Guyana

Ministry of Education

Education
Management
Certificate

Financial Management
Module Five

Drive
Developing

Teamwork

Influencing LEADERSHIP Vision

Confidence
Accountability

Commonwealth Secretariat
Modified from
Better Schools
Resource Materials for Headteachers
 These materials were prepared co-operatively under the Training and Support
Programme for School Headteachers in Africa in the 1990s. They were adapted and updated
considerably in Guyana in 2000, 2008 and 2019 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.

COMMONWEALTH SECRETARIAT

Education Programme
Human Resource Development Group
Marlborough House
Pall Mall
London,
United Kingdom
SW1Y 5HX
or
THE DIRECTOR

National Centre for Educational Resource Development, MOE

3, Battery Road
Kingston
Georgetown
Guyana

Prepared for publication by the Materials Production Unit (MPU), National Centre for
Educational Resource Development (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 2019

Notes on Assessment
Please note that each unit contains two kinds of activities as follows: e.g.

1. Reflection – You will see these from time to time throughout the booklet in bold
text. 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.

2
 Financial Management Module 5
Introduction
The ability to have funds managed in an accountable
manner is a great asset for a headteacher to possess in
achieving the major goal, namely maximising student
performance. The availability of adequate funds and the
prudent expenditure of these funds are important in a
school improving its overall performance. Headteachers
are therefore expected to use their knowledge of
financial management to work callaboratively with the
senior staff to expend gants and also any donations the
school may receive, in the most advantageous manner.
In addition the headteacher as the statutory Vice
Chairman of the Parent-Teacher Association, the only duly authorised body to engage in fund
raising and the expenditure of such funds on behalf of the school, must place this financial
expertise at the benefit of the Association. However, financial management is one of the areas
where many practising headteachers 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
headteachers, and those aspiring to be headteachers, 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

Objectives
After working through this module, you should be able to:
• Distinguish between: - (i) grants to schools and unsolicited donations and
(ii) PTA funds

• Act in accordance with PTA policy, to

(i) identify and mobilise financial resources of the school
(ii) draw up an effective budget
(iii) manage PTA funds efficiently
(iv) account for PTA funds properly and fully
(v) use PTA funds to maximise the effect of the school’s curriculum provision.
• Collaborate with other members of staff, manage school grants and donations effectively,
efficiently and accountably.

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Units
This module is divided into six units.

Unit 1: Sources of PTA 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: Budgeting for the PTA 4 hours

Through this unit you will learn how budgeting for the Parent-Teacher Association is 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 PTA funds 4 hours

In this unit you will learn about key accounting procedures for managing PTA 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 PTA/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.

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 Sources of PTA Funds
Unit 1
Introduction
For any school to operate effectively it must have funds. In Guyana, education in state-owned
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 funding for schools are usually classified into four (4) major categories namely:
Government through the Ministry of Education, Town and Regional Democratic Councils (RDCs),
parents and community groups including Non-Governmental Organisations (NGOs).
Headteachers should, at all times include senior members of staff in the decision making process.

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 Ministry of Education’s
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 withdrawn are out of the

5
age range. This, needless to say, is dishonest and sanctions will apply to headteachers who
attempt this.

In order to claim grants due to your school, you will be asked, well in advance, to provide
data for the Department of Education. It is important that this data is always kept up-to-date,
e.g. numbers on role, ages of learners, 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 MOE is essential. There are a number of
different types of grants. They generally fall into the following categories:-

• Grants provided “per capita” (number of learners 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.

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

• paying grants to schools for curriculum materials and resources, etc.

• paying salaries to teachers and other members of staff
• 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
• providing Inspectors and Senior Education Officers (SEOs) through the
Monitoring, Evaluation, Reporting and Development Unit (MERD)
• the Ministry of Education which, from the centre, provides direction and leadership
for the education system,
• Departments of Education which provide support, guidance, leadership
and direction at the regional level.

Departments of Education

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

Comments

In Guyana, each 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.

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Parents

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.

Comments
Contributions by parents are made under the auspices of the PTA, and go a far way
towards supplementing the funds provided by central government in order to meet a good
standard of educational provision. This however, applies only to state-owned schools. Of
course, some 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, e.g. ‘contingency funds’ and through fund raising
• paying a specific contribution for a building or improvement project
• parents may also give their time and skills to a range of activities from working on
building to coaching at sports
• paying teachers for officially 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?

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Comments
In Guyana, the raising of funds is the responsibility of the Parent Teacher-Association
and the headteacher should encourage parents to be involved in this but should not
directly raise funds him / herself. PTAs would raise funds and even request
donations from their members in a manner that confirms with the economic
circumstances of the members and the community.

It is advisable for the headteacher to encourage the PTA executive to plan and
execute programmes that would assist the school to cater for disadvantaged
children. This action would help to remove inequalities among children as they
are all exposed to the curricular and co-curricular activities of the school.

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.

Comments
There are restrictions in Guyana on the funds a school may raise. It is the responsibility
of the Parent-Teacher 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. To facilitate this advisory role, the headteacher is always, as stated in the
constitution, the Vice Chairman of the PTA of the school.

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

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 • voluntary collections for special, targeted fund raising activities.

Community groups

As a member of the PTA executive, consider ways you can advise the PTA to cause
existing community groups to contribute to the school financially.

Comments
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 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, entrepreneurs 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
eeds to be enforced particularly where entrepreneurs 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.

Other sources of funds

School facilities
Considering the situation in the school, what measures would you advise the PTA to use
for generating funds.

Comments
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.

10
Learners
Consider if there are different ways your learners might be involved in generating PTA funds

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

• generating funds through agricultural activities in rural areas,

making craft items and cake sales
• fund raising activities, for example, concerts, games and sports,
exhibitions, charity walks and jumble sales.

It would only be right to add here that Past Learners/Students 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 such schools 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. Fees vary and are dependent on the educational provision given.
These fees are used to fund the school. If you become headteacher of a private school, you
would 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?

11
 Comments
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 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 fête, 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.

Summary
In this unit we have considered the following major sources of funding for schools: 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 the PTA to support the school. 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
learners 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 headteacher 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 instructional time of
stipulated for the learners. Raising funds is extra to the curriculum and not a substitute for it.
Headteachers, as leaders, should encourage those around them to explore all the possible and
feasible sources of funds for the benefit of their schools.

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 Parents
Regional Learners
Departments of
Education
NGOs

Charitable foundations SCHOOL Community Groups

Individual business Others

people

Parent Teacher
School facilities Association Fundraising

13
 PTA Budgeting Unit 2
Introduction
After identifying possible sources of funds the PTA could pursue, the headteacher as a financial
planner, can now guide the Executive of the PTA to draw up a plan for securing and expending the
resources. Knowledge and experience in this area can be valuable for the headteacher to assist
the PTA Executive to design and manage its budget. For the plan to be expressed as a PTA
budget a headteacher 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 headteacher as a financial planner
• explain the nature and functions of budgeting in a PTA
• assist the PTA body to design and manage its budget.

The headteacher as a financial planner

As a headteacher, you mainly rely on resources that are determined by the government and
assigned to the school. Thus, you may operate under a financial environment with two major
elements at the level of the school and community:-

1) Resources may be received from the 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 mission and objectives of the school.

