Financial Management of Schools

Financial Management of Schools

Ladies And gentleman,

On this auspicious day, I would like to address the importance of good financial management and accountability of school monies, public funds. As you all know that the management of school finances can be one of the most challenging of principals responsibilities, because for many it is an area in which they have little or no training or expertise. Planning and Control are the two most important ingredients to a Successful School. A School financial management Plan takes most of the guess work out of School Strategy and Control through solid Financial analysis. Financial Data provides a way to gauge where you are in your Strategic Plan, telling you where changes in your Plan are necessary. Because of this, Financial Data Analysis and Management are vitally important to running a successful school. Good financial management of public schools is a complex task, one made more difficult in recent years by the declining economic fortunes of public areas nationwide. This Digest describes the challenge and briefly reports solutions developed by practitioners in public schools. It is based on responses to a recent nationwide survey of public school administrators conducted in cooperation with the American Association of School Administrators (AASA). More detailed information is available in a longer report available from both ERIC/CRESS and AASA (Inman-Freitas, forthcoming). 

Fifty-seven percent of the nation's school districts are public districts. They enroll about 20 percent of the total student population (Stephens, 1991). Diversity, isolation, small enrollments, and unique cultural legacies are common characteristics of public education (Nachtigal 1982; Stephens, 1991; and Theobald, 1989). 

Public schools can contribute significantly to the continued growth and development of their communities, but providing adequate programs has, unfortunately, become increasingly difficult in recent decades. Higher poverty rates in public areas, combined with lower personal income of public residents (Brown & Deavers, 1987), for instance, place additional fiscal pressures on public governments. Educational programs in public schools obviously suffer as a result. The burden of providing adequate educational programs is further increased by nonfunded, but mandated, programs to improve education (Stephens, 1991). 

Major Financial Problems According To Practitioners

Public practitioners report financial management problems that resemble the problems faced by all districts. The context in which public schools operate, however, affects the development of solutions. A brief description of the major problems follows. 

Revenue. One of the biggest problems is cash flow, and several factors contribute to the problem. According to public school administrators, the two most serious are (1) the receipt of 30 percent of state aid after the end of the fiscal year and (2) delayed tax receipts. Delayed tax receipts mean that districts must often borrow money to cover operating funds until they actually receive the funds due them. 

Late approval of the state budget is another problem reported by administrators in many public districts. When the state budget is two or three months late, district officials do not know just what their state revenues will ...