April 28, 2025 • 21 mins
Today we're going to talk about school budgets, what's included in them, what's not, and what you'll need to do to prepare them.
My guests are:
- Hannah Levy, Ministry of Education finance advisor – Otago/Southland
- Mārama Stewart, former tumuaki and Ministry of Education leadership advisor
- Adrian Edwards, Ministry of Education finance advisor.
This podcast was produced for the Ministry of Education as part of Te Ara Tīmatanga mō ngā Tumuaki - The Beginning Pathway for Principals.
You can learn more about this topic by accessing Te Ara Tīmatanga mō ngā Tumuaki - The Beginning Pathway for Principals e-learning modules on the Education LMS: https://training.education.govt.nz
Show notes
Episode themes:
- Principals need to prepare their school’s budget, and their board signs it off.
- The FISH (Financial Information for Schools Handbook) has a handy annual financial table with key dates around statutory deadlines and requirements for reporting.
- Your budget is based on your total income, but many of the items in that total income are tagged for usage.
- General categories included in your budget, and what’s not included.
- What to think about when you’re preparing the budget.
Additional information
Pourato https://applications.education.govt.nz/pourato
Funding and financials https://www.education.govt.nz/education-professionals/schools-year-0-13/funding-and-financials
Day-to-day financial management including link to Financial Information for Schools Handbook (FISH) https://www.education.govt.nz/education-professionals/schools-year-0-13/funding-and-financials/day-day-financial-management#paragraph-9126
Kiwi Park training model https://www.education.govt.nz/education-professionals/schools-year-0-13/administration-and-management/school-annual-financial-statements#paragraph-5782
Questions
1:06 [Hannah] Can you remind us where new tumuaki can go to understand what they need to know about school finances.
1:55 [Hannah] When it comes to a school's budget, what are a principal's responsibilities?
2:28 [Hannah] In terms of preparation of the school budget, what does a principal need to do?
3:49 [Hannah] Does Pourato have information about staffing in it as well?
4:27 [Hannah] What are financial delegations? What does that mean?
5:25 [Hannah] You touched on the FISH there, the Financial Information for Schools Handbook. In the FISH there's a basic kind of annual financial timetable. Is that something that you'd recommend a new tumuaki take a look at to make sure they're doing everything they need to be doing?
6:08 [Hannah] And that timetable also outlines some key dates around kind of statutory deadlines and requirements for reporting. What are those statutory deadlines and requirements for financial reporting?
6:56 [Adrian] What is a school budget at its most basic level?
10:08 [Adrian] What does the budget outline, what are the general categories?
11:12 [Adrian] Is there anything that's not included in a school's budget?
12:20 [Adrian] What about fundraising and things like that, would that be included in your budget?
<Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Eleisha (00:07):
Kia ora and welcome back to The Principals, a
podcast series for new schoolprincipals in Aotearoa New
Zealand. I'm Eleisha McNeill.Today we're going to talk about
school budgets, what's includedin them, what's not, and what
you'll need to do to preparethem. We're lucky that three of
our guests from the last twoepisodes are with us again today.
And here they are.
Hannah (00:27):
Kia ora koutou, ko Hannah Levy tōku ingoa. I'm a
school financial advisor withthe Ministry of Education and
I'm based in the Otago/Southlandregion.
Adrian (00:36):
I'm Adrian Edwards and I have the same role as Hannah,
but I cover Bay of Plenty and myprevious experience was at a
financial service provider,which led into this role quite
well. And I've been in this rolefor two years.
Mārama (00:51):
Kia ora koutou, ko Mārama Stewart tōku ingoa, I
am a leadership advisor in theBay of Plenty and Waiariki area,
formerly the principal ofTāneatua School with 14 years
of experience in primary schools.
Eleisha (01:06):
Thanks for coming back. So maybe, Hannah, before we even
start, can you remind us wherenew tumuaki can go to understand
what they need to know aboutschool finances.
Hannah (01:16):
So we have Ministry of Financial advisors like myself
and Adrian, and there's one ofus around all of the regions.
And then there's the leadershipadvisors are also good resource
for you as well, our website,you can use what we call the
FISH, which is the FinancialInformation for Schools Handbook,
which is on our website, andit's quite a big tome so it's
(01:39):
one of those things that youprobably just dip in and dip out
of particular issues and maybejust do like a word search, and
then if you have an externalaccountant who does either your
monthly or your annual accounts,they can be a good source of
information as well.
Eleisha (01:54):
Fantastic. And when it comes to a school's budget, what
are a principal'sresponsibilities?
Hannah (02:02):
Well basically they tend to be the ones that prepare the
budget, they're the ones whoactually put it together. So and
of course, because the boardapproves it, they need to
prepare it in such a way thatthe board is willing to sign it
off. And I guess another keything they need to do is,
wherever possible, try to getthe expenses to match the income
(02:24):
so that basically it's what wecall a balanced budget.
Eleisha (02:27):
In terms of preparation of the school budget, what does
a principal need to do?