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

What is budgeting?
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 PTA budget which guides a headteacher through the various school activities,
as well as towards achieving the objectives of the school. It is important to mention here the

14
role of school improvement planning through the use of the School Improvement Plan (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 Department of Education and supported
by the PTA will be the starting point for this decision making process.

Stages in PTA 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 the costs of each activity against the expected
resources.

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

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

budget period.

Stage 2: Identification of the resources, in terms of 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?

Conclusion
The actions of the headteacher must be guided by the regulations that exist. Funds allocated to
the school from governmental sources, and unsolicited donations to the school, are to be
addressed directly by the headteacher and staff. All Non-governmental or non-budgetary funds
must be raised under the aegis of the PTA, and must be addressed by the PTA Executive of
which the headteacher is a member, and would ensure that body benefits from his/her
knowledge and experience. The SIP is to be addressed by the SIAC, which has the input of the
PTA and must also benefit from the headteacher’s advice.

15
Let us consider this last question now.

Functions and purposes of 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. Along with the
Work Plan, the budget is also a
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 persons are responsible for
specific programmes or activities. It also
indicates monies allocated to specific
programmes or activities.
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.
Purposes
A budget is a forecast of future financial events showing the anticipated revenue, expenses and
the financial resources available to the school.

The purposes of budgeting can probably be categorised into three:

1) To show what the results will be, if present financial plans in relation to the school are
put into effect, the purpose of the budget is to disclose areas that require
attention and action.
2) To evaluate the financial performance of the school: The PTA budget is used to control
the operations, revenues, costs, and the persons responsible for the operations and
related revenues and expenditures. In effect, your PTA 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”

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Period of the PTA Budget in support of the school
Generally, the PTA budget should be long enough to show the effects of the financial policies
adopted, and short enough to allow estimates to be made with maximum accuracy. The most
commonly used budgets are:

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

CAPITAL BUDGET
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.

SPECIFIC BUDGETS
These are segments of the Master Budget, and relate to specific activities or projects in the school.
They could be prepared termly or annually.

So far we have seen that budgeting by the PTA serves as a:-

• major planning instrument

• means of focusing the contributions of the PTA to the school’s programme

PTA Budget Designs

Types of design
Budgets can be designed in many
different ways. However, in the case
of PTA, two basic designs were
proven to be more effective.

THE PERFORMANCE BUDGET OR

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

THE TRADITIONAL OR LINE-TERM / LINE-ITEM BUDGET DESIGN

In this design, you merely list estimated income and items to be funded. The emphasis is on
the issue of financing rather than on what is to be achieved.

17
In both cases the budget design should provide extensive and accurate estimates of:

• income or receipts
• expenditure.

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, organised by the PTA, Alumni, etc. and, in the case of a
private school, 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.

EARMARKED GRANTS
These are grants which come mainly from the Ministry of Education and 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.

NON-EARMARKED GRANTS
These are grants for use on expenditure items determined as priorities in the school. These
include contributions from Departments of Education and community groups, for
example, NGOs.

Expenditure
Finances expended to keep a school operating fall into two categories:

RECURRENT EXPENDITURE
This constitutes the greatest percentage of expenditure. 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 instructional
materials. This is the expenditure on consumables.

Although salaries are paid by the Departments of Education for teachers in the respective
Regions and the Ministry of Education for teachers in Georgetown, it is always
helpful for headteachers 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.

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CAPITAL OR DEVELOPMENT EXPENDITURE
This is expenditure on capital assets such as buildings, furniture, equipment and vehicles.
They are investments made at irregular intervals, but they cover a time span of several
financial years.

The amount of recurrent expenditure the school would need is influenced by its grade, physical
structure and faclities, number of teachers, geographic location, and at the Secondary level, its
listing, and programmes offered - the CSEC, CAPE, SCCP, etc.

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 available to
you either for your own or another
school.
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?

Comments
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 large schools.

19
 Managing PTA budgets
The budget, prepared by the PTA Executive, to support the achievement of the mission and
objectives of the school, must be taken to the General PTA for acceptance. The next phase
involves the Executive organising to implement, monitor, supervise and control the 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 PTA budget

Activity 2.3
Considering the situation in your school:

1) What role would you play in the implementation of the budget?

2) What procedures would you follow to access PTA funds?
3) What difficulties do you face in the implementation of the budget prepared by the
school’s PTA?

Comments
Managing the PTA budget, the task of the PTA Executive, includes the management of
its implementation, as it now forms the basis of financial decisions
of the the Association. Money can then be expended for the purpose for which it
was allocated. The rules of the Association and good accountability practices
must be followed.

It is a pre-requisite that at least simple but adequate records be kept of all monies
expended. Expenditure should be incurred to purchase items as planned in the
budget, and every expenditure should be promptly entered in the Income and
Expenditure Ledger. This Ledger must be drawn up to show all Income received
and headings of Expenditure as outlined in the budget.

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 PTA 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 PTA funds are handled in accordance with the rules, that the
authority of the headteacher, who is the school finance manager, and that of the school secretary

20
(if there is one), or theTreasurer who is responsible for collecting the PTA funds
and paying expenses, are kept separate. Having two people woking independently of
one another on the spending process leads to greater security in the choice of expenditure
and the use of funds. It alo protects both parties from any allegation of fraudulent practice.

The school secretary verifies the payment orders signed by the headteacher. After checking that
PTA funds exist on the budget headings or votes from which the orders must be paid and
that the envisaged expenditures 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 headteacher 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/are 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 PTA 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 organisations 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
21
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. This is applicable to schools that are
in receipt of unsolicited sizeable donations. While the principles can be applied to PTA funds, it
must be applied within the rules that govern that body. The authority for all financial decisions,
transactions and plans is the PTA Executive and must be reflected in the minutes. Alternatively, a
document outlining the issue can be circulated by the Chairman to other Executive members
(round Robin) to indicate their approval or disapproval. This document becomes the written
authority, as the majority decision must be followed. The headteacher must use his/her knowledge
and position as Vice Chairman to advise the other members of the Executive.

Activity 2.4
Comment on the draft budget shown below

1) Is this a line-term budget or a programme budget?

2) How useful do you think it is?
3) How could it be improved?

Draft budget for SV Primary School

INCOME EXPECTED EXPENDITURE
From Ministry of Education 174,500 Text and exercise books 172,000
From Regional Democratic 86,500 Repairs to stairway 47,000
Council
From PTA 27,380 Transport 55,000
Profits from tuck shop, 47,500 Office supplies 65,000
garden, etc
From Alumni Association 137,350 Cleaning materials 20,000
Classroom items (chalk, etc.) 47,000
Furniture for learners’ use 57,000
Reserve Fund 10,230
TOTAL 473,230 TOTAL 473,230

22
Comments
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 headteachers purchase
books which remain in locked cupboards. They are meant to be in the hands of learners
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.

Comments
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?.

23
Monitoring and supervising the PTA budget for the school
Monitoring and supervising the PTA 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 the Budget of the school’s PTA requires the

Executive to meet regularly and 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 PTA school’s budget can be more or less extensive. It requires you to
check whether the PTA school’s budget is really balanced and that all compulsory expenditures
required by law are included and fulfilled.

Controlling PTA budgets for the school

Controlling a PTA 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, then 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, PTAs 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:

24
 • offset other income which you budgeted for but did not receive, e.g. reduction in
enrolment 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.

