Chartered Accountants Australia and New Zealand (CA ANZ) has submitted feedback to the Ministerial Advisory Group on the Early Childhood Education (ECE) Funding Review. CA ANZ highlights the need for complete financial information for ECE services to ensure public funds are used effectively and to help prevent unexpected service closures.

Private ECE services are required to provide audited special purpose financial reports (SPFR) to the Ministry of Education that are limited in scope, containing only Ministry funding and how it was spent. CA ANZ recommends that private ECE services be required to provide full financial statements. This would enable the Ministry to assess each service’s financial health and help identify insolvency risks early. To keep compliance practical, CA ANZ suggests leveraging other statutory reporting obligations and using a tiered approach based on a service’s size and complexity.

Community-based ECE services, such as incorporated societies and charitable trusts, must provide audited general purpose financial reports (GPFR). However, not all not-for-profit entities have a statutory requirement to prepare GPFR. CA ANZ recommends revisiting the definition of a community-based service and again building on existing reporting obligations through a tiered framework.

Currently, ECE services with annual Ministry income under $80,000 are exempt from the requirement to provide audited financial reports. CA ANZ recommends that this threshold be revised and based on a service’s total income from all sources to provide a more accurate measure of economic significance.