S.S. Afemikhe Consulting

Financial Management for the ace school

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Table of Content Introduction What is Financial Management for the Ace School? What is Value for Money? Treasury Management The School Budget Procedure for setting up a budgetary control system Controls Type of Budgets Distinction between Finance and Accounting Internal Controls Who we are Conclusion

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IntroductionWhat are schools set up to typically do?The core business of schools is teaching and learning. Schools exist so that students can learn and the central activity of schools is instruction. The efficiency and effective management of fiscal and physical resources can enhance instructional programmes. Drake and Roe (1994).

What is Management for the Ace School?Ace - an ace school is a sustainable and viable institution that has the capacity to produce a leader with a vision and clear cut direction to change his world; this will be measured by both moral and academic standards.

Management as it regards to education is defined as ‘a process of relating resources to objectives required in organisations which explicitly exist to provide education (Paisley, 1992)

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What is Financial Management for the Ace School?Financial Management is seeing to it that schools have the funds it requires to meet its goals in its quest to becoming a sustainable and viable institution and that value for money is gained for such funds expended.

Areas covered by Financial Management

The procurement of funds –

Evaluation of the financing

alternatives open to the school and costs associated

with them

The allocation of funds

The evaluation and control of

capital projects

The monitoring of the dispensation

of funds (accountability)

The production of Financial reports for stakeholders

Compliance with financial

regulations and procedures

Internal Control

The strategy of acquisitions and

mergers and external growth

of the school.

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What is Financial Management for the Ace School?

Effective financial management ensures that: • all financial regulations and procedures

are complied with• all financial transactions are recorded

accurately, • adequate controls are in place to

ensure that expenditures do not exceed income,

• only authorised expenditures are incurred.

What is your role as education managers?Your major role as the education manager is to create an environment in the school that will facilitate effective and successful teaching and learning. This is done through the effective management of the schools’ human, material and financial resources. It is, therefore, important to stress that financial management is one of your major functions as education manager. Without good financial management practices, schools would find it difficult to achieve their goals.

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What is Value for Money?Value for MoneyValue for money (VFM) is a vital operational tool in the management of resources that are becoming scarce by the day. VFM reviews assist education managers to significantly reduce waste, strengthen inefficient operations, financial and administrative procedures etc. This has always been a focal necessity in the educational sector where doing more with less has always been the driver of resource utilization. VFM reviews verifies that resources have been applied properly to achieve economy, efficiency and effectiveness

Economy Economy – is the practice by management of the virtues of thrift and good housekeeping. An economical operation acquires resources in appropriate quality and quantity at the lowest cost. A lack of Economy could occur where there is overstaffing, or tools for learning such as computers and furniture are overpriced at the time of purchase.

Efficiency Efficiency – is making sure that the maximum useful output is gained from the resources devoted to each activity, or alternatively, that only the minimum level of energy and work necessary is used for a given level of output.

An operation could be said to have increased in efficiency if either lower costs were used to produce a given amount of output. Inefficiency on the other hand may be the accumulation of surplus materials that are not needed to support operations or the identification of work with no useful purpose

Effectiveness

Effectiveness - Ensuring that the output from any given activity is achieving the desired result. What goal did you set out to achieve?

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Treasury ManagementThe act of managing the financial resources of a school is known as treasury management. The treasurer should be experienced and qualified.

The responsibility of the Treasurer:

i) Preparation of the annual school budget as well as the departmental budget

ii) Day to Day cash management of the departmental and school budget

iii) Participation in the departmental internal committee and the finance committee of the school.

iv) Follow / monitor the implementation of operational budgets, cash and investments of the

school

v) Physically and financially continue constructions, reformations and acquisitions

vi) Render financial related support to the management of the school

vii) Train and motivate the departmental heads on financial management, accounting, budgeting etc

viii) Keep up to date with financial, accounting, administrative and legal matters

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Treasury Management (contd.)The responsibility of the Treasurer:ix) Verify and authorize every departmental payment which falls outside the budgetx) Send all financial transactions not covered in the budget for review and approval by appropriate

authorising partyxi) Manage all departmental bank movementsxii) Prepare monthly economic and financial analyses for the school and its various departments xiii) Track and approve the cash flow of the school and its departmentsxiv) Analyse and approve monthly expense reimbursementsxv) Investing surplus cashxvi) Arranging alternative means of financing for the schoolxvii) Foreign exchange transaction management (if any)xviii) Insurance coverage for all the company’s assets and liabilitiesxix) Maintain relationships with banksxx) The management of employees pension schemes

