1. Financial Management of Schools 19 March 2004 Kennedy Tat-yin Liu Chairman, Community Services Committee Hong Kong Society of Accountants The 1st Hong Kong School Principals’ Conference 2004

2. What is Financial Management ? Manage Financial Risks Key Risks – those keeping you awake at nights Other Major Risks Financial Practices – Compliance, Accountability and Reporting

3. How to handle the Risks Identified ? Manage - Policies & Procedures - Compliance - People Limit; Transfer Decline Accept

4. Internal Controls Minimise Financial Risks Safeguard Assets Coverage - Revenue - Expenditures - Assets / Investments

5. Internal Controls (cont’d) Segregation of duties Approval Supporting documents Tendering; Purchase system Revenue collection Payment system Reporting

6. Accounting System Accounting Records Books of Accounts Assets Register Timely updated and accurately maintained Regular and Appropriate Review

7. Prepare an Effective Budget Responsibilities; Approval School’s Overall Plan Income and Expenditures Cashflows Monthly Budgets

8. Prepare an Effective Budget (cont’d) Identify Major Revenue and Expenditures Income – own income; subsidies / grants Recurrent and non-recurrent expenditures Timing Contingency

9. Expenditure Budget for School Year 2003/04 Surplus b/fGov't AllocationTotal Grant Expenditure Budget Surplus SY2003-04AvailableSY2003-04 $000 c/f (I)(II)(III)=(I)+(II)(IV)(V)=(III)-(IV) General Domain School and Class Grant 400480 Revised Admin/Admin Grant 1,080800 Suppl Grant for SBM 10040 Sub-total (A) 1001,5801,6801,320360 Special Domain Capacity Enhancement Grant 10500510 0 Sub-total (B) 10500510 0 Outside OEBG Grant Composite F and E Grant 0200 0 Non-Recurrent Grant for IT 4000 0 Sub-total (C) 400200600 0 Total for A+B+ C 5102,2802,7902,430360 =============================================== Note: This is a simplified version. Budget Formulation

10. Cashflow Projection and Management Cashflow Forecast for 6 months ended 31 January 2004 AugustSeptOctNovDecJan $'000 Receipt Receipt in advance 1,030# Admin Grant 90 Total (A) 1,12090 Payment Salaries Payment -Clerical and Janitor Staff (60)(70) -Teaching Assistant (30) Electricity Payment (30)(40) Purchase of F & E (300) English tutorial course (150) Total (B) (90)(140) (440)(140)(590) Surplus/Deficit (A)-(B) 1,030(50) (350)(50)(500) Balance b/f 5101,5401,4901,4401,0901,040 Balance c/f 1,5401,4901,4401,0901,040540 #$'000 S & C Grant paid in Aug 02230 Other Grants800 Grant Received in Aug 021,030 ==========

11. Actual Results vs Budget Monthly / Quarterly Causes of the Variances Timing Difference vs Permanent Commentary Revise Budget Learning Process

12. Financial Management Reporting System Identify Information Needs Monthly / Quarterly Reports Variance Analysis, together with commentary Reports to School Management Committee

13. Budget Actual Expenditure Revised Budget Change SY2003-04 up to 31 January 04SY2003-04 +/(-) $000 % (I)(II)(III) = (II )/(I)(IV)(I)-(IV) General Domain School and Class Grant 480200424800 Revised Admin/Admin Grant 80020025600(200) Suppl Grant for SBM 403075400 Sub-total School Based Management (A) 1,320430331,120(200) Special Domain Capacity Enahncement Grant 51015029610100 Sub-total (B) 51015029610100 Outside OEBG Grant Composite F and E Grant 20000300100 Non-Recurrent Grant for IT 400200504000 Sub-total (C) 60020033700100 Total for A+B+ C 2,430780322,4300 ========== Financial Report to SMC

14. Note a: Administration Grant As a result of the contracting out of classroom cleaning services, the number of clerical and janitor staff employed are less than that originally planned. The Principal has approved under delegated authority the transfer of half of the saving $100,000 to CEG and the other half to CFEG. Financial Report to SMC (cont’d)

15. Note c: Composite Furniture and Equipment Grant The additional funds transferred from the Administration Grant will be used for the upgrading of IT equipment. Note b: Capacity Enhancement Grant With the transfer of $100,000 from the Administration Grant, the English tutorial courses will increase from 15 to 25 lessons. Financial Report to SMC (cont’d)

16. Assets Management Cash – placing surplus cash in savings accounts or time deposit Capital Assets – Fixed Assets Register

17. Financial Management of Schools Questions and Answers Experience Sharing Discussion

18. Financial Management of Schools Thank you Kennedy Tat-yin Liu Telephone: 2289 1881 E-mail: kennedy.liu@hk.pwc.com