Tuesday, February 3, 2009

Preface Module 5 Financial Management

These materials were prepared co‑operatively under the Training and Support Programme for School Headteachers in Africa in the 1990s. They were updated considerably in Guyana in 2000 and again in 2008 to meet the needs of the Guyanese educational context.

Governments in developing Commonwealth countries wishing to reproduce or adapt the materials in whole or in part in any language should inform the Commonwealth Secretariat which may be able to offer some assistance in doing so.

For further information, write to the Director of the Education Programme, Commonwealth Secretariat, London.


Education Programme
Human Resource Development Group
Marlborough House
Pall Mall
United Kingdom



National Centre for Educational Resource Development
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Prepared for publication by the MPU, NCERD
Originally designed and formatted by Geoffrey Wadsley.
Updated design and format by NCERD staff in partnership with

© Copyright Commonwealth Secretariat & Ministry of Education, NCERD Guyana 2009
Notes on Assessment

Please note that each of the unit contains two kinds of activities as follows:

1. Reflection – You will see these from time to time throughout the text. They are in white type and highlighted in black. E.g. Reflection. You are not required to submit your thoughts on these issues to your Master Trainer. You may make notes if you wish but they are your own personal reflections on the issues raised.
2. Activities – These are formal assessments which you will have to submit to your Master Trainer as part of your portfolio. You should number them in the same way as the units and carry out the activity as stated.

Module 5 Financial Management

Managing funds is one of the major tasks of a school head. The success of any school programme depends very much on the way the financial inputs are managed and this, in turn, affects the overall performance of each school. It is therefore important that all school heads have a sufficient knowledge of finance to be able to be effective financial managers. However, financial management is one of the areas where many practising heads have had neither pre‑service nor in‑service training prior to their appointment and this has contributed to school financial resources not being utilised to maximum benefit. The purpose of this module, therefore, is to reverse this trend and to equip school heads, and those aspiring to be heads, with the necessary knowledge and skills of good financial management.

In addition, it is essential that headteachers understand financial regulations and are able to apply them meticulously in order to protect themselves and the school authorities from any accusation of impropriety or fraud. In this module, we deal with financial practices in generic terms rather than specific regulations as these will change from time to time during the lifetime of this module.

Individual study time: 24 hours

After working through this module you should be able to:

identify and mobilise financial resources for your school
draw up an effective budget
manage school funds efficiently
account for school funds properly and fully
use school funds to maximise the effect of the school’s curriculum provision.

This module is divided into six units.

Unit 1: Sources of school funds 3 hours
This unit aims to assist you in identifying possible sources of school finance, and in gaining knowledge and skills for mobilising additional funds.

Unit 2: School budgeting 4 hours
Through this unit you will learn how budgets are drawn up and managed effectively.

Unit 3: Mobilising financial resources 4 hours
Here you will learn to identify specific ways of mobilising financial resources and be encouraged to practice them within the rules and regula­tions under which you have to operate.

Unit 4: Basic framework and mechanism of financial management 4 hours
In this unit you will learn about the basic framework and mechanisms of financial management and gain experience in their application.

Unit 5: Expending and accounting for school funds 4 hours
In this unit you will learn about key accounting procedures for managing
school funds, in order that you should be able to demonstrate full account­ability in the management of the funds of your school.

Unit 6: Auditing school account books 5 hours
Finally you will analyse the reasons for auditing school accounts, and learn
about ways in which this may be done and the stages involved.

Unit 1 Sources of School Funds

For any school to operate effectively it must have funds. In Guyana, education in schools is funded by the government but, to a certain extent, schools are heavily dependent on funds obtained from other sources. In this unit we set out to identify the wide range of sources of funds available to school leaders.

Individual study time: 3 hours

Learning outcomes

By the end of this unit you should be able to:

identify different possible sources of school finance
understand and apply the appropriate knowledge and skills to mobilise funds for your school
understand the relationship between effective financial management and curriculum development.

Sources of funds

Sources of school funds are usually classified into four major categories namely: Government through the Guyana Ministry of Education, Town and Regional Democratic Councils (RDCs), parents and community groups including Non-Governmental Organisations (NGOs).

Central government
The vast majority of funding for government schools in Guyana is received through the Ministry of Education from the state. It is in the form of grants. We will not go into detail here about how these grants are paid because this is information which changes regularly according to current circumstances. However, needless to say it is incumbent on the Headteacher to maximise any monies he /she receives by spending it wisely, not wasting it on ill-thought-out projects and ensuring that it is properly accounted for and all financial regulations are followed. You should refer, at this point, to current M.O.E. policy on the funding of schools.

Funds will always be administered to schools according to their size and the educational provision within. The cost of educating a secondary student, who is studying CSEC in a variety of subjects which require specialist teachers and equipment, will be greater than the more general education provided in a nursery or primary school. You would be advised to re-read the sections on timetable in Module 4 if you are not convinced of this. Therefore, the number of students on role and their age at a given point will usually be the determining factor in the amounts of grant provided. Some Headteachers have been known to falsify these records by leaving children on role who should have been removed or are out of the age range. This, needless to say, is dishonest and sanctions will apply to Heads who attempt this.

In order to claim grants due to your school, you will be asked, well in advance, to provide data for the Regional Education Department. It is important that this data is always kept up-to-date e.g. numbers on role, ages of pupils, state of the buildings, necessary repairs and maintenance, building projects required etc. This is an administrative task which helps the Headteacher to carry out the leadership role in fulfilling the vision of the school. Timely response to such requests from the REDO or M.O.E. is essential. There are a number of different types of grants. They generally fall into the following categories:-

Grants provided “per capita” (number of pupils on role and age range) which are normally given automatically once the data has been submitted. These are used for the general running of the school – its core purpose – learning resources, materials etc.
Grants for the upkeep and maintenance of the school. These are provided as and when required and will be determined by a partnership between the school and the Regional Officer responsible for buildings. They are generally related to your School Improvement Plan.
Grants for special projects. These could be given at any time and could be for a wide range of activities from new furniture to ICT equipment or literacy provision to replacing latrines.

With all of the grants, it is important to be “ahead of the game”. Timescales are often short and you may be asked to provide information with little time to spare. You will know your school and what it needs. This is why it is important to have a fully thought-out School Improvement Plan (SIP) which not only deals with buildings and premises but also educational provision and continuous improvement. All of these have a cost to them and you will need to be prepared for when funds become available.

