Transparency

Multiple Undeclared Director Conflicts, Related Party Transactions and Personal Benefit Identified  

According to records* and submissions tabled in the Review by the Administrative Appeals Tribunal (AAT), conditions were imposed on BCEL by the Department of Education 17 May 2021 to help BCEL improve its governance and financial management.  (* BCEL and Minster for Education and Youth [2021] AATA 4629 (25 November 2021)

Some of these conditions included:  a requirement for comprehensive reviews of the school’s financial management and of its governance;  record keeping requirements imposed to ensure proper management and disclosure of conflicts of interest; and full disclosure of related party transactions in the 2020, 2021, 2022 and 2023 financials.

​

The wrong financial reporting:

In 2016, BCEL changed its form of financial reporting from General Purpose Financial Reports to Special Purpose Financial Reports resulting in related party transactions no longer being disclosed. 

Bellchambers Barrett, in their 2020 audit commissioned by the Department of Education, report this change coincided with Mr Zwajgenberg becoming Board Chair.   Saward Dawson, the schools nominated auditor, is noted in AAT Documents as having previously provided BCEL with advice that "best practice (and important for true and fair) for not-for-profit entities is to disclose signifiant related party transactions".  General Purpose Financial Reports provide for such disclosure and transparency.

​

Risks to stakeholders identified:

AAT records show, the Minister, via the Department of Education, identified concerns around Directors use of school resources for possible personal benefit, or an improper purpose, which could potentially breach Section 75(3). 

​

The Ministers submissions to the AAT Review indicate in early 2020 the Department of Education had sought information from BCEL to "make a full and proper assessment of BCEL's compliance" with the Education Act 2013 and Regulation.  However, information subsequently provided by BCEL did "not fully address the departments' concerns around conflicts of interest and related party transactions" triggering a commissioning of Bellchambers Barrett to conduct an independent audit into potential conflicts of interest and related party transactions for the period 2012-2020. 

​

The Bellchambers Audit Report, dated 21 January 2021, identified:

​

"a range of issues in relation to BCEL's

governance, operational and financial management" 

​

and concluded that their audit observations...

"present ongoing risks to stakeholders of the school

and will require remediation actions, which subject to

legislative authority, should involve increased oversight

by the department to avoid further escalation".

In the interests of transparency, the Association has made request to the AAT for a copy of the full Bellchambers Audit Report, along with subsequent audits carried out by McGrath Nichol and KPMG.  As at 14 April 2023 we are still awaiting a response by the Senior Member.

Multiple undeclared director conflicts, related party transactions and personal benefit identified:

AAT Documents made available to the Association reveal, the Bellchambers Audit identified multiple undeclared director conflicts, related party transactions and transactions in which Board members had a material personal interest.  Along with consideration for the manner in which these were dealt with by BCEL, the Department decided that:

"BCEL demonstrated that it does not have the

governance arrangements of a fit and proper person". 

Consequently, on 12 February 2021 BCEL was "informed of the Departments conclusion that BCEL was not currently compliant with the requirements in Section 75(5) of the Act to be a fit and proper person to be the approved authority for Brindabella" and a proposed decision to "vary BCEL's approval".

​

The Association can reveal the conflicts, related party transactions and material personal benefits identified primarily concerned:

​

- numerous transactions between BCC and BCEL Board Chairman Greg Zwajgenberg (and/or a number of his personal companies) over many years and under the oversight of differing BCC Business Managers and differing fellow BCEL Directors; and

​

- rent arrangements and payments between BCC and Life Unlimited Church where BCEL Director Alyn Doig shares a Directorship with Life Unlimited Church (Life UC), landlord of BCC's Charnwood campus and Director Greg Zwajgenberg has identified Life UC as his local church for the past 33 years, and of which he was founding Director, and signatory to the mortgage when the Charnwood property was purchased by Life UC (formerly Life Projects Pty Ltd).

