The Financial Administration of Voluntary Secondary Schools
Guidelines for ASTI Members Serving on Boards of Management of Voluntary Secondary Schools
The establishment of Boards of Management in schools represents an important step towards collaborative management of the school system. Among the many responsibilities placed on the Board of Management is that of the financial administration of the school. Boards of Management are therefore responsible for handling large sums of money. The financial responsibilities of the Board are detailed in the Articles of Management. The relevant Articles are 2(a), 6(a), 14(c), 15(a), (b), (c), (d), (e), (f), (g), 27(a), (b), 28.
These duties include:
(a) the keeping of proper books and minutes;
(b) the opening of a bank account;
(c) the preparation of a forward budget and financial report to the trustees annually;
(d) ensuring that expenditure does not exceed income.
ASTI members on Boards have expressed concern about their responsibilities and liabilities in regard to Board finances. In response to these concerns the ASTI has prepared guidelines, following consultation with an Accountant and ASTI school Principals. These guidelines are designed to provide protection for ASTI members involved in the administration of schools' finances.
The Articles require that a sub-committee on finance be established consisting of the Principal and two Board members which has the power to invite additional persons with specific expertise and financial management to be members of the sub-committee. The role of this sub-committee is extremely important.
Controls Over School Finances
Controls Over Expenditure
(a) Petty Cash:
The school should maintain a petty cash float depending on school size. The float should be replenished by way of a cheque cashed once the balance falls below one third of the float. A petty cash book should be maintained showing details of the expenditure over a small number of categories, e.g. postage, stationery, etc. together with the date and the amount. IOUs should not be allowed. The petty cash book should be totalled off monthly and signed by the Principal.
(b) Orders / Requisitions:
All purchases (perhaps over a certain monetary amount) should be initiated by an order or requisition. The order itself will need to be authorised by the Principal by way of a signature on the face of the order. Monetary limits should be imposed, e.g. orders up to €500 one signature, orders over €500 two signatures. There is no need to actually forward the order form to the supplier. Orders can be made over the phone provided that the duly authorised order or requisition is held for future reference.
(c) Invoice Authorisation:
When invoices arrive for payment they must be matched with the signed order/requisition. This can be done by whoever holds the order forms. The individual must ensure that the details of what was ordered exactly matches with what is being charged for on the invoice. The matched invoice can then be authorised for payment. The Board of Management or the Finance sub-committee are appropriate bodies to authorise payment. Under no circumstances can the authoriser for payment be the same individual who authorised the order. This segregation of duties is an important financial control and is in line with best practice.
(d) Cheque Payments Book:
Article 15 (a) of the Articles of Management states that the Board "shall provide and cause to be kept proper books for the entering of the accounts of the school..." This must include a record of the cheques written showing details of the cheque number, the payee, the amount and an analysis of the expenditure over a small number of categories, e.g. wages, cleaning, stationery, etc.
(e) Cheque Signatories:
The cheque signatory requirement is governed by article 15 (e). It is vital that two signatories sign each cheque. The bank should be made aware of this and a panel of signatories maintained to cover for unavailability of the main signatories. The bank must receive specimen signatures in each case. The signers can be the same individuals as signed the order / requisition but cannot be the same as authorised the invoice for payment.
Controls Over Income
(a) Cash Receipts Book:
Article 15 (a) of the Articles of Management states that the Board "shall provide and cause to be kept proper books for the entering of the accounts of the school..." This must include a record of the cash receipts of the school. A cash receipts book will need to note details of the date of the receipt, a brief description of the source and the amount. It will also need to keep a record of the makeup of the lodgement to the school bank account.
(b) Approval Over Sale of Assets:
The Board must approve the sale value of any school assets which are disposed of. Their approval and a note of the asset and the sales proceeds must be minuted even if the asset is scrapped or sold for a nil consideration.
(c) Approval Over Income from use of School Property or Assets:
Article 15 (f) of the Articles of Management states "The Board shall have discretion in determining such charges as it may consider appropriate for [the] use of the premises". Their approval and a note of the property or asset involved together with the charges must be minuted even if the use is granted free of charge.
(a) Bank Reconciliation:
One of the strongest controls over income and expenditure is the bank reconciliation. This should be performed monthly. The total expenditure per the cheque payments book should be deducted from the total income per the cash receipts book. The result should be added to the previous month's closing balance and then compared to the balance on the same date per the bank statement. Any difference should be explained either as cheques drawn but not yet presented to the bank, any bank interest or charges or any lodgements which have not yet cleared the bank. The person preparing the bank reconciliation should not be the same person as maintains the books and records of the school. A member of the Finance sub-committee would be appropriate. The bank reconciliation should be signed by the Principal and presented to the Board or the Finance sub-committee.
(b) Budget Variance Explanation:
The financial report referred to in article 15 (c) of the Articles of Management for Catholic Secondary Schools presented to the Trustees should contain a detailed explanation of any variances plus or minus 10% on each line item of the forward budget previously submitted to the Trustees. (Provided the line item represents at least 10% of the total budget).
(c) School Financial Records:
Since the Board of Management is responsible for all income and expenditure and all monies raised in the name of the school, records of all financial transactions involving e.g. games, library, canteen, Transition Year Programme, fund raising, tours, Home/School liaison, examinations, etc. should be presented to the Board for examination and approval.
(d) Capital Budget:
A separate capital budget should be drawn up by the Board and details given to Board members when transactions occur.
(e) Voluntary Subscriptions:
A detailed account of voluntary subscriptions should be available to Board members.