Funding Capital Works in an Independent School: A Board Finance Guide

A new building is one of the largest decisions an independent school board will make. It shapes the school's finances for decades. Yet many capital projects are approved on the strength of the design, with the funding plan worked out afterwards.

This guide covers the main funding sources for capital works in an independent school, and the financial questions the board should settle before a project is approved.

Quick Summary

Capital works should start from a long-term master plan and a funding plan, not a single building.
The Australian Government **Capital Grants Program** helps non-government schools that lack capital resources. It is distributed through Block Grant Authorities.
In NSW, the **Building Grants Assistance Scheme** provides state grants to non-government schools with the greatest need, also through Block Grant Authorities.
Most projects also rely on reserves, a school building fund, and borrowing.
The board should test the project against enrolment forecasts, debt capacity and cash flow before approving it.

Where the money comes from

1. Australian Government Capital Grants Program

The Capital Grants Program helps non-government primary and secondary schools improve infrastructure where they lack sufficient capital resources. It operates under the Australian Education Act 2013. Funding goes to each non-government sector through its Block Grant Authority, which then allocates it to schools.

The program is needs-based. Grants are additional to the school's own funds, and school authorities remain responsible for providing and maintaining their facilities.

2. State programs: the NSW Building Grants Assistance Scheme

In NSW, the Building Grants Assistance Scheme (BGAS) is a NSW Government program for non-government schools with the greatest need. It can fund new facilities, upgrades and growing enrolments. To qualify, a school must be registered with NESA, operate on a not-for-profit basis, be affiliated with a Block Grant Authority, show it is financially viable, and own its land or hold a sufficiently long lease.

For NSW independent schools, both the Capital Grants Program and BGAS are administered through the AISNSW Block Grant Authority. AISNSW states that applications close on 30 April each year and successful schools are usually told the following January. That means grant funding is often more than a year away from the start of planning.

Other states have their own arrangements, so check with your sector association.

3. School building fund

Many schools run a school building fund that can receive tax-deductible gifts for buildings, if it is endorsed as a deductible gift recipient. Gifts must be used for the purposes the fund allows. Keep building fund money and records separate from general operations.

4. Reserves and capital levies

Planned capital reserves, built up over years from operating surpluses, reduce the need to borrow. Some schools also charge a capital or building levy. The board should be clear about how levies are used and disclosed to families.

5. Borrowing

Most significant projects need some debt. Lenders will look at enrolment trends, operating surplus, existing debt and cash reserves. Debt is affordable only if the school can meet repayments from recurrent income, even if enrolments fall.

Questions to settle before approving a project

1. Does it fit the master plan? A building should solve a long-term need, not just a current pressure. 2. What is the full cost? Include fees, fit-out, contingency, and the cost of moving classes during construction. 3. What do enrolment forecasts show? Test the project against flat and falling enrolment scenarios, not only growth. 4. Can we service the debt? Model repayments, interest rate changes and loan covenants over the full loan term. 5. What happens to cash flow during construction? Progress payments can strain cash well before any grant arrives. 6. What are the ongoing costs? New buildings bring cleaning, energy, insurance, maintenance and depreciation. 7. Is grant funding confirmed? Never commit to costs that rely on a grant that has not been approved.

The board's role

The board does not need to manage the build, but it is responsible for financial sustainability. That means approving a funding plan before the design is final, setting clear limits on cost overruns, and receiving regular reports comparing actual spending, cash and debt against the approved plan.

A finance committee that tracks the project monthly, with a named person accountable for the budget, is one of the best protections a school can have.

Governance and record keeping

Most independent schools are registered charities, so the ACNC Governance Standards apply to the board. Under Standard 5, Responsible People must act with care and diligence, oversee finances responsibly, declare conflicts of interest and not let the school operate while insolvent. A major capital project tests every one of these duties.

Good governance for a capital project includes:

a **delegations policy** setting who can approve contracts, variations and payments
**conflict of interest declarations** from board members and staff involved in tendering
**board minutes** recording each approval, the funding plan and the risks considered
**regular project reports** comparing cost, cash and debt to the approved plan

The ACNC requires registered charities to keep financial and operational records for seven years. For capital works, also consider keeping key records for the life of the building. Keep:

grant applications, approval letters and grant conditions
building fund gift records and receipts, kept separate from general funds
loan agreements and covenant reporting
contracts, variations, progress claims and payment approvals
board and finance committee minutes for every decision

Grant conditions often include obligations that last for years after the building is finished, so these records protect the school long after the project ends.

Frequently Asked Questions

Q: Who distributes Australian Government capital grants to independent schools? A: The Capital Grants Program is distributed through Block Grant Authorities for each non-government sector. In NSW, the AISNSW Block Grant Authority administers it for independent schools.

Q: Can a capital grant fund maintenance? A: Generally no. The NSW Building Grants Assistance Scheme, for example, excludes general maintenance and projects that started before Ministerial approval. Check the guidelines for the program you apply to.

Q: How long does the grant process take in NSW? A: AISNSW states applications close on 30 April each year, and successful schools are usually notified the following January.

The Bottom Line

Capital works succeed when the funding plan comes first. Combine government grants, building fund gifts, reserves and sensible debt, and test the whole plan against cautious enrolment forecasts before the board commits.

Official guidance

[Department of Education: Capital grants for non-government schools](https://www.education.gov.au/node/7838)
[NSW Government: Building Grants Assistance Scheme](https://www.nsw.gov.au/grants-and-funding/building-grants-assistance-scheme)
[AISNSW: Capital funding](https://www.aisnsw.edu.au/school-leaders/capital-funding)
[ACNC: Governance Standards](https://www.acnc.gov.au/tools/factsheets/small-charities-library-acnc-governance-standards)
[ACNC: Record keeping](https://www.acnc.gov.au/tools/topic-guides/record-keeping)

This article is general information only and does not take your school's circumstances into account.

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