Chapter 1: Financial roles and responsibilities
This handbook is for school trustees, principals, administrators and accountants working in and with schools. The purpose is to provide information to encourage best practice in financial governance, financial management and reporting.
Financial management is crucial to the health of a school in order to provide adequate funding for day-to-day needs and in planning for the future. A lapse in financial management - or deliberate fraud - diverts the attention of staff and trustees and may cause a reduction in the funds available for curriculum delivery. Problems with a school’s financial governance and management almost always impact the education being provided to students.
This handbook deals with a range of financial governance, management and reporting matters that are specific to schools in New Zealand. It is not a textbook on accounting or financial matters, nor do you have to become an overnight expert in legislation. The ministry has produced FISH to help you become familiar with the legal framework that impacts schools and especially their finances.
More information about the school Board of Trustees governance role is available here.
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1.2 Roles and responsibilities
1.2.1 Boards of trustees
A school board of trustees is responsible for the management, organisation and administration of a school under section 75 of the Education Act 1989.
National Administration Guideline 4 (NAG 4) requires a board of trustees to:
- allocate funds to reflect the school’s priorities as stated in its Charter
- monitor and control school expenditure
- ensure that annual accounts are prepared and audited as required by the Public Finance Act 1989 and the Education Act 1989.
A school board of trustees can create special committees (eg a Finance Committee or a Property Committee), and delegate any of its powers or functions to those committees or to employees (other than the power to borrow money) under section 66 of the Education Act. The nature and conditions of the delegations must be specified in writing and provided to the delegated person or persons.
Generally, a school board of trustees will delegate its day-to-day financial management responsibilities to the Principal. However, in small schools there may not be sufficient other staff to ensure segregation of duties. In this case the board should appoint one of its number to provide a further level of internal control.
The school board of trustees retains a financial governance role that includes establishing and maintaining financial policies, setting the strategic direction for the school and allocating resources to achieve the school’s goals. Every school trustee has a responsibility to establish and maintain appropriate financial policies and understand key financial information about their school.
School trustees make significant financial decisions about the school and should carefully document those decisions and their decision-making processes (see ‘Financial Decision-making’ in Chapter 2.5). Actual and potential conflicts of interests in any decisions should be declared and managed appropriately (see ‘Conflicts of Interest), Chapter 2.5).
The Ministry of Education can help. The ministry contracts with organisations to provide a range of training and support for trustees: group training opportunities are advertised in the Education Gazette; support for boards of schools that are at financial risk is available through local Ministry of Education offices, help is also available from the School Trustees Association and the school’s financial service provider or auditor.
The Ministry also has a team of financial advisors who are available to provide guidance, advice and support to schools. Contact details are in the References and Resources Section of this handbook.
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Principals are usually delegated authority from the board of trustees for the day to day financial management of the school.
Principals are responsible for monitoring and controlling school expenditure to make sure that money is carefully spent on the school’s priorities, as planned and budgeted. Principals should report regularly to the school board of trustees on financial management; and prepare annual audited financial reports.
Principals may delegate financial management tasks to school employees and may also pay for external accounting services. The Principal however retains full responsibility for the financial records and reporting.
Every Principal has a responsibility to maintain sound financial systems, understand key financial information about their school and provide appropriate reporting.
More information about the principal’s financial management role is available on the Educational Leaders website.
See also Chapter 3 – Financial Management for principals and school administrators.
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1.2.3 Financial service providers
A financial service provider is the term normally used to describe businesses or individuals that provide financial services to school boards of trustees. Financial service providers can offer a range of services, from full services, where the provider does everything, to simple bookkeeping services. Most financial service providers are happy to discuss options and packages to meet each school’s specific requirements.
For schools with little or no financial management expertise, the Ministry of Education strongly recommends that boards seek full support services. This can greatly relieve stress and time commitments on administrators and can provide the board and Principal with appropriate information to make decisions on the future direction of the school.
