TUT EDU401 Session 9 Theme 6 Financial Management of Schools

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TUT EDU401 Session 9 Theme 6 Financial Management of Schools

  1. 1. Tshwane University of Technology Faculty of Humanities Department of Education Studies Educational Management (EDU401T & EDU402T) Presenter: Dr Muavia Gallie (PhD) Session 9 Week: 3 May 2011 Content1. Introduction2. 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. 1
  2. 2. Test 3You will write a test, during the first 30 minutes of our next session. This will be our lasttest, and therefore ensure that you do you best in preparing for the test. It will count towards your year-mark. 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. 2
  3. 3. 1.2 Financial Education Management defined “The distribution and use of money for the purpose of providing educational service and producing student achievement.”;Aims of financial management (FM) is to:• Estimate the needs of local education training;• Obtain finances in accordance with the estimated needs;• Administer the finances thus obtained in a legally correct manner. 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 use of facilities by school and community; state must fund schools on equitable basis; financial tasks of SGB; financial year of public schools) 3
  4. 4. 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 year;• This will assist in determining school fees payable by parents;• 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 received 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 - S.A. spent 20.8% of total budget; 3. 2010 - Total budget was R164 Billion; 4. Largest of any other developing country; 5. Focus of financial education management differs from commercial financial management; 6. One focuses on ‘service’ and other on ‘profit; 4
  5. 5. 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.• 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. 5
  6. 6. 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). 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. 6
  7. 7. 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.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. 7
  8. 8. 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. 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. 8
  9. 9. 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. 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). 9
  10. 10. 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);• 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. 10
  11. 11. List of examination questions will be available by Wednesday onwww.slideshare.netThank You! 11

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