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The School Budget In order to facilitate effective financial management, a budget is required. It is therefore critical that education managers understand what a budget is and the benefits that can be derived from budgeting. Chartered Institute of Management Accountants (CIMA) defines a budget as ‘A plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planning income to be generated and/or expenditure to be employed to attain a given objective’.Several benefits can accrue from drawing up a budget or budgeting. According to Drake and Roe (1994), these include: • establishing a plan of action over a specific period, • requiring an appraisal of past activities in relation to planned activities, • establishing work plans, • providing security for the administration by assuring the financing and approval of a plan of

action, • foreseeing expenditure and estimating revenues, • orderly planning and coordination throughout the organization, • establishing a system of management controls, • providing an orderly process of review and planning for both personnel and facilities needs,

and • serving as a public information device.

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Procedure for setting up a budgetary control systemi. Define the objectives of the financial institution and reconcile them to the departmental objectivesii. Define the level of responsibilities by drawing organizational charts for the schooliii. Ensure the support of top management for the operation of systemsiv. Examine the level of management information system in the school to ensure its adequacyv. Ensure that there are sound accounting systems to facilitate the recording of the actual

transactionsvi. Educate the management and other employees on the benefit of the budgetary control system as

an effective instrument of improving productivityvii. Set up necessary techniques to help managers in the preparation of the budgetviii. Ascertain the control periods so that variances from the budget can be promptly analysed and

investigated

Measuring Performance and Comparison with PlansPerformance is measured and comparisons with plans are carried out in organisations through the control process. This enables actual performance to be compares with budgets and remedial action taken to improve the situation.

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ControlsWhat is a control?Control is the activity which measures deviations from planned performance and provides information upon which corrective action can be taken either to alter future performance so as to conform to the original plan or modify the original plan

Types of Control Systemsi. Budgetary control and standard costingii. Others include quality control, production control, inventory control etc.iii. Monitoring product quality and schemes of staff appraisal

The Elements of the Control Cycleiv. A standard specifying the expected performance e.g Budget, Student Pass Rate some other targetv. A measurement of actual performancevi. Comparison of a and b abovevii. Feedback on deviations or variations to a control unitviii. Action by the control unit to alter performance in accordance with the planix. Feedback to management regarding large variations between performance and plan and upon the result of

the lower level control unit’s actions.

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Types of Budgets • Summary Budget: these are budgets that provide valuable summary of the effects of the organisation’s plans. The two

budgets in this category are ‘Master Budget’ and ‘Cash flow Budget’.• Master Budget: This is usually presented in the form of budgeted operation statements, i.e. budgeted trading, profit and

loss account and a budgeted balance sheet.• Cash Budget: Liquidity and cash flow management are the key factors in the successful operations of any organisation. • Fixed Budget: Designed to remain unchanged irrespective of the volume of output or turnover attained. It is not useful for

control purposes• Flexible Budget: designed to adjust the budgeted cost levels to suit the level of activity attained. It is useful for the control

aspect of budgeting• Incremental Budgeting: the process where cost levels are frequently determined by what was spent in the previous year

plus a percentage for inflation. This is commonly used in the public sector.• Zero Based Budgeting: a method whereby all activities are revalued each time a budget is formulated. Each functional

budget starts with the assumption that the function does not exist and is a zero cost.

Key questions to note before a budget is concluded:• Does the activity need to be carried out at all?• How does the activity contribute to the organisations objectives?• What is the correct level of function?• What is the best way to provide the function?• How much should the activity actually cost?

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Distinction between Finance and AccountingFinance refers to cash flows i.e. sources of funds and how they are applied during a given period by an organisationAccounting refers to the actual recording of all financial transactions in a business to aid in determining the cash flow, to aid management and users of accounting information in their decision making.

