An introduction to finance in schools

Boards, principals, and proprietors all have different responsibilities for school finances.

These can be found in the Education and Training Act 2020open_in_new, the Education (School Board) regulationsopen_in_new, and other finance-related laws, such as the Public Finance Act 1989,open_in_new to name a few.

The underlying principle in all this legislation is:

"A board must perform its functions and exercise its powers in a financially responsible way."

How does finance work in schools?

Your school board has overall responsibility for the school's financial management, but delegates the day-to-day management of the school's finances and budget to the principal.

Every three months (quarterly), your school will receive an operations grant from the Ministry of Education.

This is the primary source of income for your school.

How much you receive depends on several factors, such as the size of your school and the number of students on your roll.

The purpose of the operations grant is to cover the day-to-day costs of running your school, which commonly include things like:

Heat, light, and power
Administration (like telephones and photocopiers)
Property maintenance (upkeep of your school buildings and grounds)
ICT – Information Communication Technology (hardware and software purchases)
Curriculum delivery (per student)
Wages for support staff, like administration staff and caretakers
Relief teacher funding (for when your staff are sick)
Teacher aide hours (for students who qualify)

Your school may also receive special government funding to build new classrooms or other special projects.

Some government and grant funding is "tagged" for specific purposes, which means it can't be spent on anything else.

Many schools receive "locally raised funds" from donations, grants from community groups, fundraising, and international student fees.

It's important to realise that locally raised funds are not something a board can rely on.

For example, you might not get any money from the annual school fair because it was cancelled due to a weather event.

You should always have a Plan B in case the money doesn't eventuate!

What is your board's role in finance?

Your board is responsible for setting the strategic direction of your school or kura and allocating your funds to achieve these goals in a financially responsible way.

You'll do this by:

Strategic planning and reporting
Establishing and maintaining appropriate board finance policies and delegations to the principal
Setting, approving, and monitoring your annual budget
Ensuring that your annual financial statements are prepared and audited
Publishing your annual report online
Complying with the negotiated conditions of any lease agreements
Maintaining your school property and implementing a 10 Year Property Plan (10YPP) to ensure the school's buildings and facilities provide a safe, healthy learning environment for students
Acting ethically.

What is the principal's role in finance?

Principals are often delegated authority from the board for the day-to-day financial management of their school or kura.

This includes things like:

Managing banked staffing
Maintaining robust financial systems, including financial policies and internal controls
Understanding key financial information about the school or kura
Providing appropriate reporting
Monitoring and controlling spending as planned and budgeted for
Regularly reporting to the board on financial management
Preparing annual financial statements that are audited.

Principals can choose to delegate financial management tasks to senior administrative staff or pay for external accounting services.

However, the principal retains full responsibility for the financial records and reporting.

Do you need a finance committee?

Your board is ultimately responsible and accountable for the financial performance and management of your school or kura.

While every board member should understand your financial policies and the key financial information about your school or kura, many boards choose to have a finance committee.

This can be a helpful way to share the workload and provide guidance to the principal in the financial management of the school.

We recommend having a "terms of reference" document to set out the role and responsibilities of the committee.

If you do not have someone on your board with finance capabilities, you could consider co-opting someone to fill this gap.

What other support is available?

Lots of support is available to help boards manage their finance and property obligations, including your accountant, auditor, and finance committee (if you have one).

The Ministry of Education also has dedicated finance and property specialists, and a suite of online resources, including:

Questions your board could ask

Do we have a Plan B for any locally raised funds?
Do we know our Ministry of Education contacts for finance and property?
Do we have a finance committee and terms of reference document?
If not, should we consider establishing one?

Templates, resources, and references

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