Summary
In this unit you have learned that:

• budgets serve as a plan designed to achieve a set of the school objectives

• budgets serve as indicators of areas of the school that require action and should be
clearly be linked to the SIP
• PTA budgets become the collective financial responsibility of the Executive, with
specific tasks being assigned to individual members
• budgets are used as a means of evaluating performance of the Executive
• a major responsibility of the Executive is to design, manage, monitor and control the
PTA budget
• the PTA budget must be linked to school effectiveness
• the school must provide “value for money”

A headteacher who is a good financial manager can assist the PTA to maximise opportunities in
order to ensure an excellent educational provision for the school.

25
 Mobilising Financial Resources
Unit 3
Introduction
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 funding for schools were identified. They include government,
PTA and the wider community. 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 and possible extra-budgetary 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. It is therefore useful to be mindful of the regulations
which state that fund raising is a PTA activity.

Individual study time: 4 hours

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

• cause the PTA to mobilise available finance

• cause the PTA to organise financial resources based on the budgetary priorities set within the
school
• demonstrate skills of distribution and the use of available financial resources by budget
items
• cause the PTA to 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.

26
EXAMPLE 1
Imagine the total government expenditure is GY167.14 billion dollars and total expenditure
on education was GY18.05 billion dollars, what was the financing availability?

Govt. expenditure GY$167.14 billion *

Education expenditure GY$18.05 billion **
Financing availability in percentage terms 18.05 x 100 = 10.8%
167.14
* Based on Gross National Income per capita (GNI) 2006
** Estimate as an example. Figures not available

EXAMPLE 2
Imagine the education expenditure on primary education in the same year was GY$8.122
billion dollars. If Canaan Primary School was getting a capitation grant of GY$33,000 **per
learner per year and the enrolment of the school was 1000, calculate the financing
availability.

Education expenditure on primary schools GY$8.122 billion *

Expenditure on Canaan Primary School GY$33,000 x 1000 = GY$33,000,000
Financing availability of Canaan Primary 33m x 100 = 0.406%
School in percentage terms 8122m

* Figures are for illustration only

* Figures include staffing costs

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 learner. 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,

27
 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
st
development. However, the balance of argument in the early 21 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. Headteachers 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 headteachers, 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 headteacher 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

28
Comments
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 jeep 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 headteacher of a new primary school, you plan is to establish a computer laboratory
st
in order to expose the children to 21 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.

Comments
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 learners in the ICT laboratory. 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.

29
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 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.

Comments
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 residential and
non-residential or within a given school when more importance is given to examination
classes than to lower classes.

30
 Activity 3.3
1) Why financial resources for education are limited?
2) What are the conditions that can ensure the satisfactory use of financial
resources?

Comments
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 of the children in the country were
educated in state controlled schools the education budget and financial availability would
have to be much larger, putting a severe strain on the system. This situation
also applies in many other countries and is not unique to Guyana.

31
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 "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 in1959 to support Latin American and Caribbean
economic and social developmentand regional integration by lending mainly to governments and
government agencies,including state corporations. Its headquarters is in Washington, D.C., United
States.

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?

32
Summary
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.
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 needs, 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.

33
 Basic Framework & Mechanism
of Financial Management Unit 4
Introduction
In the first three units, you have learnt how to identify
sources of funding for schools, budget for and secure the
funds through the PTA. 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 PTA funds and the receiving
and banking of PTA funds
• assist in planning the PTA 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 PTA 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 and answering the following questions.
If you are not currently a headteacher, please discuss with your own headteacher 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 expected?
5) If less, how and when do you envisage filling the gap or achieving your planned
target?
6) Are your priorities still the same?

34
 Comments
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 headteacher, as a public employee and the accounting officer,
must be guided by the basic framework and mechanisms of financial management.

Framework for managing PTA funds

Activity 4.2
1) Considering the school you have chosen or your own school, identify and describe the
framework in which you or the headteacher manages the available funds.
2) How flexible are you or the headteacher 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 PTA financial policies within which you or the
headteacher operate?
5) How do you or the headteacher allocate funds and operate budget headings (votes)?

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

KEEPING ACCURATE FINANCIAL

INFORMATION
You are expected to keep complete
and accurate financial information
and to present this information
properly. This information should
include sources of revenue and
accurate entry of expenditure,
avoiding 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 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.

It must be noted that the headteacher, as Vice Chairman of the PTA, can advise the PTA Executive
whether to factor on funds directly allocated to the school, into the PTA budget, or whether the
school would treat with these funds separately, while the PTA budgets for those needs not
addressed.

35
 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 Ministry of Education and the Teaching Service
Commission. However, if you wish to do the exercise as headteacher of a Private School
which pays its own staff costs, you will need to increase the income account allocation
considerably to cover these costs.

Budget for the Year 20 ___to 20 __

INCOME ACCOUNT

Budget Heading Allocation GY$ Notes

MINISTRY OF EDUCATION GRANT
RDC CAPITAL GRANTS
BALANCE BROUGHT FORWARD FROM
PREVIOUS YEAR
BANK INTEREST
LETTINGS
CHARITABLE INCOME
INCOME FROM PTA
INCOME FROM ALUMNI ASSOCIATION
MISCELLANEOUS INCOME
TOTAL

36
 EXPENDITURE ACCOUNT
Budget Heading Allocation GY$ Notes
1. STAFF COSTS
Teaching (General)
Music Teachers
SEN support
Educational support
Premises staff
Administration and Clerical
Staff advertising
Staff training

2. PREMISES
Building maintenance
Building improvement
Site management costs
Decoration
Dining equipment
Electrical maintenance
Service contracts
Grounds maintenance
Cleaning costs
Water / sewerage charges
Oil
Gas
Electricity
Insurance premium
Business rates
Other occupation costs
School Improvement Plan

4. CURRICULUM & SUPPORT

Curriculum Allowances
Curriculum contingency
Examination fees
Information Technology (Capital)
Information Technology (Support)
Library
Vehicle expenses
Field trips
Equipment purchase, repairs and
Maintenance
School Development Plan

37
 3. SUPPLIES AND SERVICES
Administration supplies
Furniture and Equipment
Telephones
Internet charges
Hospitality
Postage costs
Publicity expences
Reprographics
Travel allowance

5. RESERVES
Contingency

TOTAL

Comments
Although the above format may be different and more complex than you may be required
to do with the Ministry of Education, it provides 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 provision 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.

FLEXIBILITY AND FREEDOM WITH RESPONSIBILITY

In managing PTA funds, the Executive 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.

VIREMENT (SWITCHING EXPENDITURE)

In a PTA with a well-managed financial system, funds can be moved from one area or heading
to another when priorities change, or when there is an excess of funds in one head. There
must be agreement among the members of the Executive.

This depends on how you have prioritised the school services.

38
PURCHASING FREEDOM
The headteacher and Treasurer should be given the freedom to purchase in order to get
the best value for money. However, good financial practices and all regulations of the
PTA must be followed to avoid fraudulent transactions.

FINANCIAL POLICIES
The Executive members of the PTA must be guided by the PTA Constitution, where the rules are
spelt out under the Heading FINANCE.

Additionally, the Ministry of Education has issued a correspondence dated January 31, 2008:
Caption – Instructions in relation to Parent Teacher Associations and other Allied Bodies
and Circulars: REF. NO ED 5/25 dated January 9, 2008 – Subject: PARENT TEACHERS
ASSOCIATIONS REF. NO ED 28/1/8, dated May 20, 2008 – Subject: Procedures in relation to the
acquisition and expenditure of non-budgetary funds (including Contingency Funds and donations).

