USING FINANCIAL

INFORMATION AND
BUDGETS
1. BUDGETS
Coordination
 A budget is “… the
financial expression Raising
Rational
of a business.” allocation of
finances
resources
FUNCTIONS
 A budget is “… vital
to even the smallest
business.” Motivation Delegation

(White, Martin, Stimson &

Hodge, 1991, p. 320) Control
 1.1. Budget preparation: organizational aspects
 “It is important that all interested parties should be represented … or
consulted as the plan is prepared” (White, et al., 1991, p. 320).
 Example: https://www.lcps.org/Page/167905
August – February –
May – June January May – July
December April
• Preliminary • Depart- • Superinten • School • Final
budget ments dent Board adopted
discussion submit presents presents budget is
with School budget proposed proposed loaded into
Board requests budgets to budgets to accounting
•… School County system …
Board Board of
• … Supervisors
 1.2. Computation and presentation
A SALES FORECAST
Period January February (etc.)  “The result of these
Student weeks $ $ estimates and
calculations will be
Price $ $
draft revenue and
Income $ $ capital budgets.”
COSTS
Rent (fixed) $ $  “The projection
must be reviewed
Materials and assessed.”
$ $
(variable)
Advertising (White, et al., 1991, p. 322)
$ $
(discretionary)
 2. MANAGEMENT REPORTS
Ex: Profit and loss account for March 1992
A management report is a Actual Budget Prior year
“budget-actual comparison”. Student
396 425 430
weeks
 “Managers may take
corrective measures of
control or revise the budget Fee 32,971 33,984 31,969
in whole or in part.” income
Direct
 “It should be specific to 14,792 13,848 12,791
costs
particular organizations.”
… … … …
(White, et al., 1991, p. 323)
 2. MANAGEMENT REPORTS (Cont.)
Any form of management report should answer
the following questions:
1) Who is it for?
2) Is all the information relevant and necessary?
3) Does the report present all the necessary and relevant information?
4) What useful information does the report convey?
5) Is the report entirely accurate and reliable?
6) Is the information timely?
(White, et al., 1991, pp. 324-326)
 3. CAPACITY Rooms Days Hours
Class
Total
size
 The capacity in 3,285,
management reports Maximum 25 365 24 15
000
serves “to remind
managers of developing Weekends
(120)
profitable use of the & holidays
resources available.” Lunch &
(12)
nighttime
 “It should be regularly Non-
reviewed.” teaching (5)
rooms
(White, et al., 1991, p. 327)
441,
20 245 9 10
000
4. THE COST AND VALUE OF INFORMATION
• Information: for planning, decision-making and control.
• Source: the accounting system is treated as a basic source of
much of this information
• The manager should consider:
• whether the information they receive is sufficient, or sufficiently
clear
• whether the information is excessive or irrelevant.
• The value of information: the value of the improved
decisions to which it contributes
• Before requesting information: managers should know:
• how they plan to use it
• what they will gain from using it. (White, et al., 1991, p. 328)
 5. INTERPRETATION OF ACCOUNTS
A B
Turnover 10,000 10,000
Profit before interest 205 171
Interest 5 21
Net profit 200 150
Fixed assets 900 733
Current assets 830 830
Current liabilities (730) (730)
Net current assets 100 100
Total assets less current liabilities 1,000 833
Loan 50 210
Equity 950 623
 5.1 Which business is making more profitable sales?

A B • A makes a net profit of

20%
Turnover 10,000 10,000
• B makes a net profit of
15%
Profit before interest 205 171
• => A
Interest 5 21
Net profit 200 150 • (White, et al., 1991, pp.
329-330)
 5. 2 Which business is making more intensive use of
its assets?
A B • A turns over its assets 10
times every year
Turnover 10,000 10,000
• B turns over its assets 12
Fixed assets 900 733 times every year
Current assets 830 830 • => B
Current liabilities (730) (730) • If A could equal B's rate of
Net current assets 100 100 activity, A could increase
its profit
Total assets less current 1,000 833
liabilities • (White, et al., 1991, p. 330)

