BUDGET ITEMS Previous
Budget Previous actual Current budget Current Actual Proposed budget Income
Funds allocated by state School fees Donations Fund-raising projects Investments Hiring of facilities Etc. Total income Expenditure Personnel Administration Stores Equipment
Buildings and grounds/maintenance Transport
49 Etc.
Total expenditure Surplus/Deficit
Source: Van Deventer and Kruger (2003: 238). An Educator’s Guide to School Management Skills
There is considerable delegation within the schools, with individuals being responsible for the budgets for their departments. Each department thus becomes a cost centre with its own budget and responsibility for spending (Berkhout 1992: 4; Herman 1994: 9and Clarke (2012: 181). This means that not only principals, but also the heads of departments and subject heads must become knowledgeable about the management of their school fund. It also means that there must be clear systems for dealing with the school budget and which cover the way money is allocated, the way that school accounts are kept and the way spending is monitored. These systems are not only needed by principals but by all the members of staff who have a budget responsibility (Clarke 2007: 259).
2.7.9 Financial accounting
According to the regulations contained in the South African Schools Act (No 84 of 1996), the governing body and the school principal (as a member of the governing body) are responsible for administering the school funds effectively. Accounting is regarded as an important aspect of managing the school funds. The school bookkeeping (which forms part of the accounting component) may be delegated to a capable member of the staff who has knowledge of accountancy. However, the principal and the governing body remain responsible and accountable for the financial management of all the money that is collected for and paid out of school funds (Van Deventer &Kruger 2003: 241).
In addition, Mestry and Bisschoff (2009: 126) state that as a function of financial school management, accounting should give teams the tools needed to monitor and control work processes as well as collective behaviour. The principle of empowerment and transparency require the school to focus on internal accounting, but at the same time bearing in mind its external stakeholders. This entails deliberate, dual focus on both managerial and financial accounting, which can be considered as “people’s accounting”.
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The school’s accounting system therefore makes provision for the following accounting tasks (Bisschoff, 1997: 92):
Identifying, allocating, analysing and interpreting the school’s financial information.
Implementing and executing the school’s financial policy.
Communicating the school’s financial information to all the stakeholders.
According to Campher et al. (2002: 2), the financial accounting of the school should consist of the following documentation:
A receipt book
Deposit book
A cash analysis book
Bank statements
Reconciliation statements
An order book
Cheque book
Savings account
Documentary evidence of payments
The school financial accounting is also a system whereby the principal and the SGB analyse and interpret receipts, expenditures, assets and the school financial liabilities. It enables them to see if the school’s finances are spent in accordance with the school budget. The following are possible approaches for school financial accounting (Caldwell and Spinks 1988:109):
Cash-basis financial accounting involves all the receipts and expenditures being recorded as they occur.
Accrual basis financial accounting encourages expenditures to be recorded as they occur, irrespective of when they are received or when the payment is finally made.
Accrual basis financial accounting by the principal and the School Governing Body is usually the best, because it provides a complete picture of the school’s finances whenever it is needed, unlike cash basis accounting, where the transactions are not entered in the school financial records until the cheque is drawn (which delays recording of the expenditures).
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Modified cash accrual is done by handling receipts on a cash basis. This approach provides the principal and the School Governing Body with greater financial control, and also makes it possible for the school principal to make informed financial decisions.
The double entry system was developed to eliminate arithmetic (calculation) errors in the recording of the transactions. This simple arithmetic idea is the basis of modern accounting. An account is entered in the ledger, which is the most important financial record in an accounting system because every transaction is recorded therein. Every account is divided in two: a debit side on the left-hand side and a credit side on the right-hand side. For every entry on the debit side (generally representing assets and expenses incurred), there must be a numerically identical entry on the credit side of another account (generally representing liabilities, income and accumulated funds). In other words, for every transaction we must make two entries: one debit entry and one credit entry. The system ensures that, if all the entries in the ledger are arithmetically correct, not only will they provide a record but the net balances in each account will, when listed and totalled, balance left against right. Quite often due to human error, they do not, hence the need for a statement known as a trial balance, which can be done at any point to check whether the arithmetic is wrong (Mestry &Bisschoff 2009: 128).