PROPER ALLOCATION OF FUNDS

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 PTA funds

It is important that you are equally conversant with the authorities, rules and regulations that
should guide you in the effective handling of PTA funds. You will be provided with the
latest versions of these on your appointment as a headteacher.

Grants

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
Ministry of Education or other sources?
3) Who decides how to spend the grants?

Comments
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.

39
 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?

Comments
Your answers might have included the following:

• PTA funds are not controlled or allocated by the Ministry of Education 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?

40
 Comments
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 Ministry of
Education. 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; 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 PTA 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 PTA funds

It is clear that funds coming into the school must be recieved 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.

No. 002
RECEIPT
Aurora Primary School Date _____________
P.O. Box 17, Essequibo

Received from _______________________________

the sum of GY $ ____________________________
being payment for ____________________________
Cash/Cheque No. ____________________________
Received by ____________ Signature ____________

41
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 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.

Banking
The headteacher must organise that all PTA 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; 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:

42
 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

Savings Withdrawal

G.B.T.I. Date:
Guyana Ltd.

Branch Transaction Account Number

Type

Name

$1000

Cashier’s Stamp $500

$100

$20

Coins

$10

$5

$1

Signed

43
A cheque is a written order directing the bank or bankers to pay money as stated therein.

No. DATE
PAY TO THE
ORDER OF _____________________________________________________________G$ ____________

SUM OF _________________________________________________________________GYD DOLLARS

BANK OF NOVA SCOTIA

104 Carmichael Street,
Georgetown, Guyana

000XXX” “YYY1234-345” 00672

Book-keeping
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.

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;
• expenditure;
• balances?

Comments
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.

VOTE BOOKS
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

44
software will not allow you to spend money if the funds are not available and will record
commitments, thus not allowing you to overspend.

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

LOCAL PURCHASE ORDER (LPO)

The LPO is used for identifying and authorising
local purchases 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.

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

GREEN BOOK/PETTY CASH

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.

CHEQUE BOOK
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.

JOURNAL
It is very important for a headteacher 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.

45
 PURPOSE AMOUNT
DATE
st 20 cartons of school chalk $40,000
21 September 20--

16 dusters $3,200

20 bags of cement $20,000

th 10 bags of flour $20,000

30 September 20--

5 bags of sugar $5,000

th 2 bags of salt $4,000

14 October 20--

200 school reports $10,000

200 envelopes $3,000

40 packets of pins $5,100

FINANCIAL LEDGERS
These are the books where the headteacher 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.

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

FINANCIAL STATEMENTS
These are the regular statements made by the headteacher 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.

BALANCE SHEET
This is the financial statement produced at the end of the school year which shows the
financial position of the school. The normal practice is that the headteacher of the school submits
the balance sheets to the authority that approved the PTA budget or the board of
governors where there is one.

46
 INCOME STATEMENT
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 over-expenditure
has been approved by the financial authority.

DEBTORS BOOK
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.

GENERAL STORES INVENTORY BOOK

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 headteacher has to ensure that no items are stolen or sold 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
precautions you have. Are there any financial risks that occur?

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

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

Also note:

BANK STATEMENTS/BANK RECONCILIATION

These must be received on a monthly basis and compared with what is in the ledger;
these must agree. In other words, the account of the bank and your own accounts must be

47
 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.

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

STOP PAYMENTS
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.

CHEQUES
Ensure that you adhere 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 the reason for the withdrawal at the back of the counterfoil.
• 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 the account on both sides. The person receiving the cash must
have his/her name and identity written by him/her and signed at the back of the
cheque.
• A school cheque should normally require at least two signatories - either the Headteacher
or deputy and the person concerned with school book-keeping, in other
words, the school secretary.

48
USING CARBON PAPER
All financial papers should be signed directly and not on a carbon, as an unscrupulous clerk
can put some blank vouchers in and the officer will sign.

SIGNING WITHOUT SECURITY

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

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

SAVING ACCOUNTS
The person depositing should ensure that the 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.

Summary
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:

• PTA 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 PTA funds must be clearly linked to the School Improvement Plan (SIP)
which drives improvement in the school
• Headteachers must be able to receive and bank PTA 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.
• Headteachers 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.

49
Expending & Accounting
for PTA Funds Unit 5
Introduction
The effectiveness and efficiency of the education system largely depends on the quantity
and quality of the teaching and learning materials available. The purchase of such materials
is a skilled task and requires large sums of money. It is vital, therefore, that headteachers
know how to select appropriate materials, manage PTA funds and ensure value for
money. Although, in Guyana, most materials are provided centrally through the Book
Distribution Unit (BDU), there are many situations when heads and their staff will purchase
materials themselves. Proper care must be taken to ensure that the materials are
appropriate and used for the purpose they were intended.

Individual study time: 4 hours

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

• define expenditure
• define finance
• identify the procedure of expending PTA funds
• explain accounting procedures in the management of PTA funds
• display some knowledge of management and controlling of PTA funds
• practise proper accountability procedures for PTA funds.

Financial resources and management in schools

This unit does not comment on the various sources of PTA 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 PTA funds

• the processes of controlling school expenditure
• accountability of PTA funds.

Before we do so, remind yourself of what was covered in Units 1 - 4 by answering the
following briefly:

Activity 5.1
1) Explain what is meant by preparing and monitoring a budget.
2) How are income and expenditure dealt with in a PTA budget?
3) Differentiate between line item and programme budgets and evaluate their use
in schools.

50
 Comments
The following are useful additions to the answers you may have given:

• Budgeting is a process of preparing estimates or the statement of expected

income and proposed expenditure.
• Budgets need to be monitored throughout the year to ensure that spending is in
line with them and to ensure that the available funds are not exhausted or used
unwisely.
• Income refers to amounts of money made available to the school and where it
comes from.
• Expenditure is the amount that was / will be allocated to be spent on various
functions.
• Programme budgets are benefit-oriented, based on set goals, while line item
budgets are cost-oriented. A programme budget is more likely to assist you in
meeting your educational goals linked to your SIP whereas a line item budget
will merely keep you informed of the cost of items and services purchased
without reference to school improvement or effectiveness.

Good financial management is the disbursement of money and other resources

which assist the school in achieving its objectives.

The proper management of PTA funds is an important component of good school

management. Funds constitute the nerve centre of the school. They must therefore be
properly dealt with for the school to achieve its objectives.

Procedure for expending PTA 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.

Reflect on your experience as a school leader at whatever level and consider how the
financial regulations and practices that you have to follow assist you in performing your
function or whether they create difficulties for you.

Comments
No doubt you will have concluded that structures and regulations are necessary to
enable you to carry out your task as the finance officer for the school. However, this will
sometimes come with its own frustrations if, for example, your priorities are different
from those who provide the finance. e.g. MOE. It could also be that funds provided by
the PTA for computer equipment may not fit in with your own thinking that sports
facilities need to be developed in the school to channel the excess energies of the
children.

51
Regulations
The Ministry of Education issues specific instructions with regard to the spending of and
accounting for funds. For example:

• Funds released by the Ministry of Education for one purpose may not be diverted for
another purpose. If the need for expenditure arises, contrary to the approved budget,
written authority should be sought from the MOE, the governing body, PTA or
trustees of a private school.
• Guidance is given on how much you can spend on a particular item.
• It compels you to obtain approved authority for spending on an item.
• All expenditures incurred should be recorded in an acceptable manner according to
the Standard Accounting Practice (SAP).

