In this article Sage Senior Consultant Ian Forster draws on his experience as a school governor, business manager and head of school to reflect on one important aspect of school financial management that is often overlooked.
The business managers bête noire? I am sure if we took a poll of business managers there would be a few "pet hates" suggested, but one that many will relate to is the ubiquitous School Fund. This may have other names, including Voluntary or Unofficial funds and encompass activities like the PTA and students collecting for a specific cause or event. It is also a headache for heads of school and governors, who have the ultimate responsibility over these monies.
Entering my first role in education as a business manager I opened the safe and found it bulging with small coin bags, all full, each with a little scrap of paper inside. That is school fund money, they told me. The last business manager, who had left 6 months previously, was not really on top of it (or anything!), they said. Despite it being a UK state secondary school, with nearly 900 students, finance staff were thin on the ground - there was in fact just me. The facilities staff were thin on the ground too, there was just one aging, bad-tempered caretaker who used to regularly throw his keys at me in a temper, but that is another story.
So there I was with a safe full of cash, and no idea of what it was all about, so I started counting. Little did I know at this point that this was the start of a pattern for the next 6 years of my life. As fast as I could count the money more came in. The students were enthusiastic about collecting money for all sorts of worthy causes - charities, trips, and events. On top of that there was money from the tuck shop - which I ran with student help (the students manned the tuck shop and ate all the profits) - and the sales of school uniform items - run out of my store cupboard. Whether these should be counted as unofficial funds we will discuss later. I enlisted the help of reliable students in exchange for work experience points, and I came in to school and counted money at weekends and during holidays. I did get a good software programme to take over from the old manual ledger system, and when I left there was only a big sweet jar of uncounted money, much better.
The school was a very successful saving bank, money came in regularly, but only rarely left. The balance just got bigger and bigger. Getting the students to enthusiastically collect was one thing, but getting them to sort out details so a payment could be made was another. So in the sense that it was intended it was a failure.
I moved on over the years from my first positions as business manager into education leadership, spending many years as deputy head and then head of two large schools. However, every year I still found myself sitting in finance committee meetings, albeit with a finance person, answering questions about why we were carrying such big voluntary fund balances, why money had been collected but not spent, and whether a chosen charity was a worthy cause.
Currently, I am a brand-new governor of a small UK state primary school. You can imagine I smiled wryly last month as I was sent an end of year statement of their school fund with some words of caution from a fellow governor. Not unfounded as I was to discover. Voluntary funds provide schools with a substantial additional source of income, collected for specific purposes, for which they are merely the custodians. Although such funds are not part of the main school budget, the standards for the guardianship of these funds need to be just as rigorous. “Parents, students and other benefactors are entitled to receive the highest standards of stewardship for funds to which they have contributed”. (“Keeping Your Balance”, Audit Commission 2000).
However, the operation of voluntary funds has sadly proven to be an area susceptible to fraud by persons at different levels of organisations.
School governors bear ultimate responsibility for all the finances of a school. In addition to their responsibilities accounting for the main school budget, they have the responsibility of ensuring that voluntary funds are set up according to agreed guidelines and managed properly, with their operation delegated to the business manager or other named person, overseen by the head of school.
So some words of wisdom, but with humble honesty I have to say that it is easier to give this advice than to be held accountable for my total adherence to it over the years!
1. Start with a general description of the purpose and scope of your funds, documenting systems and procedures, and detailing each fund separately.
2. State who is/are responsible for managing the funds at different levels. It is hard with small schools, but there should be segregation of tasks at some point(s) between collecting the money, counting the money, entering it in the accounts, and banking it.
3. Make sure that areas of operation are not infringing the law in your country of operation by being operated purely as a fund. It may be that areas such as the sale of school uniforms, tuck shop and home to school transport are deemed in some countries as commercial operations and as such a company should be registered and taxes liable.
4. Ensure that you have a good - and simple - accounting soIware system that can specifically cater for private funds. It is often a poor fit to try to run them as an adjunct to your main school budget accounting system.
5. Official and voluntary monies should not be mixed. In other words income should not be collected in one and expenditure made out of the other. An exception to this is sometimes possible - depending on your local regulations - by applying an accounting rule strictly, for example in the case of school trips, but it is preferable not to do so.
6. On an operational level, for every new project establish a clear objective, a person responsible, and full details of payees. If applicable, make sure that you have full banking details at this stage, then if the organisers leave, lose interest, or move on to another project, then at least you can tidy up afterwards.
7. Always open a new fund if there will be multiple collections and/or payments made.
8. Always close a fund when its purpose has been fulfilled.
9. The balance of each fund must be capable of being identified at any time from the records.
10. The use of non-specific funds - “other”, “miscellaneous”, “general” - should be strictly restricted to very occasional transactions of a one-off nature, and not used to avoid opening new funds or to avoid detailed accounting.
11. All money received must be submitted to the appropriate place by the end of each day, and all transactions should be recorded within 24 hours of them taking place. School staff must not keep money in their desks or elsewhere.
12. Reconciliation of cash floats and bank accounts, also stock takes where appropriate, should be carried out regularly by an independent person. Any member of staff who is not normally involved in controlling stocks or cash/bank reconciliation would be defined as independent for the purposes of these guidelines, but the lines of segregation should be clear.
. Some guidelines state that, however well intentioned the thought may be, school funds should not be used in any way for staff or visitors unless contributions have specifically been made for those purposes. However, some schools do use some surplus’s from school fund operations to fund minor staff welfare items, especially when their regulations prevent the main budget being used for such.
14. The accounts should be audited annually by someone who is not associated directly to the school, signed off, and statements presented to the governors together with a clear explanation of all the funds, notes regarding their operation over the last year and timescale for disbursement of any balances. Schools must not audit their own school fund or other unofficial funds.
15. Finally, as far as possible, keep it simple!
I wish you well in negotiating the midfield of school funds, unofficial or voluntary funds. Although the world is becoming more and more cashless managing these processes will never be easy.