1909 Operations Policy Review: Finance - 16 September 2019

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 2018 financial year.

  • Extracts from auditor's Management Letter for the 2018 year:

We note that you are one of the few schools who did publish your 2017 Annual Report on your website on a timely basis. This confirms that your procedures and processes are working to ensure new legislative requirements are being complied with. 

The Day-to-Day Accounting System 

Overall, based on our knowledge of your school and the results of our audit procedures, we again found the financial control environment in place 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


Credit Card Authorisation

When performing compliance tests on credit card transactions we noted instances where there was no evidence of payment authorisation. By payment authorisation we mean that there was no supporting evidence which effectively approves payment of the month's activity on the credit card. We also noted that the credit card is in the principal's name in instances such as this we recommend that the chairperson or another BOT member should be the person authorising credit card transactions. 

We recommend that all credit card transactions be authorised by a person independent of the card holder prior to the monthly payment being made.

School Finance Procedures 

  • Credit Card purchases are authorised by the Administration Officer and the Staff Trustee.

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.

School Finance Procedures 

  • Authorisation of expenditure: Principal, Staff Trustee, Administration Officer, Board Chairperson, Board Secretary.

Deficit Budget 

We note that a deficit budget has been prepared and approved by the board for the 2019 year. We are concerned that continued deficit budgeting, if achieved, will result in a further deterioration of your school's equity. 

Whilst deficit budgeting may appear to be warranted when preparing the budget, we urge caution in the use of this approach. In our view it is vital for the board to remain diligent over ways in which to improve the actual results against the budgeted deficit during the upcoming school year and to ensure that spending does not exceed those amounts approved by the board. 

We do acknowledge that the school has adequate resources available to fund the forecast deficit.

Board members were aware of this when the budget was approved.

Financial Reports from Education Services enable the board to monitor spending against the budget.

Inventory Cost 

When reviewing stock at balance day it was noted that stock costs did not agree with prices on the December invoices from supplies. Our view is that at balance day stock needs to be valued at what the stock currently costs the School. 

It is recommended that inventory costs are updated in late December to ensure that the stock value at year end is more accurate and that prices are GST exclusive.

Noted for action

Receipting Audit Trail 

We noted a weakness in your controls over incoming cash and cheques. Cash and cheques received and related receipts were not able to be reconciled back to the bank deposit and it was unclear which deposit the receipts related to. We would like to acknowledge that the school has improved its procedures by ruling off the receipt book but those receipts were not added up and reconciled with the cash banked also unfortunately there were a few minor discrepancies. 

We recommend that the receipt book is ruled off and that the deposit total is written on the last receipt of the deposit book to provide a clear audit trail. The total of the receipts since the last deposit should agree to the amount to be deposited.

Noted for action

  • 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