Individual study time: 6 hours

Learning outcomes
By the end of this unit you should be able to:
• describe the responsibility of the school head as a financial planner
• explain the nature and functions of budgeting in a school
• design and manage your own school budget.

Comments
In the above activity you might have noted that you mainly rely on resources that are determined by others, such as the government or the Parent-Teacher Association (PTA), and assigned by them to you. Thus you may operate under a financial environment with two major elements:
1 Resources may be received from government which are usually fixed for the duration of the fiscal year.
2 Resources may be received from the region or district directly and from various community groups, which are not fixed and are often far from certain.

However, as a school planner and finance manager, you should take an active rather than a passive role in determining, mobilising and acquiring financial resources. In such a way you are more likely to ensure the effective implementation of your school programmes. Thus your major tasks as a planner are to ensure that:
• you fully understand the financial situation in which your planning is to occur
• your planned resources are available when required and are properly and effectively utilised to achieve the school mission and objectives.

Essential to the accomplishment of the above tasks is effective budgeting.

What is budgeting in a school?
Budgeting is a process of preparing a statement of the anticipated income and the proposed expenditure. In other words, it is a process for preparing a summary of the programmes of the school reflecting the expected revenues and expenditures. This statement is the school budget which guides a head through the various school activities, as well as towards achieving the objectives of the school.

Comments
In summary, the stages of budgeting which you have just gone through are:

Stage 1: Identification of programmes, projects or activities you wish to accomplish in the budget period.

Stage 2: Identification of the resources, in terms of manpower,materials and time.

Stage 3: Costing of the resources - this is the most important activity in budgeting since a budget is basically a financial statement.

Stage 4: Presentation of the budget as per budgetary guidelines formulated by the government or funding agencies.

Stage 5: Obtaining approval of the budget by the authorities.

Having considered these stages carefully, is it really necessary to go through all of them? Is budgeting really necessary in your school? Lst us consider this last question now.

Comments
Budgeting is a process of relating the expenditure of funds in a systematic way to the achievement of the planned mission and objectives of a school. Budgeting has three major functions:

1 It provides an operational cost-time framework for the implementation of school programmes. It is therefore the major planning instrument in your school.

2 It can serve as an instrument for the delegation of authority. The school budget is designed to show which particular people are responsible for specific programmes.

(Note: When a budget is approved by the authorities the delegation of functions is automatically approved.)

3 It can be an instrument for controlling and evaluating performance.

Your budget provisions offer you a simple guide to assessing the rate of expenditure in any given activity. If your budget is suitably designed, it will also readily provide you with data on three elements to assist in the control and evaluation function. These are:
• rate of expenditure
• output
• costs

Now check back to your answers in Activity 2.3 and see how they compare with the three major functions identified above.

Purposes
Your school budget is a forecast of future financial events showing the anticipated revenue, expenses and financial position of the school.

Comments
The purposes of budgeting can probably be categorised into two:

1 To show what the results will be if the present school financial plans are put into effect; in other words, the purpose of your budget is to disclose areas that require attention and action.

2 To evaluate the financial performance of the school: you use the school budget to control the operations, revenues, costs, and the persons responsible for the operations and related revenues and expenditures. In effect your school budget is a yardstick against which your financial performance may be compared. You should always aim at having a budget that promotes cost effectiveness, that is, a high level of school output at low levels of expenditure.

Comments
Generally the school budget period should be long enough to show the effect of your financial management policies and short enough so that school estimates can be made with maximum accuracy.

The most commonly used school budgets are:
SCHOOL MASTER BUDGET
This is the overall school financial and operating plan for a forthcoming fiscal period. This is usually prepared annually.

SCHOOL CAPITAL BUDGET
This interprets the school plans for major expenditure on capital assets such as buildings. It may be a five year financial plan.

SCHOOL DEPARTMENT BUDGETS
These are segments of the school master budget, relating to the different school departments. They are the responsibility of particular sub-heads, for example, heads of department. They are usually prepared termly.

Summary
So far we have seen that a school budget has three major functions as:
• a major planning instrument in the school
• an instrument for delegating authority
• an instrument for controlling and evaluating performance.

School budget designs
Types of design
Budgets can be designed in many different ways. However in the case of schools, two basic designs have proved to be more effective.

The performance budget or school programme budget design
This is the budget which serves as an instrument for carrying out a school plan. The emphasis in this budget design is on what is going to be done and on the benefits accruing to the school. In this budget design you not only state the income and expenditure, but include also a brief description of what is to be achieved after each item of expenditure.

The traditional or line-term budget design
In this design you merely list estimated income and items to be funded. The emphasis is on the issue of financing rather than on what is to be achieved.

In both cases the budget design should provide extensive and accurate estimates of:
• income or receipts
• expenditure.

Income or receipts
The school's income mainly falls into two categories:

Tied grants
These are grants which come mainly from government and they are clearly earmarked for a specific purpose, for example, teachers' salaries, maintenance of buildings and construction. These grants cannot be re-allocated at the school level for any other purposes.

Untied Grants
These are grants for use on expenditure items determined as priorities in the school. These include contributions from local authorities and community groups, for example, the PTA.

Expenditure
School expenditure essentially falls into two categories:

Recurrent Expenditure
This constitutes the greatest percentage of the budget. It includes items such as salaries and other benefits to administration, supervision, teaching, special services and support staff, maintenance and other operating costs in travel and communication, and scholastic materials. This is the expenditure on consumables.