What to look for in a financial service provider
Regardless of the type of service required, it is important that schools seek quotes from various providers. Not only will this ensure the school is receiving value for money but it also provides an opportunity to compare different packages to meet the needs of the school. Specific criteria to look for when choosing a financial service provider includes:
- experience working with schools and school’s specific accounting requirements
- has a relationship with the Ministry of Education
- provides monthly management reports that are easy for the board to read and understand and covers staffing usage, committed funds, budget versus actual, commentary on risks/opportunities, etc
- can prepare good draft annual accounts well before 31 March and respond promptly to audit queries one stop shop services available (eg payroll, 10-year maintenance planning etc).
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1.2.4 Ministry of Education
The Ministry of Education has regional financial advisors who are available to provide guidance, advice and support to schools.
The Financial Advisory service is available to all state and integrated schools. The following list gives examples of the types of services provided:
- assisting boards of trustees and principals when schools face financial problems
- assisting schools to develop financial policies and finance systems
- guidance on the preparation of school budgets
- guidance of the preparation of school annual reports
- provision of ‘best practice’ examples (eg, the Kiwi Park Model)
- encouraging best practice within the school sector (eg, sponsorship of the NZ Institute of Chartered Accountants School Annual Report Awards)
- providing technical accounting advice to schools
- presenting at seminars and conferences
- facilitating financial management workshops
- producing training material for schools
- producing self-review material for schools
- facilitating contact between schools and their auditors and accounting service providers.
The financial advisors are available by phone and email and can also visit your school to discuss any problems you may have. Contact details for the financial advisors are included in the Resources chapter of this handbook.
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1.3 The Financial Year Programme
Note: If your school employs a financial service provider then some of these tasks will be completed by them. Please contact your provider to discuss your programme with them.
||Strategic planning starts.|
Issue reminder notices for all outstanding debts to try and collect all money owing to the school before it closes for the year.
||Ensure your 10-year Property Plan is up to date and calculate the Provision for Cyclical Maintenance.|
Complete as much ordering of goods and services as possible, so that invoices will be received and processed before the end of the year.
||Present the draft budget to the finance committee or board for review.|
Start to gather information for year-end financial statements eg, inventory lists, library stock list, fixed assets register.
Ensure all reconciliations are up to date, including any funds held on trust, eg, funds received in advance for international students match funds held in trust account.
Pay as many bills as possible to minimise the number and value of the 31 December payables, receivables and associated accruals.
Ensure there will be enough money in the bank to meet any automatic payments due over the holiday period.
Review term deposits, especially if any are due to mature and bearing in mind that an operational grant is received in early January.
||Complete the: |
If your school uses a financial service provider, ensure all financial information is sent to the provider within the provider’s timeframe.
- fixed assets register and the fixed assets reconciliation
- bank account reconciliations
- payables and receivables schedules.
Complete the Analysis of Variance.
Obtain the Principal’s and Chairperson’s (or combined) report(s).
||Final review of the budget and present to board for final approval.|
||The board approves the draft annual financial report and sends it to your auditor.|
||Statutory deadline for draft annual financial report to be presented to the auditor (s87A Education Act 1989). |
||When the annual financial report has been audited, the board should adopt the report and the Principal and Board Chairperson sign the Statement of Financial Responsibility as required by section 155 of the Crown Entities Act 2004 (s87(4) Education Act 1989 Annual Reports).|
||Statutory deadline for the audited annual report, including the Analysis of Variance and audited financial statements, to be provided to the local office of the Ministry of Education. |
At the same time that the board submits the annual report to the ministry, the board must give notice to the community and have a copy of the annual report available for inspection (s100 Education Act 1989).
||Budgeting – review current budget and update cash flow forecast.|
||Review the fixed assets register and asset plan.|
Other information that can be included in your annual financial timetable
Any of the key events or important dates during the year can be included in your annual financial timetable. For example:
- dates when budget proposals need to be submitted and to whom
- dates of the board’s approval of the operating and other annual budgets
- any other key dates for the board that are finance related
- GST payments and any other payments to Inland Revenue
- deposit maturity dates
- loan repayment dates
- dates when funding payments are due from the Ministry of Education dates when monthly financial reports are due to the board.