Consider for a moment any problems which may have arisen recently for you in
following the Ministry of Education’s financial regulations.

Procurement procedures
It is essential that spending at all times
provides value for money. It would be
irregular practice, therefore, to purchase
items from the same supplier all of the
time without checking that the goods or
services supplied are the best value. This
does not necessarily always mean the
cheapest as you would wish to take into
account quality and the speed and
efficiency of delivery.

Where large items and services are being

ordered, they should be put to tender. That is, three reliable suppliers should be asked to
give a price for the same service. A tender board in the school or governing body would
make a decision on the one which best met the needs of the school. If there is any bidding,
a finance committee should be set up to deal with this. In schools where there is a board of
governors or trustees, such matters would often be out of the hands of the headteacher.

Interested parties are not allowed to supply goods and services to the institution. Anyone
dealing with finance must declare an interest if they have a friend or relative who is a
supplier to the school. One must always protect oneself from this last issue.

Pro-forma invoice
A pro-forma 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 the head for approval. At this stage the approved funds
can be released.

Order forms
The purchase of goods, furniture, materials, services or maintenance works must be done
by using an order form which clearly states your requirements and is clear to the supplier.

52
This will be used in any dispute about the quality or quantity of goods and services
received. It also serves as a record when checking off goods received against the delivery
and the delivery note, as you will only pay for items which have been delivered. Any
discrepancy must be noted and adjustments made when making payment especially if the
supplier has not noted these on the invoice for payment.

Delivery notes
All goods and services should be accompanied by a delivery note which lists the contents
of the package or services received. It is your responsibility to ensure that the delivered
goods and the note match and that any differences are noted. You must ensure that goods
and services ordered are delivered before signing the delivery notes. Ideally, this process
should be carried out by two persons to avoid fraudulent practice. All items of a capital
nature (e.g. DVD players, computers furniture etc) should be entered in the school’s asset
register, and indelibly marked with the school name and reference number, before delivery
to the department. This is a further check against theft.

Payment
Payment is normally made by cheque to ensure
that the order to pay is legal. It is a written
record that payment has been made. In addition,
the supplier must issue you with a receipt,
especially in the rare occurrence of a cash
payment. You should check if the payment
claimed was correct; that goods/services paid
for were delivered; and that the transaction was
properly recorded. It would be normal practice,
especially in a large school with complex
financial needs, that payment via the writing of a
cheque would be done by a different person
from the one who approved the order and
received the delivery. This further ensures that fraudulent practice cannot take place.

As stated before, cheques must always bear two signatures, usually out of a group of three
or four possible signatories (those eligible to sign). Choice of these signatories should be
made wisely to ensure collusion in bad practice cannot take place. We cannot express
more strongly that it would be improper for you, your staff or a member of the governing
body where there is one, to sign a blank cheque or for a cheque to bear only the signatures
of yourself and the school secretary.

Financial flexibility
In certain circumstances flexibility is possible. This will depend on the current regulations of
the Ministry of Education. The total amount of money available to the school must be used
for the benefit of the current children in the school for whom it is provided. If, therefore, in
your budget monitoring it becomes clear that you have over budgeted in one area and
under budgeted in another, action must be taken. Furthermore, sometimes long term
projects require careful financial planning and better value is gained by making savings in
one year which can be used alongside the allowances of the following financial year. It can
be done in two ways:

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 Borrowing of funds from one budget heading (vote) to another: Internal borrowing is
justifiable because under-spent accounts can compensate for over-spent accounts. For
example, maintenance of buildings (very expensive items) may lead to virements
(movement of funds) from general or contingency accounts. Internal virements also help to
counteract uncontrolled prices and inflation. However, such adjustment must be done with
the approval of the authority approving the budget.

Carrying balances forward: It may be possible to carry forward unspent capitation

allowances (the grant received based on the number of your learners on roll) from one year to
another for specific approved projects. Over-spending is carried forward as a deficit to be
paid off in the following financial year. This should be avoided at all costs as it becomes
increasingly difficult to cater for those children who are currently on roll and they must not
be disadvantaged. Institutions should only plan their expenditure outside the limits of one
financial year if the carry-over of funds or the deficit has been approved for a special
purpose. There may also be a risk of losing unspent funds or funds being used for other
purposes in the MOE if you are unable to spend your year’s allocation. We could only
conceive that this would happen, in these times of tight budgetary control, if you have
managed your funds badly.

Activity 5.2
Recollect what you have read and thought about in this section of the unit and write
answers to the following:

1) List some of the items on which your school spends money.

2) Give reasons why you may need to be flexible in financial management.
3) Name two ways of effecting financial flexibility.
4) Explain 'capital' and 'recurrent' expenditure.
5) Group the items you buy for your school into the above categories.

Comments
The expenditure of most schools will be very similar. Larger schools will break up their
ordering into the needs of individual departments, although there is an economy of
scale by buying in bulk. You may have divided your list into areas such as:-

• capital expenditure (furniture, electrical goods etc),

• services (electricians, plumbers, carpenters etc),
• learning resources (goods and materials which will eventually need replacement
but have a reasonable life span)
• consumable items (those which are expendable and have a fixed life span such
as cleaning materials, chalk and exercise books).

All but the first on the list are recurrent expenditure in that they are generally smaller
less valuable items in themselves and will need to be replaced. Capital goods will also
need to be replaced but there is also the possibility of repair and a longer life span.

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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.

Accountability: This refers to budget control. It is the evaluation and guidance of budget
administration activities through careful monitoring throughout the school's financial 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.

Activity 5.3
In view of the definitions of terms above
1) Name some of the finance records you use when accounting for PTA funds.
2) Give reasons to justify the use of such records.
3) Describe the accounting principles involved while making financial records.

Comments
It is important that you would have included the following in your points:

• Financial records are the account of day-to-day financial operations in a normal

situation in school management.
• These records are important because they are the basis for decision-making on
any financial matters
• There will be clear links between your financial records and the SIP
• 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 in a school for the effective handling of
funds:

RECEIPT BOOKS
All payments and receipts should be presented with the proper evidence. You should have
receipt books where the pages are numbered to enable the detection of lost receipts.
Receipts should be issued at least in duplicate for money received, for example, payment

55
for a school trip. They must also be receipt 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
following:-

• purpose of any payment made

• the date of the payment
• the amount
• the budget heading or vote or item within which the expense is being incurred
• the authority that has sanctioned the payment. An example of a payment voucher is
given below.

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 parental contributions and payments; and money paid out, such as for
purchasing learning resources.. 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.
A LOG BOOK OR JOURNAL
As financial controller you should open a log book in which
all financial transactions are recorded each day. This book
can be referred to as a journal, that is, a record of financial
transactions done on a daily basis.
FINANCIAL LEDGERS
For records of account to be meaningful, information from
the journal should be posted in ledgers. These account
books record the income 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.

Computer accounting software

In schools in many countries, much of the private sector in
Guyana and in central ministries, accounts are kept by the
use of computer software. However, at the time of writing, this has not reached the majority
of schools in the country. It will, though, become an inevitable progression in this country as
computers become available and accounts become more complex.