Consider at present the different financial contributions made to your school by the government through the Ministry of Education and the Town Council or RDC.

Government assists schools financially in several different ways. These include:

paying grants to schools for curriculum materials and resources etc.
paying teachers' and other staff salaries
assisting schools to establish money generating projects by providing technical assistance including materials and equipment
financing the construction and rehabilitation of school plant.

The government also makes indirect contributions to each school through, for example:

training teachers - in service and pre-service through organisations such as NCERD, University of Guyana and CPCE,
preparing syllabuses and materials through NCERD and organisations such as BEAMS
providing inspectors and Senior Education Officers (SEOs) through the Monitoring, Evaluation, Reporting and Development Unit (MERD)
the Ministry of Education which provides direction and leadership centrally for the education system
Regional Departments of Education which provide support, guidance, leadership and direction at the regional level.

Regional Departments of Education

Consider how your Regional Department of Education helps with school finances? Identify different ways in which it provides financial assistance to your school.

In Guyana, each Regional Department of Education is given the responsibility for locating and opening schools and for providing physical structures, classroom facilities and office equipment to schools. This would also include repairs and maintenance to existing buildings and facilities. It is done through and in conjunction with the RDC / Town Council. Funds are generated from central government as well as locally raised revenues and they often face difficulties in ensuring that all local taxes are paid in full and on time, often because taxpayers may not regard local government with the same respect as central government.


Activity 1.1
Explain why parents contribute to the financing of your school and list as many ways as you can in which they do so.

Contributions by parents may become necessary in order to supplement the funds provided by central government in order to meet a good standard of educational provision. Of course, many schools in Guyana are privately owned and run. These schools charge fees and would not survive without full parental contributions. But even in schools where there are good buildings, qualified teachers and a wide variety of resources, parents may still wish to contribute money for even more resources, such as transport and computers, and pay for educational visits, because they want their children to enter adult life having obtained the best possible education. In rather crude terms they want them to be at the front of the queue for good jobs.

Your list of ways parents contribute probably included:

paying official tuition fees in private schools
paying PTA contributions
paying a specific contribution for a building or improvement project
parents may also give their time and skills to a range of activities from building work to coaching at sports
paying teachers for official sanctioned additional lessons and coaching, special duties, general welfare
paying for improved resources, such as textbooks, exercise books and writing materials, desks and chairs, library and sports contributions
providing school uniforms and sports kit
paying for the children's welfare, such as transport money, school meals etc.

Activity 1.2
1) Are parents in your school generally willing or unwilling to help financially?
2) Is it always the same group of parents which is supportive? Do some parents withhold help and, if so, why?
3) What do you do in your school to encourage more parents to help?

In Guyana, the raising of school funds from parents is the responsibility of the Parent Teacher Association and the Head should encourage parents to be involved in this but should not directly raise funds him / herself. We should not assume that all parents are able to make the same contribu­tions, whether financial, in kind or in time, to the school. Income levels in both urban and rural areas are likely to vary considerably, as will the size of each family. A sensitive approach is required by a school head, first to differ­entiate between families, and second to make provisions for children and parents who are facing difficulties with payments. On the one hand you will need to set ambitious targets to raise funds for your school and on the other you will need to accept that not everyone will be able to contribute to the same extent.

In encouraging parents to contribute you will need to target your efforts on those who have the means but may not have the will. To cater for the poorer families you may need to set up a special support fund to assist in providing equal access to extra curricular activities for those children whose parents cannot afford to support them in this area.

Find out the Ministry of Education’s rules on raising funds for the school.

There are restrictions in Guyana on the funds a school may raise. It is the responsibility of the Parent Teachers’ Association (PTA) to raise funds for the school. This is not an activity that the Headteacher should be involved in as his /her role is to identify the need for resources rather than raising the funds to meet those needs. Discussions, however, will take place between the Headteacher and the PTA to highlight the areas where funding can be best used. There are, of course, strict regulations about how monies raised shall be accounted for to ensure that fund‑raisers and fund‑holders are held accountable.

A school may engage in several money generating programmes to raise funds to help it run more effectively. Such programmes may include:

workshops, such as craft work or carpentry
creative activities, such as concerts.

There is always a danger of trying to undertake too many money generating activities at the same time. You should distinguish between:

regular contributions requested from all parents
voluntary collections for special, targeted fund raising activities.

Community groups

Consider community groups in your area and think of the different ways in which they contribute financially to your school.

Community groups are often among the key sources of funds to schools. They are mobilised to carry out given tasks by leaders in the community, such as local politicians or village captains. There are many schools in Guyana that have been built by community groups. Your findings might include:

mobilising community groups in development projects
community leaders playing the leading role in mobilising the masses to participate more effectively in school projects
fund raising for individual schools in an area
involving community groups and former students in self‑help projects for the purpose of generating funds
levying education taxes on members of the community.

Within communities there may be individuals who also decide to help one or more schools on a significant scale. Sometimes business people wish to be seen as philanthropists and may contribute in the same way as community groups. Such contributions should be welcomed, but because of the idiosyncrasies of individuals a system of accountability needs to be enforced particularly where business people operate schools for profit.

In recent years, Guyana has seen a large number of NGOs which have been willing to invest time, money and resources into schools either directly or through training or sustainable activities through the regions or Ministry of Education.

Other sources of funds

School facilities

Consider the situation in your school and identify different ways in which the facilities might be used to generate funds.

Through proper management, school plant may generate substantial funds. Ways of doing this may include:

hiring school facilities to the community, for example, halls, ICT facilities, vehicles, playgrounds
engaging in money generating projects such as livestock farming, running a canteen and operating workshops.


Consider if there are different ways your pupils might be involved in generating school funds.

Pupils may be good sources of school funds if they can see the benefit both for themselves and their school. Developing this resource depends on the good management of the school head and staff. Such fundraising is done through the PTA. The following ways of involving your pupils may be considered:

generating funds through such activities as agricultural activities in rural areas, making crafts and cake sales
fund raising activities, for example, music, dance, drama, games and sports, exhibitions, charity walks and jumble sales.

It would only be right to add here that Past Pupils and Alumni Associations are often a great source of extra financial help. They frequently have very positive feelings towards their “alma mater” and are philanthropic as well. Many schools have been provided with excellent ICT facilities, for example, especially from those former students who now live abroad.

