Financial accountability in the education system

An accountable school system

Accountability is one of the cornerstones of our high-quality school system. Our school system is accountable to parents, students and taxpayers for the:

• quality of our programs
• performance of our students
• prudent management of our resources

The expectations for financial accountability are set out in:

• law and related regulations
• directives that we issue to school boards annually and periodically

Accountability framework

School board duties and responsibilities are set out in law and through policies and financial direction we provide.

Legal framework

The Broader Public Sector Accountability Act, 2010 sets the rules that school boards follow for compensation, expenses, business plans and procurement.

The Education Act and its accompanying regulations set rules for school boards, including financial rules. These laws give direction to school boards for the prudent financial management of their schools.

Ministry rules

We set rules on how school boards operate.

We share:

• policy direction through policy documents called Policy and Program Memoranda (PPM) that each have a specific number and topic
• financial direction through a series of numbered memos (B and SB)

The financial direction memos include:

• annual release of school board funding allocations
• changes to financial reporting rules and related due dates
• class size reporting rules

Rules for school boards

School boards follow these key financial rules under the Education Act.

Balanced budgets

School boards must plan for a balanced budget before the start of each school year. The school system fiscal year starts on September 1.

School boards must make sure estimated expenses don’t exceed estimated revenues.

School boards may have a planned deficit for the year if any of the following apply:

• the deficit is allowed as part of a financial recovery plan
• the board under an order giving us control of the administration of the board
• the deficit is approved by the Minister of Education according to law

If none of the above apply, a school board may still have a planned deficit for the year if, all the following apply:

• the school board did not have a deficit in both of the last 2 fiscal years (for 2024–2025 and onward)
• provides a plan to eliminate the deficit within a set timeline
• the planned deficit is:
  • covered by a surplus from any prior year
  • less than a set percentage that is defined in regulation and is usually 1% of the school board’s operating budget

Class sizes

We provide the framework, funding and flexibility needed to help school boards meet class size requirements.

Class size organization is a local school board responsibility.

School boards must:

• organize their classes to meet province-wide standards for class size
• report publicly (and to us) on class sizes

School boards report:

• elementary school class sizes in the fall
• secondary school class sizes in the summer

When school boards don’t meet class size standards, they must submit a class size compliance management plan to us in the first year of non-compliance.

If a school board does not meet class size standards for 2 or more years, we may reduce their spending limit on administration costs. This is to re-direct funds to the classroom to help the school board comply with the class size regulation.

When a school board meets class size standards, we will lift these measures.

Class size standards

Kindergarten

The maximum board-wide average class size is 26 students.

At least 90% of classes^{footnote 1[1]} must not exceed 29 students.

Up to 10% of classes^{footnote 1[1]} can reach up to 32 students if needed to avoid one of the following:

• negative effects on a program (for example, French immersion)
• an increase in kindergarten/Grade 1 combined classes

Grades 1 to 3

• At least 90% of classes must have 20 or fewer students.
• Up to 10% of classes can have as many as 23 students, but no classes can have more than 23 students.

Grades 4 to 8

• The maximum board-wide average class size is 24.5 students.

Grades 9 to 12

The maximum board-wide average class size is:

• 23 students for in-person or remote learning
• 30 students for online courses

Spending limits

We recognize that school boards need flexibility to use resources within their budgets in ways that provide the best education for their students. At the same time, there are limits (known as enveloping rules) on how school boards may use certain parts of their funding.

Examples include:

• special education — spending is limited to special education expenses
• Indigenous education — spending is limited to expenses that:
  • support the academic success and well-being of Indigenous students
  • build the knowledge of Indigenous histories, cultures, perspectives and contributions among all students
• mental health and wellness — spending is limited to expenses that support student mental health and wellness
• student safety and well-being — spending is limited to activities, staffing and programming focused on promoting student safety, well-being and inclusive education
• school board administration — spending is limited to administration and governance expenses and cannot exceed the expense limit

Approvals

We must approve:

• a school board’s in-year deficit greater than the set thresholds
• a school board’s plan to eliminate the deficit within a set timeline
• school board strike expenses that are greater than 10% of strike savings
• funding amounts for school authorities (isolate and hospital boards)

Payments for trustees

School board trustees are volunteer positions, where local representatives can be elected to become a member of their school board.

We have set legal limits on school board trustee honoraria (the payment a trustee can receive for their services). The amount varies by school board.

An honorarium is made up of:

• an annual base amount
• an amount related to the school board's enrolment
• an amount payable to the trustee for attendance at meetings
• a distance amount in the case of boards covering large areas
• additional amounts for vice chairs and chairs

Trustee honorarium limits can range from $7,500 to $29,000 depending on the school board.  

Oversight

Financial reporting, monitoring and auditing are key elements of the accountability framework associated with the funding we give to school boards.

Accounting standards

School boards must follow Public Sector Accounting Standards and use our uniform code of accounts to prepare their financial reports.

