1512 Operations Policy Review: Finance - 2 December 2015

Financial Policies

  • The Kaikohe East Board's Financial Policies are part of the board's Operations Policy and are published on the school website.

  • The policies are restated here for board members' convenience:

Financial Planning

Budgeting shall not fail to reflect the school’s strategic results, risk financial jeopardy nor fail to show a generally acceptable level of foresight. Thus financial processes must:

  • Reflect the results sought by the school

  • Reflect the priorities as established by the board

  • Comply with the requirement for a balanced budget

  • Ensure adequate working capital

  • Demonstrate an appropriate degree of conservatism in all estimates

Financial Condition

The financial viability of the organisation must be protected at all times. Therefore, the principal shall not:

  • Incur unauthorised debt

  • Violate generally accepted accounting practices or principles

  • Use tagged funds for purposes other than those approved

  • Spend more funds than have been allocated in the fiscal year

  • Fail to ensure all money owed to the school is collected in a timely manner

  • Fail to make timely payment to staff and other creditors

  • Sell or purchase unauthorised property

  • Fail to ensure that all relevant government returns are completed on time

  • Fail to ensure that no one person has complete authority over the school’s financial transactions

  • Make any purchases or financial commitment of over $1,000 without obtaining competitive process and quality information

  • Make any purchases or financial commitment of over $1,000 without an adequate review of ongoing cost, value and reliability

Asset Management

Assets may not be unprotected, inadequately maintained or unnecessarily risked. Accordingly, the principal may not:

  • Fail to insure assets

  • Allow unauthorised personnel to handle funds or school property

  • Subject plant and equipment to improper wear and tear or insufficient maintenance or inappropriate use

  • Fail to protect intellectual property, information and files from loss or significant damage or unauthorised access or duplication

  • Receive, process or disburse funds under controls that are insufficient to meet the auditor’s standards

  • Invest or hold operating capital in insecure accounts, or in non-interest bearing accounts except where necessary to facilitate ease in operational transactions

Principal's Interpretation

  • My interpretation of the board's requirements in this area is that the board wants to be assured that:

    • Its assets are protected,

    • Financial procedures are monitored and there is no possibility of fraud or inappropriate financial practices,

    • The reports the board receive fairly reflect the school's financial position and financial performance.

Data to Verify that the Policy Interpretation is Being Fulfilled

  • The board receives regular Financial Reports from Education Services that show income and expenditure against budgets and highlight any areas of concern.

  • The board received an unqualified audit (i.e. no major concerns) for the 2014 financial year.

  • The auditor's Management Letter for the 2014 year noted that.

Improvement in Your Financial Position

We would like to congratulate the school for the impressive surplus achieved in the 2013* year. It is a tribute to the efforts of your team in terms of budget monitoring and control and the focus placed on the financial health of your school.”

(*This is a misprint as this letter relates to the 2014 year)

The Day-to-Day Accounting System

Overall, based on our knowledge of your school and the results of our audit procedures, we again found that the financial control environment at your school to be good. The attitude towards controls and ensuring your school is being governed effectively is very positive. We were also impressed that your board appears concerned about planning and performance monitoring.”

“Our Sincere Thanks

We would like to take this opportunity to thank the Principal and Financial Administrator for their assistance and co-operation during our audit. The assistance from the school team greatly influences the efficiency of the whole audit process.

We would also like to thank the trustees for selecting Bennett & Associates as your auditors. We appreciate our relationship with your School and look forward to continuing to provide a valuable service to you.”

  • The auditor made several recommendations to improve our financial practice:

Auditor’s Management Letter Recommendations


Interests Register

We noted that the school does not have an interests register for BOT members.

We recommend that the school establish a register that records all BOT members, close relatives and their associated business interests.”

A Register of Board Members' Business Interests was established after the 2013 audit. The auditor did not ask to see this during the 2014 audit.

Independent Authorisation

When reviewing credit card statements we noted that the credit card holder is also one of the individuals’ who is involved with the authorisation of credit card expenses prior to their payment. In our view it is important that the individuals involved with credit card authorisation are independent of the credit card holder.

As the credit card is in the principal’s name we recommend that the principal is not involved with the authorisation of credit card payments.

The Deputy Principal has been  to delegated people and a new procedure has been added: “Credit Card purchases will be authorised by the Administration Officer and the Deputy Principal.”  Will also investigate having the card name changed.

Order Books

We understand it is the school’s policy to use order forms for all purchases. While we commend this policy we noted during our testing of supplier invoices that order forms were not always used,

We suggest that the school's policy on order forms be consistently applied. We recommend that the person who orders the goods or services put the account code, (to which the goods or services are to be posted), on the order form as this helps reduce errors in ledger keeping. A copy of the order should also be attached to the invoice to ensure that only invoices authorised for purchase by budget holders are actually paid.

All staff have been reminded that Order forms MUST be used for ALL purchases.

Authorisation of Invoices

During our testing of the control environment we noted that some creditor’s invoices had not been authorised for payment. The approval of invoices prior to their payment helps ensure that they are valid and correct and is an essential internal control in any business,

We recommend that all invoices be authorised by the delegated person prior to their payment.

This is as per our procedures. We need to ensure that we follow the procedures.

Internal Controls - Novopay

When testing the system the school employs to make changes to Novopay payroll we noted that there were no school generated source documents retained which recorded changes / input into the Novopay system. In our view it is important that the school establishes a system where it generates a source document to be processed into the Novopay system. We would expect that such documentation would be forms such as: annual leave and sick leave forms, timesheets, fortnightly relievers schedule etc.

We recommend that the school generate appropriate source documentation which is then used for processing into the Novopay system.

This needs further development with the Administration Officer.

Currently the Admin Officer keeps individual employee files in dropbox as well as ability to print off Novopay timesheets (this printing ability only available to us in recent months)

Prompt Banking

When testing receipts to deposits we noted that some of the banking was done well after the receipt was written and we also noted that some of the uniform receipts were not banked until the 2015 year. In our view, where warranted, banking should be completed at least once a month or when cash on hand totals $500 or more.

It is recommended that banking be done at least once a month, depending on funds held.

It is recommended that banking be done at least once a month, depending on funds held.

This has been implemented.

School Gala Income

It was noted that the school used a ticketing system to improve controls over cash handling at the school gala, we commend this control procedure. However we note that no reconciliation of tickets occurred resulting in the ticket system being ineffective.

In order for a ticketing system to be effective there needs to be a reconciliation of how many tickets are sold, how many tickets are remaining and then an accounting is made on unaccounted for tickets. The tickets sold then need to be reconciled with cash received. The cash should be counted by two people and also these people should be independent and not involved in the selling of the tickets or involved with the stalls.

This will be implemented for the 2016 Gala Day.

  • As part of my review in preparation for this report I have reviewed the board's financial policy statements point by point  - follow this link.

Chicky Rudkin