Private Schools
Schools may be founded by religious or charitable bodies, which are NGOs or simply run as a private, usually profit-making exercise. There are many such schools still in Guyana. Most of them are recognised by the Ministry of Education. Each has specific objectives in opening and operating the school which often involves the spiritual and moral well‑being of the children. These foundation bodies give financial support to their schools in various forms, such as land and buildings, equipment and personnel. A trust fund may be established, where money is invested and the interest generated provides operating funds for the school.

Such schools operate by charging parents for their children’s education. This is usually paid on a termly basis. There is a wide range of fees which are charged dependant on the educational provision given. These fees are used to fund the school. If you become Headteacher of a private school, you will have to familiarise yourself with the financial requirements of the laws of Guyana relating to the operation of a business and how it applies to a school with charitable status, if it falls into that category. This is beyond the remit of this Programme.

Fund raising

Activity 1.3
1) Make a list of the methods you use, through the PTA, to raise funds in your school.
2) What additional ways might you introduce?

You may have included some of the following

Sponsored walks: Where individuals are sponsored to walk certain distances to raise funds for particular school programmes.

Trusts from charitable organisations: Where materials and funds set aside by individuals or organisations are donated to run a school programme.

Through fund raising representation: By this method an influential and knowledgeable person is selected to visit people or organisations that have been selected by the fund raising committee to seek financial assistance. The representative must be well conversant with the purpose to which the funds will be used.

Fund raising agents: A group of people interested in raising funds for the school, allocate themselves areas of operation. Then each person approaches individuals for financial assistance. The group must have a co‑ordinator to oversee collections and any other activities involved.

Minor fund raising: Fund raising in the form of a fĂȘte, festival or entertain­ment organised for the purpose of raising funds.

Raffles: The school acquires a few valuable articles, ideally through donations. These articles are then given to the winners of a lottery. If many tickets are sold through this method then quite large sums may be raised.

Quiz nights: An entry fee is charged and persons form themselves into teams, usually of around 6 to 8. A series of questions are asked by a quiz-master on a variety of topics. The winning team wins a prize. This is often combined with a raffle and a meal is provided which is included in the cost of the entrance ticket.

In this unit we have considered the following major sources of school funds: government, parents and community groups. A Headteacher cannot afford to sit back and wait for the funds to appear. He / she must be proactive in gaining the maximum government grants and galvanising the efforts of others to support the school which is an important part of the community. Although fund raising may appear to be a diversion from the main purpose of schooling, it can be applied in an educa­tive way if the pupils are involved in each aspect of an event and topics for language, mathematics and other areas of the curriculum can easily be identified. Fund raising in Guyanese schools is usually done through the PTA to allow the Headteacher to concentrate on the core purpose of the school – teaching and learning.

Given that many schools are seriously short of funds, it is the responsibility of the Head to identify the need and the purpose of fundraising and to stimulate others into doing it. However, under no circumstances should it be allowed to detract from the learning time of the children. Raising funds is extra to the curriculum and not a substitute for it. School heads, as leaders, should encourage those around them to explore all the possible and feasible sources of funds for the benefit of their schools.

Unit 2 School Budgeting

After identifying possible sources of funds a school head, as a financial planner, has to draw up a plan for securing and expending the resources. For the plan to be expressed as a school budget a head needs to have some knowledge and experience of designing and managing a budget.

Individual study time: 4 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.

A school head as a financial planner
As a Headteacher, 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 financial year.
2) Resources may be received from the region or district directly and from various community groups or NGOs, 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. It is important to mention here the role of school improvement planning through the use of the SIP. Funds should always be used for a purpose. To this end, government does not and cannot provide unlimited financial resources. The Headteacher is the one who leads others in making decisions about what the school needs and ultimately what it can ask for and what it can afford. A well-articulated SIP which has been approved by the Regional Department and supported by the PTA will be the starting point for this decision making process.

Stages in school budgeting

Activity 2.1
Reflecting upon the situation in your school:

1) Identify and list activities you want to be carried out in your school this year.
2) List the resources that will be required and the possible sources.
3) Give an estimated cost of each of these resources.
4) Study the budgetary guidelines issued by the Ministry of Education and explain how you will present your budget.
5) Using the guidelines write down the costs of each activity against the expected resources.
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 personnel requirements, 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 Ministry of Education in conjunction with the Ministry of Finance

Stage 5: Obtaining approval of the budget by the financial provider.

Consider these stages carefully and ask yourself if it is really necessary to go through all of them? Is budgeting really necessary in your school?

Let us consider this last question now.

Functions and purposes of school budgeting

Major functions
Budgeting is the process of relating the expenditure of funds in a systematic way to the achievement of the planned mission and objectives of a school. It 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.
3) It can be an instrument for controlling and evaluating performance.

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

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.

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

The purposes of budgeting can probably be categorised into three:

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.
3) To determine that the operation of your school provides “value for money”

Period of school budget
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:

This is the overall school financial and operating plan for a forthcoming financial period. This is usually prepared annually.

This interprets the school plans for major expenditure on capital assets such as buildings. It is often a five year financial plan and must be linked to the SIP.

These are segments of the school master budget, relating to the different school departments. Responsibility is delegated to particular staff, for example, heads of department or level heads. They may be prepared termly or annually.

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.

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.

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

Although the latter is the simplest form of budget display, it is inconceivable that one would not link financial provision and monitoring to performance objectives. Often budgets are displayed in the traditional way described above and the detail is in an appendix and linked to the SIP.

Income or receipts
The bulk of a school’s income is pre-determined and comes from the Ministry of Education. However, other income will be generated throughout the year. The school derives this income mainly from fund raising activities, contributions from PTAs, Alumni Associations, and, in the case of private schools, from supporting agencies and donations from foundations and other charitable organisations.

Payments of teacher salaries, maintenance, construction and other aspects related to the material and human resources of the school are made directly by Government with the assistance of the Departments of Education in Georgetown and the Regions.

These are grants which come mainly from the MOE and they are clearly assigned 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.

These are grants for use on expenditure items determined as priorities in the school. These include contributions from Regional Departments of Education and community groups, for example, the PTA or NGOs.

School expenditure essentially falls into two categories:

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 educational materials. This is the expenditure on consumables.

Although salaries are paid centrally in Guyana, it is always helpful for Heads to understand the personnel costs of their school – hence, the importance of the staffing allowance given to you by the Teaching Service Commission which you will interpret to meet the needs of your school. In many countries, decentralisation of personnel costs has taken place and staff salaries are paid directly by schools through an agency. The appointment of staff lies in the hands of the Headteacher who must budget accordingly. This is an onerous task but gives more flexibility to achieve curriculum objectives.

