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. It is also likely that the elected members of the (school) governing body may be equally ill equipped for the task [Clark A; (2008; 278)].

Post-apartheid South Africa has been characterised by a shift from a highly centralised, top-down approach to education provisioning by the National Department of Education (DOE) to the devolution of powers to the Provincial Education Departments (PEDs) and down to the level of the school. Post-apartheid policy has shifted the emphasis (from redistributive policies) to less directly interventionist state policies which emphasise education growth in a context of fiscal constraint, a focus on decentralisation and cost saving … a shift of financial responsibility from public to private sources, and a growth in the notion of partnerships and voluntarism [Kallaway P; (2002; 188)]. Kallaway P (1997; 64) states that education (now) becomes a provincial competence subject to a national policy framework. The “new” South African state has deployed a complex range of discourses – the specificity seems to lie in the linkage of redistributive strategies with policies designed for a context of financial stringency (ibid; 65).

It is against this background of on the one hand the perceived inability and/or lack of expertise on the part of school principals and school governors and on the other hand the reductions in the states expenditure on education that this chapter explores the role of public school principals and school governing bodies in the management of schools’ finances.

The KwaZulu-Natal Department of Education (KZNDoE) comprises of twelve Education Districts (as depicted in figure 1) grouped for management purposes into three clusters of four districts each – namely the Coastal Cluster (comprising of the Ilembe, Pinetown, Umlazi and Port Shepstone Districts); the Midlands Cluster (comprising of the Umzinyathi, Othukela, Umgungundlovu and Kokstad Districts) and the Northern Cluster (comprising of the Amajuba, Vryheid, Obonjeni and Empangeni Districts). The Pinetown Education District is in the Coastal Cluster and covers the western and northern half of the eThekwini Municipality.

Figure 1

Source: KZNDoE-2008

Although largely urban in nature, there are some underdeveloped rural and peri-urban areas at the periphery. The district manages five hundred and eighty (580) schools – five hundred (500) are public ordinary schools; eleven (11) are LSEN schools, that is schools for Learners with Special Education Needs; five (5) are public pre-primary schools and sixty four (64) are independent schools. The direct management of these 580 schools is the responsibility of an Education Circuit Office, each of which is responsible and accountable for +/- 145 schools. There are four (4) Education Circuit Offices in the Pinetown Education District:

Circuit A comprising of Phoenix, Verulam and Tongaat

Circuit B comprising of Inanda, Ntuzuma and Kwa Mashu

Circuit C comprising of Krantzkloof, Ndengezi and Westville

Circuit D comprising of Inchanga, Molweni and Mpumalanga

This research study will focus on, in the main, the management of the finances of the 500 ordinary public schools.

The process of budget allocation by a Provincial Education Department to schools in a particular education district involves drawing the Resource Targeting List of schools, which lists all schools in that province, sorted by the level of poverty prevalent in the community surrounding the school based on Statistics South Africa (StatsSA) Census data. Table 1 indicates the Norms and Standards budget allocation made by the Provincial Education Department to schools in the Pinetown Education District.

In addition to the budget allocations (norms and standards) received from the provincial education department, schools also generate additional funds by levying school fees. Table 2 below indicates the school fees levied by fee-charging schools in the Pinetown Education District during the 2008 financial year, which is from 01 January 2008 to 31 December 2008. The fees indicated in table 2 represent the actual school fees collected during the review period – the average collection rate was recorded at +/- 35%, that is a bad debt factor of +/- 65% (most schools wrote off on average 65% of the school fees as bad), however the ex-Model C schools, which charge between R10, 000.00 to R20, 000.00 per learner per annum, reported (on average) a 90% collection rate.

According to the DoE: Self-Managing Schools (2000; 7), the South African Schools Act provides the basis for a system, which devolves much more power to schools. At the heart of the South African Schools Act is the principle that each school is on a path to self-management – if it is not already there. The intention of the State to make schools self-reliant is reinforced since “central to the new education system (is) that the South African Schools Act gives every school the status of juristic person” DoE: Self-Managing Schools (2000; 9). This implies that the assets acquired by the school become the property of the school and the school, as a legal personality, is responsible for the liabilities of the school.

