ISLAMABAD  -   The parents of school-going children on Thursday took a sigh of relief after the Supreme Court directed the private schools charging more than Rs2000 per month to reduce fee by 20 per cent.

The top court also directed the 21 private schools to either return summer fees or make the adjustment. The top court also ruled that neither any school shall be closed in the light of the verdict nor any student shall be expelled.

The top court further ruled that failing to comply with interim order by management of any school shall be tantamount to disobedience of this court.

The top court, however, allowed the schools for a five percent annual increase in future.

It, however, ruled that the regulator will decide the matter regarding over increase of more than eight percent.

The top court also directed Federal Board of Revenue (FBR) to scrutinise tax records of the directors of the said schools.

The top court further directed the Federal Investigation Agency (FIA) to confiscate the account record of Lahore Grammar School after the bench came to know that directors of the said school have been drawing more than Rs8 million per month as salary.

A three-member bench headed by Chief Justice of Pakistan Mian Saqib Nisar heard different petitions regarding excessive fees charged by private schools and schools system.

The bench also appreciated the efforts of Deputy Auditor General Sardar Azmat Shafi in conducting thorough audit of the private schools.

During the hearing, Sardar Azmat Shafi submitted the Audit report of private schools which provides a comparative analysis of 22 schools and school systems whose accounts were received and have been examined.

Report’s main finding is that almost all schools suppress their profits by using different techniques to exaggerate expenses and show as little profit and pay as little tax as possible.

“The main techniques used for exaggerating expenses have been to pay out unreasonably high remunerations to CEO/Directors (up to Rs8.5 million to one person per month in one case), take out earnings from schools and borrow money in its place, revalue assets again and again, borrow against revalued assets and increase depreciation costs etc.”

The audit report observed that the fee increases have not been a result of general price increases in the society as the fee has been raised at much higher rate as compared to all administrative expenses incurred by school during the years. “According to the accounts it is the owners who have been the main beneficiary of such fee increase.”

The prominent schools that were audited include Beaconhouse School System, Lahore Grammar School, Learning Alliance, City School, Froebel’s International, Generations School, Civilizations Public School and Bayview Academy.

The report in its findings stated that almost all schools suppressed their profits by misusing the leverage allowed to Private Limited Companies under Companies Ordinance.

The three most frequently used techniques for this purpose include; taking out large amounts for investing in other businesses directly or by large dividends and filling up of the resultant financial gap by borrowing from commercial banks, exaggeration of CEO/Directors remuneration and expenses and frequent upward revaluation of assets from a weak auditing firm and resultant higher borrowing and depreciation costs

It is recommended that Cash transactions for schools, whether collection of fee or any other charges from parents, payment of rent, vendors or salaries of teachers may be completely forbidden.

“Extra vigilance may be applied in case of collecting any charges from parents for visits, events, extracurricular activities etc. which should always be charged under intimation to Regulator and through bank and not through cash or in any other form.”

It is further recommended that fee collection should only be monthly and never quarterly after all most parents only earn their moneys through monthly salaries and not in advance.

“Admission fee may not be more than twice the monthly tuition fee similarly Security fee should not exceed two months tuition fee amount.”

Any Fee reduction should mean corresponding reduction in admission and security fee as well and not just tuition fee, each being a burden to the parent.

No summer fee may be allowed. Although the division of 12 months expenses on 10 months will mean slight increase in monthly fee amount, this would reduce the advance fee payment burden of parents.

The school must however make HR payments during this period even if for reduced number of low level security and administrative staff.

“Schools/ school systems being run as private limited companies may be forbidden from diversifying their investments from earnings of the school. The owners may do so after declaration of dividend after having paid the corporate tax.”

A limit needs to be placed in percentage terms on the maximum remuneration and expenses that the owners as CEO/Directors can incur/take out as remuneration/expenses according to the school categories.

There should be a ban on creating new heads and innovative charging to the parents under different pretexts and heads. Fee and other charges collected from parents should be under standard heads including Admission Fee Security Fee/deposit, Monthly tuition Fee.

There should be a ban on collecting any charges by joining school related to previous period upon transfer/joining of school during the study year and any security deposit and admission fee should be reimbursed within 15 days by the leaving school.

Parent Teacher Associations (PTAs) may be mandatory for all schools with active role in fee decisions, complaint redressals, major investments etc.

Schools may be mandated to charge Stationary cost, photocopying cost, uniform costs etc. on the basis of their actual costs written on face of each stationary with no profit margin whatsoever. 

There is a need to define and notify an incremental uniformed pay scales for the teachers of private schools on the basis of experience, education etc.

Regulators shall maintain a pool of audit firms and audits to be assigned randomly every two years for schools.

Charging tuition fee after end of classes and holding of final A/O level exams when no tuition is being given may be banned.

Cities and localities face extra traffic and security issues due to large school campuses which require extra police deployment etc. To curtail such problems, all schools having more than 5000 students may offer transport/pick & drop facility to students and teachers at a nominal cost.

Presently, all parents have to pay 5 percent advance tax if the fee exceeds Rs200,000 per annum. Schools benefit for three months on this collection.

It is proposed that tax filer may be exempted from this condition whereas non-tax filers may be made to pay this advance tax against any amount of fee.

Given the inconsistencies and ambiguities in the submitted accounts, it is proposed that any increase in the fee of the private schools may be frozen for the current academic year @ last completed academic year.

For the next year, formula (as given in the subsequent section below) based fee increases may be allowed subject to submission of audited accounts to the Auditor General of Pakistan and his due recommendation.

In view of the dubious/incomplete accounts besides suspected malpractices visible between the lines in the submitted financial statements, Forensic Audit of schools and school systems is recommended.

These include City School, Roots International School, Roots Millennium, Froebel’s Pvt Ltd Islamabad.

 

Court orders private schools to cut fee by 20pc

 

 

SYED SABEEHUL HUSSNAIN