‘Basic Financial Management Skills’ for

Elementary, Community and Primary Schools

Schools Work BetterSchools Work BetterSchools Work BetterSchools Work Better

When the Accounts are in Good OrderWhen the Accounts are in Good OrderWhen the Accounts are in Good OrderWhen the Accounts are in Good Order

Department of Education and Department for Community Development

Introduction

This Flip Chart contains activities to enhance the capacity of community members, primary school Boards of

Management (BoM), head teachers, inservice coordinators, and teachers to better perform their current work

responsibilities. These school-based activities support and strengthen work-place skills and knowledge and

enhance individual personal development.

The Flip Chart is intended to be used with the Basic Financial Management Booklet, the activities in this

flip chart will some understanding of the financial skills suggested in the booklet.

School teachers and community members can use these capacity building activities for your personal and

professional development, and the needs your school. These capacity building activities can be undertaken by

groups or individually. The Papua New Guinea Education Institute will provide accreditation to their

students on the completion of assessment tasks.

The capacity building activities in this booklet will help you learn about:

• How to manage your school’s financial activities and working together in supporting and improving

the financial management of your school.

• The Financial Management Act and your school’s roles in relation to accountability and transparency.

• The responsibilities of the Board of Management and the Head Teacher in school budgeting and

planning,

• How the Head Teacher and the Board of Management need to work cooperatively together, and

• Your schools’ roles and responsibilities in the recording and reporting of financial information.

Those of you who are involved in school administration need to understand the correct ways of managing

your school finances. The same skills could be applied in managing your family, clan or community group’s

funds.

This material will assist those managing public funds to understand the importance of effective management

of school funds. From this booklet, Head Teachers, as accountable officers will develop cost-effectiveness

measures, understand what it means to be transparent, and ensure that they practice good governance and

accountability in all public institutions and communities.

NATIONAL SONG NATIONAL PLEDGE PRAYER O arise all you sons of this land

Let us sing of our joy to be free

Praising God and rejoicing to be

Papua New Guinea

Shout our name from the mountains to seas

Papua New Guinea

Let us raise our voices and proclaim

Papua New Guinea

Now give thanks to the good Lord above

For his kindness, his wisdom and love

For this land of our fathers so free

Papua New Guinea

Shout again for the whole world to hear

Papua New Guinea

We’re independent and we’re free

Papua New Guinea

We the people of Papua New Guinea

Pledge ourselves, united in one nation

We pay homage to our cultural heritage

The source of our strength

We pledge to build a democratic society

Based on justice, equality, respect and

prosperity for our people

We pledge to stand together as

One people, One nation

One country

God bless Papua New Guinea

Almighty and Eternal Father,

We thank you and praise you.

For the infinite love and mercy,

You rain down blessings upon mankind,

in spite of their faults and failings.

Bless our nation PNG, and her people.

We are pilgrims on our way to freedom,

with good news for all we meet.

Help us travel lightly, travel together.

Learn as we go, we are disciples,

The mission is urgent,The journey is long.

Help us travel with authority, fearing no one. We are apostles,

Opponents of evil.

Let the cross be our compass, love be our sign.

To lean upon your great strength,

Trustfully and to wait patiently and serenely For the unfolding of Your Will.

Amen

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Topic 1: Who is the Accountable Financial Management Officer for schools?

Sopos yu lukautim moni blong school yu mas behainim

wei blong despela buk

Financial Management Act 1999

2

Topic 1: Who is the Accountable Financial Management Officer for

schools?

• The Head Teacher is the Accountable Financial

Officer in a school.

• The Head Teacher is given the responsibility of

keeping accurate records of all financial activities,

managing all school accounts, using school funds

for BOM approved activities, reporting to the

BOM on the use of school funds, acquitting

grants, and for keeping all financial records in a

safe place.

• The Head Teacher, as ex officio member of the

BOM needs to work very closely with the BOM

Treasurer and Chairperson in preparing a school

budget and in managing the school funds. The

Head Teacher and BOM Treasurer need to

prepare quarterly financial reports for BoM

meetings regarding the school financial activities

and the implementation of the school budget.

• The Head Teacher, as the accountable officer is

the person who will be held responsible if any

school money is misused.

• The Head Teacher, the BOM Treasurer and BOM

Chairperson should all be signatories on any

school accounts.

Discussion Questions

1. According to the Financial Management Act who is

the school accountable officer?

2. What are some of the responsibilities the

accountable officer has in managing the school

finances?