According to the South African Schools Act, Section 15 [Status of Public Schools]:

15. Every public school is a juristic person, with legal capacity to perform its functions in terms of this act.

As a juristic person the school exists independently from its members, which implies that the school has rights and responsibilities in its own name as if it were a natural person. The school can therefore enter into contracts; however it does so through its school governing body, that is the school governing body acts on behalf of the school – it has decision-making powers concerning the school and may bind the school legally [Potgieter (1997; 12)]. A member of the school governing body shall not be liable for any debt, damage or loss incurred by the school unless he or she acted without authorisation or with malicious intent, in which case he or she may be held responsible for the debt, damage or loss [Rajah S (2003; 2)].

Section 16 of SASA [Governance and Professional Management of Public Schools] states:

16. (1) Subject to this act … the governance of a public school is vested in its governing body

16. (2) A governing body stands in a position of trust towards the school,

which implies that the overall governance of a public school is vested in its school governing body – in other words the school governing body is liable to perform the statutory/fiduciary functions relating to the school’s assets, liabilities and resources; in essence the SGB must take responsibility for the financial management of the school.

Jones (2000; 9) states that the ultimate responsibility for the accuracy of the books (of account) is the school principal even if he or she does not have the task of maintaining the books on a regular basis – the management of the schools finances is (however) a primary function of the school governing body. This brings about the question: who is responsible for what?

According to Clarke (2008; 280) adapted – these overlapping responsibilities need to be minimised. The lines of authority need to be clearly drawn so it is quite clear who is responsible (if and) when problems arise. There are essentially three areas of responsibility:

The South African Schools Act makes provision for school governing bodies to establish committees. Section 30 [Committees of the Governing Body] reads as follows:

30. (1) a governing body may-

30. (1) (a) establish committees, including an executive committee (and finance committee); and

30. (1) (b) appoint persons who are not members of the governing body to such committees on grounds of expertise, but a member of the governing body must chair each committee.

According to Mestry (2004; 129), a view supported by Clarke (2008; 282) the governing body of every public school must ensure that there are proper policies and procedures in place for the effective, efficient and economic management of the schools finances and the school governing body must also have systems in place to monitor and evaluate the correct implementation of the policies and procedures and to report thereon. The finance policy is arguably one of the most important policies that a school governing body has to put in place. Clarke (2008; 291) states that one of the main purposes of the schools financial policy is to put in place a system of controls (checks and balances) to ensure that the schools finances are safeguarded and correctly managed. One of the more important, if not the most important, control/s is a system of internal checks whereby the work of one person is checked by another and there is a clear segregation of duties – for example the person responsible for collecting and receipting the money (school fees) should not be responsible for banking these monies.

Internal controls are systems, procedures and processes that are implemented to minimise the risk (and any financial consequences) to which the department (school) might otherwise be exposed as a result of fraud, negligence, error, incapacity or other cause [Guidelines for Accounting Officers (2000; 28)]. The purpose of a control system is to minimise opportunities for mismanagement and fraud as well as to protect the schools personnel from charges of mismanagement and fraud, to ensure that the schools money is spent for the purpose it is intended, that is educational purposes only. Internal controls are designed to “provide reasonable assurances that the organisations objectives are achieved efficiently, effectively and economically” [Guidelines for Accounting Officers (2000; 28)].

