KEY POINTS:
Schools are spending precious money buying expensive equipment to keep up with neighbouring schools and win students, says the Education Review Office.
A report from the office shows some schools have gone into debt in a bid to make themselves more attractive to families and boost their rolls.
The move can pay off if student numbers rise, resulting in an increase in Government funding.
But the ERO said the practice was risky and could put schools in a vulnerable financial position.
The report is the latest in a series of studies detailing the financial pressure under which schools are operating.
Last year, a Ministry of Education review found more than 40 per cent of schools were in the red.
It predicted the situation was likely to worsen as student numbers dropped, compliance costs increased and a fall in international student numbers affected schools' ability to raise money.
The ministry is reviewing funding of schools.
The ERO report, sent to schools yesterday, looks in depth at the way 27 schools spent Government cash and money raised locally.
It found most had satisfactory financial management systems, but there were gaps in the expertise of managers and boards of trustees.
Low-decile schools were more likely to lack the specialist skills.
It gave three examples of how competition for students had hampered decision-making.
One school spent a lot of money on information technology equipment - not because it was needed, but to keep up with high-decile primary schools nearby.
A school in a low socio-economic area abolished parent donations and gave away stationery packs and some free uniforms to entice parents to enrol children there rather than another school.
A primary school put more teachers into the junior school to match the teacher-pupil ratio at a nearby school.
"This action was not necessarily a poor use of funds, but the rationale for it was not based on improving student achievement and was more concerned with maintaining student numbers," the report said.
Principals' Federation past president Pat Newman said pressure on schools to increase the number of services available had not been matched by increased funding.
Schools in wealthy urban areas faced the most demands from parents, but schools did best when they worked together rather than competing.
Secondary Principals' Association past president Graham Young said boards of trustees wanted to make their schools the best in the region.
He said most schools covered any financial shortfalls by fundraising, rather than by getting more Government money.
The ERO report said all schools in the study raised money locally.
It said 18 per cent of primary schools' fundraising was through international student tuition, 15 per cent through selling items such as books and uniforms and 14 per cent through fees for courses and activities.
For secondary schools, almost a third of fundraising was through international student tuition, 14 per cent through family "donations" and 12 per cent through selling items.
