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Presenter:

Dr Muavia Gallie (PhD)

26 March 2012

[email protected]

Tshwane University of TechnologyFaculty of Humanities

Department of Education Studies

Education Management 4

- Session 7 -Financial Management in Schools

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Content1. Introduction

2. Financial Education Managementdefined;

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 purposeof providing education service and producing

student achievement.”;

Aims of financial management (FM) are to:

•

Estimate the needs of local education andtraining;

• Obtain finances in accordance with the estimatedneeds;

• Administer the finances thus obtained in a legallycorrect 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 notpreclude you for making a profit; must stay in company);

- Income Tax Act 58 of 1962 (tax deduction in respect ofdonations made to recognised education funds; notapplicable to compulsory school fees; maximum is R500 or2%);

• Education legislation

- SASA (MEC must provide public funds; SGB must administerfunds and control property; reasonable sue of facilities byschool and community; state must fund schools on equitablebasis; financial tasks of SGB; financial year of publicschools).

2.2 Legislation relating to F-Matters

• Obtain additional funds to improve quality ofeducation;

• 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 voluntaryfunds;

• SGB must draft budget to estimate income andexpenditure for the year;

• This will assist in determining school fees payableby parents;

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2.2 Legislation relating to F-Matters!

cont.

• Must establish rules and procedures for full orpartially 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 ofvarious countries – 14% to 22%;

2. 1995/96 – SA spend 20.8% of total budget oneducation;

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 managementdiffers from commercial financialmanagement;

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 ofschool);

•

Marketing of facilities and services (libraries; swimmingpools - 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 whowant 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, regularreports 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!

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