According to Clarke (2008; 292), Mestry (2006; 35) and Bisschoff and Mestry in Mestry (2004; 129) the schools finance policy should, as a minimum requirement, comprise of the following:

The King Report on Corporate Governance made recommendations relating to corporate governance and ethical standards for South African entities and included a set of guidelines and principles for good governance. Compliance with the King Report should be an integral part of the modus operandi of all public sector institutions. The King 2 Report incorporated, inter alia, recommendations on a Code of Corporate Practice and Conduct applicable to all public institutions – the focus was on the functions, duties and responsibilities of governors to ensure effective governance of their institutions (schools). The “King Code” includes four basic principles namely fairness, accountability, responsibility and transparency. Corporate governance therefore describes the overall management of the institution and the King Report states that corporate governance should form the basis of financial management in the public sector. Fakie in Van Wyk (2004; 413) supports the views of the King Report by stating that corporate governance deals with controls, decision making and structures for accountability that will assist in ensuring that the objectives of sound financial management practices are achieved. One of the objectives of corporate governance is to ensure that public service entities (including schools) deliver services in an efficient, effective and economical way.

Van Wyk (2004; 414) adapted states that the implementation of sound corporate governance and financial management principles is hindered due to various managerial shortcomings which include but are not limited to:

Van Wyk goes on to state that the above shortcomings can be grouped into three broad categories: (i) inadequate and unknowledgeable staff; (ii) poor integration of budgets and strategies and (iii) outdated control and reporting systems and suggests that financial management will only be effective if: (i) line managers are competent and committed; (ii) outcomes based budgeting is applied and (iii) accrual-based reporting is introduced into the public sector. Wheeler in Van Wyk (2004; 415) emphasises the need to find solutions to one of the most pressing needs in South Africa – an honest and sound financial system. Van Wyk (2004; 415) concludes by stating: “With a few exceptions financial administration in the public sector is not a pretty sight due to a lack of up-to-date technology, financial restraints, inadequate financial training and poor internal control systems.”

As schools move away from public administration and management (in their attempts to become self-reliant) towards a more business-like approach of managing their affairs, compliance with the “King Code” becomes a pre requisite. School governing bodies need to realise that they are bound by, and must comply with the stipulations of the South African Schools Act and the Public Finance Management Act. Good governance further seeks to ensure that there is adequate control over the strategic, tactical and operational planning of the school, especially the schools finances and resources, to enable it to achieve its overall objectives. Corporate governance requires an inclusive approach – the school management team on the one hand needs to demonstrate and put into practice honesty, integrity, accountability, responsibility and transparency and the school governing body on the other hand must apply tests of fairness, accountability, responsibility and transparency and must be accountable to both the school and their constituency.

The KwaZulu Natal Department of Education (KZNDoE) has identified seven strategic goals, which must be accomplished in order for the strategic plan, of the current member of the executive committee (MEC) for education, to function. Strategic goal 3 reads as follows: “Transform schools into self-reliant institutions which are community centres life-long learning” [KZNDoE Strategic Plan 2005-2010 (2005; 9)].

According to the Report to Minister (2003; 39): “The South African Schools Act embodies a shift from supply-driven service delivery in schooling, where government decides on how service delivery takes place to a more demand-driven mode, where local communities gain a greater say in how they would like the service delivery that they receive to be structured. One of the intentions of the South African Schools Act, which is based on worldwide trends in education, is for schools to become “self-managed” or “self-reliant” schools. According to the DOE: Self-Managing Schools (2000; 6) self-management in schools is based mainly on two sections of the South African Schools Act:

By default all schools have section 20 functions, which imply that the community (all relevant stakeholders and role players) plays an active role in the “life” of the school, specifically in assisting in the financing of schools. Section 20 of the South African Schools Act [Functions of All Governing Bodies] reads as follows:

20 (1) Subject to this Act, the governing body of a public school must:

20 (1) (a) promote the best interests of the school and strive to ensure its development through the provision of quality education for all learners at the school;

20 (1) (b) adopt a constitution;

20 (1) (c) develop the mission statement of the school;

20 (1) (d) adopt a code of conduct for learners at the school;

20 (1) (e) support the principal, educators and other staff of the school in the performance of their professional functions;

20 (1) (f) determine times of the school day consistent with any applicable conditions of employment of staff at the school;

20 (1) (g) administer and control the school's property, and buildings and grounds occupied by the school, including school hostels, if applicable;

20 (1) (h) encourage parents, learners, educators and other staff at the school to render voluntary services to the school;

