Financial management


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Financial management

  1. 1. Financial managementYou have learnt how to identify sources of school funds, budget for and secure the funds.Financial management, amongst other things, involves recognizing and respectingauthorities, regulations and practices governing the receiving, keeping and spending offunds. In this unit you will learn about the basic framework and mechanisms of financialmanagement and gain experience in applying appropriate financial management practicesand skillsYou will realise that funds coming into a school are not entirely certain and are often notadequate. To manage these limited funds, the school head, as a public employee and theaccounting officer, must be guided by the basic framework and mechanisms of financialmanagment. Framework for managing school fundsKeeping accurate financial informationYou are expected to keep complete and accurate financial information and to present thisinformation properly. This information should include sources of revenue and accurateentry of expenditure, avoiding errors or omissions as much as possible. Properpresentation further demands that you always put any required financial informationunder the correct heading and in the correct place.The information should be arranged under broad headings, such as transport, and then putunder smaller headings, such as petrol and vehicle maintenance. Preferably you shouldpresent the information under appropriate, clearly understood headings in a layout basedon the way in which education is actually provided. This will enable you to comparecosts of the range of services offered by the school.Flexibility and freedom with responsibilityIn managing school funds, you should enjoy some financial freedom and flexibility toenable you consider a range of options. This demands a high sense of responsibility inorder to use the freedom and flexibility effectively.Virement (switching expenditure)In a school with a well-organised financial management system overall types of virementcan be applied. Under this system you, as the head of the school, can always agree withthe governing bodies to switch expenditure between one heading and another if they sowish and if need be.This depends on how you have prioritised the school services.
  2. 2. Purchasing FreedomIt is important for you as the head to enjoy freedom of purchase. Lack of purchasingfreedom restricts the freedom of schools as consumers and delays the purchasing process.Financial PoliciesThe school should have financial policies to guide the financial administrators andmanagers. These policies will assist financial control and regulate the processes ofreceipting, keeping, withdrawing and expending funds. However these policies shouldnot clash with the official national policies on school finances.Proper allocation of fundsTo manage the school finances you should be conversant with what each department hasand what it needs. Involving teachers and heads of department in this process is veryimportant.Authorities, rules and regulations governing school fundsIt is important that you are equally conversant with the authorities, rules and regulationsthat should guide you in the effective handling of school fundsTuition feesReflecting upon the situation in your school:(1) Who establishes the level of school fees? Where is this stipulated?(2) Who pays tuition fees to the school?(3) What rules and regulations governing fees, originate at:- national;- district;- school level?(4) To whom is the school head accountable over tuition feesTuition fees are gazetted, therefore government is the authority for these funds, whichmust be expended as the law dictates. In the above activity your response might haveindicated that at national level, relevant government authorities are likely to determinethe level of fees, sources of fees and their purpose.At district level, the District Education Officer and Treasurer are likely to monitor the useof fees in schools under their jurisdiction. In some cases they may determine the level andpurpose of the fees. Whereas at school level, the management committee or board ofgovernors decides on specific items to be purchased and guides you the head to purchaseand account for the fees. This information should be found in government statutes andstanding instructions.GrantsGrants are funds that government or other non-government organisations give to runschools. Reflecting on your school situation:(1) List the various sources of grants to your school.(2) What activities or items are financed from grants in your school?(3) Who decides on how to spend the grants
  3. 3. Guidelines on the management of grants are usually contained in the rules andregulations of school governing bodies. Grants are managed and controlled in a similarway to school fees except that they have to be spent for the purpose(s) indicated againstthe grant. Some grants have specific uses, for example, salaries; other grants may bespent flexibly for example, block grant.PTA or community group funds(1) Does your school receive Parent-Teacher Association funds?(2) If so, how are PTA. charges levied and controlled?(3) What items are financed from PTA funds in your school?(4) What other community groups contribute funds to your schoolCommentsYour answers might have included the following:1 PTA funds are not government gazetted fees.2 They include funds that are voluntarily paid by parents as decided in the generalmeeting of the PTA.3 The funds are levied for the purpose agreed upon by the members of the association butapproved by the school management committee or governing board.Since you are the day-to-day administrator of the school, the responsibility for collectingand banking this money rests upon you, and you are accountable to the executive of thecommittee and the electorate. The management committee or the board of governorscontrols the PTA funds by ensuring that the money is expended in the manner and for thepurpose agreed upon by the members of the PTA and approved by the governing body ofthe schoolOther fundsAll funds obtained from other sources are also controlled by the school governing body,that is the school management committee or board of governors, which must sanctiontheir expenditure. You are the accounting officer of the school for these funds.2. Receiving and banking of school fundsIt is clear that funds coming into the school must be received according to set proceduresand kept safely. A receipt book is one of the commonest books of account. It is used inthe process of receiving funds into a school.Receiving fundsDescribe how you officially receive money in your school.(2) What kind of information do you record about funds received?(3) Look at the receipt leaf shown in Fig 3 and list the main information included on it.(4) Describe the use of a receipt
  4. 4. CommentsTypically in a school, funds come in cash, cheque or drafts. These monies must bereceived properly and kept safely.A receipt book is designed for receiving real cash or cheques. A receipt must be made orwritten out immediately on receiving the cash money or cheque, and the original shouldbe sent or given to the person(s) who has/have made the payment.A receipt is used in a school to:• acknowledge receipt of cash or cheque in settlement of school dues• to provide proof to the school that the student has paid• provide information for the cash book.It bears the following basic information:• the name of the person who paid the funds• the name of the person who received the funds• date received• purpose of the funds• type of funds (cash, cheque, etc.).If money has to be kept before banking, it must be under lock and key or in a safe toavoid theft or damage by fire, etc.
  5. 5. BankingThe head of the school should first bank all school funds and then withdraw as and whennecessary. You should avoid using cash before it is banked as much as possibleThe school can have as many accounts as found necessary by the governing body. It isalways advisable for a school to deposit its excess revenue on fixed deposit accountswhich generate higher interest. Each account usually has two or three authorisedsignatories, two of whom must sign a cheque before the bank can honour it. It is commonpractice that the chairman of the board of governors or management committee is asignatory. These signatories are usually introduced to the bank by the responsible officer.The following are some of the bank accounts that can be opened and used by schools:1 Current accounts (of various types) have deposit books both for cash and for cheques.Cheque books are used for withdrawals or transfer of deposits. Interest payment on thebalance is usually high, for example, 20 per cent per annum.2 Savings accounts.3 Fixed deposit accounts/time receipts, where the customer is given a receipt and is onlyallowed to withdraw the money when the receipt matures.Withdrawing fundsFunds are withdrawn using a withdrawal form or a cheque leaf.
  6. 6. AA cheque is a written order directing the bank or bankers to pay money as therein stated.Fig 5 A typical cheque