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Finance Assignment: Financial Management At Schools


Task: In this finance assignment, you are supposed to answer the following questions: 1.1 Who is accountable for the financial management of the school: the principal or the governing body In analysing this question, differentiate between professional management and governance; and analyse the ex-officio role of the principal.

1.2 Read the following Case Study and answer the questions below.
Ms April retired from a lecturing position at the local university. She is a very popular member of the community and passionate about education. Last year she was elected as the chairperson of a local school’s SGB. Since her election she has been visiting the school every day and tells the staff that this is because she is very passionate about teaching. She has expressed concern about the educators’ lack of commitment and disapproval of the handling of school fees by teachers and the finance officer. She took it upon herself to collect school fees from learners and parents, issue receipts, and do the banking. She decides alone whether budgeted expenses can be made or not. She also compensates herself for travelling expenses incurred due to school activities.

1.2.1 Explain in detail whether the chairperson of the governing body has acted within her sole authority to take over the financial management of the school.
1.2.2 How do you think that this take-over of school financial management by the chairperson of the school governing body can be resolved What sources of legislation (if any) can be applied to deal with this issue
1.3 The school budget is the very heart of financial management. It is the financial interpretation of the educational programmes of a school. Discuss the process of constructing a school budget and evaluate three budgeting strategies you consider suitable for use by schools.
1.4 Budgetary monitoring and control are often treated as being synonymous, but they are distinct. Differentiate between budgetary monitoring and control and provide suitable examples.
1.5 In your opinion, why is financial reporting an important component of financial school management
1.7 Critically discuss the effective management of stock, by explaining what the stock of a school is; what the management of stock includes and highlight the aspects of stock management that are important.


Answer 1.1:
The research on finance assignmentsignifies that the Principal of a school is accountable for the financial management to the Governing Board. The Governing Body has overall responsibility for all school affairs and in this sense, they are 'accountable'. However, they delegate their accountability to the Principal/Executive Head Teacher who can be removed from his or her position by them. Professional management of school finances is not consistent with 'board governance' according to the Department for Education & Business Advisory Group. The ex-officio role of the Principal means that they are automatically on the Governing Body. This means that they will always be present at meetings and if they cannot attend, they must appoint another member in their stead. This means that in all meetings, the Principal/Executive Head Teacher is present and holds voting rights.

Governing bodies are expected to "set the strategic direction for school improvement". One of the main roles of governing bodies is financial management. They are responsible for overseeing the school's budget and for making sure the school is financially sound. They are also accountable to ensure that they use funds in accordance with relevant legislation and with the plans of the school. In any given year, a governing body may not have time to scrutinize all financial documents as thoroughly as they would like because of their many other responsibilities. This is where the Principal comes in. The role of the Principal is to implement policies and practices which do not often fall well within the remit of governing bodies.

This means that 'professional management' would occur when the governing body sets objectives, policy guidelines and overall strategic direction; whereas, professional management occurs when day-to-day spending and financial decisions are made by the Principal/Executive Head Teacher. The Government has stressed that there is a clear line of accountability 'for all expenditure'. In their training manual, it states that cooperation between governing bodies and Principals/Executive Head Teachers is essential for running schools efficiently. In conclusion, professional management of school finances occurs when the Principal/Executive Head teacher implements day-to-day spending and financial decisions. The governing body are 'accountable' for all expenditure but delegate their accountability to the Principal/ Executive Head Teacher who can be removed from his or her position by them.

Answer 1.2:
The chairperson of the governing body has acted within her sole authority to take over the financial management of the school. Article 3(7) of Education Law states that "the governing body shall appoint a person or persons having suitable qualifications and experience to be responsible for finance." In addition, article 24 allows the governing body to remove from office the school's Principal. Both articles give the governing body sole responsibility for financial management of the school under article 3(1) and removal of the Principal under article 24. Thus it is within the sole authority of the chair to take over financial management in exceptional cases where a Principal fails to maintain order or to implement its policies or can be removed.

Answer 1.3:
Recently schools have been faced with a conflict of interest arising from the fact that the chairperson of the school governing body has assumed responsibility for handling all matters relating to finance within a school. Using his or her position as chairperson, he or she directs all financial management matters to an appointed committee member who acts as treasurer and handles all money matters. In this scenario, the chairperson is not required to maintain a balanced budget and has direct access to school funds.

In December 2012, a new law came into effect in Western Australia which reversed the traditional roles of governing body members by requiring the governing body chairman to take on the duties of clerk. This meant that all administrative matters including finance were to be handled by the chairman. Useful legislation can be found in Section 5(4) of the School Education Act 1999 which states that when a school governing body has failed or refused to act, or is incapable of acting, any person may apply to the Minister for an order directing the governing body to carry out its functions or such of them as are specified in the order. Should this action fail to resolve the issue, Section 12(1) allows for a member of a school community who has been directly affected by a serious breach of school governing principles may complain to the Director General. This section notes that "serious breaches of school governing principles may include breaches relating to the financial management of a school."