20 (1) (i) recommend to the Head of Department the appointment of educators at the school

20 (1) (j) recommend to the Head of Department the appointment of non-educator staff at the school

20 (1) (k) at the request of the Head of Department, allow the reasonable us of the facilities of the school for educational programmes not conducted by the school;

20 (1) (l) discharge all other functions imposed upon the governing body by or under this Act

Section 21 of the South African Schools Act makes it possible for the school governing body of a public school to apply for the allocation of additional functions or for the Provincial Head of Department to allocate additional functions to the school governing body based on the capacity of the school governing body. According to Section 21 of the South African Schools Act, [Allocated Functions of a School Governing Body]:

21 (1) subject to this act, a governing body may apply to the Head of Department, in writing, to be allocated any (or all) of the following functions:

21 (1) (a) to maintain and improve the school’s property …

21 (1) (b) to determine the extra-mural curriculum of the school and the choice of subject options …

21 (1) (c) to purchase textbooks, educational materials and equipment for the school

21 (1) (d) to pay for services of the school

In terms of the National Norms and Standards for School Funding (2000; para 107) each Provincial Education Department must develop a checklist which schools will use to apply for the allocated functions and will also assist the PED in determining whether the school governing body is capable of managing any allocated function it has applied for – its purpose “is designed to gauge the school’s preparedness to assume self-management” [Marishane and Botha (2004; 100)]. Table 3 below is the checklist currently being used by the KwaZulu-Natal Department of Education for this purpose:

In addition to completing the checklist the school governing body must also submit:

Completion of the checklist and submission of the required documents does not guarantee that section 21 functions are automatically allocated. The application follows a strict and somewhat bureaucratic procedure which is enunciated in figure 3 below:

Figure 2: Process of Approval for Section 21 Functions

Source: Norms and Standards for School Funding (2000; 10)

For a school governing body to be successful in its application for additional allocated functions certain minimum requirements must be complied with. According to DoE: Self-Managing Schools (2000; 28) each of the allocated functions has its own unique requirements:

Function 21 (a): to maintain and improve the school’s property …

Function 21 (b) to determine the extra-mural curriculum of the school and the choice of subject options …

Function 21 (c) to purchase textbooks, educational materials and equipment for the school

Function 21 (d) to pay for services of the school

If a school governing body is successful in its application for the allocation of Section 21 functions, compliance in terms of the above questionnaire does not cease – the school governing body is compelled by legislation to maintain compliance (if fact the checklist provides the minimum compliance standards). Failure to maintain the minimum standards may result in some or all of the allocated functions being withdrawn, as per Section 22 [Withdrawal of Allocated Functions] of the South African Schools Act:

22 (1) the Head of Department may, on reasonable grounds, withdraw a function of a school governing body.

The South African Schools Act imposes responsibilities on the state with respect to the funding of public schools. This basic principle of state funding of public schools is based on the Constitutional guarantee of equity and redress. According to Section 34 [Responsibility of the State] and Section 35 [Norms and Standards for Funding of Public Schools] of the South African Schools Act:

34. (1) The State must fund public schools from public revenue on an equitable basis in order to ensure the proper exercise of the rights of learners to education and the redress of past inequalities in education provision.

35. Subject to the Constitution and this Act, the Minister must determine norms and minimum standards for the funding of public schools after consultation with the Council of Education Ministers, the Financial and Fiscal Commission and the Minister of Finance.

According to the National Norms and Standards for School Funding (2000; 8) schools are viewed as cost centres and funds are allocated at the level of the provinces to types of costs:

(i) personnel costs – which includes salaries of educators and non-educators. These costs are paid by the PED.

(ii) non-personnel costs – which includes the cost of textbooks, stationery, maintenance, municipal services, and so on. These monies are paid into the current banking account of schools in the case of a Section 21 school or paid to the service providers on behalf of schools in the case of Non-Section 21 schools.

