Debentures/capital levies charged by private schools - they are NOT approved!

Updated: Oct 24

As a follow up to Part I, written in January, and Part II, written in early June, we have an update.


EDB have been turning a blind eye to the way that private - including international - schools have routinely been charging multiple, "other" (unapproved) fees for decades. Debentures, capital levies, entry fees, application fees, deposits, learning support fees, etc. In January 2020 the Ombudsman finally sat up and took notice of this irregularity and published their report here, and now the EDB are forced to do something about it. Something, but not a lot.


Shameful and Embarrassing


In a letter to schools on 18 June, the EDB stated, "We understand that these charges have become a source of funding for various activities of private schools and it is not possible to stop their collection pending the establishment of a comprehensive approval mechanism". Disappointing, to say the least, when this is communicated even before the schools have submitted any justification for charging such fees. Shameful and embarrassing that they are admitting this now after decades of not bothering to take notice, despite hundreds of complaints. Slow on the uptake here yet quick to take action to other perceived areas of illegality in schools these days.


Rushed and Rubber Stamped?


So, for the next school year 2020/21, schools now have to submit various paperwork by 15 July 2020; response by 31 August. If schools submit sooner, the result may be sooner. Still, this is at odds with the regulation that states any such applications for approval should be submitted four months before the start of the new school year. Special circumstances?! No need to consult with parents? We do, unfortunately expect most of these applications to be quickly approved, while taking a few - those that have glaring inconsistencies compared to the others - to task. [UPDATE: We are not aware of any that were not approved.]


Schools need to spend more on scholarships, bursaries and financial aid


At the same time, schools are being asked to account for the amount of money they set aside for scholarships/bursaries/families in financial need. Insufficient numbers of schools are honouring their agreements with the EDB to meet a required percentage - often around 10% of fee income. This is a lesser well known potential benefit offered by schools and parents should not be afraid to ask and apply. Respect to the few schools who do regularly meet or surpass this target.


These transitional arrangements will apparently expire in 2024/25, by which time the EDB will have come up with their "Comprehensive Approval Mechanism". Better late than never?


Optional but mandatory "other" charges


Certainly, schools' CFOs and their teams will be losing some sleep over this and will need to be getting creative with their applications and accompanying justifications. Many of the larger corporate and priority debentures will no doubt be presented as non-interest bearing loans and therefore not, in the technical sense, "charges".


Another more tenuous get-out-clause will be the optionality of such charges. Additional fees for learning support (including ESL) can, in some cases, double the tuition fee. If these and other amounts are justified as being entirely optional, we would hope that the EDB will see right through this. Yet we are not hopeful.


Too little, too late?


Regarding the "other" fees to be charged for the 20/21 AY, many schools have already issued payment demands to parents. Will they retract? Will EDB hastily approve ALL such charges for the next four years? [UPDATE: Yes, this is what has happened.]Will schools consult with parents and other payors?


The EDB is not willing to provide guidance to parents on how to handle all these other charges that have been collected for years. Is the application/approval to be backdated? This hasn't been mentioned, unsurprisingly, since this entire exercise is designed to protect the schools and their financial model, rather than those paying the ever increasing approved and unapproved fees. At this point, it is worth mentioning that many of the smaller amounts such as application fees and deposits are necessary in some way. If a school is to operate a healthy admissions funnel and ensure seats are occupied, some reasonable, smaller amounts are necessary. However, with regard to many of the millions of unapproved fees paid to these schools over the past several years (perhaps six, according to the statute of limitations, perhaps fewer), it would seem that all payors - individuals and corporates - may be seeking independent legal advice.

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