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 financial 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 re‑allocation of finance by government 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.

Activity 2.2
Obtain a budget statement either for your own school or some other.

1) Is the design of your sample traditional or is it a budget design which is related to school performance?
2) What are the advantages and disadvantages of the design of your sample budget statement?
3) How might you improve the design of the sample to fit the situation in your school?

A budget which is related to school performance is one which presents the purposes and objectives of the school for which funds are collected, 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.

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.

Implementing the school budget

Activity 2.3
Considering the situation in your school:

1) What do you do to implement your school budget?
2) What procedure do you follow to release school money?
3) What difficulties do you face while implementing your budget?

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 budget headings, often 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.

In some countries, regular paper accounting has been taken over by computerised systems. Although this is not the case in Guyanese schools at present, it almost certainly will be some time in the future. The private sector has already embraced this form of accounting. However, the principles are much the same and the computer is allowed to do the work.

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 payment by the person responsible.

It is essential 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 school secretary (if there is one), 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. It also protects both parties from any allegation of fraudulent practice.

The school secretary verifies the payment orders signed by the head. After checking that budget funds exist on the budget headings or votes from which the orders must be paid and that the envisaged expenditure follow the rules, the school secretary 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 some schools, the Head works both as Finance Manager and Secretary. This is unavoidable if the school has not been allocated the staff to separate the two roles. In this case, it is strongly advised that another person or persons is involved in order to protect the integrity of the system.

The recording of expenses and income is done by making a note of payments made 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 or budget heading.

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 budget headings and to know the status of the school financial account at any one time. This is done on two levels as follows:-

The balance in any one budget heading – this is the expenditure on the income received. e.g. $200,000 dollars is allocated for the purchase of exercise books. Half way through the year, only $100,000 has been spent and there are still books in stock. These consumable items in stock should be taken into account before ordering more. One might assume that you have over-budgeted in this area.

The balance for the whole budget – this is the school’s income from government (excluding salaries) against the total expenditure for the year to date at a given time. Although one might think that the school’s budget, which is essentially a forecast of spending, would be on target if 33% had been spent after one term, it is not quite so simple. Some expenses might be seasonal and may not occur until the final term. The reverse also applies, where one buys in bulk at the beginning of the year and 50% of the budget has been spent after one term.

Surplus Balances
All of this will convince you, we are sure, that meticulous record keeping and forward planning are essential to ensure that you neither overspend nor find yourself with surplus balances which you may lose if not spent. Often organisation rush to use all of the available unspent balances before the end of the financial year in case they lose them. This is poor planning as funds must be used in schools for specific purposes and be linked to the overall curriculum plan. Such a spending pattern should be avoided at all costs.

Nevertheless, part way through the year one may discover after completing a statement of expenditure and a trial balance that excess funds are available in one budget heading and there is a likely overspend in another. It is normal practice for funds to be moved from one area to another. This is called virement and requires authorisation from the relevant authorities who have approved the initial budget. Once an approved virement has been made it forms part of the main budget and expenditure can be placed against that subject heading.

It sounds complicated but it is just like a person who has three purses – one for gas, one for food and another for spending money. He / she simply moves money from one purse to the other when one purse has too much money in it. The only differences are that records need to be kept and it requires approval because it is public money.

To view this draft budget you will need to download the PDF version of the module as the text version does not support this type of diagram. See the side bar on the right.

In essence, this is a very simple budget which serves its purpose as a planning tool to ensure funds are available for each of the specified areas. However, it is not a Programme Budget because it does not relate expenditure to teaching and learning and school effectiveness. It is very general in nature and lacks detail.

A budget which was clearly linked to the SIP which stated the following, for example:

“To improve the provision of resource materials for CSEC Social Studies with a view to increasing examination passes by a minimum of 20%
in the next two years”

would link expenditure with overall school performance and use the funds to meet those objectives. One would be able to measure the strategy in the following year once the books had been purchased, thus showing value for money. Many Heads purchase books which remain in locked cupboards. They are meant to be in the hands of children and to make a difference to their lives.

Activity 2.5
Think of three curriculum goals which would improve school effectiveness and cost them as part of your overall budget.

Your three objectives should have the following essentials:-

A statement of improved performance in terms of school effectiveness
Measurable criteria against which to determine the performance
A time frame – when the improvement will happen.

This will all be stated in your SIP which will be carefully costed to spread expenditure over a few years, as and when it becomes available. When considering your budget against your school objectives, always ask yourself what you want to do, why, how and by when?.

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:

Check that expenditures are made in compliance with the budget authorisations.
Note, at regular intervals throughout the year, whether the budget is on target and / or whether virements need to be made.
Note whether there is a surplus or a deficit at the end of the year and whether there is the possibility of building reserves.
Assess the implementation of the budget with a view to preparing subsequent budgets more accurately.
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 budget headings, that is, ensuring they are not overspent, and that money received is put under the appropriate headings. Before you agree to any expenditure first check the heading 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 heading.

Income throughout the year
You will have estimated the income you hope to receive and will have included it in your original budget. However, schools are sometimes fortunate enough to receive funds for which they did not budget which are not earmarked. e.g. extra fund raising activities, charitable contributions, etc. Such money, when it arrives, will be accounted for in income and will either:

§ offset other income which you budgeted for but did not receive e.g. reduction in pupil numbers causing a shortfall of government funds or;
§ will be used to increase a budget heading where an additional need has been identified or;
§ will form part of the reserves so that new purposes can be found.


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 and should be clearly linked to the SIP
when a budget is approved, delegation of financial responsibility and accountability is given to the Headteacher
budgets are used as a means of evaluating performance of the school head
a major responsibility of the school Head is to design, manage, monitor and control the school’s budget.
the school’s budget must be linked to school effectiveness.
the school must provide “value for money”

A Headteacher who is a good financial manager will maximise opportunities in order to ensure an excellent educational provision for his / her school.

Unit 3 Mobilising Financial Resources

In the implementation of any educational plan, programme or project, it is important that the necessary resources are available. There are four main types of resources which can be mobilised. These are human, material, time and financial resources. This unit will deal specifically with financial resources and how they can be mobilised.