Any complaint made under this section must be received within three months from the date on which knowledge of the serious breach first came to the complainant's attention. An extension period of up to six months may allow for complexities that arise when there are a number of potentially affected parties. Under Section 10 of the same Act, governing body members may be removed from office in circumstances where they have been found guilty of misconduct by a court having jurisdiction under state law in relation to an offence against primary or secondary legislation in Western Australia.

Answer 1.3:
Schools are responsible for having a budget that provides all the resources the school needs to operate, while staying within their annual costs. A school's yearly budget is built in three stages: Firstly, project an estimate of your expenditures based upon your current budget and program offerings. Secondly, identify potential new revenue sources. Lastly, you must take the previous two stages and show how you plan to spend and earn your funds.

The three different types of budgeting strategies that schools should use are an annual lump sum, a graduated plan, and a targeted approach. The first strategy is to give schools an annual lump sum to work with. This strategy would allow for districts to make large purchases once per year, however it would not provide them with the ability to quickly buy any supplies that might be needed at short notice. The second strategy is a graduated plan. This strategy enables schools to adjust their spending based on how much they receive each month. For example if they overestimated what they think their revenue will be, then the school will have excess funds to use for supplies throughout the year. This is a better strategy because schools can adapt as needed, and don't end up having excess or not enough money based on poor estimations. The third strategy is to give schools targeted plans. For example if a school has a music program it will receive more funding for that specific program because they need more resources. This is a good strategy because it allows for schools to spend money on the programs that they really need. In conclusion, each of these budgeting strategies has their own pros and cons. A lump sum budget gives schools the ability to make large purchases, but may require more planning ahead of time. The graduated plan is adaptable to changes, but the school may overestimate income which could lead to excess funds. Lastly, a targeted plan is beneficial because it gives schools resources for programs that need extra help.

Answer 1.4:
Budgetary monitoring refers to tracking how expenditures match targets. A company may set a sales budget for January. To monitor whether the budget target is met, the financial managers will tally up all of the appropriate numbers at the end of the month. The control aspect comes into play when things are not matching up with projections. A series of corrective measures may be taken. For example, the managers may have to either cut back on expenditures or increase efforts to bring in more revenue.

Budgetary control refers to the theory that budgeted targets are treated as upper limits rather than goals that can be achieved. This means that companies set out their most pessimistic projections, thus allowing for time to take the necessary actions in the event that targets are not met. For example, if a company sets out a target of achieving $1 million in revenue during July, but only manages to bring in $900,000 by month-end, then they expect that they will need to reduce expenditures and place greater stress on sales efforts to meet their budgetary goals.

Answer 1.5:
Financial reporting is an important part of financial school management because it provides accurate and useful data. A business needs this data when making decisions about its future. There are many ways that financial reporting can be an important part of school management. These include being able to keep track of how the finances are coming along in order to see where money is needed elsewhere, keeping up with the government standards for how things should be done in order to make sure you know what you're doing when it comes time for audits, and being able to make reports others can use.

Answer 1.7:
Stock in schools refers to the material assets that can be used by students, teachers and administrators within a school environment. Stock represents the goods that are necessary for the everyday running of a school, such as pens, paper clips or stationery. Management of stock in schools is therefore simply to manage these items properly so they do not run out. Schools should manage their stock by ensuring they have an effective system in place to keep track of the items that are being used or are running low. This includes having a system that determines when items need to be reordered so there is no danger of them running out. Teachers and administrators themselves should make efforts to reduce unnecessary use of certain stationery items by students in order to ensure that the school has enough of them when they are needed. It can also be beneficial for items such as textbooks or stationery to be sold at the end of the academic year because this not only reduces waste but could also generate money by selling old books and unused stationary rather than throwing it out after one term.

As per the analysis on finance assignment, it is stated that the management of stock in schools is important because there needs to be adequate supplies of items needed by students and staff for the school year. If certain items are not available when they are required, this can cause problems for students and teachers which could ultimately impact their learning. The management of stock should thus aim to ensure that sufficient copies of books or other necessary materials exist and are available when needed by students and staff. The management of stock in schools can thus greatly benefit the smooth running of a school and ultimately allows for teachers and administrators to focus more on the academic performance and learning of their students rather than having to deal with problems such as lack of stationery or materials. Management of stock in schools is therefore important because it ensures that there are sufficient items for students and staff to make learning effective.


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