Regardless of whether the school is Section 21 or Non-Section 21 the allocation (the amount the school will receive) is the same as it is based on the number of learners enrolled at the school and the quintile in which the school is ranked. The National Norms and Standards budget allocation does however have limitations and restrictions to its use. According to KZN Circular 29 (2009; 1) schools’ allocations are intended to cover non-personnel recurrent items and small capital items required by the school as well as normal (minor) repairs and maintenance to all the physical infrastructure of the school. The school allocation is primarily and exclusively intended for the promotion of efficient and quality education in public ordinary schools. KZN Circular 29 goes on to give school governing bodies “Guidelines for the Apportionment of the Allocation” and the recommended fund split is 60% for Learning, Teaching Support Materials (LTSM) and 40% for Non Learning, Teaching Support Materials (Non LTSM). Even though a “fund split” guide is given schools are compelled to abide by the guidelines and these funds are said to be “Rind Fenced” for their intended purpose/s.

The 60% LTSM funds must be split as follows:

30% for textbooks

18% for stationery

12% for other LTSM

The 40% Non LTSM must be split as follows:

20% for materials, furniture and equipment

10% for domestic account payments

5% for security services

5% for minor repairs and maintenance

In the case of Non-Section 21 schools the Norms and Standards budget allocation is not paid into the school’s current banking account – that is, the KwaZulu-Natal Department of Education (KZNDoE) manages the school’s the Norms and Standards budget allocation and this is commonly referred to as a “paper allocation” or a “paper budget”. The school therefore may only procure goods and services through the department of educations’ education district office and regional service centre. One of the greatest disadvantages for Non-Section 21 schools, according to Mestry (2004; 130) is in the event of requisitions not being processed at financial year end, schools lose their allocation since there is no “roll over” of unspent budgeted amounts, that is the unspent portion of the allocation cannot be carried over to the following financial year. In the case of Section 21 schools the Norms and Standards budget allocation is paid into the school’s current banking. These schools may carry out their own procurement and may deal directly with suppliers and contractors for the relevant budgeted items in accordance with standard procurement procedures – [KZN Circular 29 (2009; 2)]. One of the greatest advantages of a school being allocated Section 21 functions, according to Mestry (2004: 130), is in the event of the school being unable to spend all of the states (budget) allocation in time, the school governing body may still process orders for services to be rendered or for Learning, Teaching Support Materials (LTSM) and (for goods and services) to be purchased because the money allocated by the Provincial Education Department is still in the school’s banking account.

As the state reduces its own expenditure on non-personnel costs, parents are forced to make a larger financial contribution to schools resulting in an increased burden on parents [Kallaway (2008; 189)]. This view is supported by Marishane and Botha (2004; 97) who state that the provision of education for all without parents and communities having to share the cost would not be affordable (for the state) given the resources made available for education by the state.

The South African Schools Act Section 39 [School Fees at Public Schools]; Section 40 [Parent's Liability for Payment of School Fees] and Section 41 [Enforcement of Payment of School Fees] further enunciate the obligations of the parents:

39. (1) Subject to this Act, school fees may be determined and charged at a public school only if a resolution to do so has been adopted by a majority of parents attending the budget meeting

39. (2) a resolution contemplated above must provide for-

39. (2) (a) the amount of fees to be charged; and

39. (2) (b) equitable criteria and procedures for the total, partial or conditional exemption of parents unable to pay school fees.

40. A parent is liable to pay the school fees determined in terms of section 39 unless he or she has been exempted from payment.

41. The governing body of a public school may by process of law enforce the payment of school fees by parents who are liable to pay.

Table 4 below indicates the norms and standards budget allocation made by the state to public schools over the past four years. The year 2006 serves as the base year when quintiles were standardized throughout the country – even though there is an increase in monetary terms (+/- 5%) the allocation has decreased in real terms, that is the purchasing power of the increased allocation has actually decreased as the increase in the states allocation to schools has not kept up with the rate of inflation.

