Individual study time: 7 hours

Learning outcomes
By the end of this unit you should be able to:
• define expenditure
• define finance
• identify the procedure of expending school funds
• explain accounting procedures in the management of school funds
• display some knowledge of management and controlling of school funds
• practise proper accountability procedures for school funds.

Financial resources and management in schools
This unit does not comment on the various sources of school funds nor on the need for proper budgeting in schools. These have already been discussed in Units 1 and 2. The present unit will therefore deal with:
• the procedure for expending school funds
• the processes of controlling school expenditure
• accountability of school funds.

Before we do so, remind yourself of what was covered in Units 1 and 2 by doing the following:

Comments
The following are useful additions to the answers you may have given:

1 Budgeting is a process of preparing estimates or the statement of expected income and proposed expenditure.

2 Income refers to how the amount to be used will be raised and how much it is.

3 Expenditure is the amount that was/will be allocated to be spent on various functions.

4 Programme budgets are benefit oriented, based on set goals, while line-term budgets are cost-oriented.

5 Finance refers to money and other resources which assist the school in achieving its objectives.

6 Financial management covers the administration of financial resources including money and how to generate it.

The proper management of school funds is an important component of good school administration. Funds constitute the nerve centre of the school. They must therefore be properly managed for the school to achieve its objectives.

Procedure for expending school funds
This is referred to as the implementation stage of the budget or budget administration. In practice this is the execution of planned school programmes with proper expenditure of funds as shown in the approved budget. The budget becomes a very important document for managing the finances of the school. Before beginning to implement it, you need to explore its structure so that you understand its basic requirements, as well as the opportunities and threats it may present.

Comments
In addition to what you have found out the procedures for expending school funds are usually as follows:

Regulations
The Ministry of Education issues specific instructions with regard to the spending of and accounting for funds. For example:

1 Funds released by the MoE for one purpose should not be diverted for another purpose (see note below).
2 It gives guidance on how much you can spend within the usual procedure on a particular item.
3 It compels you to obtain approved authority for spending on an item.
4 All expenditures incurred should be recorded in an acceptable manner according to the Standard Accounting Practice (SAP).

If the need for expenditure arises,contrary to the approved budget, written authority should be sought from the MoE or the governing body or PTA. Discuss with your colleagues the implications of the regulations in your country related to this issue. What problems have arisen recently?

Procurement procedures
It is advisable to use the Tender Board or Purchasing Body to control expenditure. If there is any bidding, it is done by the board of governors through its Finance Committee. Interested parties are not allowed to supply goods/services to the institution. It is not always easy to protect yourself from this last problem.

Proforma invoice
A proforma invoice is issued when payment is made before goods are delivered. When one cannot be obtained an officer responsible for implementing a task raises a claim in respect of the task and submits it to you for approval. Then the funds so approved can be released.

Order forms or delivery notes
The purchase of goods, furniture or maintenance works should be done by order forms or delivery notes. You must ensure that goods and services ordered are delivered before signing the delivery notes.

A cheque
This is made to ensure that the order to pay is legal. You should check if the payment claimed was effected; that goods/services paid for were delivered; and that the transaction was properly recorded. It is improper for you to ask the chairman of the board of governors/PTA executive committee to sign a blank cheque or for a cheque to bear only the signatures of yourself and the bursar.

Financial flexibility
If flexibility is possible, the total amount of money available to the school can be enlarged and better value gained. It can be done in two ways:

Borrowing of funds from one vote to another: Internal borrowing is justifiable because under-spent accounts can compensate for overspent accounts. For example, maintenance of vehicles ( a very expensive item) may lead to borrowing from general accounts. Internal borrowing also helps to counteract uncontrolled prices and inflation. However, such adjustment must be done with the approval of the governing body.

Carrying balances forward: An increasing number of institutions carry forward unspent capitation from one year to another; and over-spending is carried forward as a deficit to be paid off next year. There are three advantages of this practice:

1 Institutions can plan their expenditure if necessary outside the limits of one financial year.
2 There is no risk of losing unspent funds.
3 Schools spend less time on administration of funds, because there is no longer any need to balance expenditure exactly against income.

Accountability of school finance
Definitions
Accounting: This involves checking to ensure that the order to pay is legal, that payment is effected and recorded in the general financial account covering all money spent in accordance with the budget.

Financial information: This is not useful unless it is expressed in monetary terms like internationally acceptable currencies, such as dollars, pounds sterling, yen, etc. or local currencies, such as the naira, cedi or shilling.

Accountability: This refers to budget control. It is the evaluation and guidance of budget administration activities throughout the school's fiscal year.

Budget control: This acts as a device for assuming accountability to prevent misappropriation, embezzlement and illegal spending of funds. It deals with monetary records, which keep account of how money is spent, and therefore helps planning for the future.

Comments
Make sure you have included the following in your points:
The importance of financial records
Financial records are records of day-to-day financial operations in a normal situation in school administration. These records are important because:
• they are the basis for decision-making on any financial matters
• they provide a means of tracking the growth or decline of the school's assets or liabilities
• they form the basis for determining the value (appreciation or depreciation) of school property
• they are guidelines to indicate the financial position of the school.

Budgetary records
They are systematic ways of accounting for budget implementation by keeping basic records. The following documents are essential for a school or college for the effective handling of funds :

Receipt Books
All payments and receipts should be presented with the proper evidence. You should have receipt books whose leaves/pages must be numbered to enable the detection of lost leaves or receipts. Receipts should be issued at least in duplicate for money received for example, fees. They must also be received for money paid out.

The receipt is the first evidence of cash spent or received.

