Schools in good financial health

1 September 2004

Schools in good financial health

Education Minister Trevor Mallard today released a table showing the financial position of every state or state integrated school in the country, indicating that the vast majority of schools - more than 90 per cent - have enough money to cover what they owe.

"There have been requests for this information after opposition MPs started mischievously claiming schools with annual deficits were in financial strife.

"But the figures I am releasing today show the exact opposite is the case. A school might be in deficit but have plenty of cash in the bank, as evidenced by the number of schools with deficits which have positive working capital (current assets less current liabilities). Positive working capital means a school has money left over after debts are covered, while positive net worth means a school can cover any deficit.

"Nationally 92.4 per cent of schools in total have positive working capital, while the percentage of schools with positive net worth (total assets minus total liabilities) is 99.6 per cent. The percentage of schools in deficit has dropped from 43 per cent in 2002 to 39 per cent in 2003. Some schools actually plan to have a short-term deficit, knowing they can cover any debt incurred because of their positive working capital.

"Opposition MPs also like to ignore this fact - the last five years has seen a steady strengthening of the financial position of the New Zealand school sector; with the average level of schools’ working capital, current assets and investments, and fixed assets all increasing each year since 1998."

In 2003 the average current assets and investments per school was $350,000 compared to $210,000 in 1998, the average working capital per school was $140,000 ($100,000 in 1998), and average net worth per school was $430,000 ($320,000 in 1998).

"If schools show worrying deficits for longer periods of time or negative working capital, then specialists from the Ministry of Education work alongside them to help restore their financial position.

"School operations grant funding has increased by over 26 per cent since 1999. When adjusted for inflation and roll growth, this amounts to an increase per-pupil in real terms of just over 10 per cent. The attached table also indicates per school real (after inflation) changes in operational funding which is calculated according to a school's roll.

Working capital is the school’s current assets less its current liabilities. This is the cash that a school has leftover to fund the ongoing operations of the school after the amount that a school owes (current liabilities) is deducted. Working capital is negative if the school has insufficient cash to pay what it owes.

Net Worth is the value of the Crown’s investment in the school A school’s net worth is the value of its total assets, minus the value of its total liabilities. If the school’s financial obligations are more than the school owns, the school has a negative net worth. Attached is the table of individual school's financial positions in each electorate. It is also available on www.minedu.govt.nz by searching on "schools financial positions".

ENDS

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