Financial AnalysisFinancial analysis enables:• Comparison of financial information between various years• Comparison between companies in the industry• Assess the viability of the company• Assess progress and growth of the company

Reasons for Financial Analysisa) The management may like to know the profitability and financial viability of the schoolb) Workers may like to know their level of efficiency in the use of resourcesc) Various units use the analysis to measure their performance and profitabilityd) Shareholders are interested in the earnings both current and future, dividends payable and potential dividendse) Investors may like to assess whether or not it is worth investing in the companyf) Evaluation of the entities ability to pay its debtsg) The government may want to establish the amount of tax paid

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Internal ControlsInternal control is a process for assuring the achievement of organisations objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies by controlling risks to the organisation. It plays an important role in detecting and preventing fraud and protecting the organisation’s tangible and intangible resources.The main controls that can be found in a school are:i. Organisation: Enterprises should plan their organisations defining and allocating responsibilities or duties and

identify lines of reporting. The delegation of authority and responsibility should be clearly defined.ii. Segregation of duties: Ensures that a whole task is not completed by one personiii. Physical: ensures that financial instruments such as cheque books are physically secureiv. Authorisation and approval: All transactions should be approved by the relevant authorityv. Arithmetical and Accounting: these ensure that all recordings are correct. These checks are exercised by officers

other than those who recorded the transactionsvi. Personnel: Procedures should ensure that personnel have capabilities commensurate with their responsibilitiesvii. Supervision: Any system of internal control should include supervision by responsible officialviii. Management: These are controls exercised by management outside the day-t-day routine of the system e.g overall

supervision, review of management accounts and comparing them with budgets, internal audit function etc.ix. Acknowledgement of performance : this implies that any officer responsible for carrying out an activity must

append his/her signature as an acknowledgement of performance of such activity

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Who we areS.S. Afemikhe Consulting is a professional services consultancy that is passionate about its clients’ success. The company was incorporated in 2003 (CAC registration number 482453) as the business advisory arm of the highly respected firm of Chartered Accountants, S.S. Afemikhe & Co, itself registered in 1986.

Since inception, S.S. Afemikhe Consulting has worked actively to deliver value adding business solutions in an efficient and effective manner to our clients.

We believe strongly in the power of collaboration. We partner with private and public organisations in their quest to enhance their corporate performance, deliver optimal service or products at reduced total cost of ownership and maximize stakeholders’ value. Working with our wide network of local and international associates, SS Afemikhe Consulting cumulates years of professional expertise to deliver value driven services powered by deeply rooted culture, beliefs and goals entrenched in our quest to positively contribute to the success of our clients and the public wellbeing.

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Who we areOur VisionOur vision is to become the most admired indigenous and independent financial and management consulting firm of choice in Nigeria by 2020.

Our MissionOur mission is to deliver high quality and value-adding consulting services to our clients. We will achieve this by our wide breath of experience and engaging the expertise of our wide network of indigenous and international partners whose knowledge and technical expertise gives a combination that gives our clients superior value and the opportunity to maximise resources and effectively manage and minimise their business risks.

Our ValuesOur philosophy, culture and beliefs are embodied in our: Pursuit of excellence Dedication to serviceTeamwork and harmonyRespect for the individual Equity and fairness.

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Who we areA breakdown of our Services

Advisory Assurance Tax

Value for Money reviews(Cost Audit, Performance measurement and benchmarking, governance and value analysis)

Forensic Accounting Petroleum Profit Tax

Project Management Internal Audit Assurance Company Income TaxChange Management Due Diligence Assurance Personal Income tax

Information Technology Services Professional Opinion Tax audit and investigations

Human Resource Management Legal and Regulatory Compliance Transfer Pricing reviews

Public Sector Strategy, Policy and Development Corporate Governance

Accounting Services to Startups, Small & Medium Sized Enterprises Public Records /Back Ground Check

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Who we are

• NNPC• FIRS• RMAFC• PPMC• Ministry of Finance• NEITI• World Bank• Bayelsa State Government• Yaba College of Technology

• Linkso Nigeria Limited• Owel-Linkso Group• Multinational Technologies Limited• Octagon Securities Limited• A1 Services• Moren Nigeria Limited• Nubian Marine and Trade Limited

Some of our key clients are :

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Conclusion

Wherever schools are established, wise managers must be provided. The wise managers are those entrusted with the financial management of our educational institutions. They must allow no carelessness in the expenditure of means and must ensure Value for Money is at the heart of any financial decision that is taken.

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