In the light of the current global economic recession the National Treasury has reduced its budgetary allocation to provinces by 7,5% directing the Department of Education to reduce its budget to schools by 7,5% as well [KZN Circular 50 (2009; 1)]. The KwaZulu-Natal Department of Education has resolved to absorb a bigger part of the reduction and reduce the budget to each school by only 1,5% across the board from quintile 1 to quintile 4 resulting in the revised budget allocation for the 2009/10 financial year as shown in table 5:

The state has taken cognisance of the global economic recession and has addressed the perceived consequences of the recession via the unnumbered KZN Circular dated 27 May 2009 entitled “No fee Schools 2010/2011.” According to KZN Circular 27/05 (2009; 1) the DoE has extended the no fee school band to Quintile 3 schools for the 2010/2011 financial year. Quintile 3 schools will be funded at the target amount of seven hundred and eighty four rand (R784) per learner per annum in the 2010/2011 (next) financial year – representing a 31, 5% increase. The South African Schools Act has also taken cognizance of the state’s predicament and through Section 36 [Responsibility of the Governing Body] mandates the governing body to supplement the states allocation:

36. A governing body of a public school must take all reasonable measures within its means to supplement the resources supplied by the State in order to improve the quality of education provided by the school to all learners at the school.

Clarke (2008; 286) argues that preparing the annual budget is probably the biggest challenge of the school governing body. Mestry (2006; 28) states that the South African Schools Act gives the school governing body full responsibility for the managing of the schools finances including preparing the budget annually.

Section 38 [Annual Budget of Public Schools] of the South African Schools Act requires all public ordinary schools to prepare an annual budget for submission to the general parent body for approval either late in the third quarter or early in the forth quarter each year for the following academic year.

38. (1) a governing body of a public school must prepare a budget each year, according to guidelines determined by the Member of the Executive Council, which shows the estimated income and expenditure of the school for the following financial year.

38. (2) Before a budget referred to in subsection (1) is approved by the governing body, it must be presented to a general meeting of parents convened on at least 30 days' notice, for consideration and approval by a majority of parents present and voting.

A sub committee of the school governing body, the finance committee (FINCOM) is responsible for drawing up the budget, in consultation with all relevant stakeholders and role players. Before the budget is presented to the general parent body, as contemplated in Section 38 (2) of the South African Schools Act, it must be ratified by a sitting of the full school governing body.

According to Knight (1993; 126-136) the budget process is cyclical and consists of four main phases:

Phase 1: Preliminary Analysis – is part of the school’s strategic planning and takes place in the previous year. It involves prioritizing the school’s key activities and funding required bringing these activities to fruition.

Phase 2: Budget Construction – is part of the school’s operational planning and takes place in the previous year. It involves construction of a draft budget which will be presented to the general parent body for consideration and approval.

Phase 3: Budgetary Control: is part of the school’s operational planning and takes place during the current year. It forms part of the FINCOMs oversight function.

Phase 4: Evaluation of the Budget: is part of the school’s strategic planning and takes place in the following year. It forms the basis for the following years’ budgetary process.

“It is not surprising that schools find the budget process troublesome. Most seem to cope reasonably well with the operational aspects but less effectively with the strategic budget planning and final evaluation” (ibid, 126).

A budget is an estimate of the schools expected income and expenditure for the following academic year. A budget may also be seen as a financial management tool for planning, implementing and evaluating and may be defined as “a plan for the allocation of resources and expenditure to achieve the objectives of the school” (ibid; 128) – this implies two starting points: on the one hand the schools’ current objectives based on the school development plan (SDP) and school improvement plan (SIP) and on the other hand the levels of funding and financial commitments for the forthcoming financial year.

One of the largest sources of income for all public schools is the states Norms and Standards budget allocation. According to the South African Schools Act Section 34 (2): “The state must, on an annual basis, provide sufficient information to public schools regarding the norms and standards budget allocation to enable public schools to prepare their budgets for the next financial year” and the National Norms and Standards for School Funding (2000; 9) states that by the 30^th September each year the Provincial Education Department must notify the school the amount of its indicative budget, that is, how much has been allocated to the school for the following financial year for non-personnel costs.

