those things we talked about earlier as part of the case studies. Subjective factors such as what's in the mind of a parent of a child at the time of enrolment is not something the Minister's seeking to regulate. And it's not something that we are regulating, you know, through this regulation.

NATALIE STOTT: Right. Thank you. Now are there any permissible uses of income that's generated from recognised education and care programs?

JEREMY KURUCZ: So, under the regulation clause 10B, all income generated from the operation of the recognised education and care program must be used for either the operation of that program or the operation of the school, otherwise the school will operate for profit. So, for example, a school will operate for profit if say its proprietor is running a long day care centre, which is making a profit, and that profit is used to pay a dividend to a shareholder. Another example is a school will operate for profit if income generated from the long day care is used for the operation of a different school in the proprietor's group of schools.

NATALIE STOTT: Thank you. Okay. Now this is our last question I think we're gonna have time for, unfortunately. What kind of services fall under the regulation and can schools use their assets and incomes for services like playgroups, for example?

JEREMY KURUCZ: Yeah, sure. So, I'll start at the end. So, to the playgroups question, yes, they're considered recognised education and care programs, and schools can use their assets and income to provide these services for children who meet criteria set out in the guidelines. Section 9.2 of the NFP Guidelines are relevant in this. The regulation itself applies to recognised education and care programs. These do include playgroups, those that are operated by the school's proprietor for children who meet the specific criteria set out in the regulation and guidelines.

So, yes, playgroups are captured by that, and there's further clarity and information in the guidelines themselves.

NATALIE STOTT: Wonderful. Well, that takes us to the end of the questions part of today. Just before we move on to our very last slide, I wanna flag that we did get a lot of questions submitted. We are going to provide responses to those on the website. So please don't worry if you didn't have your question answered today. We have them, we are aware of them, we are providing responses, and you will get them on our website shortly.

JEREMY KURUCZ: Thanks very much, Natalie. I'm gonna wrap us up now. So, thank you all to everyone for joining us this afternoon. I hope you're leaving this session with a better understanding of the new regulation. Remember, we're here to help you. Visit our website to access some resources that can help you understand the not-for-profit requirements under the Act, the new regulation, and the updated guidelines. As Natalie mentioned, we're gonna get those FAQs and the case studies out to you on the website shortly. If you've got any questions that you need advice or particular circumstances you want clarity on, send us an email at ngsenquiries@det.nsw.edu.au. We also have a Non-Government School, Not-for-Profit Newsletter that comes out once a term. You can also email that email address to get onto the mailing list for that. And all this information, including further information about how you can contact us, is on the non-government schools unit website which you can find by searching Google. It's on the New South Wales Department of Education website. Thank you very much for your time and interest in this. Thank you very much for coming together for us on what might be your second last day of term two. If you're heading into the school holiday break, I hope you have an excellent one and thanks very much again for joining us. Thanks everyone.

NATALIE STOTT: Thank you.