Financial accountability in the education system
Learn how the education system is accountable to parents, students and taxpayers for the quality of the programs and the performance of our students.
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Ontario is committed to a high-quality education system. Accountability is one of the cornerstones of this commitment. The education system is accountable to parents, students and taxpayers for the quality of the programs and the performance of our students. It is also accountable for the prudent management of its resources.
Financial accountability is an important component of the government's overall commitment to accountability. The expectations for financial accountability are set out in legislation under the Education Act, in related regulations, including the funding regulations issued under the Grants for Student Needs, and in annual and periodic directives issued to school boards.
There are a number of school board duties and responsibilities contained in various Acts of legislation. For example, the Broader Public Sector Accountability Act establishes requirements in the areas of compensation, expenses, perquisites, business documents and procurement for organizations that receive funding from the Government of Ontario, including school boards. The Act is designed to improve accountability and transparency across the BPS.
The Education Act and its accompanying regulations define the key expectations for school boards and provide directions to school boards for the prudent management of their school systems. Some of the key financial requirements under the Education Act are outlined below.
School boards are required to adopt balanced budgets. Under section 231 of the Education Act, when preparing and adopting budgets (estimates) for the fiscal year (September 1 to August 31), school boards are required to ensure that estimated expenses do not exceed estimated revenues unless any in-year deficit can be covered by accumulated surplus of a prior year and the in-year deficit is less than a prescribed percentage of the school board’s operating budget, per regulation.
The budgets must be adopted prior to the beginning of the fiscal year, or at an earlier time, as prescribed by the Minister of Education. Typically, school boards are required to adopt budgets by June 30 for the next fiscal year beginning September 1.
It is not a contravention of the Education Act for a school board to end the fiscal year with either a surplus or a deficit. However, it is a requirement of the Education Act for school boards, in preparing their budgets for the next fiscal year beginning September 1, to make a projection of and to provide for any deficit for the current year ending August 31.
School boards are required, under section 170.1 of the Education Act and Ontario Regulation 132/12, as amended, to meet province-wide standards for class size. Please see the regulation for detailed requirements.
School boards are required to report the average class size for the school board and for each school to the public and to the Minister, in the fall for elementary schools and in the summer for secondary schools.
Education funding recognizes that school boards need flexibility to decide how best to allocate resources within their budgets to where they are needed to provide the best education for their students. At the same time, there are restrictions under the Grants for Student Needs on how school boards may use certain components of their allocation. Some examples of these restrictions, also called enveloping provisions, are the Special Education Grant is limited to special education expenses, the Indigenous Education Grant is limited to expenses that support the academic success and well-being of Indigenous students and the School Board Administration and Governance spending shall not exceed it’s related funding envelope. Details regarding limitations can be found in a ministry document called the Technical Paper which contains an overview and details of the grant formulas and other criteria for education funding through the Grants for Student Needs that are used to calculate school boards’ funding allocations.
The Education Act and the related financial regulations require approvals for certain allocations that are used in the calculation of grants to school boards. These approvals ensure that school board activities are in compliance with program objectives.
For example, the ministry gives approvals for the following special education allocations:
- Special equipment amount (SEA) to assist with the costs of equipment essential to support students with special education needs
- Special incidence portion (SIP) for students with extraordinarily high needs
- Education and Community Partnership Program (ECPP) supporting students who cannot attend regular school due to their primary need for treatment or while in custody
The ministry also gives approval for other financial matters, such as in-year deficits greater than the prescribed thresholds, school board strike savings and funding for school authorities (isolate and hospital boards).
Section 191 of the Education Act places a limit on the honorarium that may be paid to school board trustees. Trustee honoraria details are provided in the Technical Paper.
As part of the administration of the publicly funded education system, the ministry sets requirements in certain areas of a school board's operation. While policy direction is provided through policy documents called Policy and Program Memoranda (PPM), financial direction is provided through a series of numbered memoranda (B and SB) which are available on the Ministry of Education’s Financial Analysis and Accountability website.
These communications include, among others, the annual release of the Grants for Student Needs funding allocations, changes to financial reporting requirements and related due dates, and elementary class size reporting requirements. As pupil enrolment is a significant driver of the Grants for Student Needs, the ministry has a comprehensive system to gather pupil enrolment data, including enrolment registers and instructions that specify how to report pupil enrolment.
Reporting, monitoring and auditing
Financial reporting, monitoring and auditing are key elements of the government’s overall accountability framework associated with funding that is provided to school boards in the publicly funded education system. Further details are provided within the Compliance measures section.
Each fiscal year, school boards are required to submit financial information to the Ministry of Education in four reports – the March Report, the Estimates, the Revised Estimates and the Financial Statements.
March Report - School boards and the Ministry of Education have different fiscal periods. School boards report financial information based on the school year, which is from September 1 to August 31. The Ministry of Education reports its consolidated financial information based on the Province’s fiscal year, which is from April 1 to March 31. To support the preparation of the Province’s Public Accounts, the March Report contains school board information on the seven month period ending March 31 to facilitate the consolidation of school board information with the province.
Estimates – These are typically due at the end of June for the upcoming school year and contains the budget that has been adopted by the school board. The ministry uses the Estimates to calculate the grant payments for the school year.
Revised Estimates – These are typically due in December of the current school year and provide the ministry with an in-year update to the school board's budget. The ministry uses the Revised Estimates to adjust the grant payments for the current year and to collect information on key components that are essential to the development of the financial regulation for the next school year.
Financial Statements – These are typically due in November following the fiscal year ending on August 31. They reflect the final year-end results of the school board operations for the fiscal year then ended. School boards prepare their financial statements following Public Sector Accounting Standards (PSAS). There are, however, still some exceptions to PSAS for budget compliance purposes, most of which relate to employee benefits.
