MINISTRY OF EDUCATION

Transcription

1 MINISTRY OF EDUCATION EXPORT EDUCATION LEVY ANNUAL REPORT 2002! 2003

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3 MINISTRY OF EDUCATION EXPORT EDUCATION LEVY ANNUAL REPORT 2002! 2003 E13

4 TABLE OF CONTENTS Page Background 3 Commentary 4 Financial Statements 8 Statement of Responsibility 9 Auditors Report 10 Statement of Accounting Policies 12 Statement of Financial Position 15 Statement of Movements in Equity 16 Statement of Financial Performance 17 Statement of Cash Flows 18 Statement of Commitments, Contingent Assets and Liabilities 19 Notes to the Financial Statements 20 2

5 Background The Education (Tertiary Reform) Amendment Act 2002 established the Export Education Levy ( the Levy ): The GovernorGeneral may, by Order in Council, in accordance with a recommendation of the Minister, make regulations imposing an export education levy on providers who receive tuition fees from international students enrolled with them. 1 Regulations prescribing the Levy came into force on 10 January In 2003, the Levy consisted of a flat fee component of 185 (GST excl.) payable by each provider together with 0.45 percent of tuition and course fee income (GST excl.). Fee income from students studying offshore and from students sponsored by the New Zealand Overseas Development Agency were not subject to the Levy. To the extent that the Education (Export Education Levy) Regulations did not specify the purpose for which the Export Education Levy must be used, those Regulations, the collection of the Levy, and the use of it, are to be validated by section 6 of the Education (Export Education Levy) Amendment Bill [currently before Parliament] when that Bill is enacted. 3 The Levy was introduced to support a wide range of development and risk management activities for the export education industry. The Education (Tertiary Reform) Amendment Act 2002 stipulates that: The purposes to which the funds of the Levy may be put are as follows: (a) the development, promotion, and quality assurance of the export education sector, which may include (without limitation) (i) professional and institutional development; and (ii) marketing; and (iii) implementation of scholarship schemes; and (iv) research, and resource development; and (v) support (financial or otherwise) of other bodies engaged in the development, promotion, or quality assurance of the export education sector; (b) the administration and audit of the code; (c) the general administration of the Levy and associated purposes. Funds raised by the Levy are held in the Export Education Levy Trust Account and are ringfenced to ensure that strategic development work is ongoing and securely resourced. In line with Cabinet decisions, the Ministry of Education is responsible for administration of the Levy and delivery of the associated work programme in the short term pending further consultation with industry over the appropriate arrangement for the longer term. 1 Section 30, 2 SR 2003/1 3 The Regulations expire at the end of the calendar year ie 31 December 2003 and the validation will apply for the whole year (including the period covered by this report). 3

6 Commentary This report is a partyear report, covering the period from 10 January 2003 to 30 June Income and expenditure related to the mandatory Code of Practice for the Pastoral Care of International Students (henceforth the Code ) is also included in this report as the accumulated surplus generated by the discontinued Code fee for the period up to 10 January 2003 was transferred to the Export Education Levy Trust Account. The Export Education Levy replaced the Code fee on 10 January 2003 as the mechanism through which the Code is funded. Income & Expenditure The Export Education Levy generated 1,390,399 in the period to 30 June Combined with income from the Code of Practice fee, the sale of Coderelated publications and interest received, there was a total income of 1,951,422 in 2002/2003. Export Education Levy expenditure totalled 564,855 in the period to 30 June Combined with expenditure associated with the Code of Practice, the cost of goods sold, depreciation and other costs, expenditure totalled 1,074,307 in 2002/2003. There was a net surplus of 877,115 as reported in the Statement of Financial Performance as at 30 June Export Education Activities Export Education Levy expenditure in 2002/2003 fell into four main areas: development of a Levy work programme; Levy collection; completion or advancement of industry development projects already underway; and industry body core funding. A more comprehensive programme of work, spanning research, promotion, quality assurance and professional development has been put in place for 2003/2004, with input from industry reference groups. Levy Work Programme Design & Management In the first of these areas, early work consisted of further refinement of the proposed Levy work programme structure, the design of an industrydriven process to develop a Levy work programme and the negotiation of a contract covering core industry development work with the industry body. A series of export education industry reference groups were later created to assist in the development and implementation of the work programme associated with the Export Education Levy for the 2003/2004 financial year. Reference group members were nominated by industry bodies. There are six reference groups in total: Research, Professional Development Tertiary, Professional Development Schools, Professional Development ESOL (English for Speakers of Other Languages), Quality Assurance (covering the Code of Practice for 4