Hannah (02:31):
Well, often if you have got an external accountant, they
can get you started with atemplate. So what you do want to
do is have like a spreadsheet,like a Google spreadsheet or an
Excel spreadsheet and have youryear to date income and
expenditure for the current yearand have your current year
budget. And those are likecomparative figures that you can
(02:54):
use when you're putting togetheryour next year's budget, which
which you then put in anothercolumn and then you can get
started with in September, youget your operations grant, which
is in Pourato. So that's a keypiece of information that you
need to put into the budget. Soit's really focusing on getting
(03:14):
the income side in and thenknowing basically if that's the
money that you're getting inthen then that's the money
you've got to work with in termsof what you can spend for the
year, so then when you go on tothe expenses, you probably focus
on your staffing first becausethat's the biggest area and then
follow with the others andyou're, you're referring back to
(03:36):
what did you spend in thecurrent year. And also if
there's any changes, like ifyour roll is dropping, then
you'd probably be wanting toreduce expenditure because of
course your funding is going tobe impacted as well.
Eleisha (03:48):
Yeah, fo sure. Does Pourato have information about
staffing in it as well?
Hannah (03:54):
Yes. Yes. So Pourato has both the staffing information
and the operational grantinformation. And the staffing is
relevant even though like in theprevious episode we said that
the ministry pays the teachersdirectly. But still you want to
know what your staffingentitlement is, to know
basically how many teachers theministry is going to pay and
(04:15):
therefore in some situations,schools may want to have what
they call some board fundedteaching resource as well, which
they pay for themselves. So thenof course they would need to
build that into their budget.
Eleisha (04:27):
Right. We touched on financial delegations in the
last conversations. What arefinancial delegations? What does
that mean?
Hannah (04:37):
So financial delegations are usually outlined in a school
policy and it's basically whatexpenses have to be signed off
by whom for things such asinvoices and staff expense
claims. So for example, in asmaller school, the principal
may be able to sign offeverything up to say, $5,000.
And then if there's anythingmore than that, the presiding
(04:58):
member needs to sign off.Whereas, in a bigger school,
maybe you might have a head ofdepartment who are able to sign
off up to $5, 000 and theprincipal can sign off up to $10,
000 and then the board foranything bigger. And the other
key thing to keep in mind isthat you should never sign off
your own expenses. So,
Eleisha (05:16):
MM
Hannah (05:16):
for example, if a principal's got a credit card
statement with invoices attached,then that should always be
signed off by a board member. Sobasically one level up.
Eleisha (05:25):
Yeah, that's good advice. You touched on the FISH
there, the Financial Informationfor Schools Handbook. I love the
acronym um, and in the FISHthere's a basic kind of annual
financial timetable. Is thatsomething that you'd recommend a
new tumuaki take a look at tomake sure they're doing
everything they need to be doing?
Hannah (05:44):
Yes, definitely that's a really good thing to follow. You
want to try to follow it as muchas you can and then you're not
sort of trying to running,trying to catch up with things.
So for example, if you can, youwould like to sign off the
budget for the next year by thelast board meeting of the
previous year so that you hitterm one, you've already got a
(06:05):
budget set up and you're readyto go.
Eleisha (06:07):
Yeah. And that timetable also outlines some key
dates around kind of statutorydeadlines and requirements for
reporting. What are thosestatutory deadlines and
requirements for financialreporting?
Hannah (06:22):
Well, you've got your financial year, which is also
your calendar year and yourschool year. So that's 1st of
January 31st to December. Sothat's the dates your accounts
have to be prepared for. Andthen by 31st of March, your
financial accounts for theprevious year need to be
submitted with your auditor. Sothe board needs to sign off on a
(06:44):
draft of those and get those tothe auditor.
Eleisha (06:47):
Hmm.
Hannah (06:47):
And then by 31st of May, that's when the audit is
supposed to be finished and theaccounts filed with the Ministry
of Education.
Eleisha (06:55):
Cool. Adrian, so what is a school budget at it's most
basic level?
Adrian (07:02):
I'm glad you said it most basic level because
Eleisha (07:04):
Yeah.
Adrian (07:06):
disclaimer I was about to make things a little more
complicated. What we're talkingabout today mostly is the
operational budget, and that'swhat is typically in a primary
school it will be the principalpreparing that with help from an
accounts person, at a secondaryschool, it's more likely to be
the school business manager
Eleisha (07:26):
Mm
Adrian (07:26):
But that's the operational budget, which is
basically the same set of codelines that you have in your
monthly financial accounts thatyou look at. Every single one of
those items from your ops grantright down to like your postage
costs is a budget line.
Eleisha (07:44):
Yeah.
Adrian (07:44):
So you're setting the budget in detail and then most
systems will then summarize thatbudget so that you can see it in
a one pager or even a half apager that will tell you like
what your total governmentgrants are, what your total
administration, your totalproperty, your total learning
areas, it'll total everythingfor you.
Eleisha (08:05):
Mm
Adrian (08:06):
So where your accountant has provided a template, it
should do that for youautomatically so you can get
stuck into the detail. Typicallyin a school's budget, a lot of
the line items are similar fromyear to year, so postage is one
example. Schools will tend tospend what they've historically
spent. Phone bills is anotherone. All kinds of items. There
(08:28):
are some that are a bit morechallenging or can be more
challenging to set. For example,maintenance costs from year to
year can change.
Eleisha (08:36):
Hmm.
Adrian (08:37):
But this is all operational budgeting, and
that's really what we're talkingabout today. There are couple of
other types of budget that areprepared for your annual
financial statements, butthey're usually prepared by the
accountant based on youroperational budget. So that's
the one that you want to comeaway from this podcast thinking
about how do I estimate what myincome for the year is and how
(08:57):
do we estimate what all myexpenditure items are going to
be?