3. What is the BOM accountable for?

4. How should the BOM and Head Teacher work

together in managing school funds?

5. Who is going to be investigated if school money is

misused used? Why?

6. Who should be the signatories on any school

accounts? Why?

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Des pela pasin em i pasin blong

stil

Topic 2: What will happen if you do not follow what it says in the Financial

Management Act 1999?

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Topic 2: What will happen if you do not follow the Financial Management Act?

• The Department is very concerned about theft and

misappropriation of funds in some schools.

• Parents become angry and frustrated because they expect

teachers to set a good example to their children, and to properly

use all school funds.

• Parents sometimes refuse to enroll their children in schools

where they believe teachers are misusing school funds.

• Teachers who misuse school funds must expect to suffer the

consequences.

• Teachers and the community have a responsibility to report any

cases of misuse of school funds to the appropriate authorities.

• Provincial Education Officers have a responsibility to thoroughly

investigate any reported cases of misuse of school funds.

• The District Education Officers and Standards officers have been

instructed to fully investigate reported cases and to bring these

matters to the courts and to the Teaching Service Commission as

soon as possible.

• Education officers who misappropriate school funds will be

investigated and if found guilty of the offence, they will be

prosecuted by the police and will be dealt with by the Teaching

Service Commission.

Discussion Questions 1. What are some of the bad financial practices that are continually occuring in

schools? Make a list.

2. What are the consequences of mismanagement of funds? Make a list of these. Answer: Schools miss out on funds; Parents refuse to pay school fees, no infrastructure maintenance on school buildings, no improvement to school facilities and no school materials.

3. What are the penalties for misappropriation of school funds? Please refer to

the notes on the financial management booklet. 4. In your groups discuss and list your schools financial rules and the

accompanying penalties if rules are not followed.

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Topic 3: What is School Income?

We are here to pay for our children’s school Fees

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Topic 3: What is School Income?

• School income is money received by the school.

This money may be collected:

� as parent’s fees,

� school generated funds,

� donations,

� support grants from provincial governments, district

governments or LLGs

� aid donors

� individual or business support funds etc.

• The grants received by the school are sometimes tied to

specific school activities such as infrastructure maintenance.

• All school income must be recorded in the School’s Combined

Cash book,

• The Education Act recognizes the role of the BoM in setting

fees paid by parents or guardians of children attending

schools.

• The Secretary for Education recommends that large Primary

Schools operate two cheque accounts

• General account: for project fees, and other income and

• Subsidies account: solely for national and provincial

Government subsidies.

• These two school accounts should be audited by the PSI or

DEA every year.

Discussion Questions

1. What income does your school receive each year? Make a list

of the sources of income.

2. What type of grants does you school receive and what purpose

are these grants for. Describe how these grants are used by

your school.

3. What is the amount of school fees charged by your school BoM?

4. Has it remained the same each year or has it changed and if it has

changed why it has changed? Discuss if you think the sum needs to

be reviewed.

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We must come up

with a plan of how we

will spend our school

income. Let us use the

steps suggested in the

booklet

Topic 4: What is a budget?

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Topic 4: What is a budget?

• A budget is a financial plan of how you intend to raise money for your

school and how that money will be spent. • When you budget you look into the future and you identify the income

you expect to receive and how you will spend that income, and what expenses you expect to incur.

• Your expenditure must not exceed the total income. If the proposed

expenditure (money out) is more than the income (money in) then: • reduce the expenditure, or • increase the income.

• Your budget must be flexible and should be easily adjusted.

This is done to allow for changes in prices of goods, unexpected damages to school equipment or facilities.

• The BOM must be involved in preparing the school budget. • Annual Budgets can be broken down into quarters or terms.

Discussion Questions

1. Role Play: Prepare a role play involving BoM members’ teachers and the head teacher sitting down discussing what should go into the next year’s school budget. Discuss in the role play the following:

• what steps will you take to do a budget? • what is the first thing you should consider and the next

and so on. • when do funds come into schools and what are these

funds for • what is your current school expenditure did your budget

last year match your expenditure of 2006?

2. What funds does your school expect to receive this year and When do you expect to receive the funds? 3. What are your school priority activities for budgeting?

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Topic 5: Why is it important that you keep financial records?

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Topic 5: Why is it important that you keep financial records?

• Maintaining financial records is important for the purpose of

monitoring expenditure and keeping records of school income.

• There are different types of records that you could use to

maintain your school financial activities and these are: • Cheque account records, • Receipts, invoices, • statements of account, • files for all payment transactions, • combined cash book, • Annual budget and others as outlined in the booklet.