7 the Pastoral Care of International Students), and Promotion. The reference groups have been tasked with developing a recommended work programme for their area in consultation with their industry sector or subsector. The Ministry facilitates all reference group meetings which are chaired by an elected industry representative. A contract was entered into with Education New Zealand to provide secretariat services for the reference groups. The Ministry will have oversight of the implementation of initiatives once the work programmes are finalised. Levy Collection Advice on the most costeffective and efficient Levy collection mechanism was provided by Rutherford and Sloan, following discussion with sector representatives and officials. The resulting Levy collection process was then formalised through the gazetting of the Education (Export Education Levy) Regulations Levy collection expenditure, including costs associated with the abovementioned advice totalled 121, The following table provides a breakdown of the cost of Levy collection to 30 June Costs Associated with Export Education Levy Collection External advice on Levy implementation 37,299 Salaries 49,053 Operational policy and establishing systems 34,470 Printing costs 525 TOTAL 121,347 Income generated by the Levy between 10 January and 30 June 2003 totalled 1,390,399. The following table shows income by sector. Income by Sector from Export Education Levy: 10 January 30 June 2003 Schools Sector 401,490 Polytechnics 164,159 Colleges of Education 5,933 Universities 400,508 Subsidiary providers 25,712 PTEs 392,597 TOTAL 1,390,399 Industry Development Projects Levy funding was used to continue or complete a range of industry development initiatives. 5

8 A series of workshops and seminars on the Code of Practice and best practice in international education were held throughout the country, with a particular emphasis on primary and intermediate schools, during the period November 2002 to February These complemented workshops and seminars covering other parts of the sector held in 2001/2002. Levy funds also enabled the completion of a detailed needs assessment report identifying the professional development requirements of staff working for tertiary providers of international education in New Zealand, and proposing a professional development programme for 2003 and beyond. The International Education Visits Fund provided grants to assist education representatives undertake short missions to improve overseas understanding of aspects of New Zealand s education and qualifications system. Levy funds also enabled the finalising of a crosscultural communication resource and a resource for schools entitled English for Speakers of Other Languages (ESOL): Effective Provision for International Students and contributed towards the costs of developing an international student survey. A publication on New Zealand s education and qualifications systems, designed for use overseas, was translated into Japanese, Korean, Thai, Portuguese and Chinese (simplified and traditional versions). Industry Body Core Funding The Ministry of Education negotiated a core services agreement in May 2003 with Education New Zealand to support export education industry development activities. As the Export Education Levy effectively limited Education New Zealand s ability to charge subscription income, this agreement enables Education New Zealand to continue to engage in core activities and provide export education services previously supported by subscription income during the 2003 calendar year, pending further decisions about management of the Levy and implementation of the ongoing programme of work it funds. Code of Practice Activities The mandatory Code of Practice came into force on 31 March 2002 with a six months transition period allowing time for providers to become familiar with the requirements of the Code and make application to become a signatory. The purpose of the Code is to provide a set of standards for educational providers so that international students are well informed, safe and properly cared for. Attestation of compliance was a key task in implementing the Code and an assessment and approval process was established as well as a data base of signatories. By 1 October 2002 there were over 900 signatories and by 30 June 2003 almost

9 Implementation also included setting up systems for the ongoing monitoring of compliance. Agreements and interagency liaison have been established with existing provider audit agencies and other government departments including the New Zealand Immigration Service. The International Education Appeal Authority (IEAA) was also established to adjudicate on complaints from international students. To meet the need for promoting best practice, the Code and Code summaries have been translated into six languages and there are Guidelines to support the Code. Separate guidelines for primary and intermediate schools who enrol international students and an information sheet for the parents of these students have also been printed. The Ministry of Education s web site provides a comprehensive range of good practice resources and links, including templates, frequently asked questions and newsletters. Sector associations, regional organisations and advisory groups have been involved in developing and disseminating these resources. 7

10 EXPORT EDUCATION LEVY FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE

11 STATEMENT OF RESPONSIBILITY In Terms of Section 238I (3) of the Education Act 1989 The Ministry of Education as the agency responsible for administering the Levy has prepared these financial statements. The Secretary for Education accepts responsibility for the preparation of the annual financial statements and they have been prepared in accordance with generally accepted accounting practice. Appropriate systems of internal control have been employed to ensure that all transactions are executed with appropriate authorisation, that all transactions are correctly processed and accounted for in the financial records, and that the assets are properly safeguarded. In our opinion, the financial statements fairly reflect the financial position as at the end of the financial year and the financial performance and cash flows for the financial year ended 30 June Howard Fancy Secretary for Education Rose Anne MacLeod Chief Financial Officer 08 December December