56
The principles of computer accounting are much the same as those on the paper equivalent
but the software makes the calculations for you and adds additional levels of security.
Where computers are used, care must be taken to make regular back-ups of work and to
print records on paper on a regular basis to ensure data is not lost.

Example of Payment Voucher

KINGS COLLEGE SCHOOL

General payment voucher: No.1576324

Payment to: Mrs BROWN

P.O. Box No. 7062
GEORGETOWN

Note: This voucher must be written in duplicate

DATE ACCOUNT/ITEM DETAILS G$

Games and sports Purchase of one volleyball net 45,000
as per receipt attach

Games and sports Supply of 5 volley balls 25,000

Games and sports Supply of 10 junior cricket 40,000
bats
Total 110,000
By cheque No. By cash:
Amount in words:

Payment of the sum is hereby authorised:

Date: ___________________ Signature_____________________ HEADTEACHER

Pass for payment: Entered into cash book

Date: __________________ Signature _____________________

Signature of payee or paying official

Date: __________________ Signature ______________________

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The following are the types of ledger operated in schools

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
below.

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.

The Fees Ledger (private schools only): This ledger records all information on each student's
fees payment, that is, date, amount, total paid to date and balance outstanding, or carried
forward. At a glance it is easy to assess the extent of fee collection, to obtain a list of fees
defaulters and to know accurately how much fee money is still outstanding. The information
has to be recorded as soon as the fees are paid in order to avoid problems caused by the
loss or misplacement of receipts and receipt books or accumulation of work.

Such a ledger is often used where there are subscriptions to be paid to the PTA.

Example of a General Ledger

DATE VOUCHER NO. FOOD EXPENSES

$ CTS
192/8 Beans 7,500 00
192/8 Cooking oil 9,000 00
193/50 Sugar 8,500 00

Credit Ledger: 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 overspending or not and is a
particularly useful check on high spending. It is therefore essential that you maintain a vote
book. You will find an example below.

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Example of a Vote Book

ITEM: Buildings maintenance Budget allocation $9,000,000

DATE PURCHASES AMOUNT BALANCE
4 new windows 1,000,000 8,000,000
30 litres paint 50,000 7,950,000
2 new light fittings 30,000 7,920,000
Security Door 130,000 7,790,000

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.

Asset Registers: It is essential that you keep track of capital items and learning materials.
This is done by maintaining an asset register (sometimes known as an inventory book). You
will enter details of items purchased, date purchased, where they are stored and who is
responsible for them. Equipment like DVD players, computers, printers etc. are recorded in
this book. You would also record furniture, gardening implements, cookers etc. The
purpose of these asset registers is to enable the school management to keep track of
school property, to hold named persons responsible for its safety and to make replace-
ments accordingly. Regular checks (at least annually) must be made on random items in
the asset register and the register signed. This task is often delegated to heads of
departments and level heads but overall control must be maintained by a member of the
Senior Leadership Team.

Items may be grouped together, such as sets of text books and DVDs, cricket bats and
balls and other learning and sports materials. However, checks must to be made to
minimise theft and loss. When an item is deemed no longer serviceable, it must be
inspected and officially deleted from the register with notes and a signature. This should
preferably be done by two persons.
Consumable items are much more difficult to keep track of – bails of toilet tissue, chalk,
pencils, exercise books, cleaning materials. Although a certain amount of trust must be
placed in the hands of those responsible, such items often disappear especially when they
have a use in the home. Checks should be made on excessive use and time spans given to
users before new materials may be ordered. For example a teacher is given an allocation of
materials which must last until more is ordered the following term.

Consider for a moment whether the procedures you use in your own school differ from
those described here. If they do, how are the different?

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:

59
 • preparation of financial statements such as: income statements, balance sheets,
reconciliation statements and flow of funds statements, etc.
• analysis and preparation of financial statements and drawing 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
the Ministry of Education, Department
of Education, RDC or PTA to adopt, dependant
on the purpose of the finance. 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, the
Ministry or PTA will not 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 financial year which items are taking
up most of the school’s funds. 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 an accounting period or the financial year. Before
you proceed, ensure that three of the accounting terms used in the Balance Sheet are
clear.

Consider for a moment on what you understand by the terms financial statements, assets
and liabilities.

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 of the school at a particular time.

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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.
Assets can be in the form of money or property. In terms of the Balance Sheet it normally refers
to money. However, when making a valuation of the school, say for insurance purposes,
property is taken into account.
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. For example, a fuel or
telephone bill is an example of a liability.
The goods or services have been received
but not yet paid for. Such liabilities should
be recorded as commitments when
drawing up the balance sheet.

You may wish to make a quarterly

balances sheet. Some heads make it monthly. However, an annual one is essential.
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 headteacher. It is essential
that he / she knows the financial position of the school and has complete control over it.

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:
• Changes in your financial plan will cause changes in the school balance sheet.
• Such changes should be recorded systematically in the record books already
referred to.
• The balance sheet requires the proper keeping of all records of account such as
receipts, vouchers, inventories, ledgers, etc.
Avoiding fraudulent practice
Even if you trust yourself to keep accounts which are above reproach, you must be mindful
of the fact that not all others will do the same. Especially in times of poor remuneration,
temptation to commit fraud, to steal or behave in a corrupt manner is rife. You must set up
checks and balances that avoid this at all costs.

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Never allow only one person, especially yourself, to deal with all aspects of the financial
processes – tendering, ordering, receiving goods and payment. There must always be others
in the process. Use the available staff such as the school secretary, SMs, HODs and
level heads. This is a safer practice for you. However, it is more difficult in small schools.
Perhaps a parent or a teacher can check on a regular basis what you are doing with the
school accounts. The DEO could be involved.

Activity 5.4
You can now look back at the whole of Unit 5. Recollect what you have learnt and
answer the following questions:

1) Explain the procedures for expending PTA funds.

2) Show, using specific examples, how failure in conforming to book-keeping and
accounting functions may lead to the mismanagement of PTA funds.
3) How can you employ the basic accounting concepts in maintaining financial
records in the school?

Summary
In this unit you have learnt about:

• expending and accounting for school money

• the procedure for expending PTA funds
• the financial regulations of the Ministry of Education
• the need to exercise flexibility in the management of funds
• the importance of maintaining proper financial records
• the operation of proper and regular school balance sheets
• the need for a good financial plan.

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 Auditing School Account Books
Unit 6
Introduction
The earlier units covered five major areas within the general subject of management of
PTA funds. These included the identification of sources of PTA funds, concepts and
skills in budgeting for school income and expenditure, the mobilisation of financial
resources, the management and control of school expenditure and good practices in school
book keeping.

In this unit, we will analyse the objectives and types of school accounts auditing and
discuss the stages in the process involved.

Individual study time: 5 hours

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

• explain the reasons and purposes for auditing accounts

• describe your expectations of the school accounts auditor
• list the types of school auditing, the records and books of accounts used for audit
purposes
• respond to audit queries
• read an audit report.

Reasons and purposes of auditing school accounts

Auditing school accounts is the final stage in the process of managing PTA funds. At the
end of each financial year or budget period, the headteacher has a statutory responsibility to
prepare and present to the financial authority (MOE or Governing Body) an audited financial
report.

This should give a true and fair view of the financial position of the school.

Activity 6.1
Acquire and study the relevant
financial regulations, principles and
practices of the Ministry of
Education.