Eleisha (09:00):
Cool. And if we are talking about the operational
budget here, it's obviously,what's it based on?
Adrian (09:06):
So the way I look at it is actually the whole budget is
based on your total income, butthere are items in that total
income that are very much taggedfor usage.
Eleisha (09:16):
Yeah.
Adrian (09:16):
One example would be learning support funding. So
learning support funding is tiedinto specific students. So what
you're receiving in income willbe a guideline for what you can
afford to spend. A great part ofthe budget, though, is funded
from your your operations grant,which although it is calculated
(09:37):
from a number of things - soproperty figures are calculated
from property data, etc. Thebiggest driver is the school
roll
Eleisha (09:44):
hmm.
Adrian (09:45):
and even the make up of the roll, because different year
levels are funded at differentrates,
Eleisha (09:50):
Yeah.
Adrian (09:50):
all of that is available in Pourato, so you can see what
makes up your funding, but thatwould only be a guide to what
you're going to spend. And
Eleisha (10:00):
Mm
Adrian (10:00):
probably
Eleisha (10:00):
hmm.
Adrian (10:01):
history is a better guide to what you're likely to
spend next year than thebreakdown of your operational
grant
Eleisha (10:08):
Yeah. And so obviously, you know, you talked about the
kind of line by line there. What,you know, what does that budget
outline, what are the generalcategories?
Adrian (10:17):
Right, so income is usually presented first, and
generally there's a bit of adistinction made between the
operational funding, you'regiven your provisional figure at
the start of the year to as anestimate, and then you have
other government grants whichcan be tagged or tied into
certain programmes and thingslike that.
Eleisha (10:37):
Mm
Adrian (10:38):
So income is made up of a few different things, but it's
one total category. And then thetypical categories in the
Kiwipark model includeadministration, property,
learning. And there's a few kindof different categories of other
because it depends on the theoperations of each individual
school, what they might be. Soan example on the income side
(11:01):
might be international students,where some schools have
international students, othersdon't. Some schools run in a
uniform shop, others don't. Soyeah, there's a bit of variation
from school to school.
Eleisha (11:12):
Yeah. Is there anything that's not included in a
school's budget?
Adrian (11:16):
Well, the big one that I usually think of first is and
this is for state schools, butnot state integrated schools,
the 5YA and other ministryfunded property projects. So if
you were going to budget forthese ahead of time, it could be
considered kind of extra forexperts. Most schools don't
because that budget has to beagreed on with the Ministry
(11:38):
property team anyway. So that'ssomething that's not included
there. In the normal operationsof the school the teachers
salaries don't have to beincluded in the monthly accounts
Eleisha (11:50):
hmm.
Adrian (11:51):
and they often aren't because they're such a large
item, they can distort all yourvariances.You know, teacher
salaries might be five times asmuch as the operations grant.
And because they are funded bythe Ministry, you don't need to
look at those budgets month tomonth. They do need to be
included in the annual financialstatements. But typically from
the principals point of view,they'll get the accountant's
(12:12):
advice on what figure to put inbecause you could just about
build a whole spreadsheet justto work out those two figures.
Eleisha (12:18):
Yeah.
Adrian (12:18):
So.
Eleisha (12:20):
What about fundraising and things like that? Would you
would you include that in yourbudget, or?
Adrian (12:24):
Yes. So the locally raised funds is quite a large
category of income because it'sbasically anything that didn't
come from the government. Andthat's, that's all sorts of
things like uniforms,fundraising, sports clubs, all
kinds of extracurricularactivities, all of that stuff.
And it should be budgeted for. Iwould just exercise caution on
the fundraising in particular.So you can feel you really feel
(12:49):
really enthusiastic about itwriting the budget to make your
budget work and then feel lessenthusiastic about it when you
actually have to do it in termthree and it's really busy. The
other potential pitfall is youneed to make sure that if an
activity is funded by a locallyraised fund, you want to kind of
match those up in your budget.So don't fall into the trap of
(13:09):
putting in fundraising for aspecific purpose and then
forgetting to put theexpenditure in for what you're
going to use those raised fundsfor. So you need to make sure
that everything links up.
Eleisha (13:21):
Yeah, for sure. And, Hanna, what should a tumuaki and
the board be thinking about whenthey're preparing the school's
budget?
Hannah (13:29):
Well, they should be thinking about the strategic
plan that they've set. Sousually you'd set up a strategic
plan for a three year period.And then you would break that
down into an annual plan eachyear. So you'd be wanting to
think about what are the keypriorities, the things that we
want to be working on. So forexample, if your focus is on
maths and literacy, then youmight put more into the budget
(13:52):
in those areas. I guess justalso be thinking about like
Adrian said like what's beenspent in previous years
Eleisha (13:59):
Mm
Hannah (13:59):
as to whether budgets are realistic, and also to think
about planning for the future aswell. So Adrian mentioned that
we've talked mostly about anoperational budget, but you do
also need to think as part ofyour budgeting process, like are
there any sort of projects thatwe need to do, like in terms of
painting school, or do we needto replace some furniture or
(14:21):
some Chromebooks? So those itemsare considered capital items
because
Eleisha (14:26):
hmm.