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14 EXPORT EDUCATION LEVY STATEMENT OF ACCOUNTING POLICIES For the year ended 30 June 2003 Reporting Entity The Export Education Levy is a scheme administered by the Ministry of Education in accordance with section 238H of the Education Act These financial statements have been prepared pursuant to section 238I of the Education Act Measurement Base The measurement base adopted is modified historical cost unless otherwise stated. Specific Accounting Policies Financial Instruments The Ministry of Education as agent for the Levy is a party to a variety of financial instrument arrangements as part of its everyday operations. A financial instrument is any contract that gives rise to both a (recognised or unrecognised) financial asset of one entity and a (recognised or unrecognised) financial liability of another entity, or is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Financial instruments include accounts payable and receivable and cash. These have been recognised in the Statement of Financial Position. Revenues and expenses in relation to these financial instruments are recognised in the Statement of Financial Performance. Revenue Revenue is derived from levies paid by participating educational institutions, sales of Code books and interest on the funds held with Westpac Banking Corporation. This revenue is recognised when it is earned and is reported in the financial period to which it relates. 12

15 Accounts Receivable Accounts receivable are stated at expected net realisable value. Cash Cash consists of cash and bank and is recognised at its fair value. Accounts Payable Accounts payable are stated at cost. Goods and Services Tax The Ministry of Education as agent for the Levy is a registered person in terms of the Goods and Services Tax Act All statements are GST exclusive except for Accounts Payable and Accounts Receivable in the Statement of Financial Position. Fixed Assets The initial cost of a fixed asset is the value of the consideration given to acquire the asset and any directly attributable costs of bringing the asset to working condition for its intended use. All fixed assets costing more than 1,000 are capitalised and recorded at historical cost. Depreciation Depreciation is provided on a straight line basis at rates that will write off the cost of the assets, less their estimated residual values, over their estimated useful lives. The useful lives are: Years Computer software 3 Inventory Inventory is valued at the lower of cost (on a FIFO basis) and net realisable value. 13

16 Statement of Cash Flows The year end bank balance in the Statement of Cash Flows consists of cash on hand and the bank account that form part of the daytoday cash management of the Ministry as agency for the Levy. The cash flows are classified into two activities: a) Operating Activities: Includes cash received from all income sources including the Export Education Levy, the sales of Code books, bank interest and cash payments made for the supply of goods and services. b) Investing Activities The sources and use of this cash include the sale of operational fixed assets. Comparatives As this is the first six months of the Export Education Levy comparatives are not available. Changes in Accounting Policies There have been no changes in accounting policies during the year. 14

17 EXPORT EDUCATION LEVY STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2003 Description of Statement The Statement of Financial Position reports the total resources and liabilities of the Export Education Levy. The difference between the resources and the liabilities is the equity. Notes 30/06/03 Equity 877,115 Which is represented by: Current Assets 1,983,914 Bank 1 883,974 Composition of cash 883,974 Accounts Receivable 2 1,085,611 G.S.T. Receivable 6,839 Inventory 7,490 Less Current Liabilities (1,108,048) () Accounts Payable 776,591 Levies Received in Advance 331,457 Working Capital 875,866 Plus NonCurrent Assets 3 1,249 Software 1, ,115 The accompanying accounting policies and notes are an integral part of these statements. 15

18 EXPORT EDUCATION LEVY STATEMENT OF MOVEMENTS IN EQUITY FOR THE YEAR ENDED 30 JUNE 2003 Description of Statement The Statement of Movements in Equity combines information about the net surplus with other aspects of the financial performance of the Export Education Levy to give a degree of measure of comprehensive income. This, together with the Statement of Financial Position, provides information for assessing the return on investment in the Export Education Levy. Notes 30/06/03 Equity brought forward as at 1 July 2002 Add net surplus 877,115 Total Recognised Revenues and Expenses for the Year 877,115 Total Equity as at 30 June , The accompanying accounting policies and notes are an integral part of these statements.

19 EXPORT EDUCATION LEVY STATEMENT OF FINANCIAL PERFORMANCE AS AT 30 JUNE 2003 Description of Statement The Statement of Financial Performance details the income and expenditure relating to all goods and services produced by the Ministry as agency for the Export Education Levy. Notes 30/06/03 Income: Export Education Levies 1,390,399 Code of Practice 547,604 Sales of Code Books 5,795 Interest Received 7,624 Total Income 1,951,422 Expenditure: Audit Fee 5,500 Export Education 4 564,855 Code of Practice 5 497,031 Cost of Goods Sold 6 6,627 Depreciation 250 Other Costs 44 Total Expenditure 1,074,307 Net Surplus 877,115 The accompanying accounting policies and notes are an integral part of these statements. 17