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 Comments
Financial accountability is one of the major responsibilities of the headteacher in
conjunction with the governors / trustees where they exist. Government statutes include
sections outlining the financial principles and practices which headteachers must follow to
achieve accountability for the funds they collect and receive to manage their schools.

The Ministry of Education also issues financial regulations from time to time whereby
audited accounts of a given financial period must be submitted to facilitate financial
decisions on, for example, allocation of grants, issuing of loans, etc.

The main objective of auditing is to enable the auditor to form an opinion on the accuracy of
the financial statements prepared by the school for a given period. Auditing also helps the
headteacher to improve the school's accounting system. The secondary objective of auditing is to
detect or prevent errors. Auditing therefore enhances the headteacher’s skills in financial
management and evaluates his/her performance.

Activity 6.2
Without looking at Units 3-5, write simple definitions of the following common terms in
accounting:

Accounts Journal
Account Books Financial Statement
Bank Reconciliation Receipt Book
Balance Sheet Store Ledger
Budget Voucher
Cash Book Ledger
Cheque Vote Book
Invoice Asset Register

Now return to the appropriate sections and check on your answers.

Auditing is a process whereby all accounts of the school are examined and evaluated in
detail by a competent auditor in order to determine and report on the financial standing of
the school for the period under review. A school audit of financial statements also
establishes the credibility of the accounting records as specified in the statutory accounting
principles and practices. To understand the audit process, you should know the common
books in accounts which are the key records used in auditing.

Reflect for a while on why auditing of school accounts is necessary and consider which
accounts books and records are relevant for audit purposes.

The auditor officially examines and verifies the books of accounts and writes a final report
which gives a true and fair view of the financial status of the school. Once the books of
accounts have been examined and verified, the findings reflect the fact that the financial
transactions were made and recorded according to accepted principles and practices.

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Qualified auditors are the only ones authorised to examine and verify the books of accounts
of any formal organisation. They are skilled in the techniques of auditing and they are
governed by international professional ethics.

Expectations of the school accounts auditor

A headteacher has a statutory responsibility to prepare and submit financial statements
which give a true and fair view of the financial standing of the school. As you have already
learnt, that can only be achieved through auditing the school accounts.

In this section you will learn about:

• the professional and personal qualifications of an auditor

• the process involved in engaging a school accounts auditor
• the relationship between an auditor and the school
• the information required for audit purposes.

Activity 6.3
What do you understand by the phrase 'a true and fair view' of the financial standing of
the school? Give examples.

In Guyana, auditing of school finances is

carried out by the audit sections of the
Ministry of Education and Regional Democratic
Councils. Auditing of school
accounts must be done with care and skill.
The auditor must be professionally trained
and qualified with an independent mental
attitude about the school. He/she must
have reputable and known personal
qualities which would support his/her
opinion about the school financial
statements.

If you are asked to engage an auditor, say

in a board school, the contract must state clearly the tasks expected, the terms of payment
and date when the report must be completed and submitted to the school or the board
where there is one. The auditor should not have any vested interest in the school.

After signing the contract, the headteacher must submit to the auditor all accounts, records
and books to facilitate his/her work. In addition, he/she should include all relevant evidence to
enable the auditor to draw conclusions on the state of the school accounts. He/she should also
be ready to give oral evidence and to allow any inspection of assets which the auditor may
consider necessary. A thorough knowledge of the school's financial environment, for
example, regulations, principles and practices, mechanisms of control and the school
budget, on the part of the headteacher will greatly enhance the work of the auditor. Auditors
are in a highly privileged position and have statutory rights to demand such information and
explanations as they consider necessary for the purpose of auditing.

65
Activity 6.4
Do some additional research on auditing practices by doing one or more of the following:-

• Pay a visit to one of the auditing firms or audit section of the Ministry of Education
and find out about the routine functions of the staff in the section or firm.
• Study the general procedures used in auditing a small company's accounts. This will
give you some general knowledge on the subject of auditing.
• Research the topic of auditing company and school accounts on the internet.
• Study a leaflet issued by an auditing firm
• Discuss the matter with your headteacher or District Education Officer, (if you are a Head)

Types of auditing
There are two types of auditing.

Internal auditing
Internal auditing is usually a management activity and is a service intended to ensure
regular and frequent checking on a school's financial transactions and records. An internal
auditor is normally an employee of the school, for example a deputy headteacher, whose main
role is to supervise the accounts staff to ensure efficiency in the day-to-day management of the
school finances. It also serves to check whether all financial transactions have taken place
according to budget, to set procedures, and following management policies. The objectives
of internal auditing may differ from school to school, but the general aim is to promote
efficiency in the school's financial control and management.

Some schools are small and internal auditing may be more difficult due to lack of personnel.
In any case, the headteacher is directly involved in authorising and approving expenses and
signing cheques and therefore it is essential that someone oversees this process.

External auditing
This gives an independent report on the financial performance of the school in accordance
with the terms of the contract agreed with the school. The focus of external auditing is on
establishing the truth and fairness of the accounts. It gives added credibility to unaudited
financial statements and records of the school's financial transactions and confirms their
compliance to the statutes.

Consider the nature of your own financial transactions in your current sphere of
responsibility and reflect on the advantages and disadvantages of an official audit.

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 Comments
It has been noted already that internal auditing is to ensure regular and frequent
checking of the financial transactions of the school. A schedule for internal auditing
should indicate and outline the objectives, the procedures to be followed, the
frequency and the methods of communicating or reporting the information to
management.

An internal audit report should point out areas of weakness and strength in the
accounts records and books and draw the attention of management to any
irregularities in the transactions. Information from internal auditing must be reliable,
complete and available on call to enable the headteacher and the board to make quick
decisions where necessary.

The functions of internal auditing and external auditing may seem to overlap but it
should be noted that the former is a management measure to ensure daily efficiency in
managing PTA funds, while the latter evaluates the adherence to the accepted
principles, practices and statutory provisions of management in financial transactions.
However, internal auditing, if properly done, will cut down on the cost of external
auditing and greatly enhance the process.

Records and books of accounts for external auditing

The headteacher depends on financial statements as a basis for financial decision making.
Accounts and records are therefore very significant to the auditor who reviews the school’s
systems of accounting to give his/her professional opinion about the state of the accounts
of the school.

Although many auditing procedures are designed to test accuracy in accounting and to
reveal manipulations which would conceal the true financial situation, the main aim in
applying such procedures is to prove that the accounts are acceptable and to give a true
and fair view of the school's financial standing, not to find faults.

The auditor's report is reached by a process of examining and evaluating all documents or
evidence pertaining to the financial transactions of the school. In a school, books of
accounts are usually written and kept by the headteacher or the school Secretary.

A primary record in the school's financial statements is the general ledger. This consists of
figures and records from various journals which give the daily records of the financial
transactions in the school.

A cash book, where the daily cash income and expenditure is recorded, forms one of the
primary sources of evidence that the auditor examines in the process of auditing. It states
the date, the cash received or spent, a full description of what is bought and the actual cost
of the items bought, details of the payment voucher and number of the cheque. A petty
cash voucher may also be used along with the cash book. Almost all assets, liabilities,
income and expenses clear through the cash account and the auditors will spend time

67
carefully examining the cash book to establish the validity and reliability of other financial
statements.

Payment vouchers, purchase invoices, receipts

books, asset registers and cheque books are
primary documents which must be submitted to
the auditor for verification, inspection and
evaluation, before a report is written and an
opinion is given on the school's accounts.

