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Presenter: Dr Muavia Gallie (PhD)

26 March 2012 muavia@mweb.co.za

Tshwane University of Technology Faculty of Humanities

Department of Education Studies Education Management 4

- Session 7 - �

Financial Management in Schools�

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Content 1.  Introduction 2.  Financial Education Management

defined; 3.  Legal requirements; 4.  Legislation relations relating to

financial matters; 5.  Guidelines for Financial Management; 6.  Fundraising and strategies; 7.  Financial budgeting; 8.  Conclusion.

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1.1 Introduction

We will focus in this theme on: •  The legislative requirements when

managing finance in schools; •  Sources of finances available to the

school; •  Importance of budgeting when

managing finances.

1.2 Financial Education Management defined “The distribution and use of money for the purpose

of providing education service and producing student achievement.”;

Aims of financial management (FM) are to: •  Estimate the needs of local education and

training; •  Obtain finances in accordance with the estimated

needs; •  Administer the finances thus obtained in a legally

correct manner.

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2.1 Legal requirements for FM •  General legislation

- Companies Act 61 of 1973 (Companies without gain – Section 21 company exempted from paying income tax = main objective is to furtherance of education; does not preclude you for making a profit; must stay in company);

- Income Tax Act 58 of 1962 (tax deduction in respect of donations made to recognised education funds; not applicable to compulsory school fees; maximum is R500 or 2%);

•  Education legislation - SASA (MEC must provide public funds; SGB must administer

funds and control property; reasonable sue of facilities by school and community; state must fund schools on equitable basis; financial tasks of SGB; financial year of public schools).

2.2 Legislation relating to F-Matters •  Obtain additional funds to improve quality of

education; •  Devise strategies to obtain funds from parents,

community and private institutions; •  Can’t spend funds on unnecessary luxuries; •  Must establish and maintain account for funds; •  School funds consist of compulsory and voluntary

funds; •  SGB must draft budget to estimate income and

expenditure for the year; •  This will assist in determining school fees payable

by parents;

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2.2 Legislation relating to F-Matters … cont.

•  Must establish rules and procedures for full or partially exemption;

•  Budget must be approved at parent meeting – school can legally enforce payment of school fees;

•  Keep financial records of funds receives and spent, assets and liabilities, financial transactions;

•  Financial statements within 3 months after end of financial year – must be audited and copy to HoD;

•  New category of schools – No Fee Schools!!

3.1 Guidelines for FM 1.  Education spending by central government of

various countries – 14% to 22%; 2.  1995/96 – SA spend 20.8% of total budget on

education; 3.  2011 – Total budget was R178 billion; 4.  2012/13 will be R236 billion; 5.  Largest of any other developing country; 6.  Focus of financial education management

differs from commercial financial management;

7.  One focuses on ‘service’ and other on ‘profit’.

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3.2 Fundraising •  School fees (primary source of funding; supplement

through school functions; admissions and subscription fees for sporting events; letting of facilities);

•  Marketing (public relations; positive image); •  Support network (school activities; positive attitudes of

school); •  Marketing of facilities and services (libraries; swimming

pools - share with community; offering courses like literacy and preparatory courses; offset poor parent contribution with service to school; utilise expertise);

•  Alumni culture (attracting students back to school; when they received outstanding education);

3.2 Fundraising … cont. •  Financial resources:

- contribution to education fund; - donations; - fundraising campaigns; - letting of sport facilities; - interest-free loans from parents; - creation of education trust.

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3.2 Fundraising … cont. •  Diverse sources of income:

- net profit from sales; - interest on savings, investments and bank accounts;

- fundraising enterprises such as bazaars, concerts, etc.;

- insurance investments like unit trusts; - sponsors through service by banks; - commission made from selling insurance; - income from farming.

3.3 Strategies in Fundraising •  Multiple, small and uncoordinated fundraising drives

by well-meaning staff and voluntary workers should be avoided;

•  Utilisation of learners during fundraising should not be seen as ‘exploitation of learners’;

•  Take care of ‘competitive spirits’ and ‘learners who want to impress teachers and their peers with their performance’ so that they coerce their parents to assist;

•  Must be economically viable - look at the social and incidental cost (time and effort).

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4.1 Financial Budget •  Planning and proper control of funds are

extremely important; •  Create harmony between the people who are

involved and the objects to gain, which will contribute to the success or failure of financial education management;

•  Budgets is one of the most important tools used in the financial management of a school.

4.2 What is a Budget? •  It is a detailed plan, expressed in monetary

terms, of activities that have to take place within a specified period.

•  The school budget should be a scheduled plan which balances estimated future income and expenditure;

•  Budget serves as control mechanism - enables one to establish at any stage whether expenditure exceeds the budgeted amount and to take remedial steps timeously.

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4.3 Advantages of a budgetary system •  Is a source of information regarding finances of the

school; •  A macro-programme designed to advance the goals of a

school; •  Forces everyone concerned to think in financial terms; •  Makes it possible for the needs of all sections of the

school to be noted and evaluated; •  May encourage savings by all concerned; •  Forces people to set clear targets within the financial

means of the school; •  Is a control mechanism that readily reflects deviations in

expenditure.

4.4 Disadvantages of a budgetary system •  Instead of being used as a tool for management, the

budget is often applied purely as an accounting system;

•  Goals are adjusted according to the availability of funds - first goals, then priorities, then availability of funds;

•  A budget may act as a mental straitjacket – a budget may at any time be amended as extra funds become available.

•  See examples on p.221.

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4.5 Goals and Actions •  Budget does not consist merely of words

and figures - gives a financial reflection of all activities of a school;

•  Activities should be linked to a goals or objective - set clear goals;

•  Budget should agree with mission of school.

4.6 Budgeting Principles •  Must be realistic; •  All sources of income should be identified; •  All possible expenditure must be determined; •  Financial projection must be done (expected price

fluctuations, short-, medium- and long-term goals); •  All parties concerned should be involved; •  Financial means of community should be

considered; •  Schools with hostels should budget separately for

them; •  To build reserves, one should budget for a surplus.

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4.7 Elements of the Budget •  Sources of Income (school fees, contributions,

interests, etc.); •  Costs (obtaining quotations; problems due to

unrealistic demands - convince people, establish priorities; don’t undermine efficiency; get away from ‘each one fighting for own interests’);

•  Assets (fixed assets - machinery, motor vehicles - depreciation; current assets - temporary and fluctuate from day to day);

•  Liabilities (long-term liabilities - loans; current liabilities - creditors, overdraft facilities).

4.8 Budget Management •  Not the task of one person; •  Control (compare actual and budgeted figures to

detect discrepancies timeously; exercise budgetary control; guard against overspending by departments; successful control needs adjustment of budgets from time to time, regular reports from budget committee and dealing with discrepancies);

•  Deviation analysis and interpretation (make recommendations to SGB with deviations are detected);

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4.8 Budget Management … cont. •  Internal audit and control of calculations (internal

audit to trace problems; check calculations); •  Accounting and reporting back (in meeting with

SGB; get reports from departments through budget committee; early detection of problems to be eliminated);

•  Corrective measures (under-budgeting; deficiencies in school structure; friction among staff; lack of communication; negligence in handling of finances; protect CEO against criticism from teachers and parents).

5. Conclusion •  Exercise financial discipline by curbing

unnecessary expenditure in accordance with the list of priorities;

•  Involve as many persons from the community as possible to assist in planning the budget;

•  A budget is not a secret document, drafted by a secret committee. SGB should communicate its contents to all involved and as widely as possible in order to minimise the possibility of friction.

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Thank You!