School boards are also required to follow the Uniform Code of Accounts which outlines the ministry's detailed financial data requirements for school boards by defining the smallest building block necessary to produce financial information for the ministry. It also defines how revenues and expenses should be recorded and the accounts that are grouped for enveloping purposes. While school boards can expand the accounts for their reporting purposes, they must summarize and report the mandatory accounts using the prescribed codes.
When the reports show that a school board is not managing its financial resources within the intent of the Education Act, the ministry implements follow-up action. The ministry may also use a number of compliance measures to bring school boards into compliance with the Education Act. Further details are provided within the Compliance measures section.
Monitoring and compliance measures
A myriad of strategies are used in the ongoing monitoring of school boards as outlined below.
Ministry review – The ministry reviews the four financial submissions noted above to ensure they are complete, accurate funding is provided to school boards, and to ensure compliance with the grant regulations, legislation, funding envelopes and accounting standards. The reviews take into consideration the quality of the school boards’ submissions, financial materiality, field intelligence, sampling and cyclical reviews and the representation of English, French, public and Catholic school boards. These reviews occur on a timely basis, throughout the year, following the receipt of the financial submissions. The review of financial reports ensures that the school boards provide information to the public and to the ministry that fairly represents the financial results for the year in accordance with the prescribed PSAS and the Uniform Code of Accounts.
Compliance measures - The ministry may take measures to ensure a school board is in compliance with all Acts administered by the Minister of Education, and with all regulations, policies, guidelines, directives and similar instruments made under an Act administered by the Minister. Some of the measures may also be applied to a school board when the ministry has concerns over a school board’s financial health.
- Withholding grants payable to the school board when the school board is not in compliance. All or part of a grant otherwise payable to a school board could be withheld.
- Directing a school board to take measures to become compliant, including through the submission and presentation of a formal action plan that outlines how the school board intends to become compliant. Action plans serve to identify the commitment and level of responsibility of the school board. They also help the ministry to monitor the school board's progress.
- Increasing the frequency of financial reporting by school boards, through interim financial reports, which could be either quarterly or monthly to proactively monitor a school board’s financial health.
- Appointing a team of internal or external advisors to review the financial situation of a school board. Based on the team's findings, the team may help the school board to identify and develop strategies that would result in compliance.
- Appointing an investigator to review the financial and the administrative affairs of the school board. The investigator would report in writing to the Minister and could make recommendations on specific actions that would ensure that a school board's operation becomes compliant in a specific area or support the school board in meeting its financial obligations. The Minister may then order the school board to implement any action that the Minister deems necessary to address the situation.
- Upon the recommendation of the investigator, or if the school board does not comply with the Minister's order, the Lieutenant Governor in Council may vest in the ministry, or a supervisor appointed by the Minister, control and charge over the administration of the affairs of the school board. The Minister has the authority to take whatever action he or she considers necessary and appropriate to manage the affairs of the school board in order to remedy the non-compliance.
Compliance Audits - The ministry has a formal compliance audit plan that supports accountability objectives by reviewing the reasonableness of data that is reported by school boards. Using a risk-based approach, it primarily focuses on pupil enrolment as it is the key driver to the Grants for Student Needs. The ministry’s auditing procedures assess the accuracy, completeness and overall reasonability of sampled school board enrolment data. These audits are typically conducted twice per year, in the Fall and the Spring.
External Audits - External auditors certify that a school board's financial statements have been prepared in accordance with Canadian generally accepted auditing standards. Ministry staff communicate regularly with the school boards’ external auditors to provide information on ministry financial directives and discuss issues concerning the boards’ financial statements.
Value-For-Money Audits - The Auditor General of Ontario watches over the administration of Ontario’s finances to help the Legislature hold the government accountable. The Auditor does this by carrying out detailed scrutiny of government spending and then producing Annual and Special reports that provide MPPs with the information they need to judge how well public resources are being used. A key part of the Auditor General’s mandate is the value-for-money audits, which assess whether money was spent with due regard for economy and efficiency, and whether appropriate procedures were in place to measure and report on the effectiveness of government programs.
When the Auditor General Act became law on November 30, 2004, it expanded the Auditor’s value-for-money mandate to include organizations in the broader public sector that receive government grants. These include hospitals, colleges and universities, school boards, children’s aid societies, and so on. While the expanded mandate does not apply to municipalities, it does allow the Auditor to determine whether a municipality spent a provincial grant for the purposes intended. The annual review of financial reports ensures that the school boards provide information to the public and to the ministry that fairly represents the financial results for the year in accordance with the prescribed PSAS and the Uniform Code of Accounts.
Reporting to the public
The Ministry of Education maintains a public website which provides comprehensive information about education in the Province of Ontario. A school board's financial information is also reported publicly through the school board's annual report and audited financial statements.
Director's Annual Report
The Director of Education of a school board is required annually to report to the board of trustees and to the ministry on the actions that the school board has taken to develop and implement policies and programs that make the school board an effective organization.
School boards publish their annual reports on their public websites. Links to the school boards' public websites can be found on the ministry's website.
Audited financial statements
The Broader Public Sector (BPS) Business Documents Directive requires school boards to publish their audited financial statements on their public website within six months after their year-end. As such, the deadline to post the financial statements for their August 31 year-end is by February 28 of the following year. Digital versions of school boards’ audited financial statements can be found on the the school board and school authority contact information website.
Consultation with education partner stakeholders has been critical to the review, development and implementation of the financial accountability framework. The ministry continues to establish ongoing and ad-hoc committees to consult on financial matters with key stakeholder groups, such as trustees’ associations, senior business officials, directors of education and other school board officials. The committees provide a forum for input that contributes to the ongoing improvement of financial reporting methods and accountability procedures.