Circular 2008/14: Annual Reporting 2008

Date: 31 October  2008
To end date: 30 October 2009
Circular Number: 2008/14
Category: Finance

Annual Reporting Circular

This circular is about: Preparation of your 2008 annual report.

This circular replaces: Circular 2007/20 issued October 2007.

The action required is: Ensure your school incorporates all financial reporting requirements into its 2008 Annual Report.

It is intended for: Chairpersons of boards of trustees and principals of all state and integrated schools.

All those preparing school annual financial statements.

Appointed auditors of schools.

For further information: Direct any enquiries about this circular to your school accountant, financial service provider, your local Ministry of Education Financial Advisor (listed at the end of this circular), or your school auditor.

Introduction

This circular provides information, advice and guidance on the preparation of schools’ annual reports for 2008.

Annual reports

Content of annual reports

An annual report is a statutory requirement for schools. It allows your board to account for how it has used resources provided by the government and the local community for the education needs of students. It can also be used to reflect on your school’s achievements and how information gathered over the previous year will shape activities in the future.

The Ministry of Education encourages boards to use the report as a way to communicate key messages to the ministry, members of parliament, parents and the wider school community.

Minimum requirements

The information that must be included in your annual report, along with model financial statements, can be found at www.minedu.govt.nz/kiwipark
All information on school financial management (including the link above) can be found on the school finance contents page www.minedu.govt.nz/finance.

Timeframe for completion of 2008 annual reports

31 March 2009 - Your draft annual report must be provided to your auditor. Failure to do so may result in operational funding payments being withheld. If a financial service provider completes your annual accounts you must convey the importance of this date. 

31 May 2009 - Your annual report, including audited financial statements, signed by your principal and board chair must be filed with your local ministry office by this date.

Filing your 2008 annual report

You must send four paper copies of your school’s annual report to your local ministry office by 31 May 2008 (or send one copy electronically). The ministry retains two copies of your report and forwards one to your electorate MP and one to the local Māori Electorate MP.

The ministry recommends that you ask your auditor to return your annual accounts to the school by Monday 25 May 2009 to allow time to send them to the ministry.

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Guidance for 2008 annual accounts

Differential reporting

Over 98% of schools qualify for ‘differential reporting’ which is a type of financial reporting designed to reduce the complexity and information contained in smaller entities’ annual reports. The Kiwi Park School Differential Reporting model can be used by most primary, intermediate, secondary and area schools.

Schools that do not qualify for differential reporting include those large schools that meet any two of the following three criteria: 

• Total revenue (including teacher salaries) is more than $20,000,000; 
• Total assets of more than $10,000,000; and 
• More than 50 full time equivalent paid employees.

If your school meets two of these criteria please use the Kiwi Park School model for schools which do not qualify for differential reporting.

Use of land and buildings

Your accounts must recognise a notional value for the use of land and buildings owned by the Crown (or proprietor for integrated schools) as an occupancy expense. You must also recognise an equal notional value as revenue for the provision of land and buildings. For state schools this grant is reflected in Government Grants, while for integrated schools it must be reflected in Local Funds Other (as the grant is provided by the proprietor, not the Crown).

>The notional lease value for state schools will vary each year and will be available on the Property Management Information System (PMIS) as a field on the ‘Property Information’ tab. This page should be printed and included with your working papers for the auditor.

For state-integrated schools the notional lease value will be calculated each year by the proprietor and provided to each school.

Cash and cash equivalents

Bank deposits and term investments with an original maturity of less than three months are classified as cash and cash equivalents under NZ IFRS. When preparing your 2008 annual report you must separate out any such bank deposits and record them as part of your cash and cash equivalents.
 
A bank overdraft is also now classified as cash and cash equivalents but shown as a separate line item under current liabilities on the balance sheet.

Impairment of assets

An asset is impaired if something has happened to reduce its value compared to the carrying amount of the asset in your school’s financial statements. For example if your school’s uniform changes and part of your school uniform inventory becomes obsolete it is considered to be an impaired asset.

Further information about impairment, including testing for impairment and its accounting treatment, is available on the ministry’s website.

Low or zero interest loans

If your school has one of these loans you should refer to the ministry’s website for guidance on how to recognise and measure the loan.

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Related party disclosures

The definition of a ‘related party’ under NZIFRS includes key management personnel of the school and any of their close family members. This definition is considerably wider than you may have used in previous years. Related party transactions will need to be identified and disclosed appropriately as a note in your school’s financial statements (refer to the Kiwi Park models for examples and www.minedu.govt.nz/conflict for further information).

Budget figures

Your 2008 board-approved budget figures should be included in your 2008 annual report, including the budget for teacher salaries and the notional value for the use of land and buildings (revenue and expense in both cases).

Recognition of sick leave

The ministry and the Office of the Auditor general are working to establish whether a liability for sick leave accrued by non-teaching staff can be recognised by schools with as little impact on the preparers of accounts as possible. Schools should be aware that future years’ annual accounts may require this to be recognised and that the ministry will provide advance notice and guidance on the treatment if this occurs.

Financial Information for Schools Handbook

The ministry is printing and distributing copies of the Financial Information for Schools Handbook (also known as ‘FISH’) to schools, auditors and financial service providers in early 2009. FISH is an authoritative guide on the financial management of schools and along with www.minedu.govt.nz/goto/finance should be your first point of reference for all guidance and instructions on good financial management in schools.