​

AAT Documents reveal "BCEL did not accept that the Bellchambers Audit had identified significant issues with its governance and operation and expressed significant misgivings about the audit report".  

Further information subsequently provided by BCEL, to support their claims and misgivings, given to the Department was reviewed by Bellchambers on 13 May 2021.  However, AAT documents show the Department of Education notes this did not result in any new information or material which would vary the findings of the Bellchambers Audit Report.

Protecting the Interests of the Charity and its Stakeholders

​

The Federal Education Minister has sought to protect the school and its interests by varying BCEL's approval and imposing conditions which the three BCEL Directors determined to appeal in the Administrative Appeals Tribunal with legal costs alone amounting to almost $300,000 (as indicated by BCEL Lawyers during AAT Final Hearings). 

Why are these valuable school resources being diverted away from the classroom to defend poor governance and mismanagement?

On 17 May, 2021 BCEL the Department gave BCEL notice that it was

​

"not presently complying with the ongoing fit and proper person

requirement under Section 75(5) of the Act and decided to

vary BCEL's approval as an approved authority",

imposing conditions with the intention to ...

​

"assist BCEL with its governance and financial management

so it may regain its status as a fit and proper person

to be the approved authority for the school".   

The Department also determined at the time "BCEL's financial viability risks have substantially increased as a result of its recent capital expenditure and current loan arrangements" with specific reference made to "the fact that BCEL's directors had certified its solvency in BCEL's 2019 audited financial statements and that that had not been qualified by BCEL's auditor".

​

The Association notes 2021 financials are still unavailable and the 2020 financials contain conditional statements regarding solvency by Saward Dawson, the appointed auditor.  These can be viewed on the Charity Register here.

​

What are related party transactions?

​

A lack of public transparency around related party transactions can undermine confidence and trust in the school’s leadership and how it is managing school resources.    

Related party transactions refer to financial transactions between two parties who have a pre-existing relationship. This could be between two companies under the same ownership or a company and its owners or management.   This can be a problem because it can create conflicts of interest and not necessarily be in the best interests of the company or charity.

ASIC and the ACNC provide some examples which demonstrate the potential risk associated with related party transactions and the importance of ensuring that these transactions are conducted fairly and transparently.

1. ASIC found that a director of a mining company used his position to approve excessive payments to a related company, of which he was also a director. This led to the mining company losing over $6 million in funds.

2. The ACNC reported that a charity organisation paid its CEO a salary that was significantly higher than what was appropriate for the size of the organisation. The CEO was also involved in a related company that provided services to the charity at inflated prices, resulting in a conflict of interest.

3. ASIC found that a director of a listed company authorised the purchase of an asset from a related party at an inflated price, resulting in a loss to the company's shareholders.

4. The ACNC reported that a non-profit organisation entered into a lease agreement with a related party for a property that was not being used, resulting in a significant loss to the organisation.

5. ASIC found that a director of a financial services company authorised loans to related parties without appropriate security or documentation, resulting in significant losses to the company's shareholders.

In Australia, the Corporations Act 2001 requires companies to disclose related party transactions in their financial reports to make sure everything is fair and above board. This includes details of the nature and extent of the related party relationships and transactions, as well as any outstanding balances or guarantees.

The Act requires that the disclosures be made in a clear and concise manner so that stakeholders (in BCC’s case parents, employees, regulators and the general public as tax payers) can understand the implications of the transactions for the company's financial performance and position.

The Act also requires that any material related party transactions be approved by the board of directors or shareholders BEFORE they are entered into. In some cases, they might need to also obtain an external expert, or additional quotations, to ensure the transaction is at a fair and reasonable value.

The purpose of these requirements is to ensure transparency and accountability in the reporting of related party transactions, and to protect the interests of any shareholders and stakeholders.

The Australian Securities and Investment Commission (ASIC) and the ACNC hold records of current and historical directors of companies and charities for public access and set out requirements for companies under the Corporations Act, which includes charities, such as BCEL.