Capital or Development Expenditure
This is expenditure on capital assets such as buildings, furniture, equipment and vehicles. They are investments made at irregular intervals, but they cover a time span of several fiscal years.

The amount of recurrent expenditure you need in your school is determined by the growth of your school, that is, by the number of pupils and teachers, by the extension of facilities, and by any improvements in the economic position of the government or in the reallocation of finance by governmnet from some other sector to education..

For ease of management you can sub-divide capital expenditure by differentiating between level (primary, secondary and tertiary) and within each of these between ongoing and new development projects. The purpose of classification is to provide you with a clear picture of the balance of resource allocation between new and ongoing projects.

Comments
A budget which is related to school performance is one which presents the purposes and objectives of the school for which funds are collectred, the costs of the school programmes proposed to achieve the school objectives and the quantitative data measuring the accomplishments and work performed under each programme. This budget is suitable for long-term school strategies.

The advantages of such a budget are as follows:
1 It sets out each major school programme and what it is attempting to achieve.
2 It may be used as a good control mechanism to show value for money.

The disadvantage is that it is complex and costly to put together, usually requiring a computer. It is only suitable for big schools.

A traditional line budget looks at school programmes as if they have just been started.

Managing school budgets
After getting your budget approved by the appropriate authorities, you enter the next phase in which you have to implement, monitor, supervise and control the school budget. This is the most important stage of the budget cycle since a well managed budget should lead to more effective levels of achievement of the mission and objectives of your school.

Comments
Managing the school budget includes the management of its implementation. Once approved by the appropriate authority, your budget becomes the basis for your financial decisions in the school. Within the appropriation for various budget headings you are entitled to make commitments to spend money. Each type of expenditure you make can be subject to particular norms designed to guarantee that you follow the rules and good accounting practices.

School budgets are operated under specific headings called votes. Whatever expenditure you make in school should always be entered in a vote book under the appropriate vote headings. The use of a vote book is mandatory in accounting systems. Whatever financial transaction you make must be made on an expenditure voucher. You will learn more about vote books in Unit 5.

Using the school budget effectively
Budgets are estimates of income and expenditures and there may be changes as your school financial situation becomes more reliable. Your forecasts may therefore be revised during the course of the year. However, any decision to change the budget should follow the same procedure and restrictions as the main budget so that the budget remains a meaningful document and an effective tool of management and forecasting.

When you receive delivery of goods or services ordered, you should always settle the account promptly. You should calculate the exact amount involved as indicated on the supplier's invoice and compare it with the amount on the order. You can also settle the account by certifying that service was rendered. This certification makes it possible to issue a signed payment order, by which you instruct the school bursar to pay. It is advisable, to ensure that school funds are handled in accordance with the rules, that the authority of the head, who is the school finance manager, and that of the bursar, who is responsible for collecting the school funds and paying expenses, are kept separate. Having two people working independently of one another on the spending process leads to greater security in the choice of expenditure and the use of funds.

The bursar verifies the payment orders signed by the head. After checking that budget funds exist on the votes from which the orders must be paid and that the envisaged expenditure follow the rules, the bursar pays the creditor and records that fact in the books which have to be kept in accordance with the school ledger. In the case of a primary school, the head works both as a finance manager and bursar.

The recording of expenses and income is done by making a note of payments effected on a series of documents:
A log or journal: this lists in chronological order the payments made per day.

A vote book: this lists the orders paid out of any one vote.

You should always draw up summary documents periodically, as follows:
A statement of expenditure: this allows you to see to what extent school funds for various headings have been used.

A balance sheet: this allows you to check that there are no discrepancies between the various votes and to know the status of the school financial account at any one time.

Fig 2 Draft budget for Thaba Primary School

Monitoring and supervising the school budget
Monitoring and supervising the school budget goes on throughout the year. However, at the end of the year, the total amount of income and expenditure is consolidated in a yearly financial account which is drawn up according to a strict procedure. This makes it impossible to camouflage operations in the books and makes it possible for the Ministry of Education and other bodies to check the accounts.

Monitoring your school budget requires you to do the following:
1 Check that expenditures are made in compliance with the budget authorisations.
2 Note whether there is a surplus or a deficit at the end of the year and whether there is the possibility of building reserves.
3 Assess the implementation of the budget with a view to preparing subsequent budgets more accurately.
4 Provide continuity in the school's accounting system, in as much as a financial account is established on the basis of the balance sheet of the previous year, and leads to the balance sheet of the following year.

The supervision of the school budget can be more or less extensive. It requires you to check whether the school's budget is really balanced and that all compulsory expenditures required by law are included and fulfilled.

Controlling school budgets
Controlling a school budget requires you to understand the financial status of your school and its priorities for expenditure. Controlling the budget means controlling the votes, that is, ensuring votes are not overspent, and that money received is put under the appropriate vote headings. Before you agree to any expenditure first check the vote to ensure there is enough money to cater for the expenditure. If there is no money you should either abandon the expenditure or seek permission from the appropriate authorities to re-allocate funds on the vote.

Summary
In this unit you have learned that:
• budgets serve as a plan designed to achieve a set of the school objectives
• budgets serve as indicators of areas of the school that require action
• budgets are used as a means of evaluating performance of the school head.