Does my School Need a Finance Manual?
BY SUSAN LAIR, Phd - CONSULTANT, Executive Coach
Whether you are a new head of School or a seasoned veteran, most leaders rose through the ranks of teacher, department chair, office manager, division director, and assistant head of School. While excellent school visionaries and managers, many heads of schools lack experience in the School’s business side, which is all the more reason to have a well-written and regularly reviewed Finance Manual.
Why Should I insist on written documentation?
Relook at your employment agreement. A statement will be similar: “The Head of the School shall abide by policies, rules, regulations, and procedures as established by the Board of Trustees and shall conduct the operation of the School consistent with all applicable external laws, rules, and regulations.” As Head of School, you are ultimately responsible for the School’s business practices.
Your School’s accrediting organization will require best practices. The standard will look something like this: “In addition, the School has written policies that place appropriate controls over standard business practices, including but not limited to gift acceptance, endowment, investment management, purchasing, and personnel.” “I trusted my CFO” is not a defense.
Best Practices, Federal Law, and Accreditation Associations require audits. The requirement will look like this: “Every year, the School’s Board of Trustees engages an independent certified public accounting firm to perform an audit with an accompanying management letter. A school with less than $1,000,000 (+ or -) annual revenue may alternate annually between an audit and a review.” Financial Procedures must include a policy and be well organized with a record of using the same process all year.
Fraud happens anywhere there are multiple handlers. Because school athletic tickets, bake sales, community service fundraisers, and more are routinely paid in cash and are handled by numerous staff within a school, there is a high chance of skimming and cash-on-hand misappropriation.
What Should You Expect in a Finance Manual?
Definitions of Terms, explanation of Internal Controls, and Segregation of Duties:
Explanation and Responsibilities of the School’s financial operations and a financial organizational chart
Fiscal Year Organization, Information, Policies, and Procedures about the General Ledger and Chart of Accounts
Revenue and Contribution explanations, receipts, disclosures, policies and procedures
Accounts Payable Management Policies and Procedures – requirements for purchases, recording payment requests, cash disbursements (checks), voided checks, payroll, who can sign a contract, reconciliation of A/P Subsidiary ledger and general ledger, etc.
Assets – cash management, prepaid expenses procedures, investments, property and equipment, etc.
Liabilities and Net Asset Policies and Procedures – accounting and classifications, etc.
Financial and Tax Reporting Policies and Procedures – standard financial statements, review and distribution of financial statements, filing of returns,
Financial Management Policies and Procedures – Preparation and adoption, monitoring performance, budget revision, annual audit, insurance, document retention and destruction, etc.
Board Governance Finance and Audit Committees - purpose, authority, membership, responsibilities, etc.