NSW Government Freezes Islamic Schools Funding under Section 21A
It has been about five years since the NSW Government introduced section 21A of the Education Act which prohibits funding assistance being paid to non government schools operating for profit.
For the first time, to our knowledge, the NSW Government has used this section to freeze funds to a non government school.
The NSW Government is reported to have frozen funding to Sydney’s largest Islamic school, Malek Fahd, after an investigation into payments the school made by way of management fees and backdated rental fees to its owner, the Australia Federation of Islamic Councils, the nation’s peak Muslim body.
Apparently, issues relating to the payments were uncovered during an audit by the NSW Department of Education and Communities.
Under this section of the Act, a non government school is taken to operate for “profit” if any part of its proprietor’s assets or income (insofar as they relate to the school) are paid to any other person. There are exceptions to that rule which largely relate to operational and capital expenses in conducting the school. There is an exemption for payments to third parties in connection with property, goods or services relating to the school at no more than reasonable market value.
It would appear that the government has formed the view that the amounts paid by the school to the Australian Federation of Islamic Councils do not qualify for that exemption.
Further information appears in a newspaper article in The Australian on 22 March 2012.