Financial Management for schools.pptx

how to solicit, and manage school funds

1. Financial Management

2. Definition Definition Financial Management is the effective and efficient use of financial resources {money} for the achievement of organizational/project objectives

3. Definition Financial management is concerned with the sourcing, utilization and control of funds in order to add value to the stakeholders and report to them accordingly

4. Definition Finance is an important part of management and it is one of the key resources in an organization Money is the life blood of an organization

5. Importance of Financial Management Financial management is important because demand for funds is always greater than the supply of funds Financial resources are scarce Head of school needs financial management to make effective and efficient use of resources to achieve objectives of the school

6. Importance of Financial Management Financial management helps the school to be more accountable to donors and other stakeholders Financial management helps the school to gain the respect and confidence of funding agencies, partners and beneficiaries

7. Importance of Financial Management Financial management gives the school competitive advantage in the mobilization of scarce financial resources Financial management prepare the school for long-term financial sustainability

8. Importance of Financial Management Good financial management ensures that the school’s funds are safeguarded and used for the intended purposes Financial management ensures there is adequate liquidity for the school Good financial management is a basis for performance evaluation

9. Elements of Financial Management There are three key elements to the process of financial management Financial Planning/budgeting Management need to ensure that enough funds are available at the right time to meet the needs of the organization/project, e.g. paying for salaries & wages, services and expenses

10. Elements of Financial Management Financial Control Financial control aims to ensure that the project is meeting its objectives Financial control addresses questions such as: Are assets being used efficiently? Are the organization’s assets secure?

11. Elements of Financial Management Do managers act in the best interest of stakeholders and in accordance established policies? Is there conflict of interest?

12. Elements of Financial Management Financial control occurs when systems, procedures and policies are established to make sure that the financial resources of an organization are being properly handled

13. Elements of Financial Management Financial Decision-making The key aspects of financial decision-making relate to I nvestment Financing

14. Elements of Financial Management Financial Decision-making The financial manager helps management decide what investments to undertake and how they will be financed, bearing in mind the available sources of funds and the related costs of obtaining finances

15. Key Aspects of Financial Management Incomes should always exceed expenses Retain part of the surpluses in a reserve fund Ensuring accurate financial record keeping Planning and budgeting Comparing actual to budgets Managing risks (insurance) Cost reduction measures

16. Managing Finances Income versus expenses Ensure that your total incomes cover all your expenses Organizations which consistently make losses will close down. Look for ways to increase your income and cut costs

17. Managing Finances Cost-cut measures Bulk purchases gives you quantity discounts Avoid discretionary expenses Turn off unnecessary lights and prevent wastage of water D rop unnecessary travels C ost-sharing with others

18. Managing Finances Managing Risks (insurance) Unexpected events can lead to major financial loss and closure of an organization. These risks are managed by buying appropriate insurance policies as well as putting preventive measures in place

19. Managing Finances Insurance Fire & burglary insurance Cash-in-transit insurance Motor vehicle insurance Public liability insurance Professional idemnity insurance

20. Decisions by Financial Manager I. Investment decisions What assets should the organization hold? These decisions are concerned with the effective utilization of funds in one activity or the other, in order to add value to the stakeholders

21. Investment Decision The investment decision can be classified under two groups Long term investment decision also known as capital budgeting Short term investment decision also known as working capital management

22. Financing Decision II. Financing Decisions From where should the school get the funds for the investments it makes? It is also known as capital structure decision Here the decision is reached after considering cost of financing and risk

23. The Process of Financial Management The process of financial management comprises of: Financial Planning (Budgeting) Mobilization of funds Internal Financial Controls Reporting and Accountability Monitoring and Evaluation Auditing

24. Financial Planning Financial planning (budgeting) A budget is a financial plan designed by a school management so as to achieve the implementation of the curriculum It involves the estimation of income and expenditure for a given period Budgets are based on clearly planned activities

25. Types of Budgets There are two major types of budgets: Recurrent budgets: these are forecasts of regular income and expenditure for the next operating period Capital budgets: these are forecasts of investments in in long term assets

26. Capital budgeting Capital budgeting is a key investment decision all organisations face Planning for acquisition of long term assets has to be planned wisely and objectively, because they cannot be easily reversed once taken

