Accounting for locally raised donations and fundraising and other income

Against these income categories there are expenses. Some require a separate expense account related to the category while others are expensed in other sections of the financial statements. Note that it is essential that separate account codes are used for revenue and payments. Income and expenditure accounts must not be combined.

Each category of local fund is further explained as follows:

Donations

Schools can request donations from parents and caregivers. These are voluntary donations and are recorded in full, ie without deduction of GST. There is no directly related expense as these funds generally contribute to classroom and curriculum expenses.

Schools sometimes receive gifts or bequests which are tagged in some way by the donor. They may be designated for the purchase of particular equipment such as library books. It may be intended to be invested and only the interest received utilised, perhaps for a scholarship or similar.

The correct accounting treatment for restricted donations and bequests is to recognise it as income as soon as the school has control over the assets. This would normally be upon receipt.

The donated assets should then be transferred to a reserve and disclosed in the financial statements as a restriction on equity. A donation should be recognised as a liability only where there is an obligation to return it to the donor in the event that it is not used for the purpose specified.

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Fundraising

Schools undertake a variety of fundraising activities in order to increase the funds available for supporting students. Some fundraising examples are:

funding for capital expenditure such as an adventure playground (often the PTA is a source of this type of fundraising)
funding for equipment such as whiteboards or computer equipment
funding for sporting equipment or sports uniforms
funding for school camps
funding for field trips, sporting trips, music trips etc.

All receipts must be included in income under Local Fundraising – either under Donations or Fundraising.

The expenditure which is enabled through fundraising however is unlikely to be recorded directly against local funds expenditure. Expenditure on capital assets such as playgrounds or equipment such as computers will be expensed into the asset register. Sporting and music expenses will be expensed against extra-curricular expenditure. Expenditure on field trips and camps may be expensed directly against these categories.

Note: where a school receives donated assets (such as computers) the estimated value of the donated assets must be recorded in local funds (under Fundraising) and the asset expensed into the asset register in the usual manner.

Activities

There are several types of activity revenues. In primary schools it may be the income which is requested from parents and caregivers to meet the costs of a camp or field trip. For intermediate and secondary schools there are the additional expenses for sports and music activities and for curriculum expenses where the goods or services provided are for the individual students' use and generally are taken away by the student. These include materials used in subjects such as photography, food technology etc.

Trading

Schools at times may undertake the purchase of goods for subsequent sale on a semi-commercial basis. Examples of these include the supply of school uniforms, stationery and lunches. It is usual for schools to only recover the costs rather than to make a profit. It is however acceptable for a school to generate a profit from a trading operation. Where parents or caregivers have no alternative providers (such as if uniforms are only available from the school) there needs to be clear agreement with the community that the surplus will be used to enhance student learning.

There is usually a time difference between when the stock is purchased and when it is sold. It is common for stock to be still on hand at balance date (year-end). Stock needs to be counted and priced at cost or realisable value if the original cost can no longer be recovered.

For this reason it is preferable not to have trading income and expenditure included in monthly management reports as the time differences may provide a false indication of the school’s financial position. Trading income and expenditure should be kept in separate accounts and reported only at year-end.

It is, however, important for the board to know whether the school’s trading operations are performing satisfactorily throughout the year . This assurance should be provided in a separate management report alongside the board’s regular financial reporting.

International students

Schools enroling foreign fee-paying students (international students) must comply with the Code of Practice. All income from international students must be recorded in an Income in Advance account and released to revenue only when the student has taken up their place in the classroom – usually at the beginning of each term.

Expenditure that relates directly to international students (such as the employment of teaching staff to assist with the students’ learning of English, or any special pastoral care staff) should be expensed under Learning Resources.

Hostels

Schools that operate a hostel should account for fees under its own heading within Other non-Government income. Similarly, hostel expenditure should have its own heading under expenditure.

Use of Land and Buildings

State schools have their Use of Land and Buildings grant recorded under Government grants. Integrated schools however must report the grant from their proprietor under Other Income.

In both cases, the Use of Land and Buildings expenditure should appear under Property expenses.

Boards should note that when their annual report and financial statements are submitted for audit, auditors will be making comparisons between the current and previous year’s income and expenditure for each category of local funds.

Boards should provide appropriate notes to explain any differences which are greater than 10%. For this reason it is easier to make sure local funds are accounted for in a similar way between years.