FISH also includes model financial policies (i.e. credit card use, fraud prevention etc) that boards can adopt to assist with the good governance of their schools.

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Common issues

Property

The ministry provides a useful property management annual planner for schools which is available on the ministry’s website at www.minedu.govt.nz/property.

Board minutes

Board of trustee minutes, including “in committee”, must be signed and available for the auditor.

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Analysis of variance

The Analysis of Variance is a vital part of the board’s annual report. This is a primary opportunity for the board to inform its community on how the school is performing in regard to student achievement against the targets set by the board in its strategic and annual plan.

The presentation of the Analysis of Variance is a key indicator as to whether the board has student achievement plans in place, and is able to measure actual achievement against these targets.

Guidance on the preparation of the Analysis of Variance is available on www.minedu.govt.nz/spr. This site contains: 

• general information on planning and reporting; 
• answers to Frequently Asked Questions (FAQs); 
• planning and reporting legislative requirements; and 
• Planning for Better Student Outcomes newsletters

The June Planning for Better Student Outcomes newsletter (on annual reports) contains a section on the Analysis of Variance. The September newsletter describes how the analysis of student achievement data can inform your plans.

Remuneration notes

The Education Act 1989 s87 requires school annual reports to include notes showing the remuneration and other benefits paid to principals, trustees, committee members, and any employees earning in excess of $100,000 each year. The format of these notes is shown in the Kiwi Park Model Annual Report. Where a school has made no payments to trustees or committee members, or where it has no employees earning in excess of $100,000, a ‘nil’ disclosure is required.

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Advice and support

If you have questions about the preparation of annual reports and the requirements of this circular, ask your school’s accountant, accounting service provider or auditor. You can also speak to financial advisors in the Ministry of Education who are experienced in schools’ financial matters and who can provide advice and support. See below for contact details.

The Financial Information for Schools Handbook (FISH) lists a number of resources and references that may be useful for technical advice and in the preparation of your annual report (see www.minedu.govt.nz/fish). For all information on financial management, including annual reports, see www.minedu.govt.nz/finance.

Carmel Riordan
Northern Region Financial Advisor
Private Bag 92 644, Symonds St
Auckland 1150
Phone: 09 632 9440
Fax: 09 632 9401
Email: carmel.riordan@minedu.govt.nz [NO SPAM]

Ann Clarke
Central North Region Financial Advisor
P O Box 147, Napier
Phone: 06 833 6734
Fax: 06 833 6731
Email: ann.clarke@minedu.govt.nz [NO SPAM]

Phil Carver
Central South Region Financial Advisor
PO Box 301 77, Lower Hutt
Phone: 04 463 7634
Fax: 04 463 8698
Email: philip.carver@minedu.govt.nz [NO SPAM]

Tracy Summerfield
Southern Region Financial Advisor
PO Box 2522, Christchurch
Phone: 03 378 7777
Fax: 03 378 7308
Email: tracy.summerfield@minedu.govt.nz [NO SPAM]

David Stephen
Senior Implementation Advisor
PO Box 1666, Wellington
Phone: 04 463 8250
Fax: 04 463 8252
Email: david.stephen@minedu.govt.nz [NO SPAM]

Alan Curtis
Acting Lead Advisor Operational Policy
PO Box 1666, Wellington
Phone: 04 463 8797
Fax: 04 463 8252
Email: alan.curtis@minedu.govt.nz [NO SPAM]

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Issued by

Beverly Pitkethley 
Acting Group Manager, Schools and Student Support
National Office 45 – 47 Pipitea Street, Thorndon
P O Box 1666, Wellington, New Zealand
Phone: 0-4-463 8000
Fax: 0-4-463 8001

Appendix A - School Annual Report Awards

The Ministry of Education in partnership with the NZ Institute of Chartered Accountants (NZICA) sponsors the School Annual Report Awards. The Annual Report Awards is a prestigious competition in which New Zealand companies vie with public sector organisations for the honour of the best annual report. These awards also include a school category, which is split into three sections based on school type and size. The winners in each category are acknowledged at the Annual Report Awards ceremony in Wellington.

When judging the awards the judges look beyond the financial statements and assess the quality of the non-financial information presented. The underlying consideration is how well the report conveys the school’s achievements to its readers (particularly parents and the community).

Winners of the award in previous years have impressed the judges with the quality of information about student achievement and outcomes, links to charter goals and objectives, information about the school’s future plans, and their use of graphics, pictures, and photographs to illustrate the annual report.

The winners of the awards for 2007 annual reports were:

The category winners won a Hewlett Packard media drive worth $249 and $1000 cash, as well as a trophy and certficate.

Supreme Award - This year the judging panel introduced a Supreme Award with a significant prize donated by Hewlett Packard, a tablet PC worth $3,500.

The judging panel presented a commendation award to Hagley Community College.

This year, prizes of $500 cash were awarded to one short listed school from each category, selected at random. The recipients of these prizes were St Hilda's Collegiate School (High Schools and Colleges category), Takaka Primary School (Primary Schools >= 100 pupils) and Miramar Christian School (Primary Schools <100 pupils).