27. Capital Budgeting In capital budgeting, technical feasibility and financial viability of the project have to be carefully evaluated Normally, more than one project are considered at the same time The cash flows for each option are established and the NPV is calculated which is the basis of decision

28. Capital Budgeting No project with negative NPV will be selected If one project has to be chosen among alternative projects, one that has the highest NPV is chosen

29. Fund Mobilization Fund mobilization is also known as financing There is a need to enhance local fundraising since donor funding is dwindling In the case where the school has deficit, the challenge is how to finance the deficits

30. Fund Mobilization Fund mobilization is very much needed especially for acquisition of long term assets The key question is: where do we get affordable funds? The funds can be sourced internally or externally Internal sources are mainly from previous surpluses

31. Fund Mobilization To decide which source to go for: Consider the various sources Compare the alternative cost of funds Choose the most cost effective source

32. Internal Controls At the heart of financial management is the practice of financial control Financial control is a situation where the financial resources are being correctly and effectively used Systems and procedures are established to make sure that the financial resources are properly handled

33. Financial Control Internal Financial control includes: Safeguarding of assets Accurate and reliable financial record keeping Compliance with internal policies and funding requirements Separation of duties

34. Financial controls Internal financial controls are the controls put in place by the management to safeguard the school resources Controls ensure that T here is completeness in recording of all incomes and expenditures Assets are safeguarded against loss, theft, misuse, extravagance etc.

35. Reporting and Accountability The school must make periodic reports (for internal and external use) The reports must be prepared on time The major reports are: The Balance Sheet The Income statement The cash flow statement

36. Reporting and Accountability School reports should be timely, relevant and accurate There is a need of employing a good accountant to make sure that is done But the head of school is responsible for the accountability

37. Monitoring and Evaluation When reporting it is good to compare the actual vs the planned When there is significant deviation, there must be sufficient explanation as to the cause of the deviation Once the cause is known corrective action needs to be taken

38. Auditing Auditing is an independent examination of the books of account Auditing adds credibility to project financial reports

39. Types of Audit There are two types of audits Internal audit External audit Internal audit is concerned with efficiency of operations and adherence to policies External audit is concerned with accountability and transparency

40. Sound Financial Accounting System Keeping books of account There is a need to keep all books of account and the supporting documents for transparency and accountability of funds Levels of authority: these should be established for authorization of expenses

41. Sound Financial Accounting System Policies and Procedures The accounting system consist of policies and procedures that describe H ow transactions are handled (authorized and recorded) How information moves through the organisation How accounting information is stored for ease of retrieval

42. Sound Financial Accounting System Use of Special Funds Many times in the non profit organisations, we are required to account for funds that are granted to us with restrictions on their use They normally require separate bank accounts They are reported separately

43. Principles of Good Financial Management Consistency Accountability Transparency Viability Integrity Stewardship Accounting standards

44. Consistency The financial policies and systems of the school must be consistent over time This promotes efficient operations and transparency in financial reporting

45. Accountability The school must explain how it has used its resources The school must explain what it has achieved to all stakeholders and beneficiaries

46. Transparency The school must be open about its work It should make information about its activities and plans available to relevant stakeholders This includes the timely, accurate and complete financial reports And making them accessible to stakeholders

47. Viability To be financially viable Expenditure must go according to the income of the school If a school is not viable, it cannot continue for long

48. Integrity At a personal level, teaching and support staff must operate with honesty and propriety Head of School has to lead by example The board members follow the policy and procedures and declare any personal interests that might conflict with their official duties

49. Stewardship A school must take good care of the financial resources it is entrusted with and make sure they are used for the purpose intended This is known as financial stewardship The governing body has overall responsibility for this

50. Accounting Standards The books of account must be kept according to internationally accepted accounting standards and principles Any accountant from anywhere around the world should be able to understand the school’s system for keeping financial records

51. Effective Financial management Key Factors; Written financial policies and procedures manual Competent staff, especially accounting Proper and effective internal control environment Timely financial reporting

52. Effective Financial Management Good stewardship of financial resources Quality education to the students Involvement of key stakeholders Financial controls: proper authorization, monitoring and control of operations