Individual study time: 6 hours

Learning outcomes
By the end of this unit you should be able to:
• describe the basic framework of financial management
• state the authorities, rules and regulations governing school funds and the receiving and banking of school funds
• describe the practices for book-keeping in schools and the use of inventories
• outline safeguards for the security of school funds.

Comments
You will realise that funds coming into a school are not entirely certain and are often not adequate. To manage these limited funds, the school head, as a public employee and the accounting officer, must be guided by the basic framework and mechanisms of financial managment.

Comments
Your answers in the above activities are likely to bring out and include the following:
Keeping accurate financial information
You are expected to keep complete and accurate financial information and to present this information properly. This information should include sources of revenue and accurate entry of expenditure, avoiding errors or omissions as much as possible. Proper presentation further demands that you always put any required financial information under the correct heading and in the correct place.

The information should be arranged under broad headings, such as transport, and then put under smaller headings, such as petrol and vehicle maintenance. Preferably you should present the information under appropriate, clearly understood headings in a layout based on the way in which education is actually provided. This will enable you to compare costs of the range of services offered by the school.

Flexibility and freedom with responsibility
In managing school funds, you should enjoy some financial freedom and flexibility to enable you consider a range of options. This demands a high sense of responsibility in order to use the freedom and flexibility effectively.

Virement (switching expenditure)
In a school with a well-organised financial management system overall types of virement can be applied. Under this system you, as the head of the school, can always agree with the governing bodies to switch expenditure between one heading and another if they so wish and if need be.
This depends on how you have prioritised the school services.

Purchasing Freedom
It is important for you as the head to enjoy freedom of purchase. Lack of purchasing freedom restricts the freedom of schools as consumers and delays the purchasing process.

Financial Policies
The school should have financial policies to guide the financial administrators and managers. These policies will assist financial control and regulate the processes of receipting, keeping, withdrawing and expending funds. However these policies should not clash with the official national policies on school finances.

Proper allocation of funds
To manage the school finances you should be conversant with what each department has and what it needs. Involving teachers and heads of department in this process is very important.

Authorities, rules and regulations governing school funds
It is important that you are equally conversant with the authorities, rules and regulations that should guide you in the effective handling of school funds.

Comments
Tuition fees are gazetted, therefore government is the authority for these funds, which must be expended as the law dictates. In the above activity your response might have indicated that at national level, relevant government authorities are likely to determine the level of fees, sources of fees and their purpose.

At district level, the District Education Officer and Treasurer are likely to monitor the use of fees in schools under their jurisdiction. In some cases they may determine the level and purpose of the fees. Whereas at school level, the management committee or board of governors decides on specific items to be purchased and guides you the head to purchase and account for the fees. This information should be found in government statutes and standing instructions.

Comments
Guidelines on the management of grants are usually contained in the rules and regulations of school governing bodies. Grants are managed and controlled in a similar way to school fees except that they have to be spent for the purpose(s) indicated against the grant. Some grants have specific uses, for example, salaries; other grants may be spent flexibly for example, block grant.

Comments
Your answers might have included the following:
1 PTA funds are not government gazetted fees.
2 They include funds that are voluntarily paid by parents as decided in the general meeting of the PTA.
3 The funds are levied for the purpose agreed upon by the members of the association but approved by the school management committee or governing board.

Since you are the day-to-day administrator of the school, the responsibility for collecting and banking this money rests upon you, and you are accountable to the executive of the committee and the electorate. The management committee or the board of governors controls the PTA funds by ensuring that the money is expended in the manner and for the purpose agreed upon by the members of the PTA and approved by the governing body of the school.

Comments
All funds obtained from other sources are also controlled by the school governing body, that is the school management committee or board of governors, which must sanction their expenditure. You are the accounting officer of the school for these funds.

Receiving and banking of school funds
It is clear that funds coming into the school must be received according to set procedures and kept safely. A receipt book is one of the commonest books of account. It is used in the process of receiving funds into a school.

