1. Overview

The NSW Department of Education (DoE) is committed to working with service providers to improve service accountability and simplify grants administration through the Early Childhood Contract Management System (ECCMS).

This guide should be used in conjunction with the ECCMS Service Provider Guide (PDF, 7MB) (pages 74 to 87) which details the steps for completing financial accountability through ECCMS. This guide also aims to assist service providers to complete their annual financial accountability in accordance with the ECE Grants Programs Terms and Conditions and Program Guidelines.

• Section 1: covers information that service providers need to know before starting to complete accountability.
• Sections 2 to 4: provide information on completing different types of accountabilities, guidance notes and management of surplus funds.
  
• Section 5: provides information on the financial accountabilities review process.

Funding Specification Accountabilities

Service providers are required to complete a separate accountability for each funding specification received, detailing how the funding was expended including details of any unexpended funds. The Financial Accountability must be submitted through ECCMS.

Financial Reporting Requirements

Financial reporting requirements depend on whether the service provider is classified as a Tier 1 or Tier 2 organisation.

Tier 1 Organisations

These are Associations and Public Companies limited by guarantee who are required to prepare Audited Financial Statements under the NSW Government Associations Incorporation Act 2009, the Associations Incorporation Regulation 2010 or the Corporations Act 2001. Statements should be for the service provider as a whole and must be audited by a qualified auditor.

Where Audited Financial Statements are required they must comply with Australian Accounting Standards and should encompass the operations of the entire organisation. The Audited Financial Statements should include as a minimum:

• Balance Sheet as at the end of the period.
  
• Statement of Income and Expenditure for the period - preferably with a breakdown of all sources of income.
  
• Statement of Movements in Equity for the period.
  
• A statement of accounting policies appropriate for transactions undertaken by the association.
  
• An independent Audit Certificate that provides an opinion as to the truth and fairness of the financial statements of the organisation, printed on auditor’s letterhead (or as part of the Annual Report) and signed by an appropriately qualified auditor.
  
• A signed declaration from the directors or committee members, attesting to the accuracy of the financial accounts.
  

In addition, where the association has total revenue greater than $2 million in a financial year, it will be necessary to prepare full financial statements including:

• Statement of Cash Flows for the period.
• Notes comprising a summary of significant accounting policies adopted by the service provider and other explanatory information in accordance with Australian Accounting Standards.

A qualified auditor must be independent of the service provider, must not have any financial interest in the service provider and must be a member of one of the following:

• Chartered Accountants Australia and New Zealand
  
• Australian Society of Certified Practising Accountants
  
• Institute of Public Accountants
  
• A company auditor who is registered with the Australian Securities and Investment Commission (ASIC).
  

Tier 2 Organisations

Associations that are not required to prepare Audited Financial Statements can submit unaudited Income and Expenditure Statements and a Balance Sheet (including Statement of Equity). These statements are to be:

• Included as part of ‘minutes of meeting’ approving the unaudited Financial Statements and agreed to by all members of the board of management or governing committee, and
  
• Provided with a definitive statement, signed by a person or firm that is independent of the service and a qualified accountant, as to whether the unaudited financial statements are true and fair.
  

A qualified accountant is someone belonging to one of the following professional bodies:

• Chartered Accountants Australia and New Zealand
  
• Australian Society of Certified Practicing Accountants
  
• Institute of Public Accountants.
  

Due Date for Submission of Financial Documentation

The Statement of Expenditure and supporting financial documentation must be submitted to the department by the due date noted in the accountability correspondence.

For further information, please refer to Financial Accountability -– Information for Services.

Please retain a copy of all submitted documents for your own records. If an extension to the due date is required, please contact the info line (1800 619 113) or email ECEAudit.funding@det.nsw.edu.au.

2. Financial Accountabilities

Please refer to the tables below to determine Tier 1 or Tier 2 service providers and requirement to submit financial statements.

Information Requirements

Tier 1 Service Providers	Accountability requirements
Associations with a total revenue as recorded in the income and expenditure statement (i.e. gross receipts) for a financial year is more than $250,000 or An association with current assets more than $500,000	Complete the Financial Accountability through ECCMS Audited Financial Statements for the end of the funded provider’s Financial Year (please refer to Section 1, Financial Reporting Requirements) Income and Expenditure Statement - preferably with a breakdown of all sources of income Asset Register (if required)

Tier 2 Service Providers

Accountability Requirements

Associations with a total revenue as recorded in the income and expenditure statement (i.e. gross receipts) for a financial year is $250,000 or less, and An association with current assets of $500,000 or less

Complete the Financial Accountability through ECCMS A copy of the Minutes of the meeting approving the unaudited Financial Statements, and agreed to by all members of the board/management committee Statement signed by an independent qualified accountant verifying that the unaudited Financial Statements are true and fair Income and Expenditure Statement - preferably with a breakdown of all sources of income Asset Register (if required)

Income and Expenditure Statement

An Income and Expenditure Statement is required for each service/funding specification. The statement should clearly show the overall financial activity of each service/funding specification being funded.