Once the needs for human and material resources have been identified, estimates of the amount of financing required to deploy and use these resources effectively should be worked out. In Unit 1 sources of school funds were identified. They include the government, parents and the community, as well as the school itself through finance generating projects. Mobilisation of any of these sources involves sensitisation, education, justification for the activities to be done and a plan for achieving the objectives. This unit considers the availability of finance, budgetary prioritisation in a school, the distribution and use of financial resources.

You may have listed the inequalities mentioned in the first paragraph of this section or others. Inequalities may arise when more importance is given to preferred levels of education. E.g. primary rather than secondary or between boarding and day or within a given school when more importance is given to examination classes than to lower classes.

Activity 3.3
1) Give reasons why financial resources for education are limited.
2) What are the conditions that can ensure the satisfactory use of financial resources?

Considering the number of sectors sharing the national revenue, education gets a relatively large share in countries where learning is a priority for national development. Guyana would be included in this group of countries. However, the overall Gross Domestic Product (GDP) is relatively small due to Guyana’s small population and large land mass covered in untouched rainforest. GDP is the total production of goods and services producing revenue in a country. As such, the overall government budget is small and the education budget is small pro rata. Among the necessary conditions for the satisfactory use of resources can be included:

the capacity to use available funds
the provision of funds in time
the proper accounting for expenditure based on priorities.udgetary sources of financing.

However, when considering the issues in this unit, remember that you must measure gains against the efforts made to achieve them. One must also ensure that the core purpose of the school – teaching and learning – is not devalued by our efforts to mobilise funds. It is a fine balance but essential to be aware of it.

Individual study time: 4 hours

Learning outcomes
By the end of this unit you should be able to:

§ mobilise available finance
organise financial resources based on the budgetary priorities set within the school
§ demonstrate skills of distribution and the use of school financial resources by budget items
describe how to make provisions for additional sources of finance for school projects and programmes.

Financing availability
Financing availability may be described as the percentage of public expendi­ture given to education. In the case of an individual school, financing avail­ability can be considered as a percentage of education expenditure on the appropriate sector. Although it is not essential that a Headteacher is fully conversant with overall government spending policy, it helps if he / she has a broad idea of “the big picture” to locate the school within it. The examples below illustrate how financing availability can be determined.

To view this diagram you will need to look at the PDF version by going to the sidebar on the right.

Therefore, the financing availability for education is the percentage of government expenditure allocated to education. The financial availability for an individual school is the percentage of the total education budget that is allocated to that individual school.

In order to calculate this, work out the total amount of money available to the individual school by multiplying the enrolment by the capitation grant for each pupil. Then find what percentage this amount is of the total expenditure on schools generally. This calculation can be done as a percentage of the following:-

The total government expenditure
The government expenditure on education
The expenditure on a particular level – secondary, primary or nursery
The expenditure on a region.

Although increasing steadily, Guyana still has low financing availability and because of this, government and communities need to mobilise additional financial resources. It should be noted that mobilisation of financial resources for education is strongly affected by changes at both the national government level and education sector level. Readjustments in expenditure from, for example, defence spending might be diverted to education. Often, priorities are directed to providing the infrastructure (such as roads, electricity and water) to support economic development. However, the balance of argument in the early 21st century is now back in favour of additional funding for education, particularly for basic education (literacy and numeracy) and for disadvantaged groups, such as those living in rural areas, and children with special educational needs. Since the year 2000 countries, including Guyana, have concerned themselves, often with the help of other nations, with achieving the Millennium Development Goals. Guyana is well advanced in the educational area of “Universal Primary Education”. Schools should take note of this and, as far as possible, adjust their plans or projects accordingly. School heads should try to ensure that they are receiving a fair allocation of funds, particularly those from government sources. This is why it is important to keep an eye on your school’s financial availability both within the sector and the region.

Budgetary prioritisation in a school
Because an institution's financing availability might not meet all its educational requirements priorities have to be set. Educational planners, including school heads, seek to channel resources to the educational activities which will have the greatest impact and are likely to be able to solve educational problems. Prioritisation involves putting first things first, that is, deciding on the activities that must be done before others are carried out. When a country defines its priorities in accordance with an overall development policy it has more chances for mobilising resources for education.

Likewise the head of a school should arrange developmental activities in order of importance, so that funds may then be allocated.

Activity 3.1
1) List all the activities or items on which you would like to spend money in the next financial year. Set yourself a limit of ten items and make sure the items are realistic!
2) Rearrange them in order of priority

There is a wide range of activities or items which you might have identified, for example, purchase of teaching materials, stationery, furniture, practical and extra curricular equipment; construction of a classroom block, a library, repair of a leaking roof, painting of a dormitory, purchasing a pick up for school transport; installation of internet, purchase of audio visual equipment etc. Considering the importance of each item you should be able individually or in a group to prioritise the items.

Prioritising may mean having to make hard choices. Clearly the leaking roof must come before a library, since it is necessary to stop more damage being done. Some decisions relate to direct improvements in the teaching and learning environment, whilst others are more to do with personnel and welfare matters. Thus would money spent on school transport be more beneficial than building a library room? How about balancing say, four less expensive things against one more expensive item? Perhaps you suggested in your answer that you might concentrate on different types of things from one year to the next; so this year you could target one more expensive item and next year give something to each area.

In all of this, however, it is important that your priorities form part of the School Improvement Plan (SIP) and that everything can be traced either directly or indirectly to an improvement in the quality of education and a more effective school in terms of teaching and learning.

Activity 3.2
As the head of a new primary school you plan is to establish a computer suite in order to expose the children to 21st century technology

1) List the hardware and software that will be required (you need not go into too much technical detail)
2) Outline the estimated costs for building or refurbishment
3) Identify the costs for technical support
4) Arrange the activities in order of priority to facilitate the mobilisation of resources.

Do not concern yourself too much with exact prices but identify the process that you will have to follow to achieve your goals.

Unless you are well versed and trained in Information technology, we assume that you will have sought help in this answer. We cannot expect to know everything ourselves but accept that many persons have different skills. However you have tackled this, you should have identified a logical progression of activities from original costings to implementation with children in the ICT suite. You will have reached a total cost which will enable you to make decisions about how you will raise the funds and whether the activity will need to be spread over several years.