Loan 50 210
Equity 950 623
 5. 3 Which business is making more profitable use of
its total capital?
A B • A:
Turnover 10,000 10,000 205:1,000* 100= 20.5%
Profit before interest 205 171 •B
171:833*100 =20.5%
Interest 5 21
=> Both businesses make a
Net profit 200 150 total return on capital of
Net current assets 100 100
20.5%
+ Note: profit = (profit of
Total assets less 1,000 833 each sale) * (number of
current liabilities sales)
(White, et al., 1991, p. 330)
Loan 50 210
Equity /ˈek.wɪ.ti/ 950 623
5. 4 Which business is more profitable to its owners?
A B • A:
Turnover 10,000 10,000 200:950*100= 21.05%
Profit before interest 205 171 • B:
Interest 5 21 150:623*100= 24.08%
Net profit 200 150 => B's owner receive more
return of capital
Net current assets 100 100
=> As B's owners are using
Total assets less 1,000 833 more of other people's
current liabilities capital=> They're able to enjoy
Loan 50 210 a higher return on their own
capital.
Equity 950 623
(White, et al., 1991, p. 330)
5.5 Flaws in the above analysis
• Some factors to concern:
• whether the fixed assets are purchased at the same
time
=> whether the depreciation charges are the same
• whether the assets owned are used or they are
rented or leased. (If not owned, assets are not
shown in the balance sheet)
• => off-balance sheet financing
(White, et al., 1991, pp. 330-331)
5.6 Financial health- gearing
• “How safe is this business?”
• Gearing: a long-term measure of health:
 Gearing = debt: equity
 Gearing = debt: (equity + debt)
• High gearing:
(+) boosts the profitability of shareholders' capital
(-) leaves little margin of safety in the case of a downturn in
profits
(-) become progressive more difficult & more expensive to raise
further loan capital for expansion
(White, et al., 1991, p. 331)
5.7 Financial health- the current ratio
• Current liabilities are those which must be settled in cash
within a year.
• Current ratio = current assets: current liabilities
• A low current ratio (especially less than 1) means that the
business may have difficulty in meeting its liabilities as they fall
due.
• A high current ratio is good but not always as it may means:
(-) the business is complacent and has run out of ideas for investment
(-) a failure of credit control
(-) downturn in sales
(White, et al., 1991, p. 331)
5.8 Summary
1) Financial accounts are generated by a system designed to
record historical information. They're not initially created for
interpretation.
• => Should be interpreted with care.
2) The principal difficulty in assessing performance arises
from the ambiguity of balance sheet asset values.
3) Each indicator only reflects one aspect of a business
=> There is no single key or critical indicator by which a business
may be assessed.
(White, et al., 1991, p. 332)
6. MANAGERIAL PERFORMANCE
• Managers of large organization may be assessed on
the performance of their division.
• The measure must
 be fair
 encourage managers to act in the best interests of the
organization as a whole
• 6.1 Fairness
• The assets at managers' disposal are frequently not of
their choosing, and not comparable with those of
other managers
6. MANAGERIAL PERFORMANCE (2)
• 6.2 Overheads
• The problem of managerial behavior becomes acute on the question
of overhead allocation (general expenses allocation)
• Head office overhead costs need not be allocated to the separate
schools.
• Alternatively overheads may be allocated on some purely arbitrary
basis. (one school has 20 teachers, the other has 30 => Overheads are
allocated on a 40:60 basis)
• 6.3 Accounting and behavior
• Where accounting information is used to spur or assess behavior, the
effects are not entirely predictable.
• Managers should be aware of the problems and capable of exercising
compensating judgement.
 7. RAISING FINANCE AND THE BUSINESS
PLAN
• Content of a basic business plan:
• 1. A summary of the proposal: how much is required and for
what
• 2. A brief discussion of the people involved: their experience,
qualifications, and (projected) responsibilities.
• 3. A marketing plan
• 4. A budget forecast for at least the first year of operations
• 5. A cash flow forecast for the same period
• 6. A projected balance sheet after one year's operations
• 7. A statement of the major assumptions or estimates, and
the degree of risk attached to them.
 7. RAISING FINANCE AND THE BUSINESS
PLAN
• . Managers can apply to central funds on their own with the
help of major sources of finance, who provide:
• information packs, including pro-forma budget and cash flow
statements
• notes on how these should be prepared.
• Major business venture should use services of an
independent accountant, who:
• offer helpful criticism of the plan and assumptions
• check the rigour (accuracy) of calculations and presentations
• give advice on matters such as forms of business organization, and
business and personal taxation.
ARTICLE REVIEWS
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More “Private” than Private Institutions: Public Institutions of Higher
Education and Financial Management
 Adams, Robichaux and Guarino (2010)
 Aim of the study: compare the status of managerial accounting practices in
public and private institutions, 1998-99 and 2003-04
 Instruments: Surveys
 first section: uses a Likert type scale
 second section: open-ended question
 Participants: 310 CFOs (1998-1999); 156 CFOs (2003-2004)
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Main findings:
 1998-99: Private institution > public institutions (pricing and performance
measurement)
 2003-04: public institutions > private institutions (budgeting, performance
measurement, organization behavior, and outsourcing)
 Largest differences between public and private institutions were shown in
some items of four domains
 budgeting practices
 performance measurement
 organization behavior
 outsourcing
 declining public support: most important issue in the finance of higher
education
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Implication and Reflection:

 Reduced state appropriations public institutions raise tuition
substantially; rising costs, notably in health care benefits  public
institutions seek more frugal approaches to management
 Similar to Vietnam context, Government budget for Vietnam National
University - Ho Chi Minh City is declining ( below 30% in 2016,2017, 2018) –
Giao duc va Thoi dai (2019)  financial autonymy, declining Government
budget, building brand
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CAUSES OF FINANCIAL MISMANAGEMENT IN

SOUTH AFRICAN PUBLIC SCHOOLS:
THE VIEWS OF ROLE PLAYERS
Paul Rangongo, Mokgadi Mohlakwana and Johan Beckmann (2016)

Aim of the study: investigates the underlying causes of financial

mismanagement in public schools and focuses on the perceptions of various
role players in the Limpopo Province of South Africa
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Methodology
- Approach: qualitative research
- Instrument: semi-structured interviews
- Participants: 18 purposively selected participants in 6 randomly selected
primary schools in Limpopo Province.

6 departmental
6 principals 6 finance officers
officials
 Findings
1 Lack of Skills, Knowledge and Expertise required in Finances
2 Unavailability of Financial Policies in Schools

3 Temptations

4 Lack of Monitoring and Control of Funds

5 Ignorance of the Law

6 Lack of Honesty, Openness and Trustworthiness

Laxity and Leniency of the Principals and Departmental Officials

7
when Dealing with Culprits of Financial Mismanagement
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Reflection
Article's Authors Others
- “...are placed under tremendous pressure to manage their schools’ finances because they are
- Lack of Skills,
Knowledge and unable to work out practical solutions to financial problems, on account of their lack of financial
Expertise required knowledge, skills and expertise.” Bush and Heystek (2003), Mestry (2006), Joubert and Van Rooyen
(2008), Bagarette (2011, 2012), Rangongo (2016)
in Finances
Mestry (2004), Clarke (2012)
- Unavailability of “there are proper policies and procedures in place for the effective, efficient and economic
Financial Policies management of the school’s finances and the school governing body must also have systems in
in Schools place to monitor and evaluate the correct implementation of the policies and procedures and to
report thereon.”
Ochse (2004), Mestry (2004, 2006), Hallak and Poisson (2007), Mobegi, Ondigi and Simatwa
- Tempatations (2012), Corruption Watch (2012, 2015), Talane and Pillay (2013), Rangongo (2016)
“rampant corruption in public schools is caused by temptations and poor financial management.”
Coleman and Anderson (2000), Mestry (2006), Mestry and Naidoo (2009), Motsamai, Jacobs and De
- Lack of
Wet (2011), Yau and Cheng (2011), De Bruin (2014)
Monitoring and “poor monitoring and weaknesses experienced with the application of legislation contribute to
Control of Funds financial mismanagement at school level.”
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School District Budgeting and Student Achievement

By Scott Alan Burckbuchler (2009)
Aim of the study:
• Discusses school districts' move toward performance-based
budgeting
• Find out the relationship between performance-based budgeting
and student achievement
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Methodology
- Approach: mixed methods case study
- Rationale and Participants: chief business officials from school
districts in the Hampton Roads, Virginia
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Findings
- Performance-based budgeting has a positive correlation to
student achievement
- This connection between budgeting and student achievement is
most obvious in the fact that the budget provides needed
programs to increase student achievement and in the absence of
said funding.
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Reflection on the article