Bank reconciliations and bank statements, which

compare the balance in the bank with that shown
in the school's records, can reveal book keeping
errors either by the bank or by the school
Secretary as well as unauthorised withdrawals.
These should be submitted along with other documents for auditing.

Activity 6.5
1) Study a sample of a cash book and list all the information that is found or recorded
in it.
2) Give reasons for keeping a petty cash voucher book in your school.
3) Read the case study below and trace the steps to be taken to record all the
transactions. Explain why each step is important.

Case study

Mr Mercurius, Head of the Science Department in EBB Multilateral School, submitted a

requisition to the headteacher to buy chemicals for the end-of-term examinations. He
contacted three suppliers in Georgetown and New Amsterdam to ascertain the best price
and made the order on the school’s local purchase order form No. 7865. He obtained a
supplier's invoice No. 0658 indicating the quantity of the items:

1) 10 tins of sulphur costing $5,000 each

2) 10 tins of potassium costing $7,000 each.

The invoice was submitted to the school Accounts Clerk who checked vote No. 031 on
educational materials and has confirmed that there is a balance of $200,000 which is
sufficient to cover the cost of the chemicals.

The suppliers delivered the chemicals in the quantities indicated on the order. The materials
were accompanied with a supplier's invoice dated 29th February, indicating the details of
the materials and the cost of each item.

Mr Ali, the storekeeper and Mr Mercurius checked and found the materials in order as per
the local purchase order, the delivery note and the supplier's invoice. The chemicals bought
were recorded in the Science Store Ledger on folio No. S/10/009

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All invoices were received and recorded by the accounts clerk in the journal or ledger. The
headteacher authorised payment for the chemicals and payment instructions were given to
st
the school Secretary. A payment voucher No. 5465 dated 31 March was made out and the
headteacher endorsed it. The voucher gave quantities of what had been purchased and gave the
total cost as $120,000 (one hundred and twenty thousand dollars) only. A cheque No.
02568 for that amount was written on 6th April, payable to ACPY, the suppliers. A cash
th th
receipt No. 136 dated 9 April was issued by the suppliers on 13 April.

Comments
You have already learnt that a cash book is a
very important book of accounts because all
cash income and expenditure go through it.
The auditor therefore, spends quite a lot of
time and care in examining the cash book.
Wrong or inadequate entries, plus omissions
made in a cash book, will greatly affect the
auditor's opinion on the state of the school
books.

You should also note that before any entries

are made in the cash book, all other
documentary evidence of the transactions like
vouchers, invoices, receipts must be checked
and certified to ensure that all procedures and
regulations were followed and no errors were
made.

A thorough knowledge of how a cash book is

written will enhance your internal financial
control and it will enable you to understand
and appreciate the purpose of auditing school
accounts.

Reading an audit report

Activity 6.6
Try to obtain a recent audit report: from your school or any other small organisation.
There are many examples on the internet if you cannot find one.

1) List the main features in its format (schedule).

2) Analyse its contents briefly.
3) Point out its weaknesses, if any.

An audit report should be clear, constructive and concise. The auditor will point out in
writing to the authorities:

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 • any weaknesses /strengths in the accounting system of the school
• deficiencies in the financial control system
• inadequacies in the financial policies and practices
• non-compliance with accounting standards and legislation.

The report also explains any implications of the above points and gives advice or
recommendations for improvement. The auditor should give in clear terms his/her
professional opinion on the state of the accounts. One of the main schedules in an audited
report is the balance sheet. This is a summary statement of all assets and liabilities of the
school by the date of the report in reference. However, an audit report should also have the
following components:

• a title, that is, Auditors Report

• a statement as to whom addressed, for example, The School Senior Leadership
Team, The Board of Governors, the Regional Education Department or the Ministry
of Education
• a description of the scope of the audit, showing the books examined and the tasks
executed by the auditor according to the contract and audit standards
• the auditor's opinion on the state of the school accounts
• the auditor's address
• the date of the report.

The auditor's opinion can be unqualified, qualified or adverse, depending on the state of the
books of accounts and any other evidence the auditor may have examined and evaluated.
An unqualified opinion is positive and satisfactory and a qualified opinion indicates that the
auditor has some reservations about the state of the school's accounts. An adverse opinion
might, for example, be that regulations have not been followed, that security of cash is lax,
that receipts have not been issued or perhaps that the cash book has only been completed
once a week. Such issues will all impact on the auditor’s opinion of the state of financial
management in the school. Generally, the report will list recommendations for improvement
which the headteacher must put in place before the next report.

Responding to audit queries

If you have already been involved in the auditing of your school accounts, consider what queries
the auditors may have raised about your books of accounts and about any other submissions
you made.

You have already learnt that the primary objective of an audit is to enable the auditor to
determine the accuracy of the school's financial accounts. You have also learnt that the
auditor gives his / her opinion on whether or not the accounts give a true and fair view of
the financial standing of the school.

A secondary objective of the audit is to detect errors in the accounts and advise the headteacher
or the board on how to improve the book keeping standards.

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Audit queries can be raised where errors have been made in the records. These can be
due to a wrong entry or an omission of some vital information. When an error is located by
the auditor he/she raises a query to the headteacher seeking an explanation. For example, he/she
may raise a query where the trial balance does not agree with the statements of accounts.
In response the headteacher can take any of the following steps:

• submit further information to the auditor on the queried items

• let the auditor inspect the assets and stores
• go over the trial balance with the auditor checking:
✓ the totals
✓ lists of debtors and creditors
✓ transfer or entry of all the accounts books to the trial balance
✓ all figures in the trial balance.
• go over the cash book and all other financial documents and statements to
locate errors, omissions or any evidence of fraudulent payments that may have been
made in the transactions.
• consider making adjustments by reviewing assets against liabilities.
• consider writing off bad debts.

A trial balance summarises the effect of all financial transactions on the school accounts
and it helps you and the auditor to get a preliminary view of the accounts before a balance
sheet is written and an audit report is finalised.

Where you, as the school's financial manager, fail to answer all the queries satisfactorily,
the auditor will present what is termed as a qualified audit report. This is a report where the
auditor has been unable to obtain all the information and explanation he or she considers
necessary for the audit.

Summary
The questions below give you a brief summary of the various stages involved in the auditing
of school financial statements. These correspond generally with the topics which you have
covered in this unit. The summary diagram is also based on questions which you may pose
to yourself to make a checklist of what you have learnt from the unit.

THE HEADTEACHER AS FINANCIAL MANAGER

1) Do I have the relevant financial statements for auditing?

• Always keep accounts books
• Follow statutes and financial regulations strictly

2) What accounts books do I submit for auditing?

• Budget statements
• Book of accounts
• All financial statements

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3) What will the auditor expect?
• Full knowledge of financial regulations and accounting procedures
• Full submission of accounts books
• Co-operation

4) What type of audit will the auditor present?

• An unqualified report, a qualified report or an adverse report

5) What are the auditor’s recommendations?

• Will give a “true and fair view”
• Need for observing accounting principles and practices in future
• Need for better internal mechanisms to ensure efficiency

6) What queries are raised and how should I respond?

• Cash on accounts does not balance with cash at bank
• Carry out a check of assets, bank statements and cash books
• Discuss with auditors the balance sheet and whole report

7) What action can I or the board, if there is one, take?

• Correct the accounts
• Send copies to authorities
• Keep copy of report

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