Hannah (14:26):
they last for more than a year. They're kind of assets,
but it is good to think about aspart of budgeting process, to
think about how much do we wantto spend on those kind of items
each year.
Eleisha (14:38):
Yeah, for sure. Mārama, when you were getting your head
around the budget process inyour school, how how did the
budget process work, in firstthe smaller school and then in
the larger school that weretumuaki of.
Mārama (14:51):
Very different, they're very different situations.
Eleisha (14:53):
Mm
Mārama (14:53):
So when I was in the small school I was it, I didn't
have any admin, but I had a verygood board finance person who
first actually just told meabout the process because I had
to do all the processing ofbills and code and do all that.
And was lucky because theybrought in the external
accountant
Eleisha (15:11):
Mm
Mārama (15:11):
who specialized in school budgets and she sat down
with me and we just looked atday to day operations and how
the different budget areasworked. And she gave me the good
advice about, you know, try andkeep the overview for
administration, try and keepthat within budget. But I mean,
if you're spending more onpostage one year, it might mean
(15:32):
that you don't have to spend asmuch the next year. And that's
where I built that story. And bykeeping the notes on what was up
and what was down, so I was ableto use it at the end of the year
when we got the new budget and Icould see, well, we spent more
here because of this and wespend this here, so next time I
can do this.
Eleisha (15:52):
hmm.
Mārama (15:52):
So yeah, we didn't really talk about depreciation
or asset purchases because I itwas just too much.
Eleisha (15:57):
Yeah.
Mārama (15:58):
My whole goal for that first year was keeping in budget.
When it came to staffing, I hada local principal. She came out
and every time I did any bigstaffing decisions, she she sat
with me and she did it with meand I learnt from her because
the calculations, it's really,really different or the point
zeros or point two or whatever.It's
Eleisha (16:20):
Mm hmm.
Mārama (16:21):
all based on different hours. So I was really lucky and
I think as soon as you can finda buddy, experienced principal
within your area, who knows yourschool, who can come and sit
with you, the better you are.And I always keep notes on
whatever I was working on so Icould look back again, and you
forget
Eleisha (16:38):
Yeah.
Mārama (16:38):
like, you go and do it again the next month, you're
like oh, I can't remember how Idid this. And then we were lucky
when I came in the small school,I didn't have any property
projects at
Eleisha (16:49):
Yeah,
Mārama (16:49):
the time to start, so I didn't have to learn that until
the second year. And then that'swhen I started working with the
ministry team. So if you canjust focus on the ops stuff
first, then you can just getthrough day to day, and try
really hard stick to budget. Imean, you don't always have to
in the future, but just practisethat at the start and it's
(17:10):
probably better off for yourcareer.
Eleisha (17:12):
Yeah
Mārama (17:12):
When I went the larger school I actually found a bit
tricky because I had someone whocould do it for me.
Eleisha (17:17):
Yeah.
Mārama (17:17):
So I was so used to doing it all myself. Yes. So.
Yeah, managing that and having agood relationship with my office
lady who process all the bills.Again, I actually had the same
accountant. So yeah. So I wentfrom one school with the same
accountant and we had a goodrelationship already. I learnt a
bigger budget. Actuallyunderstood what depreciation
(17:40):
meant by
Eleisha (17:41):
Mm hmm.
Mārama (17:41):
then. Understood about strategic alignment because at
the time in my first two years Iwas just trying to stay alive
and that's okay. Like it's okayas long as you stay alive and
stay within budget, you'reactually pretty okay, you can
deal with that. And then now Idon't think we had financial
advisors when I started, but nowwe've got Adrian's and Hannah's
(18:04):
all over the show. And yeah,they're really great and they
can step in and walk you throughit in your first couple of years
Eleisha (18:11):
And what kinds of things did you think about when
you were preparing that budget?You know, in terms of of what
you prioritized and how to makethat all work?
Mārama (18:21):
You kind of start off just thinking, have I bought
enough toilet paper, like. Butyeah, you really just need to
use the previous couple of yearsand a lot of accountants they
give you your template budgetswith the, a couple of years
previous so you can see thetrends over time
Eleisha (18:38):
Mm hmm.
Mārama (18:39):
how much you've spent and often when you're upgrading
the tech and stuff, other thingsdrop away. And you have to also
be really careful. I'vementioned depreciation a couple
of times because when you startbuying these capital items,
Eleisha (18:53):
Like the Chromebooks?
Mārama (18:54):
the value doesn't go by.
Eleisha (18:55):
Yeah.
Mārama (18:56):
Yeah, yeah, the value stays and it comes back in and
then depreciation, which is themoney you're saving to replace
things as they fall off getsbigger and bigger and you've
actually got to get rid of someof the older stuff
Eleisha (19:09):
hmm.
Mārama (19:10):
and um it can look really big and scary because the
principals before you may nothave gotten rid of the old stuff,
there might be stuff from 1977still on there. Especially if
you've had a big clean out makesure you remove all your assets
from your assets register thatyou've disposed of and explain
why. Because if you move toomuch the auditors are going to
(19:32):
be like, where has this gone.
Eleisha (19:35):
Hannah and Adrian, did you want to add anything around
depreciation in there?