• A statement of account is information provided by the bank of

your banking activities. • This information should be used to check whether it

corresponds with your Combined Cash Book or whether this information is correct or inline with your other records.

• There are two parts of the combined Cash book (i) Cash Book: The Cash Book includes date, details of transaction, cheque number

or deposit slip, details of receipts or payments and a copy of the progressive balance, eg

(ii) Item Analysis Section: The Item analysis section includes receipt items and payment items.

Discussion Questions 1. Why is it important that we maintain financial records? 2. Name the different types of financial records kept in schools and explain

how each one may be used. 3. Which two records must be brought together to check if they correspond with each other. 4. Discuss what happens if your financial records do not correspond with

each other. 5. What are the two elements of the combined cash book?

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Topic 6: Maintaining financial records

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Topic 6: Maintaining Financial Records

• To reconcile means to bring together in agreement. A bank reconciliation

statement compares the school’s records with the bank’s record of the accounts.

• Bank reconciliation ensures - that you have done no mistakes in entering your payments and receipts into the

CCB - that the bank did not accidentally deduct money from your school’s account

• Bank reconciliation statements are usually required to be carried out monthly by a responsible officer.

• Why could there be the differences between bank statement and cashbook? There are several reasons for differences between the bank statement and a month’s entries in the combined cashbook. These are:

• some entries appear in your CCB, but not in the bank statement • cash withdrawn and/or deposited not being cleared until the next day • cheques deposited in the bank are often not cleared for 7 to 14 days • some entries from the bank statement do not appear in your CCB until

you enter it • interest paid by the bank will appear on the bank statement but will not

be shown in the Combined Cash Book • any bank charges (e.g. bank fees) appear on the bank statement but do

not in the combined cashbook • there may be incorrect entries in the bank statement or in the combined

cashbook.

Discussion Questions

1. Reconciliation of accounts means to bring together in agreement two records of accounts. What are these accounts called?

2. Why is it important that reconciliation of these financial

records must be done quarterly? 3. Why do you think there may be differences between the

bank statement and combined cash book? 4. Explain how you would reconcile these two accounts.

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You must ensure

that all funds are

recorded

TOPIC 7: Petty Cash

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TOPIC 7: Petty Cash

• Petty cash is:

� a small amount of money kept in the school � used only for the purchase of small value items � usually has a maximum amount of K200.00 � topped up every so often to the agreed amount � managed by one designated individual who must

at all times be prepared to account for the cash or its use.

• The designated officer verifies that the request for reimbursement is legitimate, collects any possible receipts and pays out the cash.

• Ensures that a receipt or docket is used for every petty cash amount paid out.

• Keeps the cash in a safe, locked place. • Regularly manages the petty cash so it will not get out

of control.

Discussion Questions

1 What is a petty cash account?

2. How much petty cash money should be kept by the school?

3. Who is responsible for maintaining the petty cash account?

4. What are his/her responsibilities in maintaining the petty cash account?

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TOPIC 8: Acquittal of funds

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TOPIC 8: Acquittal of funds

• Funds acquittal refers to reporting on how funds are used. Usually original receipts are provided with an acquittal report.

• The provider usually provides an acquittal format to be used by the

school when a acquitting funds.

• There are a number of reasons why the provider of the funds requires you to provide acquittals. These are: o if you acquit they will continue to fund school activities o it demonstrates that the funds have been used for the correct

purpose. o It assists the provider in assessing how successful the funds have

been in achieving the goals of the funding activity. o It helps you to consider how you can better use funds available to

your school in the future.

• What happens if you do not acquit? Failure to satisfactorily acquit funding will make you ineligible for future funding opportunities and may result in action to recover the funds made available to your school.

Discussion Questions

1. What is meant by acquitting funds? Answer: Acquitting funds refers to reporting on how funds have been used. Usually original receipts are provided to the donor to show that the funds have been correctly used.

2. How can schools acquit funds given to them? Answer: by providing

a detail account of how the money made available to them has been used. As well as this the school will have available original receipts of any purchase made or services provided to the provider of the funds.

3. Why is it important that schools acquit funds given to them? Answer:

o if you acquit they will continue to fund school activities o it demonstrates that the funds have been used for the correct

purpose. o It assists the provider in assessing how successful the funds have

been in achieving the goals of the funding activity. o It helps you to consider how you can better use funds available to

your school in the future.

4. What documents do you need to produce as evidence of how funds have been used? Answer: Original receipts