0.1 Literature review  (Page 4/19)

According to Mestry (2004; 129), a view supported by Clarke (2008; 282) the governing body of every public school must ensure that there are proper policies and procedures in place for the effective, efficient and economic management of the schools finances and the school governing body must also have systems in place to monitor and evaluate the correct implementation of the policies and procedures and to report thereon. The finance policy is arguably one of the most important policies that a school governing body has to put in place. Clarke (2008; 291) states that one of the main purposes of the schools financial policy is to put in place a system of controls (checks and balances) to ensure that the schools finances are safeguarded and correctly managed. One of the more important, if not the most important, control/s is a system of internal checks whereby the work of one person is checked by another and there is a clear segregation of duties – for example the person responsible for collecting and receipting the money (school fees) should not be responsible for banking these monies.

Internal controls are systems, procedures and processes that are implemented to minimise the risk (and any financial consequences) to which the department (school) might otherwise be exposed as a result of fraud, negligence, error, incapacity or other cause [Guidelines for Accounting Officers (2000; 28)]. The purpose of a control system is to minimise opportunities for mismanagement and fraud as well as to protect the schools personnel from charges of mismanagement and fraud, to ensure that the schools money is spent for the purpose it is intended, that is educational purposes only. Internal controls are designed to “provide reasonable assurances that the organisations objectives are achieved efficiently, effectively and economically” [Guidelines for Accounting Officers (2000; 28)].

According to Clarke (2008; 292), Mestry (2006; 35) and Bisschoff and Mestry in Mestry (2004; 129) the schools finance policy should, as a minimum requirement, comprise of the following:

• Cash Management – which includes but is not limited to: safe storage of cash; daily banking of monies received; proper accounting records; financial transactions supported by source documents&monthly reconciliation of the cash book with the bank statement
• Internal Controls – which includes: internal checks (checking of one persons work by another); segregation of duties; internal audits; functioning finance committees (FINCOM); establishment of audit committees
• Audit trails – that is the ability to check every stage of any transaction. The SASA requires that a school’s financial records be retained for a period of seven years. If the school uses a computer programme for its finances, then records must be backed-up daily.
• Procurement Procedures must involve, inter alia ,: the FINCOM to approve expenditure / purchases above a certain pre-determined limit; the SGB to ratify expenditure / purchases above a certain pre-determined limit; the FINCOM to obtain three quotes for expenditure / purchases above a certain pre-determined limit; to put out to tender expenditure / purchases above a certain pre-determined limit