Directly Resourced Transport - Managing The Funding

The intent of shifting the funding for school transport services directly to schools rather than to entities which manage the services was to move the responsibility for the funds back into the hands of schools. This was to ensure that Crown funds remained under the control of Crown entities – school boards of trustees.

It doesn’t matter that the previous entity might have been owned or controlled entirely by the schools concerned. As the controlled entity is not itself a Crown entity, the payment of Crown funds into a bank account not under the control of the board is a breach of the Education Act 1989.

This does not mean that the school cannot engage another entity to manage the administration of transport funding. This can happen as long as the school retains control and the accounts are consolidated into those of the school (lead school in the case of a network) at year end.

The new funding mechanism has shifted the responsibility on to schools to receive and manage funding. The school has the responsibility for engaging either a bus operator directly or engaging a third party administrator according to good procurement and financial management practices.

Funds must remain under the control of the board of the school until such time as the funds are paid to the transport operator.  A third party administrator can have access to this account and can manage the payments - but there must be an agreement in place in regard to the performance of the third party administrator. This agreement should state the fees charged by the administrator which must be paid by the school on an invoice basis on a due date.

For administrative convenience, and to avoid having transport network transactions cluttering the school’s ordinary accounts, the school can open a separate bank account for administering the network - but the account must remain under the ownership of the school board of trustees.

It also means that the GST returns for the school board and the transport network, although perhaps managed separately, must be combined on a single GST return and IRD number in the name of the school.

Within a network, at the end of the year any residual balance will be accounted for in the lead school's balance sheet and may be paid out to the other schools on whatever basis the schools in the network have agreed. The transport network accounts will be consolidated into those of the lead school and will become part of the lead school's annual audit.

How should schools go about concluding the previous arrangements?

The ideal mechanism is to complete the accounting for the existing school transport service on a realisation basis as at December 2008. Networks will have to produce a liquidation statement showing the distribution of the remaining funds to either the lead school or to the schools in the network in accordance with the current agreement. The accounts can then be audited and closed.

A model liquidation statement is available for download from www.minedu.govt.nz/finance.