Hannah (19:38):
I think one thing to say about depreciation is that often
schools, if they find that theirexpenses are higher than their
income initially, when they dothe budget, they can be really
tempted to take the depreciationout to try to make it balance.
But it's a bit of a mistakebecause, as Mārama said, that's
your way of putting money asidefor when you need to replace
(20:01):
things in the future. And thenthe other thing is when you get
to the end of the year, you'llget a big shock because the
depreciation will definitelyhave to be in there for your
year end accounts. So then youcould go from thinking that you
were in a good profit situationto actually being in a loss
situation. So I guess it's justa trick for young players
Adrian (20:20):
Yeah. And I would say to a new principal coming in, I
think Mārama's advice onfocusing on the operational
first is good advice. Just arule of thumb or a guideline
with your capital budget in yearone and maybe year two is
whatever your depreciation levelis, try to spend within that. So
(20:42):
if your school has depreciationof $40,000, that can be a
guideline to I want all of mycapital items to be $40,000 or
less. So that's just a guidegoing in. The idea of
depreciation is it smooths outthe lumps,
Eleisha (20:57):
Mm hmm.
Adrian (20:57):
in one year in the future you might spend $150,000
on capital items one year andalmost nothing the next. But
depreciation is useful to use asa guide to what you should be
spending to replace what you'vecurrently got.
Eleisha (21:14):
Absolutely. Stay with us, in the next episode we're
going to be talking aboutfinancial reporting. Mā te wā.
Kia ora and welcome back to The Principals, a
podcast series for new schoolprincipals in Aotearoa New
Zealand. I'm Eleisha McNeill.Today we're going to talk about
school budgets, what's includedin them, what's not, and what
you'll need to do to preparethem. We're lucky that three of
our guests from the last twoepisodes are with us again today.
And here they are.
Hannah (00:27):
Kia ora koutou, ko Hannah Levy tōku ingoa. I'm a
school financial advisor withthe Ministry of Education and
I'm based in the Otago/Southlandregion.
Adrian (00:36):
I'm Adrian Edwards and I have the same role as Hannah,
but I cover Bay of Plenty and myprevious experience was at a
financial service provider,which led into this role quite
well. And I've been in this rolefor two years.
Mārama (00:51):
Kia ora koutou, ko Mārama Stewart tōku ingoa, I
am a leadership advisor in theBay of Plenty and Waiariki area,
formerly the principal ofTāneatua School with 14 years
of experience in primary schools.
Eleisha (01:06):
Thanks for coming back. So maybe, Hannah, before we even
start, can you remind us wherenew tumuaki can go to understand
what they need to know aboutschool finances.
Hannah (01:16):
So we have Ministry of Financial advisors like myself
and Adrian, and there's one ofus around all of the regions.
And then there's the leadershipadvisors are also good resource
for you as well, our website,you can use what we call the
FISH, which is the FinancialInformation for Schools Handbook,
which is on our website, andit's quite a big tome so it's
(01:39):
one of those things that youprobably just dip in and dip out
of particular issues and maybejust do like a word search, and
then if you have an externalaccountant who does either your
monthly or your annual accounts,they can be a good source of
information as well.
Eleisha (01:54):
Fantastic. And when it comes to a school's budget, what
are a principal'sresponsibilities?
Hannah (02:02):
Well basically they tend to be the ones that prepare the
budget, they're the ones whoactually put it together. So and
of course, because the boardapproves it, they need to
prepare it in such a way thatthe board is willing to sign it
off. And I guess another keything they need to do is,
wherever possible, try to getthe expenses to match the income
(02:24):
so that basically it's what wecall a balanced budget.
Eleisha (02:27):
In terms of preparation of the school budget, what does
a principal need to do?
Hannah (02:31):
Well, often if you have got an external accountant, they
can get you started with atemplate. So what you do want to
do is have like a spreadsheet,like a Google spreadsheet or an
Excel spreadsheet and have youryear to date income and
expenditure for the current yearand have your current year
budget. And those are likecomparative figures that you can
(02:54):
use when you're putting togetheryour next year's budget, which
which you then put in anothercolumn and then you can get
started with in September, youget your operations grant, which
is in Pourato. So that's a keypiece of information that you
need to put into the budget. Soit's really focusing on getting
(03:14):
the income side in and thenknowing basically if that's the
money that you're getting inthen then that's the money
you've got to work with in termsof what you can spend for the
year, so then when you go on tothe expenses, you probably focus
on your staffing first becausethat's the biggest area and then
follow with the others andyou're, you're referring back to
(03:36):
what did you spend in thecurrent year. And also if
there's any changes, like ifyour roll is dropping, then
you'd probably be wanting toreduce expenditure because of
course your funding is going tobe impacted as well.
Eleisha (03:48):
Yeah, fo sure. Does Pourato have information about
staffing in it as well?
Hannah (03:54):
Yes. Yes. So Pourato has both the staffing information
and the operational grantinformation. And the staffing is
relevant even though like in theprevious episode we said that
the ministry pays the teachersdirectly. But still you want to
know what your staffingentitlement is, to know
basically how many teachers theministry is going to pay and
(04:15):
therefore in some situations,schools may want to have what
they call some board fundedteaching resource as well, which
they pay for themselves. So thenof course they would need to
build that into their budget.
Eleisha (04:27):
Right. We touched on financial delegations in the
last conversations. What arefinancial delegations? What does
that mean?