Comments
Typically in a school, funds come in cash, cheque or drafts. These monies must be received properly and kept safely.

A receipt book is designed for receiving real cash or cheques. A receipt must be made or written out immediately on receiving the cash money or cheque, and the original should be sent or given to the person(s) who has/have made the payment.

A receipt is used in a school to:
• acknowledge receipt of cash or cheque in settlement of school dues
• to provide proof to the school that the student has paid
• provide information for the cash book.

It bears the following basic information:
• the name of the person who paid the funds
• the name of the person who received the funds
• date received
• purpose of the funds
• type of funds (cash, cheque, etc.).

If money has to be kept before banking, it must be under lock and key or in a safe to avoid theft or damage by fire, etc.

Comments
The school can have as many accounts as found necessary by the governing body. It is always advisable for a school to deposit its excess revenue on fixed deposit accounts which generate higher interest. Each account usually has two or three authorised signatories, two of whom must sign a cheque before the bank can honour it. It is common practice that the chairman of the board of governors or management committee is a signatory. These signatories are usually introduced to the bank by the responsible officer.

The following are some of the bank accounts that can be opened and used by schools:
1 Current accounts (of various types) have deposit books both for cash and for cheques. Cheque books are used for withdrawals or transfer of deposits. Interest payment on the balance is usually high, for example, 20 per cent per annum.
2 Savings accounts.
3 Fixed deposit accounts/time receipts, where the customer is given a receipt and is only allowed to withdraw the money when the receipt matures.

A cheque is a written order directing the bank or bankers to pay money as therein stated.

Book-keeping
To facilitate accountability and keep records and to enhance planning and overall financial performance, the school must keep clear and accurate information of all its financial transactions. This is called book-keeping.

Comments
Your list of books may have included the following:

Vote books
This is a book in which records of items and amounts of money approved to be expended per term are kept. This book should be consulted before spending is undertaken, as is it a safeguard against overspending in any one area.

Vouchers
Before payments are made, vouchers have to be written. A voucher explains the reasons and authority for the expenditure. A school should have and keep vouchers showing the details of financial transactions in the school.

Local Purchase Order (LPO)
The LPO is used for identifying and authorising local purchases voted for in the school. This is an agreement made between the school and a supplier that the school is ready to purchase the item at an agreed price. The LPO book should always be kept under lock and key as some bad elements may use it wrongly.

Cash Book
This is the book where all cash transactions are recorded each day.

Green Book/Petty cash
Money which is disbursed for official purposes is recorded in the green book or petty cash book.

Cheque book
A cheque is a written order directing the bank or bankers to pay money as therein stated. One should insist on obtaining receipts for any payments made by the school. Where official receipts are not available it is advisable to use petty cash vouchers to serve as written statements supporting the expenditure.

Journal
It is very important for a school head to record all financial transactions in the journal. The journal has to be written every day. This is the first step of the accounting cycle of the school. See Figure 6.

Financial Ledgers
These are the books where the head of the school posts the information provided in the journals. The purpose of ledgers is for recording the financial transactions of a school as they occur. See details on page 45.

Trial Balance
This is the list of all the accounts used by the school. It is used to summarise the effect of all transactions on the school accounts and show how each account is being used.

Trial balances help heads know the balances of each account and whether the school's records match those of the bank. Also they help check whether budgets are being adhered to.

Financial Statements
These are the statements made by the head to convey information on the financial position of the school at a particular time. Often they are presented to the board of governors for discussion.

Balance Sheet
This is the financial statement produced at the end of the school year which shows the financial position of the school. The normal practice is that the head of the school submits the balance sheets to the authority that approved the school budget, that is, the board of governors.

Income Statement
The income statement summarises the extenet to which profits or losses in an account are occurring. In it, revenues and expenditures are compared in order to project the profits or losses. It is also prepared at the end of the financial year.

