Presentation on Finance

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Presentation on Finance

• Aspiring Principals Programme
• 22 April 2009
• Paul McGirr
• Financial Advisor to Schools
• Southern Region

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Agenda

• Introductions
• Management and Governance
• The Finance Function
• Internal Controls, Processes
• Budgeting / Forecasting
• Monthly Accounting Function
• Monthly and Annual Reporting
• Monitoring by the Ministry
• Summary

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Introductions

• Most of the ideas are based on common sense and
  best practice
• May not be relevant to all schools
• However we should all adopt the following
• Doing it right the first time
• Getting it right if the above fails
• Adhering to the laws of the land
• Public Finance Act, Education Act, Crown Entities
  Act, Income Tax Act, Goods and Services Act etc
• Not upsetting the authorities

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Management and Governance

• Section 75 of the Act - Board responsibility for
  Management and Governance
• Section 94(b) the Principal is on the Board
  automatically no choice
• In the case for Companies
• Air New Zealand, Lyttelton Port, Mighty River
  Power, NZ Windfarms (CE is not a Board Member)
• Telecom (CE is a Board Member)

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The Finance Function

• Internal Controls / Procedures / Systems
• Delegated Authorities (DAs)
• What do they cover - Financial and Non Financial?
• Do they exist?
• Supported by documentation
• Is it clear who you go to if you do not have the
  DA
• Is it clear to whom and what can be delegated to
  others?

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Purchase of Goods / Services

• Delegated Financial Authorities (DFA's)
• Are they GST Inclusive / Exclusive?
• Different amounts for
• Operational (OPEX)
• Capital (CAPEX)
• Approved Budget does not equal ability to spend
  budget controlled by DFA
• If you are away what happens?
• DFA applies at when approval is given to
  purchase an item
• Approval of claim by Principal / Board Chair

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Payment of Purchase

• Signing of cheques
• Electronic Payment
• Transfer of funds to / from Call Account
• Use of Direct Debits
• Use of Automatic Payments
• Credit Card

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Fixed Assets

• What level for CAPEX is there?
• Updating the Fixed Assets Register
• Donated Assets on Fixed Asset Register
• Depreciation - definition
• Replacement of Fixed Assets
• Purchased
• Donated

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General Ledger Structure

• Allows the parts of a financial transaction to be
  categorised and reported on
• Are the grouping appropriate for you
• Is the level of detail what you want
• Is the description appropriate
• Grouping of Trading Activities
• Netting off of Revenue / Expenditure
• Coding of invoices

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GST

• Need to understand the basics
• No GST on School House income and costs
• Issuing Tax Invoices
• When can you claim back GST
• GST Returns to IRD

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Cash Management

• Do you know how much is in your Bank Account?
• Do you run a Cash Book?
• Management of Cluster Funds
• Cash in your bank account
• Belongs to schools in cluster
• Management of Foreign Fee Paying Students Funds

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Segregation of Duties

• Does one person involved in too many parts of the
  process e.g. same person
• Orders the goods
• Received the goods
• Approves the invoice / code the invoice
• Prepares signs the cheque
• Does the accounting processing
• If limited then need to have controls and review
  process in place

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The Budget

• All amounts are GST Exclusive except school house
  income and expenditure
• Allocates resources to achieve Charter
  requirements
• Template should show
• Last years actuals
• This years budget, actuals to date, year end
  forecast
• Figures for next year and basis of calculation
• 1st draft, 2nd draft etc, final
• Phasing of budget during the year
• Timeframe for approval of budget

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• Balance the budget based on Ops Funds and known
  funding to be received
• Need to make an assessment of achieving roll
• Icing on the cake expenditure matched to
  variable income no income no spend
• Income and Expenditure Budget
• Budget for Depreciation
• Capital Expenditure (CAPEX) Budget

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Monthly Accounting

• Could be done internal and / or external
• Agree on timeframes / Board meeting
• Is it clear
• what they do / what information they provide?
• what you do / what information you provide?
• Is there Quality Control on processing?

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• Provide analysis / narrative
• Are there monthly journal entries for
• Operations Grant
• Depreciation
• Board Fees / Audit Fee / MOE Salaries / Property
  Grant etc
• Do you have online access?

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Monthly Reporting

• Reporting for first months of year
• Standard / Customised Reporting
• Statement of Financial Performance (Profit
  Loss)
• Summarises Income and Expenditure during the year
• Statement of Financial Position (Balance Sheet)
• Shows Assets and Liabilities Equity as at year
  end
• Capital Expenditure v budget / forecast
• Format of Monthly Reporting
• Who prepares / checks report to Board
• Who presents report / does EO attend
• Report your Bank Staffing liability

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Forecast

• Prepare a Forecast as to likely full year result
• Should be included in Finance Report to Board
  from (say) September onwards and updated monthly
• Highlights cases were reallocation is necessary
  or available
• Handy for budget exercise for next year

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Annual Accounts

• Results shown in Dec Mgt Accounts v shown in
  Annual Accounts
• Need to reconcile difference (if any)
• Draft adopted by Board and sent for Audit
• Audit of Annual Accounts
• Final adopted by Board and sent to MOE
• Audit Management Letter (different from Audit
  Report)
• Benchmarking

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My Role in the Ministry

• Advisory role to Schools / Boards / Service
  Providers
• Monitoring role undertaken
• Upon receipt of Annual Accounts
• Financial Indicators
• Surplus / Deficit for year and trend
• Working Capital for year and trend
• Variances between actuals and budget
• Trading Activities masking core activities
• Audit Report
• Compliance
• Breaches of Education Act re Investing /
  Borrowing
• Were all documents included and signed

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• Indicators during the year
• Bounced fortnightly salaries payment
• Not meeting loan repayment terms
• Change of Service Providers
• Change of key personnel
• Suppliers not getting paid
• Asking for Advance of Operations Grant
• Outcome of Roll Audit / changes in roll changes
  in funding

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• Delay in getting accounts to Auditors
• Comments in ERO Reports
• School Newsletters
• Going Concern letters requested by Auditor
• Issuing post dated cheques
• Under / over used bank staffing
• The grape vine
• However still requires decision to intervene

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Your next action

• Attend an Accounting for non accountants course
  or similar
• Obtain a copy of your schools (and your next
  schools ) Annual Accounts
• Obtain copy (from MOE web site) of
• Financial Information for Schools Handbook
  (called FISH) excellent document
• Funding, Staffing and Allowances Handbook
• Ask questions / read articles / bother those that
  know the topic

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Summary

• Presentation designed to raise broad issues
• Make you aware of what finance is about
• Importance of getting it right
• technically
• the first time
• Monitoring by Ministry
• Help is available via your
• Executive Officer / School Board Treasurer
• Auditor
• Service Provider
• Financial Advisor at the Ministry
• Best of luck with your next application