The Income and Expenditure Statement is the basis from which the Financial Accountability is completed in ECCMS and should clearly agree with the figures reported in any Audited Financial Statements, with a clear breakdown of income from all sources, and expenditure relating to the service/funding specification.

The Income and Expenditure Statement must be for the end of the approved funded provider’s Reporting Year (i.e. Financial or Calendar).

Statements from previous years can also be submitted if there are surplus funds from previous years required to be reported in the annual accountability. This information would normally be generated from the organisation’s accounting system or Financial Statements.

Financial Accountability

A Financial Accountability is required for each service/funding specification. If a service provider reports:

• An overall nil balance or deficit for each service/funding specification, no further action is required.
• A surplus please see Section 4, Management of Surplus Funds.

The amounts shown in the Financial Accountability should be clearly identifiable on, or clearly reconciled to, the Income and Expenditure and Financial Statements.

Note: Services should consult with their bookkeeper or accountant if there is not an identifiable breakdown of grants and other income on their Income and Expenditure Financial Statements.

Asset Register

An Asset Register showing Early Childhood Education (ECE) and non-ECE funded assets must be submitted if any depreciation, capital expenditure or sale of assets has been reported in the accountability.

3. Guidance Notes

3.1 Changes to the Start Strong Financial Accountability

The Start Strong for Community Preschools and Mobile Preschool Financial Accountability was updated last year to provide greater visibility to the Department for the use of its funding and the funding services receive from sources other than DoE.

There are two columns within the Financial Accountability that the services are required to complete as noted below:

1. DoE Funds – surplus carried forward from prior years and expenditure section relating to the Early Childhood Education (ECE) Start Strong for Community Preschools or Mobile Preschools Contracts grant funding only.
2. Non-DoE Funds – income and expenditure sections relating to funds received from sources other than DoE.

3.2 Financial Accountability

Income - there are now two columns to record income

1. DoE Funds

This column includes the Start Strong funding provided by DoE during the reporting period, which is automatically prefilled.

Note: No values are required for the greyed-out cells.

Any DoE ECE grant funding surplus noted on last year's Start Strong Community Preschool or Mobile Preschool financial accountability will be automatically carried forward, if not refunded already.

2. Non-DoE Funds

This column should only include funds received from sources other than DoE. (Don't include any other DoE grant funding amounts, eg COVID-19 Free Preschool, Disability and Inclusion Program, Community Grants. These grant amounts will have their own financial accountability.)

Total Fee Income

Enter income received from people paying to use the early childhood education and care service. Do not include COVID-19 Free Preschool grant funding from DoE.

Fundraising and donations

Enter income raised through fundraising activities and any donations received.

Grant Funding from other sources

Enter any grant income received from other sources not provided by DoE. This may include specific assistance funding from the local councils, commonwealth funding and local associations etc.

Sale of Assets

Enter profit/gain from the sale of an asset that was purchased with the DoE ECE funding.

Other Income

Don't include any DoE ECE grant funding.

Enter other income as reported in the financial statements that is not acquitted elsewhere. For example: JobKeeper and JobSeeker, Cashflow Boost payments, Trainee grants and Maternity Leave payments.

Note: Do not include COVID-19 Free Preschool funding or any other ECE grant funding under this section. These grants will be acquitted on their own financial accountability.

Surplus Carried Forward from Prior Years

Enter any surplus funds noted in the Non-DoE column on last year's Start Strong for Community Preschools or Mobile Preschool financial accountability.

Surpluses to carry forward are those noted on the prior year's financial accountability. Surpluses noted on the audited financial statements are a combination of all sources of funding, and may not be the exact amount relative to Start Strong for Community Preschools or Preschool Mobile programs.

Expenditure - there are two columns to acquit expenditure.

Please split and show expenditure relative to both DoE Funds and Non DoE Funds in each column.

Note: You must enter values into each column. Please refer to the two guidance notes below:

1. For some expenditure categories 'Salaries and Wages' where splitting is difficult, a revenue % apportion basis can be used as a guide, eg if the total income for 'DoE Funds' is $60,000 and 'Non-DoE Funds' is $40,000 totalling to $100,000 then 60% of expenditure can be apportioned to 'DoE Funds' column and 40% to 'Non-DoE Funds' column.
2. If Department of Education is the major funder, eg if total income for 'DoE Funds' is $90,000 and 'Non-DoE Funds' is $10,000 totalling to $100,000, then services should show the expenditure firstly in the 'DoE Funds' column, bringing the balance to $0 and show the remaining expenditure under the 'Non-DoE Funds' column.

Salaries and Wages

Service delivery staff: Enter expenditure for staff directly involved in service delivery.