Black Book
This is a record of the outstanding debts of the school.

General Stores Inventory Book
This is a book where records of equipment and tools are kept. The purpose of this inventory book is to enable the school administration to keep track of school property and plan for the future supply of such property whenever needed. The items should be clearly arranged. Provision should be made to record both acquisitions and dispositions of items kept. The head has to ensure that no items are stolen or sold out, and that an item which should last one month does in fact do so.

In this book acquisitions and dispositions resulting from deployments in equipment are posted from books of inventories.

Security of funds
Care must be taken to ensure that monies received into the school are safely handled and expended only by authorised persons as officially planned.

Comments
Cash or sensitive books of accounts must be kept under lock and key and if possible, in a strong safe to guard against fire, theft, burglary, forgery and pests.

During banking
Ensure that you carefully fill in banking forms and retain and file copies of the deposit forms. Also note:

Bank Statements/Bank Reconciliation
These must be received on a monthly basis and compared with what is in the ledger and these must agree. Any discrepancies must be reported to the bank manager immediately.

Account Balance
The bursar should always ask for the account balance when he comes to the bank. This account must be signed by the manager and the accountant, and not the ledger keepers. Why?

Bank staff
The bursar should avoid getting used to one bank staff member doing everything as this encourages forgery, or complicity.

Stop payments
Once the cheque book is misplaced or has some leaves missing, immediate report should be made to the bank to stop payment, otherwise the money can be paid to wrong elements.

Withdrawal of funds and prevention of forgery

Comments
Cheques
1 When you write the figures in words on a cheque, there should be no space in between the words. Any space left at the end of the word 'only' should be covered with one ruled line.

2 The amount in figures and all parts of the cheque must be clearly written and the remaining areas uncovered should be covered by double ruled lines.

3 The following figures should be watched carefully as they can easily be forged: 9, nine(ty) 8, eight(y) 7, seven(ty) 6, six(ty) 4, four(ty).

4 Change of signatories should be communicated to the bank immediately.

5 Any alteration on the cheque must be countersigned by both signatories. However, where the alteration involves altering both the amount in words and in figures, a fresh cheque should be written and the wrong one cancelled.

6 The counterfoil must be countersigned by both signatories and the amount on the cheque must agree with the amount on the counterfoil. It is important to write at the back of the counterfoil the reason for the withdrawal.

7 The cheque book and all important accounting documents and banking documents must be kept under lock and key by the responsible officer.

8 No cheque leaf must be signed when blank as this can be stolen and used in forgery.

9 Every time a cheque is written the remaining cheque leaves must be counted and must also be used in their serial order. Watch out for cheques taken from the back of the book!

10 For cash cheques both the face and the back must be signed by both signatories and must bear the title of account on both sides. The person receiving the cash must have his/her name and identity written by him or her and signed at the back of the cheque.

11 A school cheques should normally require at least two signatories - either the head of school or deputy and the person concerned with school book-keeping, in other words the bursar.

Using carbon paper
All financial papers should be signed directly and not on a carbon, as an unscrupulous clerk can put some blank vouchers in and the officer will sign.

Signing without security
No voucher or cheque should be signed without first scrutinising it. Signing when one is too busy or too tired can encourage lack of security.

Signatures
Signatures should not be so simple that they can easily be forged. Many people keep two signatures - one for bank purposes and one for other duties.

Saving Accounts
The person depositing should ensure that the bank employee initials or signs for the balance posted in the passbook, as sometimes the passbook may be posted when actually the deposit slip has been destroyed and money taken. Periodically the balance in the passbook should be compared with that on the bank's ledger card.

Summary
In this unit you have learnt the following:
1 School funds are managed within specific authority guidelines and a framework which must be clearly known.
2 School heads must learn to receive and bank school funds properly.
3 Books of accounts of school fees must be kept properly.
4 All possible care should be taken to ensure security of funds.