Our uniform code of accounts puts school board expenditures into specific categories for transparency and accountability. It defines:

• how school boards must record revenues and expenses 
• accounts that are grouped for a specific use (enveloped)
• mandatory accounts and codes

School boards must summarize and report the mandatory accounts using the set codes. They may expand the accounts for their own reporting purposes. 

Reporting

School boards must submit 4 reports to us each fiscal year:

1. March report shows school board spending for the 7-month period ending March 31. We use this report to help us prepare the Public Accounts.
2. Estimates are due at the end of June. This report shows the budget the school board has adopted for the next school year. We use this report to calculate the grant payments for the next school year.
3. Revised estimates are due mid-December of the current school year. This report gives an in-year update to the school board's budget. We use this report to:
   • adjust the grant payments for the current year
   • collect key information to help us create the financial regulation for the next school year
4. Financial statements are usually due in late November after the school board fiscal year ends. They show the final year-end results of the school board. We use this report for public accounts and setting final funding payments for the current year.

When the reports show that a school board is not managing its financial resources within the intent of the Education Act, we take follow-up action.

Monitoring

We review the 4 financial reports on a timely basis, throughout the year, following the receipt of each type of report.

We ensure that:

• reports are complete and comply with legal requirements, funding envelopes and accounting standards
• school boards provide an accurate financial statement to the public each year

Auditing

Compliance audits

Our compliance audits use a risk-based approach with a focus on student enrolment.

Factors we use to identify a school board as high risk include previous audit findings and the accuracy of their reporting to us.

Compliance audits assess the accuracy, completeness and overall reasonability of sampled school board enrolment data. Audits usually take place twice per year, in the fall and the spring.

Student enrolment is a key factor in school funding calculations, and we have a system to gather this data. We provide yearly instructions for school boards on how to record enrolment.

External audits

Each year, external auditors conduct audits of school boards’ financial statements in line with Canadian auditing standards.

We communicate regularly with the school boards’ external auditors to:

• provide information on our financial directives
• discuss any issues with the boards’ financial statements

School boards post the audited reports on their website within 6 months of the school year end.

We review the reports to make sure school boards are complying with the law.

Value-for-money audits

The Auditor General of Ontario monitors the administration of Ontario’s finances to help the Legislature hold us accountable.

A key part of the Auditor General’s mandate is value-for-money audits. These audits include school boards and other organizations in the broader public sector that receive grants from us. 

These audits assess whether:

• money was spent with due regard for economy and efficiency
• appropriate procedures were in place to measure and report on the effectiveness of government programs

Compliance

There are measures we can take to ensure a school board is complying with all:

• laws we administer
• regulations, policies, guidelines, directives and similar instruments made under these laws

We can also apply measures to a school board when we are worried about their financial health.

Compliance measures include:

• directing a school board to submit and present a formal action plan that:
  • outlines how the school board intends to become compliant
  • identifies the commitment and level of responsibility of the school board
  • helps us monitor the school board's progress
• making a school board submit financial reports more often (with quarterly or even monthly interim reports) so we can proactively monitor their financial health
• appointing a team of internal or external advisors to review the financial situation of a school board and potentially help the school board identify and develop strategies that would result in compliance
• withholding all or part of a grant(s) when the school board is not in compliance
• starting an external investigation and taking control of a school board’s administration

External investigation

In some cases, we may appoint an investigator to review the financial and the administrative affairs of a school board. The investigator reports in writing to the Minister of Education.

The investigator can make recommendations on specific actions to:

• ensure the school board becomes compliant in a specific area
• support the school board in meeting its financial obligations

The Minister of Education may then order the school board to implement any action that the Minister of Education deems necessary to address the situation.

Ministry control of a school board

The Lieutenant Governor in Council may give us (or a supervisor appointed by the Minister of Education) control over the administration of the school board in either of the following cases:

• upon the recommendation of the investigator
• if the school board does not comply with the Minister of Education’s order

The Minister of Education has the authority to take whatever action they think necessary and appropriate to manage the affairs of the school board to remedy the non-compliance.

Reporting to the public

Ministry reports

Each year, we publish our plans for the coming year, and the results and outcomes of our programs delivered during the previous year.

Read our published plan for 2023-2024 and annual report for 2022-2023.

Director's annual report

Each year, the director of education must report to us and to the board of trustees on the development and implementation of policies and programs that make their school board an effective organization. School boards publish these annual reports on their public websites.

Find your school board’s website.

Audited financial statements

School boards must publish their audited financial statements on their public website within 6 months of their year-end. The deadline is February 28 of the following year.

Find your school board’s website.

Consultation

Consultation with education partner stakeholders has been key to the review, development and implementation of the financial accountability framework.

We have ongoing and ad-hoc committees to consult on financial matters with key stakeholder groups, such as:

• trustees’ associations
• senior business officials
• directors of education
• other school board officials

The committees provide a forum for input that contributes to the ongoing improvement of financial reporting methods and accountability procedures.