Chapter 3.5: Management Reports

3.5.1 Purpose of monthly financial reports

To enable the Board of Trustees to carry out their financial governance responsibilities they need to receive regular (preferably monthly) updates about the school’s financial performance and financial position.

The board of trustees should get assurance from the financial reports that:

• they have been advised of all key current financial issues and how those are being managed, eg, if the audit management letter was received recently, what actions are planned to respond to any recommendations
• the school has positive working capital – or what is being done to improve the financial position
• income and expenditure is within budget for the year to date  or reasons for major variations are supplied
• forecast income and expenditure for the rest of the year indicate the school’s finances will remain on track – or what action is being taken to mitigate identified issues and risks, eg, if the roll has changed significantly, has the forecast been adjusted
• all funds held on trust are kept separate and managed appropriately
• the school has set aside enough money for long-term commitments eg, asset replacement, external painting
• the school is operating within the policies approved by the board, eg, there has been no unauthorised expenditure, all spending is within delegations.

3.5.2 Responsibility for preparing reports

The responsibility for preparing monthly financial reports will vary from school to school. It may lie with an accounting service provider, the executive officer or the Board Treasurer. However, in general the board will delegate to the Principal responsibility for the quality of the reports and for ensuring they are prepared and presented on time.

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3.5.3 The basics of good reporting

Things to keep in mind when preparing internal reports:

• old information is worthless information – so reports must be prepared and presented as soon as possible. For example, if it takes 15 working days for monthly financial reports to be generated by your accounting service provider, commented on by budget holders and reviewed by the Principal, the board will not get their reports until near the end of the following month. If the report indicates that urgent action needs to be taken it may be too late
• the information presented should be limited to what is useful and relevant for decision-making. Providing too much detail can cloud the issues and may confuse
• information should be presented according to the needs of the audience. Avoid accounting jargon, especially for a board whose members have little or no financial experience. The Finance Committee is likely to want more detail.

3.5.4 Monthly Report to Board (through Finance Committee)

The monthly report to the board should include:

• Statement of Financial Performance (or a summary statement) showing revenue and expenditure against budget to date
• Statement of Financial Position (or a summary statement) including significant commitments for the next month
• Commentary/Exception Report – a simple written report showing:
  • any unusual or unexpected variance from what was budgeted, eg, extra interest
  • any points that should be brought to the board’s attention
  • any areas of risk and plans for mitigating that risk
  • plans and expectations for the coming month(s).

  Payments outside the Principal’s delegation (eg, over a certain amount or of a certain type) need to be presented to the board for approval.

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  3.5.5 Monthly report to Principal and Finance Committee

  The Principal, as the manager of the school’s day-to-day finances, should receive more detailed monthly reports. It is important the Principal is fully conversant with the financial performance of the school.

  Therefore, in addition to the reports provided to the board, the Principal should receive a complete Statement of Financial Performance and review a full ledger transaction report, listing all income received and payments made during the month.

  3.5.6 Monthly Report to Budget Holders

  If a senior staff member has been allocated responsibility as a budget holder then the Principal is obliged to keep them fully informed. They should receive regular and up-to-date reports showing details of all transactions from accounts within their control and the balance against budget.

  The budget holder should always have an accurate picture of all expenditure committed. They should also hold records of all outstanding orders.