Distribution and use of school financial resources
In general, financial resources are scarce and this scarcity can be made worse by the inappropriate distribution or misuse of such resources. It is, therefore, necessary to rationalise all expenditures. This can be achieved by drawing up proper criteria for resource distribution and thus to reduce imbalances. Inequalities frequently exist in the sharing out of resources committed for education. One such inequality is the way that resources are distributed between urban and rural schools. Normally the urban schools are advantaged while the rural schools become marginal in matters of education and other social services. Another inequality occurs when the resources allocated have high administrative costs which limit implementa­tion of projects. In Guyana, the cost of distribution and the sheer difficulty of some of the terrain often mean that rural and hinterland areas are the least served with resources in material, personnel and financial terms. Even when there is a political will of equality as in Guyana, sometimes these difficulties can seem overwhelming.

From the national point of view the distribution of financial resources for the education sector is affected by pressure from other sectors for which there seems to be greater justification regarding the distribution of funds. It is true that in the education sector significant results are reached only in the medium or long‑term while in other sectors they are realised in the short­ term and often with greater efficiency.

It is important to note that often the good use of financial resources is limited by administrative problems. Utilisation is satisfactory when:

the allocation of funds takes account of the activities to be carried out
there is the capacity to use the funds committed
resources are provided in time
expenditure is properly accounted for and is according to priorities.

For example, an issue in Guyana is the availability of qualified personnel at all levels because of the migration of Guyanese residents, sometimes known as the “brain drain”. The government may allocate, for example GY$60 million for curriculum specialists but, if they are not available, progress will not be made. Hence, the need for capacity building.

Consider two factors that cause inequality in the distribution of financial resources

You may have listed the inequalities mentioned in the first paragraph of this section or others. Inequalities may arise when more importance is given to preferred levels of education. E.g. primary rather than secondary or between boarding and day or within a given school when more importance is given to examination classes than to lower classes.

Activity 3.3
1) Give reasons why financial resources for education are limited.
2) What are the conditions that can ensure the satisfactory use of financial resources?

Considering the number of sectors sharing the national revenue, education gets a relatively large share in countries where learning is a priority for national development. Guyana would be included in this group of countries. However, the overall Gross Domestic Product (GDP) is relatively small due to Guyana’s small population and large land mass covered in untouched rainforest. GDP is the total production of goods and services producing revenue in a country. As such, the overall government budget is small and the education budget is small pro rata. Among the necessary conditions for the satisfactory use of resources can be included:

the capacity to use available funds
the provision of funds in time
the proper accounting for expenditure based on priorities.

Possible extra‑budgetary sources of finance
Most of the financial resources for the different levels and types of education are provided by the public sector. In Guyana, while government contributes most of the educational requirements, there has to be a constant search for other sources of finance. Parents have played a big role in meeting the largest part of educa­tion costs.

In education systems the most important component is personnel since the sector makes intensive use of human resources. In other words, the running or recurrent costs reach much higher levels than investments. Among extra‑budgetary sources the contributions which the parents and the community can make constitute an important supplementary way of mobil­ising financial resources allocated to education.

This particularly applies to those parents who choose to have their children educated privately. They pay twice for education in that they pay fees and also local and government taxes to pay for state controlled schools. They only benefit indirectly from this in others’ education providing them with services. At present, if all children in the country were educated in state controlled schools the education budget and financial availability would have to be much larger than at present putting a severe strain on the system. This situation also applies in many other countries and is not unique to Guyana.

Resources mobilisation strategy
In order to gain extra resources for education, a strategy is needed, which may involve the following aspects:

To increase financial resources for education, account should be taken of the fact that it is important to improve the lot of disadvantaged groups in the population since they provide continuing examples of social inequalities.

Additional resources need to be sought to supplement the normal budget coming from the Ministry of Education, taking into account each school's characteristics.
It can sometimes be difficult to convince the providers of such sources of funding that they should invest in education because the economic gains are not immediate.
Extra resources should be sought to reduce unit costs and improve the implementation of plans or projects.

It is often staffing costs which increase the burden of any project or plan.

It is difficult to find additional sources of financing, given the great variety of sources already used in Guyana. Currently the country benefits from many financial and charitable sources from NGOs such as VSO, Peace Corps, Every Child Guyana and Educare amongst many to international organisations such as UNESCO and UNICEF. Many resources derive from other countries where there are particular good relations such as Canada and the Canadian International Development Agency (CIDA). This Education Management Programme is funded through GBET which means "Improving Guyana Basic Education Teacher Training Project." It is funded by CIDA which is sponsored by the Canadian Government. On the other hand long term loans for major projects with favourable rates are often used. There are many partnerships such as BEAMS which was funded by the Inter-American Development Bank . IDB was established with headquartered in Washington, D.C., United States, in 1959 to support Latin American and Caribbean economic and social development and regional integration by lending mainly to governments and government agencies, including state corporations.

At school level, here are a variety of ways of mobilising financial resources which are commonly used. Some of these have already been mentioned in Unit 1. They include the following:

Fund raising functions: these may involve activities like raffles, drama, concerts, charity walks, collecting various items and auctioning them, cash donations.
Contributions or donations by private companies.
Special grants by government for specific activities.
Sales of school products.

Activity 3.4
1) Examine the various ways of mobilising financial resources and determine which one of them gives the best returns.
2) What are the risks for each of them?
3) Can you mention any other ways you consider important but which have been omitted?

In this unit you have been able to learn a number of concepts or ideas concerning mobilisation of financial resources. These can be summarised as follows:

The main types of resources are human, material, time and financial resources. These need to be mobilised to facilitate implementation of school plans, programmes or projects.
To mobilise financial resources one must consider the financing avail­ability, which is the percentage of the public expenditure given to education or, in case of a school, it is the percentage of the education sector expenditure given to that school.

Budgetary prioritisation is the arrangement of items or activities in order of importance and allocating money which will facilitate their execution. Often there are inequalities which arise in the distribution of financial resources nationally as well as at the school level. Great care must be taken in distribution of the available funds.

All budgetary plans must be related to your School Improvement Plan which will identify need, express developments in teaching and learning strategies and be the overall school document which identifies priorities for improved school effectiveness.

As the financing availability is extremely small, a search for extra budgetary sources of financing educational activities has to be carried out.

Various mobilisation strategies should be used to obtain the necessary funds in order to implement the school plans.

Unit 4 Basic Framework & Mechanism of Financial Management

In the first three units, you have learnt how to identify sources of school funds, budget for and secure the funds. Financial management, amongst other things, involves recognising and respecting authorities, regulations and practices governing the receiving, keeping and spending of funds. In this unit you will learn about the basic framework and mechanisms of finan­cial management and gain experience in applying appropriate financial management practices and skills.