Other sources of income include: School Fees; Interest Income; Rental of School Premises; Fund Raising; Donations. The main expenditure items include, but are not limited to: Audit Fees; Bank Charges; Cleaning and Sanitation; Electricity and Water; Printing and Stationery; Repairs and Maintenance; Salaries and Wages; Security Services; Sport and Extra-curricular Expenses; Telephone and Fax; Textbooks.

Bischoff and Mestry in Mestry (2004; 129) states that the budget should reflect the schools prioritized educational objectives, seek to achieve the efficient use of funds and be subjected to regular, effective financial monitoring. One of the intentions of budgeting is to ensure that the school raises sufficient income to meet the anticipated expenses so that the school can provide quality education efficiently, effectively and economically.

There are several different strategies available to the FINCOM when they plan to construct the budget:

(i) Incremental budgeting – is a method of budgeting wherein the previous years budget is adjusted with increments for any anticipated increases in income and expenditure items (or in the case of decreases, decrements), that is a fixed percentage is added to each and every income and expense item in the previous years Statement of Receipts and Payments (Income Statement). This added percentage is usually an inflation-linked percentage.

(ii) Pragmatic budgeting – is a method of budgeting that bases the following years budget on the previous years one but attempts to improve the previous years one via savings and redeployment.

(iii) Base budgeting – is a method of budgeting which advocates the schools planned priorities as the starting point however it accepts that the major part of most schools’ budgets will be “irrevocably committed to core activities and therefore not available to alternative uses” [Knight (1993; 134)]. This ideology is advocated in the Norms and Standards for school funding where the budget allocation has been “ring fenced”.

(iv) Zero based budgeting – is a method of budgeting which involves “wiping the slate clean”, that is by beginning the process with a blank sheet of paper. All expenditure is then estimated based on the planned priorities and identified needs of the school, that is, a cost is attached to each and every planned activity and each and every identified need in order to ensure the efficient, effective and economic functioning of the school. Sources of income are then identified and the difference between the estimated expenses and estimated income is attributed to the school fee to be levied (taking into account school fee exemptions).

(v) Programme budgeting – is a method of budgeting whereby the resources available to a school are matched to the school’s priorities and “finalized” via a reconciliation process

(vi) Coombs and Hallak (1972; 257) recommend that a cost benefit analysis be incorporated into the budgeting process. Conventional budgets and accounts, though useful for certain purposes, for example, assisting auditors, guarding against misappropriation of funds, and so on but are of limited value to compare the efficiency of the educational system.

Schools need to adopt a system that fits their own needs. Simpkins and Lancaster in Knight (1993; 140), adapted, suggest a wide range of possible criteria:

In relation to the budgeting process, the FINCOM has four main tasks:

The South African Schools Act provides that the governance of a public school is vested in its governing body, which stands in a position of trust towards the school. SASA also stipulates that the school principal, under the authority of the Head of Department, must undertake the professional management of a public school. Figure 3 shows where a school governing body fits into the provincial school governance structure.

Figure 2

Source: Understanding the S A Schools Act (1997; 15)

Clarke (2008; 280) states that the first and most important aspect of managing a school’s finances is to be quite clear who is responsible for what. Overlapping responsibilities need to be minimized because the areas of overlap are also likely to be areas of conflict, that is, the lines of authority and responsibility need to be clearly drawn. Mestry (2006: 28) indicates that many principals and school governing body members are placed under tremendous pressure to manage their schools’ finances because they are unable to work out practical solutions to financial problems, on account of their lack of financial knowledge, skills and expertise.

The difference between professional management and governance is somewhat difficult to isolate as these two functions normally overlap. Mestry (2004; 127) refers to this overlap as a grey area and Bisschoff and Mestry in Mestry (2004; 127) state that this grey area has given rise to many conflicts between principals and parent members of the school governing body. Section 16 [Governance and Professional Management of Public Schools] defines the responsibilities of the principal and the school governing body.