Hannah (04:37):
So financial delegations are usually outlined in a school
policy and it's basically whatexpenses have to be signed off
by whom for things such asinvoices and staff expense
claims. So for example, in asmaller school, the principal
may be able to sign offeverything up to say, $5,000.
And then if there's anythingmore than that, the presiding
(04:58):
member needs to sign off.Whereas, in a bigger school,
maybe you might have a head ofdepartment who are able to sign
off up to $5, 000 and theprincipal can sign off up to $10,
000 and then the board foranything bigger. And the other
key thing to keep in mind isthat you should never sign off
your own expenses. So,
Eleisha (05:16):
MM
Hannah (05:16):
for example, if a principal's got a credit card
statement with invoices attached,then that should always be
signed off by a board member. Sobasically one level up.
Eleisha (05:25):
Yeah, that's good advice. You touched on the FISH
there, the Financial Informationfor Schools Handbook. I love the
acronym um, and in the FISHthere's a basic kind of annual
financial timetable. Is thatsomething that you'd recommend a
new tumuaki take a look at tomake sure they're doing
everything they need to be doing?
Hannah (05:44):
Yes, definitely that's a really good thing to follow. You
want to try to follow it as muchas you can and then you're not
sort of trying to running,trying to catch up with things.
So for example, if you can, youwould like to sign off the
budget for the next year by thelast board meeting of the
previous year so that you hitterm one, you've already got a
(06:05):
budget set up and you're readyto go.
Eleisha (06:07):
Yeah. And that timetable also outlines some key
dates around kind of statutorydeadlines and requirements for
reporting. What are thosestatutory deadlines and
requirements for financialreporting?
Hannah (06:22):
Well, you've got your financial year, which is also
your calendar year and yourschool year. So that's 1st of
January 31st to December. Sothat's the dates your accounts
have to be prepared for. Andthen by 31st of March, your
financial accounts for theprevious year need to be
submitted with your auditor. Sothe board needs to sign off on a
(06:44):
draft of those and get those tothe auditor.
Eleisha (06:47):
Hmm.
Hannah (06:47):
And then by 31st of May, that's when the audit is
supposed to be finished and theaccounts filed with the Ministry
of Education.
Eleisha (06:55):
Cool. Adrian, so what is a school budget at it's most
basic level?
Adrian (07:02):
I'm glad you said it most basic level because
Eleisha (07:04):
Yeah.
Adrian (07:06):
disclaimer I was about to make things a little more
complicated. What we're talkingabout today mostly is the
operational budget, and that'swhat is typically in a primary
school it will be the principalpreparing that with help from an
accounts person, at a secondaryschool, it's more likely to be
the school business manager
Eleisha (07:26):
Mm
Adrian (07:26):
But that's the operational budget, which is
basically the same set of codelines that you have in your
monthly financial accounts thatyou look at. Every single one of
those items from your ops grantright down to like your postage
costs is a budget line.
Eleisha (07:44):
Yeah.
Adrian (07:44):
So you're setting the budget in detail and then most
systems will then summarize thatbudget so that you can see it in
a one pager or even a half apager that will tell you like
what your total governmentgrants are, what your total
administration, your totalproperty, your total learning
areas, it'll total everythingfor you.
Eleisha (08:05):
Mm
Adrian (08:06):
So where your accountant has provided a template, it
should do that for youautomatically so you can get
stuck into the detail. Typicallyin a school's budget, a lot of
the line items are similar fromyear to year, so postage is one
example. Schools will tend tospend what they've historically
spent. Phone bills is anotherone. All kinds of items. There
(08:28):
are some that are a bit morechallenging or can be more
challenging to set. For example,maintenance costs from year to
year can change.
Eleisha (08:36):
Hmm.
Adrian (08:37):
But this is all operational budgeting, and
that's really what we're talkingabout today. There are couple of
other types of budget that areprepared for your annual
financial statements, butthey're usually prepared by the
accountant based on youroperational budget. So that's
the one that you want to comeaway from this podcast thinking
about how do I estimate what myincome for the year is and how
(08:57):
do we estimate what all myexpenditure items are going to
be?
Eleisha (09:00):
Cool. And if we are talking about the operational
budget here, it's obviously,what's it based on?
Adrian (09:06):
So the way I look at it is actually the whole budget is
based on your total income, butthere are items in that total
income that are very much taggedfor usage.
Eleisha (09:16):
Yeah.
Adrian (09:16):
One example would be learning support funding. So
learning support funding is tiedinto specific students. So what
you're receiving in income willbe a guideline for what you can
afford to spend. A great part ofthe budget, though, is funded
from your your operations grant,which although it is calculated
(09:37):
from a number of things - soproperty figures are calculated
from property data, etc. Thebiggest driver is the school
roll
Eleisha (09:44):
hmm.
Adrian (09:45):
and even the make up of the roll, because different year
levels are funded at differentrates,
Eleisha (09:50):
Yeah.
Adrian (09:50):
all of that is available in Pourato, so you can see what
makes up your funding, but thatwould only be a guide to what
you're going to spend. And
Eleisha (10:00):
Mm
Adrian (10:00):
probably
Eleisha (10:00):
hmm.
