6. Finance

The principal has the ultimate responsibility for operating the school on a sound financial basis within the school board-approved operating and capital budgets. The principal is expected to be informed regarding all aspects of school finance, including day-to-day protocols and processes (e.g. bank reconciliations, purchasing, payables/receivables). Therefore, it is vital that the principal and those responsible for the school's finances (business manager/accountant/treasurer) communicate regularly.

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FINANCIAL POLICIES ­— BOARD

The principal should ensure that the local school board has policies that govern the financial practices of the school. Several examples are listed here:

Capitalization Limit

The school board upon recommendation of the finance committee should vote a dollar limit above which equipment should be capitalized and depreciated. Auditors can provide guidance in this area.

Spending Limits

The school board should vote a single-item, maximum-dollar limit for purchases above which the administration must seek board approval. Often, financial controls also include a dollar limit above which two signatures are required on check payments.

Agency/Trust Funds

The principal should be aware that agency/trust funds do not belong to the school. The school is holding them in trust. It is recommended that a savings account be maintained with adequate funds to cover the total of all agency/trust funds. This account should be reconciled regularly.

Rental Rates for Facility

A facility rental policy and booking procedure should be in place for both constituent and nonconstituent groups that use the school facility. This should include use agreements and liability waivers.

BUDGETING

The principal is to provide leadership in the budget process and must work collaboratively with other school financial personnel. The budget should reflect the mission of the school and provide adequate support for student learning. Operating and capital budgets are to be developed by administration and approved by the school board each year as well as the constituency (when stipulated by the school constitution).

A recommended budgeting process usually includes the following:

  • Comparison to previous annual budget
  • Income
    • Tuition/Fees
    • Subsidies
    • Donations
    • Investments
  • Expenses
    • Payroll
    • Departmental expenses
    • Equipment
    • Plant/maintenance
    • Utilities
    • Depreciation

Projecting the Enrollment for Next Year

The principal should be conservative on enrollment estimates. There are a variety of methods for estimating tuition income based on enrollment for the coming year:

  • Base the expected enrollment on 95 percent of the current enrollment.
  • Estimate the number of students coming from “feeder” schools and add that to the estimated number of returning students.
  • Use the history of enrollment for the past several years to estimate the number of new and returning students.

Classroom/Departmental Budgeting

Teachers need to have money available to purchase supplies and equipment essential for instruction. Teachers should be given the opportunity during the budgeting process to have input on an amount needed for instructional resource materials, textbooks, and equipment.

FINANCIAL STATEMENTS

The principal should ensure that the school board receives an accurate monthly financial statement and understands it.

  • Every school board member must understand enough to ask pertinent questions. It may be valuable to arrange an information session for new board members on how to read the financial statement.
  • Every financial report should include a summary page that everyone, including those without an accounting background, can understand. Frequently, the highlights include:
    • Current student enrollment and a comparison with previous year(s).
    • Monthly and year-to-date income.
    • Amount paid by parents compared to the amount expected to be paid.
    • Amount owed to the school, including current and noncurrent accounts receivable, with an aging report.
    • Monthly and year-to-date expense.
    • Amount owed by the school to others, including current and noncurrent accounts payable, with an aging report.
    • Cash balance in the school checking and savings accounts.
    • The “bottom line” compared to the budget.
  • The board’s finance committee should review the financial details and provide the entire board with a summary of financial data required for them to give financial oversight.
  • Accounting practices should be based on current NAD accepted guidelines.

AUDITING

Schools are audited on a regular basis. Secondary schools are audited by the General Conference Auditing Service (GCAS), while all other schools are audited by local conference auditors. Principals must:

  • Collaborate with the auditors in scheduling the audit.
  • Ensure that school financial personnel adequately prepare materials necessary for the audit.
  • Be available during the audit process for interview(s).
  • Work with the LCOE for appropriate audit follow-up.

ASSET INVENTORY

Each school should maintain an up-to-date inventory of the school’s physical assets as required by the auditors.

INSURANCE

The principal needs to consult with the LCOE to ensure that adequate insurance coverage has been obtained. The principal should be aware of the limits of the coverage, deductibles, and the protocols that should be followed when insurance claims need to be filed. Some typical insurance coverages are:

  • Boiler and Machinery
  • Executive
  • Liability
  • Property
  • Student Accident
  • Student Travel
  • Vehicle

STUDENT WORK PROGRAM

The principal has ultimate responsibility for the student work program, even though the day-to-day operation may be delegated to a campus work coordinator. In all cases, the school must comply with all federal and state/provincial labor laws.

BUILDING PROJECTS

The title to the property and buildings of Adventist schools is held by the local conference legal entity. Therefore, when a school desires to construct, reconstruct, enlarge, or improve its property, the following should be used to guide the process:

  • Work closely with the local conference superintendent of schools in planning major building improvements.
  • Understand denominational policy applicable to the specific project. (See NAD Working Policy S 05 42-43.)
  • School constitution and bylaws should also be consulted for any required procedures.
  • Obtain school board and constituent support for major capital projects.
  • Determine local conference policy regarding the signing of construction contracts. DO NOT SIGN A CONTRACT WITHOUT PERMISSION OF THE LOCAL CONFERENCE.
  • Secure appropriate building permits.