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CONCEPT, THEORY, AND MODEL IN FINANCIAL MANAGEMENT OF EDUCATION

INSTITUTION

Definition and characteristics of financial management Elements in financial management

Basic concepts and terms in financial managementTheory and model related to financial management

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CONCEPT OF FINANCIAL MANAGEMENT

management activity that is concerned with decisions on how to procure funds, of an organization's financial resources, disburse and give account of funds provided for the implementation of educational programmes.

• Pengurusan kewangan dalam pendidikan adalah berkaitan dengan pengagihan dan penggunaan sumber kewangan oleh institusi pendidikan bagi memenuhi tujuan penyediaan perkhidmatan pendidikan dan pencapaian kejayaan pelajar.

(Odden & Picus, 2004).

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THE PURPOSE OF FINANCIAL MANAGEMENT IN EDUCATION

1. The funds are utilized in the most effective and efficient manner.

2. To assist educational managers and administrators to keep a record of their stewardship in financial matters.

3. Supervision of cash receipts and payments and safe guarding of cash balance.

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School business administration contributes to teaching and learning by providing information and services that

speak to questions such as:

1. What are educational needs that have business implications?

2. What are the nature and cost of each feasible alternative to meet a given educational need?

3. What is the most efficient means to provide each alternative?

4. What is the cost-effectiveness of each alternative (to what extent does each alternative meet the educational need, and how does this equate to the expenditure involved)?

5. What is the relative priority of each expenditure decision to all of the other expenditure decisions in the school system?

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EDUCATIONAL FINANCE

education finance as the process by which tax revenues and other resources are derived for the establishment and operation of educational institutions as well as the process by which these resources are allocated to institutions in different geographical areas. (Ogbonnaya, 2000)

THE ROLE OF ECONOMICS IN EDUCATION POLICY RESEARCH

(BREWER ET AL, IN LADD & FISKE, 2008)

Economists are interested in how society organizes and uses resources to produce various types of knowledge and skills through formal schooling and distributes them to various groups in society.Economics is a framework for helping understand the

behavior of individuals and organizations in allocating resources

1. How much education should an individual acquire?2. How should education be produced and allocated by a

society?3. Can we be more efficient in organizing the production

of education?

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COMPONENTS IN FINANCIAL MANAGEMENT (Garner 2004)

1. Management structure2. Programs, services and institution activities3. Budgeting 4. Financial system that manage budgeting and

accounting

FINANCIAL MANAGEMENT OF PUBLIC SCHOOLS IN MALAYSIA

1. Entities involved (Malaysia Treasury, Accounting General Department, National Audit Department, Financial Division Ministry of Education)

2. Activities in managing school finance3. School organizational structures related to school finance

(PTj, committee of school finance)4. Concept of public financial management5. Financial regulations

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3 ACTIVITIES IN FINANCIAL MANAGEMENT FOR EDUCATION INSTITUTIONS

1. Obtained financial resourcesa. Budgeting administrationb. Generating income

2. Implementing educational programs/projects/activities a. Procurementb. Payrollsc. Managing asets

3. Controlling financial resourcesa. Managing cash and debtsb. Preparing financial reportsc. Disposal, Loss, and write-of,d. Auditing

SCOPE OF PUBLIC FINANCIAL MANAGEMENT IN MALAYSIA

1. Expenditure management2. Accounting management3. Revenue collection and deferred revenue

management4. Supplies and asset management5. Preparation and presentation of financial

report and annual report for federal statutory body

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EVALUATION IN FINANCIAL MANAGEMENT

1. Cost-benefit analysisThe process of weighing the total expected costs vs. the total expected benefits of one or more actions in order to choose the most profitable option

2. Cost-effectiveness Cost-effectiveness relates effectiveness to the cost incurred – greater effectiveness for the same or low additional cost, or the same effectiveness at lower cost.

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ISSUES IN SCHOOL FINANCE• Discuss in a group, identify main problems in

financial management at your school.• Explain the impact of the problems on teaching

and learning proses for your school.• Elaborate steps need to be taken to rectify the

problems

5 CONCEPTS OF COST

1. The nature of costs2. Costing3. Opportunity cost4. Cost classification5. Cost characteristics of school

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COST CLASSIFICATION

Cost information needs to be organised into a pattern before significance can be read into it.

a. Direct and indirect costsb. Prime and subsidiary costsc. Variable and fixed costsd. Controllable, sunk, and idle costse. Unit costs

• Variable and fixed costs• Controllable, sunk and idle costs

• Unit costs• Unit cost of education

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COST CHARACTERISTICS OF SCHOOL (KNIGHT, 1993)

1. Most schools are ‘non-profit’ organisations.2. Schools are service organisations and perform a

social as well as an economic function.3. School cost structure are very stable4. Schools work within a very slow cycle.5. School unit costs tend to rise when education

become more technical and science-centred.6. Schools are very labour-intensive7. School calendar cause high costs8. Schools are constrained by legislation,

regulations, policies and attitudes that have often developed without consideration for costs, and yet which considerably affect them.

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6 KEY CONCEPTS FOR EFFECTIVE FINANCIAL MANAGEMENT (Knight, 1993)

1. Economy2. Efficiency, cost-efficiency3. Effectiveness, cost effectiveness4. Cost/benefit analysis5. Productivity6. Value for money

• Cost-efficiency• Effectiveness• Cost-effectiveness

• Cost / benefit analysis

• Productivity• Value for money