Financial Management of Schools19 March 2004

Kennedy Tat-yin LiuChairman, Community Services CommitteeHong Kong Society of Accountants

The 1st Hong Kong

School Principals’ Conference 2004

What is Financial Management ?

Manage Financial Risks Key Risks – those keeping you

awake at nights Other Major Risks Financial Practices – Compliance,

Accountability and Reporting

How to handle the Risks Identified ?

Manage - Policies & Procedures- Compliance- People

Limit; Transfer Decline Accept

Internal Controls

Minimise Financial Risks Safeguard Assets Coverage

- Revenue- Expenditures- Assets / Investments

Internal Controls (cont’d)

Segregation of duties Approval Supporting documents Tendering; Purchase system Revenue collection Payment system Reporting

Accounting System

Accounting Records Books of Accounts Assets Register Timely updated and accurately

maintained Regular and Appropriate

Review

Prepare an Effective Budget

Responsibilities; Approval School’s Overall Plan Income and Expenditures Cashflows Monthly Budgets

Prepare an Effective Budget (cont’d)

Identify Major Revenue and Expenditures

Income – own income; subsidies / grants

Recurrent and non-recurrent expenditures

Timing Contingency

Expenditure Budget for School Year 2003/04

Surplus b/f Gov't Allocation Total Grant Expenditure

Budget SurplusSY2003-04 Available SY2003-04

$000 $000 $000 $000 $000

c/f

(I) (II) (III)=(I)+(II) (IV) (V)=(III)-(IV)

General Domain

School and Class Grant 400 480Revised Admin/Admin Grant 1,080 800Suppl Grant for SBM 100 40

Sub-total (A) 100 1,580 1,680 1,320 360

Special Domain

Capacity Enhancement Grant 10 500 510 510 0Sub-total (B) 10 500 510 510 0

Outside OEBG Grant

Composite F and E Grant 0 200 200 200 0Non-Recurrent Grant for IT 400 0 400 400 0

Sub-total (C) 400 200 600 600 0

Total for A+B+ C 510 2,280 2,790 2,430 360========= =============== ============= ========== ==========

Note: This is a simplified version.

Budget Formulation

Cashflow Projection and Management Cashflow Forecast for 6 months ended 31 January 2004

August Sept Oct Nov Dec Jan$'000 $'000 $'000 $'000 $'000 $'000

ReceiptReceipt in advance 1,030 #

Admin Grant 90 90 90 90 90 90Total (A) 1,120 90 90 90 90 90PaymentSalaries Payment-Clerical and Janitor Staff (60) (70) (70) (70) (70) (70)

-Teaching Assistant (30) (30) (30) (30) (30)Electricity Payment (30) (40) (40) (40) (40) (40)Purchase of F & E (300) (300)English tutorial course (150)

Total (B) (90) (140) (140) (440) (140) (590)

Surplus/Deficit (A)-(B) 1,030 (50) (50) (350) (50) (500)Balance b/f 510 1,540 1,490 1,440 1,090 1,040

Balance c/f 1,540 1,490 1,440 1,090 1,040 540

# $'000S & C Grant paid in Aug 02 230

Other Grants 800Grant Received in Aug 02 1,030

==========

Actual Results vs Budget

Monthly / Quarterly Causes of the Variances Timing Difference vs

Permanent Commentary Revise Budget Learning Process

Financial Management Reporting System

Identify Information Needs Monthly / Quarterly Reports Variance Analysis, together

with commentary Reports to School Management

Committee

Budget Actual Expenditure Revised Budget ChangeSY2003-04 up to 31 January 04 SY2003-04 +/(-)

$000 $000 % $000 $000 (I) (II) (III) = (II )/(I) (IV) (I)-(IV)

General Domain

School and Class Grant 480 200 42 480 0Revised Admin/Admin Grant 800 200 25 600 (200)Suppl Grant for SBM 40 30 75 40 0

Sub-total School Based Management (A)

1,320 430 33 1,120 (200)

Special Domain

Capacity Enahncement Grant 510 150 29 610 100Sub-total (B) 510 150 29 610 100

Outside OEBG Grant

Composite F and E Grant 200 0 0 300 100Non-Recurrent Grant for IT 400 200 50 400 0

Sub-total (C) 600 200 33 700 100

Total for A+B+ C 2,430 780 32 2,430 0========== ========== ========== ========== ==========

Financial Report to SMC

Note a: Administration Grant

As a result of the contracting out of classroom cleaning services, the number of clerical and janitor staff employed are less than that originally planned. The Principal has approved under delegated authority the transfer of half of the saving $100,000 to CEG and the other half to CFEG.

Financial Report to SMC (cont’d)

Note c: Composite Furniture and Equipment Grant

The additional funds transferred from the Administration Grant will be used for the upgrading of IT equipment.

Note b: Capacity Enhancement Grant

With the transfer of $100,000 from the Administration Grant, the English tutorial courses will increase from 15 to 25 lessons.

Financial Report to SMC (cont’d)

Assets Management

Cash – placing surplus cash in savings accounts or time deposit

Capital Assets – Fixed Assets Register

Financial Management of Schools

Questions and Answers Experience Sharing Discussion

Financial Management of Schools

Thank you

Kennedy Tat-yin LiuTelephone: 2289 1881E-mail: kennedy.liu@hk.pwc.com