16. (1) Subject to this Act, the governance of every public school is vested in its governing body

16. (2) A governing body stands in a position of trust towards the school

16. (3) Subject to this Act, the professional management of a public school must be undertaken by the principal under the authority of the Head of Department (Superintendent General)

The principal is responsible for the professional management of the school under the direction of the Superintendent General while the overall governance of the school is vested in the school governing body, whose role is described as fiduciary in respect of its conduct towards the school. According to Mestry (2004; 129) the principal has no executive role in relation to the school governing body on property and financial matters – in fact there are no specific duties relating to assets, liabilities and property entrusted to or vested in the principal. The principal does however have a duty to facilitate, support and assist the school governing body in the execution of its statutory financial functions. Table 6 below illustrates some of the differences between professional management and governance:

Section 37 [School Funds and Assets of Public Schools] of the South African Schools Act indicates the responsibilities of the school governing body in respect of the monies and assets of the school:

37. (1) The governing body of a public school must establish a school fund and administer it in accordance with directions issued by the Head of Department.

37. (2) All money received by a public school including school fees and voluntary contributions must be paid into the school fund.

37. (3) The governing body of a public school must open and maintain a banking account.

37. (4) Money or other goods donated or bequeathed to or received in trust by a public school must be applied in accordance with the conditions of such donation, bequest or trust.

37. (5) All assets acquired by a public school on or after the commencement of this Act are the property of the school.

37. (6) The school fund, all proceeds thereof and any other assets of the public school must be used only for educational purposes

Clarke (2008; 280) argues that the financial responsibilities of a school governing body are perhaps its most important responsibilities and in terms of the South African Schools Act the governing body of a public school has the following fiduciary functions:

The South African Schools Act therefore makes it quite clear that the school governing body, and not the principal, of a public school has the ultimate responsibility for its financial management, The principal, as a member of the school governing body, shares that responsibility and is responsible for ensuring that it is implemented [Clarke (2008; 281)]. Mestry (2004; 129) states that the principal must work in collaboration with the school governing body in the management of finances. Although the school governing body is accountable to the parents for the school funds, the principal can play a supportive role in ensuring that the school’s finances are managed efficiently.

One of the core duties and responsibilities of the school principal is to manage the school’s finances and apply the necessary controls to maximize the use of funds available and to account for all spending – Occupational Specific Dispensation (2007; 52). Mestry (2004; 129) states that he principal, by virtue of his position, plays a dual role: one who is responsible for the professional management of the school and the other as a member of the school governing body.

Although the school governing body has the ultimate responsibility for the financial management of the school it is normal practice for the school governing body to delegate the daily operational financial management functions to the school principal [Clarke (2008; 288)].

According to the Occupational Specific Dispensation (2007; 52), other tasks of the school principal include, but are not limited to:

Clarke (2008; 278) indicates that financial management is an area in which most (school) principals have little or no training or expertise and elected members of the school governing are equally ill-equipped. Mestry (2004; 126) concurs when he states that there are many principals and school governing body members who lack the necessary financial knowledge and skills. Wohlstelter and Mohrman in Marishane and Botha (2004; 96): “… simply transferring power to the school site is not enough to bring about desirable improvements – more supportive efforts by the state are needed”. It is the responsibility of the Head of Department to ensure that principals and other (education) departmental officials render all the necessary assistance to governing bodies in the performance of their functions [Mestry (2004; 129)].

Du Preez and Grobler research findings as cited in Mestry (2006; 35) indicate emphatically that there is a correlation between sound financial management and effective and efficient school governing bodies – it is incumbent for the Head of Department to ensure that school governing bodies are trained continually. Training in financial management is fundamental in preparing and equipping school managers with financial skills. Bush, et al in Mestry (2006; 35) states that every member (of the school governing body) – not just a few – must receive training. The training should enable the school governing body to be responsible and accountable for funds that have been received for the attainment of specific school objectives. It will also equip them to make a contribution towards the improvement of the overall quality of teaching and learning of the school.