If you received funding for the Disability and Inclusion Program or the COVID-19 Free Preschool Funding program remember to deduct any wages paid to staff from these two grants from the total wages line item on your audited financial statements. The total wages line item on your audited financial statements is a total of all wages paid using all grant funds. It is not correct to transpose the total amount unless Start Strong for Community Preschools or Mobile Preschool grant funding is the only grant income received by your service.

Use the guidance notes above to apportion the wages across the DoE Funds and Non-DoE Funds columns.

If the service received JobKeeper and JobSeeker Traineeship grants or Maternity Leave payments, the expenditure of these amounts should be noted against the wages expenditure line items in the ‘Non-DoE Funds’ column as they were received from other sources, not DoE.

Administration and management staff: Enter expenditure for employees not directly involved with the service provision, such as administration, management, accounting and co-ordination staff.

Use the guidance note above to apportion the administration and management staff wages across the DoE Funds and Non-DoE Funds columns.

Operating Costs

Enter day-to-day operational expenses, not directly involved with the service provision.

Use the guidance note above to apportion the operating costs across the DoE Funds and Non-DoE Funds columns.

Depreciation

Depreciation is a non-cash expense which represents the decline in value of an asset over an asset’s estimated useful life. Service providers with assets that contribute to the provision of the service and which are recognised on their Balance Sheet can claim depreciation expenses as expenditure against ECE recurrent funding, to the extent that the asset is being utilised for direct service delivery of ECE funded services.

Asset/Capital Acquisitions

Enter the purchase of any funded assets or capital items funded through an ECE one-off or capital grant only.

Loss on Sale of Assets

Enter the loss incurred from the sale of an asset that was purchased with ECE funding.

Other Expenses

Enter other expenses reported in the financial statements that have not been reported elsewhere.

Note: Do not include COVID-19 Free Preschool or any other DoE grant expenditure under this section. These grant amounts will have their own financial accountability.

BALANCE (SURPLUS OR DEFICIT)

It is expected that services will utilise the full DoE grant funds first, and cover any expenses over and above the DoE grant funding from their other sources of funding (Non-DoE Funds).

There should not be a deficit noted in the DoE Funds column with a surplus in the Non-DoE Funds column.

The DoE Funds column total at this section should be $0.00 showing all DoE grant funds have been expended.

It is acceptable for the service to have surplus funds in the Non-DoE column after all DoE grant funds have been expended.

A deficit in both DoE Funds and Non-DoE Funds columns is acceptable if a service utilised all DoE Funds as well as their other sources of income (Non-DoE Funds), and were required to utilise reserves stored to keep operating.

3.3 Additional Information

Cross-Subsidisation

Service providers cannot transfer grant funding between services from different grant programs.

Funding Deficits from Previous Years

If a service has incurred a deficit in prior years, this deficit cannot be carried forward and should be absorbed by the service provider.

Administration Costs/Fees

These charges often arise when there is a central administration or head office cost centre that supports multiple units within an organisation. It is acceptable for service providers to allocate a reasonable portion of overhead costs to ECE funded programs. This however must be done on a consistent basis and as part of an appropriate costing methodology.

4. Management of Surplus Funds

DoE ECE grant surplus funding may need to be returned to the department.

Transfer/Reallocation

DoE ECE surplus funds cannot be transferred to other service providers, in between services or across funded programs; unless it is permitted specifically in the program guidelines.

Recovery of Funds

As outlined in the Early Childhood Education Grants Terms and Conditions, a service provider is required to return any unexpended funds in accordance with the department’s requirements. Unexpended funds are ECE grant funding not actually expended or committed for the purposes specified in the relevant program guidelines.

Service providers with any surplus funds to be recovered or returned should contact the department. The department will advise the service provider, after reviewing the accountability, whether these funds will be recovered by offset or if they should be returned to the department.

Offsets against Future Payments

In some cases, a surplus will be recovered by offsetting future grant payments. Money owed to the department will be deducted from future payments to the service provider until the entire surplus is recovered. Service providers are expected to make adjustments to their accounts to transfer the surplus funds to the operational account where the grant payment would have been deposited.

Process for Return of Funds to the Department

In instances where an offset cannot be used to recover a surplus, for example where a service provider no longer receives ECE grant funding or where it is not allowable under program guidelines, funds must be returned in accordance with the department’s requirements.

If a service provider is required to return funds to the department, they will receive an Invoice for payment, specifying the program, amount and the service to which the request relates, as well as payment options.

5. Financial Accountabilities Review

The following review process will be undertaken:

• Accountability and financial statements will be reviewed by the department.
• If any issues have been identified the service provider will be contacted to clarify and amend the accountability where necessary.
• The accountability may also be reviewed by an external auditor engaged by the department.
• If there are any compliance issues identified, the department will contact the service provider.
• If a service provider is seeking clarification of an accountability review, a written request should be made to ECEAudit.funding@det.nsw.edu.au.