Circular 2009/04 - Information on financial reporting requirements

Date: 17 April 2009
To end date: 31 March 2010
Circular number: 2009/04
Category: Funding

Early Childhood Education Funding

This Circular is about: The financial reporting requirements for licensed, chartered early childhood education (ECE) services for the financial year ending in 2008.

This Circular replaces: 2008/06.

The action required is: Proprietors or licensees must complete the enclosed declaration form and return it, together with the audited financial statements for the financial year ending during 2008 to: Resourcing Division, Ministry of Education, PO Box 1666 Wellington by 30 June 2009.

It is intended for: All early childhood services (Chartered prior to 1 December 2008) and their umbrella organisations (excluding Nga Kohanga Reo).

For further information: 
Contact the Resourcing Division Contact Centre, Ministry of Education, PO Box 1666, Wellington.
Phone 0800 323-323 Fax: 04 463 8374
Email resourcing@minedu.govt.nz  

For licensing or general operational matters, please contact your local office of the Ministry of Education.
You can obtain further copies of this circular at www.minedu.govt.nz/goto/circulars

Refer also to the Early Childhood Education Funding Handbook (as amended in February 2007) www.lead.ece.govt.nz/Funding

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Introduction

This circular explains what information Early Childhood Education (ECE) services need to send to the Ministry of Education, National Office, by 30 June 2009. This circular replaces all previous ECE financial reporting circulars. Please read this circular carefully, and show it to your accountant and auditor.

Why you need to provide your audited financial statements

Section 311 of the Education Act 1989 provides for the payment of bulk funding subsidies to licensed Early Childhood Education (ECE) services. One of the conditions for receiving government funding is that services must send the ministry a copy of their audited financial statements every year.

The ministry's Statement of Desirable Objectives and Practices (DOPs) also requires, as a condition of funding, that ECE services provide information showing how the ministry's subsidies have been spent. ECE services must have copies of their annual financial statements available for perusal by parents, staff, Ministry of Education officials and the Education Review Office within 90 days of the end of the service's financial year.

This financial information is required from ECE services so that the ministry can be sure that services have spent the ministry's subsidies appropriately. Funding may be withheld from services not meeting the financial reporting requirements.

Audited financial statements for 2007/08 and the enclosed declaration form are due with the Ministry by 30 June 2009

Services' audited financial statements for the financial year ending during 2008, and the complete and signed declaration form included with this circular, are due with Resourcing Division, Ministry of Education, no later than 30 June 2009.

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Penalty for late or incomplete returns

Advance funding may be withheld from services that do not send their audited financial statements by the 30 June 2009 deadline or if the information they send is incomplete. If the audited financial statements are incomplete, they will be returned for amendment, along with a letter explaining why they do not meet the ministry's financial reporting requirements and what you must do to bring them up to the required standard.

Exemption from financial reporting

If your service did not complete a full financial year of operation in 2007/08, you do not have to supply audited financial statements for the financial year ending during 2008. However, please return the attached declaration form with a note saying why you consider the service to be exempt from providing 2007/08 financial statements.

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Services' audited annual financial statements should include the following information:

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A privately owned Early Childhood Education service is a service operated by any person as a sole trader, or persons through a company, partnership or private trust. Private operators invest their own personal funds and/or capital into the services with any profits made being paid back to the investor for their own private purpose.

Community-based ECE services are generally operated by an Incorporated Society, Charitable Trust or Registered Charity for the benefit of the community they serve. Community-based services will have a constitution, trust deed or similar founding document setting out the aims and objectives of the organisation. Community-based services' funds are not available for any group or individual's private purpose. ECE services owned by public bodies e.g. health boards or government departments are considered community-based services for the purpose of this exercise.

Umbrella Organisations such as regional Kindergarten Associations may choose to return consolidated general purpose financial statements on behalf of their individual services. Each regional Playcentre Association, as well as the Playcentre Federation, should send consolidated general purpose financial statements. Individual Playcentres are required to send their audited statements of receipts and payments to the ministry via their Association. The National Office of Barnardos returns consolidated general purpose financial statements on behalf of its individual services.
 
If you are uncertain what information you need to supply, please refer to Chapters 3, 5, 10 and 12 of the Early Childhood Education Funding Handbook (as amended in February 2007) or contact the ministry by phone, email, or fax as indicated on the last page of this circular.

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Reporting 'tagged' funding (equity grants, ECE provisionally registered teacher support grants, and ATIS funding)

Equity grants, ECE provisionally registered teacher support grants, and Annual Top-up for Isolated Services grants (ATIS) are `tagged' funding. These funds must be used for the purposes for which they have been paid and must be reported separately. Chapter 10 of the Early Childhood Education Funding Handbook explains the objectives of Equity funding, and sets out guidelines for expenditure of each component. Chapter 5 of the Handbook explains the objectives of ATIS funding and gives guidelines for the expenditure of ECE provisionally registered teacher support grants.
 
The last page of this circular shows a suggested format for reporting `tagged' funding. This format is optional, but is designed to ensure the reporting criteria are met.

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Financial statements must be audited by a NZICA member

All services must have their financial statements audited by a chartered accountant who is a member of the New Zealand Institute of Chartered Accountants (NZICA). NZICA members are bound to follow the auditing standards prescribed by the Institute. Auditors need carry out only limited testing, sufficient to provide assurance that the conditions which enabled a service to access the government funding subsidies have been met.

Services can check whether their auditor is an NZICA member by visiting the NZICA website www.nzica.co.nz.  Note that services' annual financial statements may be prepared by an accountant or financial adviser who is associated with the service's management group but the person or entity carrying out the audit must be independent of that group. This means the person preparing the financial statements cannot also audit those statements.

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The audit report must have the following information

NZICA set the auditing standards and members can obtain information about these from their website. In broad terms the basic elements of an audit report are: 

• A statement indicating to the reader the full name of the entity reporting and the entity's legal status as an Incorporated Society, Sole Trader etc. 
• A statement confirming the auditor's independence e.g. "When carrying out the audit I/we followed the independence requirements of the NZ Institute of Chartered Accountants". The auditor should also disclose whether he or she has any personal or professional interests/relationships with the centre other than as auditor e.g. "Other than the audit I/we have no relationship with (the entity being audited)". 
• A brief explanation of the audit process and what the auditor has done to be able to give an opinion. 
• The audit findings. 
• The audit report must be signed and dated.
  

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Issued by

John Clark - Group Manager Resourcing
Resourcing Division
Te Wāhanga Whakrato Rawa
National Office
Physical address 45 - 47 Pipitea Street, Thorndon, Wellington, New Zealand
Postal address PO Box 1666, Wellington, New Zealand
Phone (04) 463 8383
Fax (04) 463 8374

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Suggested format for reporting Equity Funding, Support Grants and ATIS if you have received this funding during 2007/08

Notes to the Financial Statements for the Financial Year _____
(these notes should form part of your financial statements and must be audited)

Ministry of Education Equity Funding (this information can be found on the bottom of your funding advice notice)

For whichever components of equity funding you have received, briefly describe the goods and services to which the funding was applied and state why management chose to spend funding this way.

_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________

Ministry of Education Support Grants for Provisionally Registered Teachers
(refer to your funding advice notices for information)

Briefly describe the goods and services to which Support Grant funding was applied.

_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________

Annual Top-up for Isolated Services (ATIS)
(refer to the bottom of your funding advice notice for details)

___________________
¹. Privately owned ECE services may provide an audited special purpose financial report setting out how the Ministry's subsidies have been spent or if they prefer can provide an audited general purpose financial report.