Adrian (10:01):
history is a better guide to what you're likely to
spend next year than thebreakdown of your operational
grant
Eleisha (10:08):
Yeah. And so obviously, you know, you talked about the
kind of line by line there. What,you know, what does that budget
outline, what are the generalcategories?
Adrian (10:17):
Right, so income is usually presented first, and
generally there's a bit of adistinction made between the
operational funding, you'regiven your provisional figure at
the start of the year to as anestimate, and then you have
other government grants whichcan be tagged or tied into
certain programmes and thingslike that.
Eleisha (10:37):
Mm
Adrian (10:38):
So income is made up of a few different things, but it's
one total category. And then thetypical categories in the
Kiwipark model includeadministration, property,
learning. And there's a few kindof different categories of other
because it depends on the theoperations of each individual
school, what they might be. Soan example on the income side
(11:01):
might be international students,where some schools have
international students, othersdon't. Some schools run in a
uniform shop, others don't. Soyeah, there's a bit of variation
from school to school.
Eleisha (11:12):
Yeah. Is there anything that's not included in a
school's budget?
Adrian (11:16):
Well, the big one that I usually think of first is and
this is for state schools, butnot state integrated schools,
the 5YA and other ministryfunded property projects. So if
you were going to budget forthese ahead of time, it could be
considered kind of extra forexperts. Most schools don't
because that budget has to beagreed on with the Ministry
(11:38):
property team anyway. So that'ssomething that's not included
there. In the normal operationsof the school the teachers
salaries don't have to beincluded in the monthly accounts
Eleisha (11:50):
hmm.
Adrian (11:51):
and they often aren't because they're such a large
item, they can distort all yourvariances.You know, teacher
salaries might be five times asmuch as the operations grant.
And because they are funded bythe Ministry, you don't need to
look at those budgets month tomonth. They do need to be
included in the annual financialstatements. But typically from
the principals point of view,they'll get the accountant's
(12:12):
advice on what figure to put inbecause you could just about
build a whole spreadsheet justto work out those two figures.
Eleisha (12:18):
Yeah.
Adrian (12:18):
So.
Eleisha (12:20):
What about fundraising and things like that? Would you
would you include that in yourbudget, or?
Adrian (12:24):
Yes. So the locally raised funds is quite a large
category of income because it'sbasically anything that didn't
come from the government. Andthat's, that's all sorts of
things like uniforms,fundraising, sports clubs, all
kinds of extracurricularactivities, all of that stuff.
And it should be budgeted for. Iwould just exercise caution on
the fundraising in particular.So you can feel you really feel
(12:49):
really enthusiastic about itwriting the budget to make your
budget work and then feel lessenthusiastic about it when you
actually have to do it in termthree and it's really busy. The
other potential pitfall is youneed to make sure that if an
activity is funded by a locallyraised fund, you want to kind of
match those up in your budget.So don't fall into the trap of
(13:09):
putting in fundraising for aspecific purpose and then
forgetting to put theexpenditure in for what you're
going to use those raised fundsfor. So you need to make sure
that everything links up.
Eleisha (13:21):
Yeah, for sure. And, Hanna, what should a tumuaki and
the board be thinking about whenthey're preparing the school's
budget?
Hannah (13:29):
Well, they should be thinking about the strategic
plan that they've set. Sousually you'd set up a strategic
plan for a three year period.And then you would break that
down into an annual plan eachyear. So you'd be wanting to
think about what are the keypriorities, the things that we
want to be working on. So forexample, if your focus is on
maths and literacy, then youmight put more into the budget
(13:52):
in those areas. I guess justalso be thinking about like
Adrian said like what's beenspent in previous years
Eleisha (13:59):
Mm
Hannah (13:59):
as to whether budgets are realistic, and also to think
about planning for the future aswell. So Adrian mentioned that
we've talked mostly about anoperational budget, but you do
also need to think as part ofyour budgeting process, like are
there any sort of projects thatwe need to do, like in terms of
painting school, or do we needto replace some furniture or
(14:21):
some Chromebooks? So those itemsare considered capital items
because
Eleisha (14:26):
hmm.
Hannah (14:26):
they last for more than a year. They're kind of assets,
but it is good to think about aspart of budgeting process, to
think about how much do we wantto spend on those kind of items
each year.
Eleisha (14:38):
Yeah, for sure. Mārama, when you were getting your head
around the budget process inyour school, how how did the
budget process work, in firstthe smaller school and then in
the larger school that weretumuaki of.
Mārama (14:51):
Very different, they're very different situations.
Eleisha (14:53):
Mm
Mārama (14:53):
So when I was in the small school I was it, I didn't
have any admin, but I had a verygood board finance person who
first actually just told meabout the process because I had
to do all the processing ofbills and code and do all that.
And was lucky because theybrought in the external
accountant
Eleisha (15:11):
Mm
Mārama (15:11):
who specialized in school budgets and she sat down
with me and we just looked atday to day operations and how
the different budget areasworked. And she gave me the good
advice about, you know, try andkeep the overview for
administration, try and keepthat within budget. But I mean,
if you're spending more onpostage one year, it might mean
(15:32):
that you don't have to spend asmuch the next year. And that's
where I built that story. And bykeeping the notes on what was up
and what was down, so I was ableto use it at the end of the year
when we got the new budget and Icould see, well, we spent more
here because of this and wespend this here, so next time I
can do this.
Eleisha (15:52):
hmm.