Individual study time: 4 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
plan a school budget and understand the system of monitoring it throughout the year
describe the practices for book‑keeping in schools and the use of inventories
outline safeguards for the security of school funds.

Basic framework of finance management

Activity 4.1
Before you proceed to look at Unit 4 in detail, please revise Units 2 and 3 by looking back on the sources of funds for your school budget and answering the following questions. If you are not currently a Headteacher, please discuss with your own Head or one from another school.

1) How much funding did you secure from each source?
2) Which source was most reliable? Why?
3) Over what period did the funds come into the school?
4) Is the amount collected more or less than budgeted?
5) If less, how and when do you envisage filling the gap or achieving your planned target?
6) Are your priorities still the same?

You will realise that funds coming into a school are not entirely certain and are often not adequate. They do not arrive all in one go but are spread throughout the year and often have to be claimed. If you do not do this you will not receive the funds. 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 management.

Framework for managing school funds

Your answers in the above activities are likely to bring out and include the issues outlined in the following paragraphs.

Activity 4.2
1) Considering the school you have chosen or your own school, identify and describe the framework in which you or the head manages the school funds.
2) How flexible are you or the head in deciding what to spend funds on and under what circumstances?
3) How free are you to make purchases?
4) What are the national as well as school financial policies within which you or the head operate?
5) How do you or the head allocate funds and operate budget headings (votes)?

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 all errors with no omissions. 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, both in an Income Account and an Expenditure Account. We have provided for you an example layout which you may wish to use. However, you will not need all of the budget headings and you should choose only those that are appropriate for your situation. The Ministry of Education will have a format for you to use, so this is just as an illustration. This will enable you to compare costs of the range of services offered by the school within a year and from year to year.

Activity 4.3
Below you will find an example of a budget plan laid out as income and expenditure accounts. It contains most of the headings (votes) which one might need to use in a school and many more.

Select from these headings the ones which you feel might be appropriate for your school. If you do not see the ones you need, add your own ones to the bottom of the list in each section.

Draw up a budget structure for your own school or a fictitious one if you wish. For the sake of this exercise, assume a total income of GY$25 Million. Allocate the funds to the various headings. The accuracy of the funds you allocate to each heading is not essential. However, you must ensure that the budget balances and that the totals for the income and expenditure accounts are the same. Remember that this is not actual income and expenditure at this stage, but merely a forecast.

You will not need to complete the first section of the expenditure account “Staff Costs” as this will be dealt with by the MOE and the Teaching Service Commission. However, if you wish to do the exercise as Head of a Private School which pays its own staff costs, you will need to increase the income account allocation considerably to cover these costs.

To see these charts you will need to view the PDF version by going to the side bar on the right.

Although the above format may be different and more complex than you may be required to do with the Ministry of Education, it provides you with a good overview of the expenses incurred in Guyanese schools. Some of these will only apply to large primary or secondary schools and some may be needed only for the future as accounting systems and financial accountability becomes more and more complex on a yearly basis.

Whatever the case, it is essential that the budget balances and, where the providence of the income is uncertain, that there is flexibility within the expenditure account if the income is not received. For example, we can only estimate the fundraising power of the PTA and a change of chairperson could easily mean a loss of considerable revenue. Flexibility to make changes, knowledge of costings and understanding of basic accounting procedures are the important requirements of any budget preparation.

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

In a school with a well‑organised financial management system, virements can be applied. A virement is when you make the decision to transfer funds between two budget headings (votes) where there is excess money in one and a need for funds in another. Under this system you, as the head of the school, will agree with the funding authority (MOE, Regional Department or governing body) 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.

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. However, regulations must be followed in order to achieve value for money. For example, estimates of purchase costs must be obtained in order to get the best prices and to avoid fraudulent practice.

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.

To manage the school finances you should be conversant with what each department has and what it needs. Involving teachers, heads of depart­ment and level heads 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. You will be provided with the latest versions of these on your appointment as a headteacher.


Activity 4.4
Grants are funds that government or other non‑government organisa­tions give to run schools. Reflecting on your school situation:

1) List the various sources of grants you receive in your school.
2) What activities or items are financed from grants in your school, whether from the MOE or other sources?
3) Who decides how to spend the grants?

Guidelines on the management of grants are contained in the rules and regulations of the Ministry of Education. Schools with governing bodies or private schools will have their own regulations which will fit in with standard accounting practices. Relevant government authorities will determine the level of grants and their purposes.

You will certainly be required to provide the relevant authorities in good time with information that will allow them to determine the level of the grants for your school.

It may be, also, that you will have less flexibility than you would like in how you spend the money allocated to you. However, all good accountants are flexible and creative and can be so as long as they operate within the regulations.

PTA or community group funds

Activity 4.5
1) Does your school receive Parent Teacher Association funds?
2) If so, how are PTA charges levied and controlled?
3) What items are financed from PTA funds in your school?
4) What other community groups contribute funds to your school?

Your answers might have included the following:

§ PTA funds are not controlled or allocated by the MOE or the school.
§ They include funds that are voluntarily paid by parents as decided in the general meeting of the PTA.
§ 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 manager 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 parent teacher management committee 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 leadership team or the governing body of the school.

Other funds

Activity 4.6
1) List other sources of funds for your school.
2) Do you declare funds from extra sources to school authorities?
3) Who decides on their use?
4) Do you include them in your budget?

All funds obtained from other sources are controlled by the school authorities from the moment you receive them. You are the accounting officer of the school for these funds. In fact the funds are accounted for twice. Firstly, by the organisation which donates them, following their own internal regulations, and secondly, once you have received them, by the school accounting system following the regulations of the MOE. All such funds must be declared, whatever their source.

The use of the funds would normally be decided upon in partnership between the donor and the recipient school as both have an interest in the future development of the school. It may not be possible to include them in your original budget as you may not know about them or you may only have an estimate. However, budgets are revised and updated throughout the year as funds become available and such donations must be included in the income account and an allocation made in expenditure account or the school’s contingency fund. However, excessive use of the latter would not be good practice as it may lead to an under-use of school funds.

Please Note: In the following pages you will find a number of examples of forms which are commonly used in accounting procedures. They serve only as examples and, although the principles will be the same, they may differ from those you are currently required to use in the Ministry of Education.

Receiving and banking of school funds
It is clear that funds coming into the school must be retrieved 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.

Receiving funds

Consider how you officially receive money in your school and the kind of information you record about the funds received.