The Voucher
This can be in book form or in loose sheets which can be filed. It is a document detailing the purpose of any payment made, the date of the payment, the amount, the budgetary vote or item within which the expense is being incurred and the authority that has sanctioned the payment. An example of a payment voucher is given in Fig 7.

Fig 7 Example of a payment voucher

Note that:
1 The voucher has to be written and signed first before money is released.
2 It must bear a number that can be quoted.
3 Receipts obtained after purchases must be attached to the voucher.
4 This document informs one as to how public money has been used.

The Cash Book
This is a book into which information is entered on a daily basis, giving details of money received, such as fees and money paid out, such as for buying school chalk. This book has to be balanced daily so that cash received that day must be balanced against cash spent on the same day. That way, you are immediately aware of the day's collections and spending.

Cheques received or paid out all form part of the day's income and expenditure respectively.

Financial Ledgers
For records of account to be meaningful, information from the journal should be posted in ledgers. These account books record the gains and money spent by the school on particular days. The record emphasises the items in the income and expenditure sides and the net balance for that date.

The following are the types of ledgers operated in schools and colleges:
The General Ledger: This is a book that contains all major items of the budget, for example, food, lighting, stationery. A few pages are allocated to each budget item and on these pages are recorded the daily expenses made under the particular item. An example is given in Fig 8.

Note that all information in receipt books, vouchers and cash books have ended up in the ledger. It offers a clear picture as to which items are frequently purchased.

Credit Ledger/Black Book: This is a book that contains the list of the school's debtors, the amount owed to the school by each, dates when settlement was made and the outstanding amount still to be paid. It is necessary to keep checking this book to ensure that your school has recovered what is due to it. You ensure this by keeping the entries in the book up-to-date.

Vote Book: This is a book which essentially shows how much is left of the vote for an item. It records the total amount voted for the item as per the budget, the daily purchases made under that item and the balance left after these purchases. It makes it easy for you to see whether you are over-spending or not and is a particularly useful check on high spending. It is therefore advisable that you maintain a Vote Book. You will find an example in Fig 9.

Fig 9 Example of a Vote Book

The Green Book: This is a book that lists all those who have been given money for purchasing, the amount given and all the details related to it.

General Stores Inventory Book: Apart from Teachers' Houses Inventory Book and a Book Stores Inventory Book, you should maintain a General Stores Inventory Book where equipment like slashers, hoes, etc. are recorded. The purpose of these inventory books is to enable the school administration (you) to keep track of school property and make replacements accordingly.

Basic accounting processes
Once you know how to keep the account books properly, you can turn your attention to thinking about how to analyse the financial data now available. To do this, you should know the basic accounting processes. These are:
• preparation of financial statements such as: income statements, balance sheets, reconciliation statements and flow of funds statements, etc.
• analysis and preparation of financial statements to arrive at hidden facts and draw corresponding conclusions
• preparation of comprehensive financial reports
• rendering of financial advice on decisions to be made in the light of the conclusions reached.

In practice, to be able to perform the above functions, as the accounting officer of the school, your duty is to initiate financial plans for your board of governors or PTA to adopt. You are at the centre of the school's financial plan and therefore you need to help those with whom you work to formulate proper plans. If that is achieved, then your job of mobilising funds becomes relatively easy. Remember, no parent will contribute more money to the school if the plans are not well defined.

Note that knowledge of accounting will assist you in the day to day management of the funds of the school. It is important so that you have some insight into the financial planning and organisation of your school's finances.

Trial Balance
We first look at the Trial Balance which is an important tool in accounting and gives a list of all the accounts used by the school at the appropriate value and time. Its main purpose is to enable you to know precisely the balance in each account at say fortnightly or weekly intervals. This enables you to know at any point of the fiscal year which items are being deflected first. It helps you to put a brake on if you are spending too fast on one item.

The School Balance Sheet
This is the most important financial document for the school. It is a financial statement of the school at a given date. It must reveal all the assets and liabilities of the school at a particular time, for instance, at the end of the financial year. Before you proceed, ensure that three of the accounting terms used in the Balance Sheet are clear.

Comments
The importance of a school's Balance Sheet lies in the revelation of all the assets and liabilities of the school at the date in question. The terms 'financial statements', 'assets' and 'liabilities' should therefore be understood in the context of the Balance Sheet to mean the following:

Financial statements: These show at a glance the amount spent on various items. They convey the financial status (blue or red) of the school at a particular time.

Assets: These are the properties or belongings of the school which appear in the Balance Sheet. They may be classified as long or short term assets, namely fixed or current assets.

Liabilities: These are the debts or claims of outsiders against the belongings of the school as at the date when the Balance Sheet is drawn up. They too can be long term or short term in nature, namely fixed or current liabilities.

You may wish to make a quarterly Balance Sheet, or an annual one depending on the practical problems of your school. Some heads make it monthly.

Annual accounts and Balance Sheets have to be prepared and a copy sent to the MoE at the end of every financial year.

Balance Sheets should be the main financial concern of a new school head.

Comments
If you look at a school balance sheet, you should be able to see:
• the total value of fixed assets
• the total value of current assets
• the sources of funds
• the debts to which you would give immediate attention
• debts which require payment - but not in the near future
• the total value of assets possessed by the school and how much of this is claimed by outsiders.

Note that:
1 Changes in your financial plan will cause changes in the school Balance Sheet.
2 Such changes should be recorded systematically in the record books already referred to.
3 The Balance Sheet requires the proper keeping of all records of account such as receipts, vouchers, inventories, ledgers, etc.

Summary
In this unit you have learnt about:
• expending and accounting for school money
• the procedure for expending school funds
• the financial regulations of your Ministry of Education
• the need to exercise flexibility in the management of funds ù the importance of maintaining proper financial records
• the operation of proper and regular school balance sheets
• the need for a good financial plan.