- In school, besides major fundings from the Department of
Education and Training, it’s important to find other fundings in
order to best facilitate teaching and learning.
- Principals need to be good at estimate the budgets for all school
use so that there won’t be any lack of money for school activities
during the school year.
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IMPROVING BUDGETING AND EXPENDITURE
MANAGEMENT IN THE PUBLIC EDUCATION SYSTEM
Carol Bellringer - May 2016
AUDIT SCOPE AND OBJECTIVES
• to examine the processes and practices used by school districts to
develop plans and budgets
• to monitor and control expenditures for a sample of school districts
• to examine whether the Ministry of Education is adequately
monitoring and providing guidance to school districts
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AUDIT CONCLUSION
• School districts: follow many of the good practices
• Three main improvements:
Šbetter development and communication of strategic plans, and the
linkage to budgeting
Šbetter reporting to school boards of financial performance relative
to budget
Šstronger budgetary and expenditure controls, including
expenditure initiation
• Ministry: monitor and provide guidance to school district boards
and management
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RECOMMENDATIONS
• The Ministry of Education provide school districts with guidance,
support and expectations for:
developing and communicating strategic plans
documenting and communicating the actual results achieved
compared to the budget and the goals developed during the
strategic planning process
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RECOMMENDATIONS
• Every school district:
develop a strategic plan and a long-term facilities plan, then
communicate these plans to all stakeholders
document milestone dates and key deliverables in budgets
document the authorities and key responsibilities for managing and
monitoring budgets
report forecasted results compared with actual budget results to
the school board
implement more rigorous controls to prevent the initiation of
unbudgeted purchases
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REFLECTION
• Tips in managing school budget:
1. Make a plan in managing the budget
2. Make your budget work for your school improvement plan
3. Understand the basic principles of school budgeting
4. Get value for money when procuring resources
5. Help other teachers understand financial accountability
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STRATEGIES TO MAINTAIN SCHOOL DISTRICT FINANCIAL SOLVENCY:

ILLINOIS SCHOOL BUSINESS OFFICIALS' RECOMMENDATIONS

• Statement of the problem: many public school districts in Illinois have problems
balancing their budget.

• Aim of the study: to identify financial management strategies that School

business officials have found most successful in achieving school district financial
stability

• Scope of the study: school business officials

• Research site: public school districts in 6 counties in Illinois, USA

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METHODOLOGY

• Approach: qualitative

• Instrument: open ended survey and interview

• Participants: 208 school business officials from 6 counties in Illinois

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FINDINGS
• School Business Officials (SBOs) should make a long-time financial planning.
• SBOs should be active members of the school board team when bargaining
with collective employees.
• SBOs should work to stress on the importance of financial balance for
stakeholders regularly.
• SBOs should work with stakeholders to help them make reasonable
decisions in terms of budget balance.
• SBOs should guide the school board to establish a fund balance policy.
• SBOs should be encouraged to take a leadership role in making a structure
and process for continuous assessment of district spending.
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REFLECTION
• The study is useful as it suggests ideas for school business officials and
people of management in terms of financial balance.

• It reflects the view of business officials only. There should be other view
points from many people who are involved with school management.

• The study is taken place in public school districts in 6 counties in Illinois

only. There should be studies in different kinds of educational entities and
also in different sites.
 REFERENCES
Adams O. L., Robichaux R. R. and Guarino A. J. (2010). More “Private” than Private Institutions: Public Institutions of
Higher Education and Financial Management. Journal of Educational Research & Policy Studies.10 (1),1 - 16
Burckbuchler, S. A. 2008. School district budgeting in the era of increased accountability and No Child Left Behind: A mixed
methods case study of school district budgeting processes and the correlation to student achievement. Ph.D. dissertation,
Old Dominion University, United States.
Carol (2016). Improving budgeting and expenditure management in the public education system. Auditor General of British
Columbia
Phien An (2019) ĐH Quốc gia TP.HCM nhiều tiềm năng phát triển nhưng cũng đầy thách thức. Giao duc va Thoi
Dai.https://giaoducthoidai.vn/giao-duc/dh-quoc-gia-tphcm-nhieu-tiem-nang-phat-trien-nhung-cung-day-thach-thuc-
3974753-c.html
Rangongo, P., Mohlakwana, M., & Beckmann, J. (2016). Causes of financial mismanagement in South African public schools:
The views of role players. South African Journal of Education, 36(3), 1-10. doi:10.15700/saje.v36n3a1266
White, R.M., Martin, M., Stimson, M. & Hodge, R. (1991). Management in English Language Teaching. Cambridge:
Cambridge University Press.
Williams, A. C., & Kersten, T. A. (2013). Strategies to Maintain School District Financial Solvency: Illinois School Business
Officials‘ Recommendations. International Journal of Educational Leadership Preparation, 8(2), p. 94-110. ISSN: 2155-
9635