One copy would be issued to the person making payment. Typically in a school, funds are received in cash, cheques, or drafts. These monies must be received properly and kept safely. A receipt book is designed for receiving cash or cheques. A receipt must be made or written out immediately on receiving the cash money or cheque, the original should be sent or given to the person(s) who has/have made the payment and another would be retained by the school.

A receipt is used in a school to:

§ acknowledge receipt of cash or cheque in settlement of any payment, including school fees in a private school.
§ provide proof to the school that payment has been made for whatever purpose.
§ 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.

The head of the school must organise that all school funds should first be banked and then withdrawn as and when necessary. You should avoid using cash before it is banked as much as possible. This leads to confusing accounting procedures which are difficult to follow both for the school and auditors.

There are strict regulations on the use of school bank accounts and you should refer to these alongside this unit. The school can hold as many accounts as found necessary by the financial authority or 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 headteacher or chairman of the board of governors or management committee in a private school are signatories. 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) which have deposit books both for cash and for cheques. Cheque books are used for withdrawals or transfer of deposits. It is rare that interest is paid on this kind of account.
2) Savings accounts on which regular interest will be paid. This will vary according to national and international markets.
3) Fixed deposit accounts, where the customer is only allowed to withdraw the money after a fixed period.

Withdrawing funds
Funds are withdrawn using a withdrawal form or a cheque book. A typical withdrawal form and a typical cheque are shown below

To view copies of the withdrawal slip and the cheque you will need to go to the PDF version by going to the side bar on the right
To facilitate accountability, 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.

Your list of books should have included those in the list below. In many countries, financial accounting systems have been computerised. However, the principles and procedures are much the same. The advantages are that the system will produce at the touch of a few keys, many financial reports which will assist you in managing your funds.

Activity 4.7
1) List all books of accounts which you should be using in your school.
2) Which of these are used in handling

the receiving of funds;
the withdrawing of funds;

This is a book in which records of items and amounts of money approved to be expended from any budget heading e.g. fuel or educational consumables, are kept. This book should be consulted before spending is undertaken, as it is a safeguard against overspending in any one area. You will check if funds are available before agreeing new expenditure. It is also important to remember any commitments for future months that you may have agreed to but have not recorded (e.g. future fuel bills). When using a computerised system, the software will not allow you to spend money if the funds are not available and will record commitments, thus not allowing you to overspend.

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.

The LPO is used for identifying and authorising local purchases agreed 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 in a very secure place to avoid fraudulent activity. However, it is not acceptable to use only one supplier (unless there is no other).

A system of competitive tendering should be in place especially when purchasing large items or expensive services. In other words, suppliers will be allowed to submit estimates of their costs for certain goods or services. Taking into account quality, you will select the one which provides the best value for money. It is also essential that you or anyone involved in the finances of your school declare any interest in local businesses that may be school suppliers.

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

Money which is paid out for official purposes is recorded in the green book or petty cash book. Receipts for all purchases must be supplied by the purchaser claiming the money.

A cheque (see above) is a written order directing the bank or bankers to pay money as stated on the cheque. 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.

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.

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 in Unit 5.

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 budget heading and whether the school's records match those of the bank. Also they help check whether budgets are being adhered to, especially if they are being operated by others in the school. It is the overview of the state of finances at any given point of time.

These are the regular statements made by the head to convey information on the financial position of the school at a particular time. Often they are presented for discussion to the Ministry of Education or the trustees in a private school or the board of governors in a board school.

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 or the board of governors where there is one.

The income statement summarises the extent to which profits or losses in an account are occurring. In it, receipts (revenues) and expenditures are compared in order to project the profits or losses. It is also prepared at the end of the financial year. In a school, needless to say, losses are unacceptable unless an overspend has been approved by the financial authority.

This is a record of the outstanding debts of the school by individuals or companies. Considerable effort must be made to ensure that these debts are paid.

This is a book where records of consumable items, 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 disposal of items. 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 disposals resulting from deployments in equipment are posted from books of inventories. This is often called the asset register and generally records capital equipment in the school e.g. computers, TVs, furniture, CD players

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.

Receiving funds
Reflect for a moment on how you keep your cash within the school and what safety

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:

These must be received on a monthly basis and compared with what is in the ledger and these must agree. In other words the account of the bank and your own accounts must be the same and must balance. This is called a bank reconciliation – reconciling your own accounts with the bank statements. Any discrepancies which you consider to be the fault of the bank must be reported to the bank manager immediately.

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


Once a cheque book is misplaced or has some pages missing, an immediate report should be made to the bank to stop payment, otherwise the money can be used fraudulently.

Withdrawal of funds and prevention of forgery
It is essential that you protect yourself and other staff in the school from accusations of fraud. This is done by following procedures to the letter. It is very easy to ignore certain rules when operating an account within a busy school. This would be foolhardy. You will be advised, therefore, to follow the procedures below to avoid this.

Ensure that you keep to the following procedures when writing cheques.

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. Computerised systems will write the cheques for you on your own pre-designed stationery.
The amount in figures and all parts of the cheque must be clearly written.
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).

Change of signatories should be communicated to the bank immediately.

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.
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.
The cheque book and all important accounting documents and banking documents must be kept under lock and key by the responsible officer.
Under no circumstances must any cheque be signed when blank as this can be stolen and used in forgery.
Every time a cheque is written the remaining cheques should be checked and must also be used in their serial order. Watch out for cheques taken from the back of the book!
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.
A school cheque 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 school secretary.

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.

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 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.

The person depositing should ensure that the balance written 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. However, this is becoming less and less necessary as computerised systems in banks are being operated.

We hope that, having worked through this unit, you will be much more familiar with the procedures of financial management within a school and the responsibilities of the headteacher to ensure sound financial systems which not only keep track of all funds going in and out of the school’s account but also enable the headteacher to plan effectively for the best use of those funds.

Some of the principles are:

School funds are managed within specific guidelines from the Ministry of Education and a framework which you must be familiar with and follow meticulously.
The use of school funds must be clearly linked to the school improvement plan (SIP) which drives improvement in the school
School heads must be able to receive and bank school funds properly.
An accurate projection of spending in the form of a budget must be drawn up at the beginning of the year.
Regular monitoring of that budget must take place and necessary adjustments made.
All possible care should be taken to ensure security of funds.
School heads should seek to protect themselves and those for whom they are responsible from any accusation of malpractice or fraud by ensuring open and transparent accounting which follows the guidelines.