An independent audit of one of Victoria’s biggest Chinese language schools has uncovered a list of financial mismanagement issues and called for further investigation.
It concluded Xin Jin Shan Chinese Language and Culture School (XJS), which is partially taxpayer-funded, does “not have adequate governance policies, procedures and practices” to comply with funding guidelines, particularly in relation to financial controls.
The ABC obtained a copy of the audit report into the XJS after successfully challenging a decision by the Victorian Department of Education and Training to refuse a Freedom of Information request.
The XJS is a charity which, with two affiliated charities — the Eastern Chinese Language School and the Western Chinese Language School — teaches Chinese language to thousands of Victorian students.
XJS received more than $1 million in funding from the Victorian Government in 2019.
The audit into XJS was conducted in September last year and was first revealed by the Herald Sun newspaper that same month. Until now, its findings have not been made public.
The XJS was founded in 1992 by a group of Chinese migrants including Haoliang Sun, the school’s current chairman.
Independent audit uncovers financial mismanagement
While the 33-page audit by independent consultants HLB Mann Judd found that the school was compliant on some accreditation requirements, the report makes a number of adverse findings, including:
• long delays in the depositing of large amounts of cash for tuition fees into the school’s bank account;
• an ‘unusual increase in tuition fee amounts’ over three years that was not matched by a corresponding increase in the number of students;
• inadequate record-keeping, including a lack of supporting documentation for $15,000 in donations to the Xin Jin Shan Library, and a $13,000 contract with CAN Media Services, which was signed and became effective one month after the services were provided;
• donations totalling $125,000 to the Xin Jin Shan Education Foundation and Xin Jin Shan Library, where the auditors ‘could not identify the business purpose of these payments’;
• transactions between related parties creating a potential conflict of interest, such as a $35,000 per annum lease agreement with Suns Group Corporation and another $85,000 per annum lease agreement for a property owned by a committee member;
• an agreement to pay a separate entity, XJS Service Centre an estimated annual fee at August 2019 of $280,000, which the auditor calls a ‘high service fee’ for the size and complexity of the school’s operations; and
• a lack of employment contracts for staff and a lack of documented policies relating to bonuses, incentives and allowances.
Mr Sun is the chairman of both Xin Jin Shan Library and Xin Jin Shan Education Foundation.
Mr Sun is also a part owner of CAN Media Services, a part-owner in Suns Group Corporation and owner of the property leased by the school for $85,000 per annum.
The XJS Service Centre is a business name registered with ASIC and Mr Sun is listed as a name holder.
Audit findings ‘completely unacceptable’
The auditors recommend the Department consider an in-depth review of the school’s fee collection practices to check “whether the monies deposited into their bank accounts represent the student’s tuition fee”.
It also recommends the Department review instances of poorly documented spending to check “whether the payments are linked to school activities and not paid for personal-related transactions”.
The report makes positive findings about a number of practices that comply with accreditation and funding requirements. They include a charter setting out the requisite policies, detailed attendance records, properly registered teachers and a separate bank account for DET funding with at least two signatories.
In a statement, Mr Sun strongly denied there had been any impropriety at the school.
“I believe that our school has conscientiously implemented the relevant provisions of the Department of Education on the use of funds,” he said in a statement.
He thanked the auditors “for pointing out the problems in our school’s financial management, which we have and are improving.”
XJS is accredited by the Education Department as a community language school, an authorised provider of VCE Chinese, and an approved third-party provider for international students wishing to study in Melbourne.
The Department labelled the audit findings “completely unacceptable” and demanded further information from the operators.
“The 2019 audit report into the Xin Jin Shan, Eastern and Western Chinese Language Schools found serious and concerning instances of non-compliance by these schools with some of the accreditation requirements and funding agreements,” a spokesperson for the Department told the ABC in a statement.
“The findings of this report are completely unacceptable.
“We are committed to ensuring the integrity of the Community Language Schools Funding Program and we take very seriously any instances of non-compliance. As such, it is our expectation that these matters are addressed urgently.
“If we are not satisfied with the response from these schools, we will take immediate action to either recoup funds, suspend funding, or terminate the agreement.”
Another audit will be conducted in October 2020.
A spokeswoman from the Australian Charities and Non-for-Profit Commission said she was unable to comment on XJS specifically due to secrecy provisions in ACNC legislation.
The ACNC can investigate charities it suspects have breached the ACNC Act or governance standards, including those believed to be not pursuing their charitable purposes, not operating in a not-for-profit manner, or providing private benefits to members.
“Where there is evidence of a breach, the ACNC will use its regulatory powers,” the spokeswoman said.
Educational bodies are often also registered as charitable entities and required to report their finances to the ACNC each year. All charities registered with the ACNC are able to apply for income and GST tax exemptions.
Additional reporting by Joanna McCarthy