20 EXPORT EDUCATION LEVY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2003 Description of Statement The Statement of Cash Flows summarises the cash movements in and out of the Export Education Levy Trust Account during the year. It takes no account of monies owed to the Export Education Levy or owing by the Export Education Levy, and therefore differs from the Statement of Financial Performance. Notes 30/06/03 30/06/03 OPERATING ACTIVITIES Cash was Received from: Export Education Levy 643,420 Code of Practice 547,604 Sales of Code Books 5,795 Interest 449 GST 10,129 1,207,397 Cash was Expended on: Production of Outputs Personnel 150,586 Operating 171,338 (321,924) () Net Cash Flows From Operating Activities 7 885,473 INVESTING ACTIVITIES Cash was Expended on: Fixed Assets 1,499 (1,499) () Net Cash Flow From Investing Activities (1,499) () Total Net Increase/(Decrease) in Cash Held 883,974 Bank and Cash Balances Bank and Cash Balances 30/06/03 883,974 Represented by: Cash 883, The accompanying accounting policies and notes are an integral part of these statements.

21 Statement of Commitments There are no commitments at 30 June (Nil for the year ended 30 June 2002). Statement of Contingent Assets There are no contingent assets as at 30 June (Nil for the year ended 30 June 2002). Statement of Contingent Liabilities There are no contingent liabilities at 30 June (Nil for the year ended 30 June 2002). The accompanying accounting policies and notes are an integral part of these statements. 19

22 Notes to the Financial Statements Note 1 Bank 30/06/03 Cheque Account 883,974 Total Bank 883,974 Note 2 Accounts Receivable 30/06/03 Trade Debtors 1,085,611 Total Accounts Receivable 1,085,611 Note 3 Noncurrent Assets 30/06/03 30/06/03 Accumulated Depreciation 30/06/03 Net Book Value Computer Software At Cost 1,499 (250) 1,249 Total Noncurrent Assets 1,499 (250) 1,249 20

23 Note 4 Export Education Levy Costs Notes 30/06/03 Capability Development 8 161,232 Promotion and Communication 9 14,932 Research 10 58,844 Other ,847 Total Export Education Levy Costs 564,855 Note 5 Code of Practice 30/06/03 Attestation 368,685 Monitoring 49,403 Resources 78,943 Total Code of Practice 497,031 Note 6 Cost of Goods Sold 30/06/03 Inventory 1 July 2002 Purchases 14,118 Cost of Goods Available for Sale 14,118 Less Closing Inventory 30 June 2003 (7,491) Total Cost of Goods Sold 6,627 21

24 Note 7 Reconciliation of Net Surplus with Cash Flows from Operating Activities Description of Reconciliation This reconciliation discloses the noncash adjustments included in determining the net operating surplus reported in the Statement of Financial Performance on page 17 to arrive at the net cash flows from operating activities disclosed in the Statement of Cash Flows on page /06/03 Reported Net Surplus 877,115 Add/(Less) Noncash Items: Depreciation Add/(Less) Movements in Working Capital Items: (Increase)/Decrease in Accounts Receivable (1,078,435) (Increase)/Decrease in Interest Receivable (7,175) (Increase)/Decrease in Inventory (7,491) Increase in Accounts Payable 1,108,048 Increase/(Decrease) in Net GST (6,839) Add/(Less) Items Classified as Investing Activities: Net Loss on Sale of Fixed Assets 8,108 Net Cash Flows from Operating Activities 885,473 22

25 Note 8 Capability Development 30/06/03 Schools Professional Development Cross cultural communication resource. 105,423 TSOL Professional Development ESOL resource. 22,207 Tertiary Professional Development Professional development needs assessment and programme development. 33,602 Total Capability Development 161,232 Note 9 Promotion and Communication 30/06/03 Provision of Factual Information Translation of publications on NZ education system. 14,932 Total Promotion and Communication 14,932 Note 10 Research 30/06/03 International Student Survey. 58,844 Total Research 58,844 23

26 Note 11 Other 30/06/03 Industry Body Core Funding 156,000 Levy Collection Establishing systems & ongoing. 121,347 Levy Management Work programme design and management. 52,500 Total Other 329,847 Note 12 Financial Instruments Credit Risk Financial instruments which potentially subject the Export Education Levy to credit risk principally consist of bank balances, accounts receivable and prepayments. Maximum Credit Risk Exposure 30/06/03 Bank 883,974 Accounts Receivable 1,085,611 Total Maximum Credit Risk Exposure 1,969,585 The above maximum exposures are net of any recognised provision for losses on these financial instruments. Fair Value The fair value is equivalent to the carrying value disclosed in the Statement of Financial Position. Note 13 Related Party Disclosure The Export Education Levy has no related third party transactions as all transactions are on an arm s length basis, with the interests of each party being completely independent. 24

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