Mārama (15:52):
So yeah, we didn't really talk about depreciation
or asset purchases because I itwas just too much.
Eleisha (15:57):
Yeah.
Mārama (15:58):
My whole goal for that first year was keeping in budget.
When it came to staffing, I hada local principal. She came out
and every time I did any bigstaffing decisions, she she sat
with me and she did it with meand I learnt from her because
the calculations, it's really,really different or the point
zeros or point two or whatever.It's
Eleisha (16:20):
Mm hmm.
Mārama (16:21):
all based on different hours. So I was really lucky and
I think as soon as you can finda buddy, experienced principal
within your area, who knows yourschool, who can come and sit
with you, the better you are.And I always keep notes on
whatever I was working on so Icould look back again, and you
forget
Eleisha (16:38):
Yeah.
Mārama (16:38):
like, you go and do it again the next month, you're
like oh, I can't remember how Idid this. And then we were lucky
when I came in the small school,I didn't have any property
projects at
Eleisha (16:49):
Yeah,
Mārama (16:49):
the time to start, so I didn't have to learn that until
the second year. And then that'swhen I started working with the
ministry team. So if you canjust focus on the ops stuff
first, then you can just getthrough day to day, and try
really hard stick to budget. Imean, you don't always have to
in the future, but just practisethat at the start and it's
(17:10):
probably better off for yourcareer.
Eleisha (17:12):
Yeah
Mārama (17:12):
When I went the larger school I actually found a bit
tricky because I had someone whocould do it for me.
Eleisha (17:17):
Yeah.
Mārama (17:17):
So I was so used to doing it all myself. Yes. So.
Yeah, managing that and having agood relationship with my office
lady who process all the bills.Again, I actually had the same
accountant. So yeah. So I wentfrom one school with the same
accountant and we had a goodrelationship already. I learnt a
bigger budget. Actuallyunderstood what depreciation
(17:40):
meant by
Eleisha (17:41):
Mm hmm.
Mārama (17:41):
then. Understood about strategic alignment because at
the time in my first two years Iwas just trying to stay alive
and that's okay. Like it's okayas long as you stay alive and
stay within budget, you'reactually pretty okay, you can
deal with that. And then now Idon't think we had financial
advisors when I started, but nowwe've got Adrian's and Hannah's
(18:04):
all over the show. And yeah,they're really great and they
can step in and walk you throughit in your first couple of years
Eleisha (18:11):
And what kinds of things did you think about when
you were preparing that budget?You know, in terms of of what
you prioritized and how to makethat all work?
Mārama (18:21):
You kind of start off just thinking, have I bought
enough toilet paper, like. Butyeah, you really just need to
use the previous couple of yearsand a lot of accountants they
give you your template budgetswith the, a couple of years
previous so you can see thetrends over time
Eleisha (18:38):
Mm hmm.
Mārama (18:39):
how much you've spent and often when you're upgrading
the tech and stuff, other thingsdrop away. And you have to also
be really careful. I'vementioned depreciation a couple
of times because when you startbuying these capital items,
Eleisha (18:53):
Like the Chromebooks?
Mārama (18:54):
the value doesn't go by.
Eleisha (18:55):
Yeah.
Mārama (18:56):
Yeah, yeah, the value stays and it comes back in and
then depreciation, which is themoney you're saving to replace
things as they fall off getsbigger and bigger and you've
actually got to get rid of someof the older stuff
Eleisha (19:09):
hmm.
Mārama (19:10):
and um it can look really big and scary because the
principals before you may nothave gotten rid of the old stuff,
there might be stuff from 1977still on there. Especially if
you've had a big clean out makesure you remove all your assets
from your assets register thatyou've disposed of and explain
why. Because if you move toomuch the auditors are going to
(19:32):
be like, where has this gone.
Eleisha (19:35):
Hannah and Adrian, did you want to add anything around
depreciation in there?
Hannah (19:38):
I think one thing to say about depreciation is that often
schools, if they find that theirexpenses are higher than their
income initially, when they dothe budget, they can be really
tempted to take the depreciationout to try to make it balance.
But it's a bit of a mistakebecause, as Mārama said, that's
your way of putting money asidefor when you need to replace
(20:01):
things in the future. And thenthe other thing is when you get
to the end of the year, you'llget a big shock because the
depreciation will definitelyhave to be in there for your
year end accounts. So then youcould go from thinking that you
were in a good profit situationto actually being in a loss
situation. So I guess it's justa trick for young players
Adrian (20:20):
Yeah. And I would say to a new principal coming in, I
think Mārama's advice onfocusing on the operational
first is good advice. Just arule of thumb or a guideline
with your capital budget in yearone and maybe year two is
whatever your depreciation levelis, try to spend within that. So
(20:42):
if your school has depreciationof $40,000, that can be a
guideline to I want all of mycapital items to be $40,000 or
less. So that's just a guidegoing in. The idea of
depreciation is it smooths outthe lumps,
Eleisha (20:57):
Mm hmm.
Adrian (20:57):
in one year in the future you might spend $150,000
on capital items one year andalmost nothing the next. But
depreciation is useful to use asa guide to what you should be
spending to replace what you'vecurrently got.
Eleisha (21:14):
Absolutely. Stay with us, in the next episode we're
going to be talking aboutfinancial reporting. Mā te wā.
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