A Steiner school's BER crisis shifted the focus to independent schools, writes Heath Gilmore.
The voluntary administrator Stephen Parbery laughs ruefully when talking about the financial and business acumen of the Steiner school he helped rescue.
A founding partner of PPB, Parbery is used to giving advice in corporate collapses including Ansett Airlines, HIH Insurance, Lehman Brothers Australia and ABC childcare centres.
But the chartered accountant admits to being in strange territory when Shearwater, the Mullumbimby Steiner School, asked to be placed under voluntary administration in March.
The school, located in the heart of the alternative lifestyle movement of Australia, was collapsing under a $10 million debt and the problem of misappropriating part of a $600,000 Building the Education Revolution grant from the federal government.
''Naiveness,'' Parbery says. ''Absolutely, that is the best word to describe how these people got themselves into trouble … these were well-meaning people who got into trouble when experiencing big growth in numbers and infrastructure but with little expertise in business and proper governance. We see it a lot with start-up businesses and clubs.''
Being naive, however, counts for little with a federal government under pressure. The Department of Education, Employment and Workplace Relations is investigating the use of BER funding at Shearwater and another Steiner school at Taree.
Last week the Herald reported that the Manning River Steiner School also used part of its $250,000 grant for a library to patch up its working budget. The school has declined to comment on its predicament.
Chris Evans, the new minister responsible for the $16.2 billion building program, views the misuse of money by the Steiner schools as a serious issue. His office was unable to rule out more schools emerging.
''The [department will] investigate all improper or inappropriate use of Commonwealth money,'' a spokesman for the minister said.
''The department is working closely with the Association of Independent Schools NSW to ensure they have been appropriately spent.''
The actions of the Steiner schools shifts the close scrutiny of the federal government's $16.2 billion building program to the independent education sector for the first time.
Earlier this year the Australian National Audit Office found 82 per cent of schools that were self-managing projects - mostly private or independent schools - believe they had received value for money compared with just 40 per cent for government schools.
The NSW government was pilloried for its handling of the federal grant money, with the construction of classrooms, libraries and covered outdoor areas costing double those of ACT public schools and Catholic schools in Tasmania and Queensland.
The Association of Independent Schools of NSW distributed $484 million in BER money to 327 participants in the primary school building program.
The association includes more than 340 schools that together enrol more than 135,000 students. The membership includes schools of many different types, sizes, religious affiliations and educational philosophies, ranging from private school including Shore and Wenona at North Sydney to Blacktown Youth College at Broken Hill.
Under a bilateral agreement with the federal government to act as a block grant authority, the association is required to validate the ''accuracy of information provided by schools or other parties''.
The government required the association to provide monthly reports on the school projects, including expenditure and the start and completion of construction.
The association's executive director, Geoff Newcombe, says appropriate accountability frameworks were put in place to monitor all BER projects.
He said project liaison officers made visits to the Shearwater and Manning River schools at various stages of progress, adding that these measures were effective and met their aims.
''It should be noted that under the BER program the initial assessment of a school's financial viability was the responsibility of the Department [of Education, Employment and Workplace relations]," he says.
Newcombe says appropriate processes were implemented effectively at the two Steiner schools, and that no government money was lost.
Wroth Wall, a solicitor and new Shearwater director, says the rapid expansion of the school, coupled with crippling differences within the community, flowed through to problems with governance.
The decision to place the school in voluntary administration left it with 10 weeks to find $2 million, or it would close.
Shearwater Action was formed to organise fund-raising, donations, community awareness and social media, including Facebook. Every Steiner school in the world was contacted to ask for their support.
Two benefactors came forward with loans. A grandfather of two students, Nigel Woodward, gave $600,000 and the Organic India company founders, Bharat Mitra and Bhavani Lev, gave $675,000.
''These fights are endemic in Steiner schools where groups are trying to run their own agenda. Authoritarian control is not well received,'' Wall says.
Authoritarian control, however, was implemented at the recommendation of receiver Stephen Parbery's team. The $600,000 BER grant was repaid in full. Bank and parent loans were renegotiated for repayment over a longer period.
Unsecured creditors compromised, with debt repayment of up to 12¢ in the dollar. All outstanding superannuation was repaid to staff.
New school directors were appointed with entrepreneurial, legal and accounting backgrounds.
More tellingly, a headmaster was installed and given day-to-day running of the school, which emerged from voluntary administration in May.
''Having truly independent directors with the required skills and management structure that has a headmaster reporting to the board was needed,'' Parbery says. ''Previously it was a clumsy organisational structure which was a committee of teachers, parents and others in control of day-to-day management. It didn't help in dealing with a crisis.''