TUT EDU420 Session 7 - Financial Management in Schools


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TUT EDU420 Session 7 - Financial Management in Schools

  1. 1. Tshwane University of Technology Faculty of Humanities Department of Education Studies Education Management 4 - Session 7 - Financial Management in Schools Presenter: Dr Muavia Gallie (PhD) 26 March 2012 1 muavia@mweb.co.za 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. 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. 2
  3. 3. 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; 3
  4. 4. 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 FM1.  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’. 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. 5
  6. 6. 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). 6
  7. 7. 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. 7
  8. 8. 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. 8
  9. 9. 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. 9
  10. 10. 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); 10
  11. 11. 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. 11
  12. 12. Thank You! 12