How school governing bodies should be run

By Lorraine Louw

The Western Cape Education Department (WCED) has released a policy document setting out the rules of school governance, and how schools need to be managed and run. The Basic Financial System for Schools is 80 pages of helpful information designed to assist school governing bodies keep within the law, and ensure well-managed section 21 schools.

Section 21 schools manage their own finances. The Education Department deposits the school allocation into the schools’ accounts at the beginning of every financial year, after the schools have submitted audited annual financial statement reports.

By comparison, the department manages the finances of non-section 21 schools. They order what the schools require to function properly, and the department pays the suppliers. All schools are informed of their allocations six months before the beginning of the financial year so that they can budget properly for the next financial year.

As section 21 schools are responsible for managing their own finances, governance needs to be scrupulous to avoid any untoward behaviour, fraud or corruption. Governing bodies are established for this reason. This is where WCED’s Basic Financial System for Schools steps in. It begins by defining the role of the school governing body (SGB) in terms of the South African Schools Act. The objective is “to ensure that the [SGB] is aware of the roles it is expected to play, both legislatively and otherwise, with regard to the finances of the institution”.

It also gives an exhaustive list of the laws and policies governing SGBs, from provincial government requirements and circulars, to the Constitution. The overall responsibility for controlling school money and property, in terms of the South African Schools Act, lies with the governing body.

When it comes to non-compliance, however, the document simply refers to “appropriate action” being taken after a “thorough investigation”. “At the request of the governing body, and after a thorough investigation into the financial management and procedures of a school, the WCED may assist the governing body to take appropriate action against any governing body member who has breached the fiduciary relationship between himself or herself and the school by mismanaging, stealing or being found to be involved in fraudulent activities when dealing with school finances,” it concludes.

Role of SGBs

The document gives pointers to SGBs on electing office bearers from its member body, among which must be a treasurer, and the legal requirements of this position, as well as a chairperson and a secretary. It also looks at the importance of setting up a finance committee. The treasurer and people on the finance committee should preferably have some financial expertise. Other appointments the SGB must make include a finance officer who administers financial matters on a day-to-day basis, as well as an auditor to examine and report on the financial documents.

A school fee committee must be established.

Treasurer’s duties:

• Oversee all financial matters of the school and advise on financial matters;
• Provide a quarterly financial report to the SGB; and,
• Monitor expenditure and income against the budget.

Finance committee duties:

• Support the treasurer;
• Draw up a budget each year;
• Advise on fundraising;
• Advise on investing surplus money;
• Advise the SGB on amount of school fees;
• Advise the SGB on exemptions from school fees;
• Assist the financial officer in drawing up annual financial statements; and,
• Suggest an auditor.

The finance committee, however, may not take final decisions on any aspect. This is the sole prerogative of the SGB. All responsibilities and duties of office bearers must be put in writing, and must be reviewed regularly.

Financial reporting is crucial. The SGB is legally bound, under the Schools Act, to submit to WCED a copy of the annual audited financial statements of the school by 30 June each year. Schools’ financial year runs from 1 January to 31 December. A quarterly income and expenditure report must also be submitted to the relevant education management and development centre (EMDC); this is a legal requirement of the Public Finance Management Act.

The SGB should draw up a financial policy, setting out the procedures and rules for handling money at the school. The Basic Financial System for Schools gives a helpful example of such a policy.

Drawing up a budget

Included in the document is guiding information on how and why to draw up a budget. It unpacks the prohibitions on paying state employees, under the Schools Act. Opening up bank accounts, how to complete deposit slips, safety and control measures around banking, credit and overdrafts, and other banking tools are discussed.

When it comes to preventing fraud, the WCED document advises how to avoid becoming a victim of fraud and scammers, such as refusing to accept dye-stained money and waiting for funds to be cleared before releasing goods.

Receipting of income; tax certificates; procurement, payments and petty cash; filing and record keeping; running petty cash; book-keeping; tax obligations and PAYE; UIF; Workman’s Compensation Fund; employment contracts; and drawing up financial statements are explained in detail. Diagrams and examples are offered to ease understanding. It covers fund raising, running tuck shops, learner transport and all other aspects of running a school smoothly and successfully.

Fraud prevention

The eighth section deals with “Internal control and fraud prevention”. Here, the governing legislation runs from the big acts – the Constitution, the Schools Act and the Promotion of Access to Information Act – to WECD circulars and minutes, as well as South African Audit Standard 400: Risk Assessments and Internal Controls.

In this chapter, the document unpacks what constitutes fraud, which ranges from financial misconduct to not submitting leave forms. Corruption is explained, which helps SGBs avoid it. This includes forms of corruption, and rewards for corruption. Warning signs are given regarding procurement fraud, such as high costs of inventories and not shopping around for prices.

Internal control mechanisms must be set up to prevent fraud and corruption. These must be preventative, detective and corrective. Preventative measures include recruiting competent and trustworthy personnel, and strictly adhering to segregation of duties. Detective controls must be undertaken regularly, and include checking, supervision, reviewing, surprise inspections and transparency. Finally, correction action includes meetings, acknowledgement of guilt, relieving the suspect of his or her duties, and calling in the provincial government’s forensic unit.

The WCED, the Office of the Auditor-General or the provincial government’s forensic unit may visit a school to investigate any acts of fraud or corruption, and to determine the school’s compliance levels with the law.