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
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muavia@mweb.co.za
Content
1. Introduction
2. 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.
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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.
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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;
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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 FM
1. 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’.
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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.
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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).
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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.
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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.
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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.
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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);
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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.
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12. Thank You!
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