Financial Accountability Return Guide
Information on how early childhood education service providers can complete their annual financial accountability in accordance with grant terms and conditions and program guidelines
The NSW Department of Education is committed in 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 86) 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 grant 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 Statement of Expenditure 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
- 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:
- The Institute of Chartered Accountants in Australia
- 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 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 financial statements are true and fair.
A qualified accountant is someone belonging to one of the following professional bodies:
- The Institute of Chartered Accountants in Australia
- 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 Accountabilities 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 (1300 755 426) or email ECEAudit.email@example.com.
2. Financial Accountabilities
Please refer to the tables below to determine Tier 1 or Tier 2 service providers and requirement to submit financial statements.
|Tier 1 Service Providers||Accountability requirements|
|Tier 2 Service Providers||Accountability Requirements|
Income and Expenditure Statement
An Income and Expenditure Statement is required for each service/funding specification. The statement should show the overall financial activity of each service/funding specification being funded.
The Income and Expenditure Statement is the basis from which the Statement of Expenditure is completed in ECCMS and should clearly agree with the figures reported in any Audited Financial Statements.
The Income and Expenditure Statement must be for the end of the approved funded provider’s Financial Year.
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.
Statement of Expenditure
A Statement of Expenditure 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 Statement of Expenditure should be clearly identifiable on, or clearly reconciled to, the Income and Expenditure and Financial Statements.
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
The following information should be referred to when completing the financial accountability.
3.1 Statement of Expenditure
Enter income received from people paying to use the early childhood education and care service.
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 which is not provided by the NSW Department of Education.
Sale of Assets
Enter profit/gain from the sale of an asset that was purchased with the ECE funding.
Enter other income as reported in the financial statements that is not acquitted elsewhere.
Surplus Carried Forward from Prior Years
Enter any carried forward ECE grant funding surpluses from prior years, if not refunded already.
Salaries and Wages
Service delivery staff: Enter expenditure for staff directly involved in service delivery.
Administration and management staff: Enter expenditure for employees not directly involved with the service provision, such as administration, management, accounting and co-ordination staff.
Where it is not possible to distinguish salaries and wages between the above two categories, realistic percentages should be allocated.
Enter day-to-day operational expenses, not directly involved with the service provision.
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.
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.
Enter other expenses reported in the financial statements that have not been reported elsewhere.
3.2 Additional Information
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.
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
ECE grant surplus funding may need to be returned to the department.
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 grant Terms & 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.
Start Strong Fee Pass through
Under the Start Strong Funding Guidelines, for non-equity 3 year old children, services are required to pass through at least 50 per cent of the new base rate funding for these children. This fee pass through will be measured using the data collected through the August 2019 Preschool Census to compare a service’s reported fees in the August 2018 Preschool Census.
For fee pass through excluding non-equity three year olds, services were required to pass through at least 75 per cent of the increased funding to families by lowering their daily fees. Daily fees for children from low income or Aboriginal families and children with disability and additional needs (equity children) must be lower than the daily fee for non-equity children. In exceptional circumstances where the preschool cannot reduce fees by at least 75 percent of the increase, a justification must be provided.
The department will monitor fee pass through using the data collected through the Preschool Census and periodically conduct audits of preschool services, and may request a funding compliance audit in these or other circumstances.
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.firstname.lastname@example.org.