According to the Australian Tax Office (ATO), teaching and learning about taxation and superannuation should be an integral component of consumer and financial literacy education. In Australia, there have been moves over several years to strengthen consumer and financial literacy education in schools and bring about sustainable improvements in the types of learning outcomes associated with active and informed citizenship.
The ATO promotes the OECD International Network on Financial Education - OECD/INFE Guidelines on Financial Education in Schools which basically argue that the students of today face increasingly complex financial problems and decisions, and advocate teaching and learning programs that “will enable students to make savvy and effective financial decisions in their daily life and when they become adults”.
The OECD/INFE guidelines recommend that members:
There is no reason why points 2, 5 and 6 cannot also apply to school governing body members. Many of them may not have had financial education during their formal schooling and many may have limited understanding of financial processes in relation to schools.
School governing bodies are accountable for the finances of the school. Many governing bodies are composed of parents or other members of the local school community. The contribution of these parents or volunteers who give up so much of their valuable free time to help in the governing of their school is usually very much welcomed but no matter what their background or capabilities, they need to understand both school finances and how to interrogate the school’s financial statements so that they can make educated decisions regarding income and expenditure in line with their fiduciary responsibilities.
Every non-government school in Australia has legal obligations to have financial stability and accountability as a condition of their registration/accreditation. In general, they must:
Additional financial obligations also arise from a myriad of ancillary legislative and regulatory requirements such as those imposed by the Australian Securities and Investment Commission (ASIC) and the Australian Charities and Not-for-profits Commission (ACNC).
According to ASIC:
“Financial literacy is defined as the ability to make informed judgments and to take effective decisions regarding the use and management of money. In today's world of increasingly complex financial decisions, financial literacy may be considered a vital skill for all consumers”.
It can be argued that governing body financial responsibilities can be divided into three distinct categories:
So, when any person is invited or applies to join a school governing body, the school needs to ascertain their current level of financial acumen and their 'knowledge gap' in terms of being able to read, understand, and ultimately approve governing body financial documents. Governing body members need to understand reconciliation from an accounting context both internally as per school requirements and externally as per accounting standards.
Training should include (as a minimum):
In addition, the business manager (however named) in each school should explain the minutiae of profit and loss sheets, cash flow statements, the financial dashboard and other regular financial documents in detail to new governing body members as required.
In 2019, School Governance identified three crucial governance risks, relating to school governing bodies and leadership that will have a significant impact on school operations:
In addition, when one or more of the following risks for governing body effectiveness is present in a governing body, it could make its total work ineffective:
Without the right or adequately trained people with the required talent and experience on a school governing body, it is highly unlikely that the governing body will meet the financial (think changes to Commonwealth per capita funding) or the strategic challenges that lie ahead which is particularly relevant in the current ‘COVID-19 circumstances’.
Schools receive considerable per capita funding from state/territory and Commonwealth governments. They are accountable for these funds and how they are used. In a previous School Governance article we wrote:
”If schools accept government funding and if schools are serious about providing quality education in a safe and caring environment, then they need to remain compliant - and should be trying to remain continually compliant; not just reviewing policies and procedures in the six-month lead up to their next registration visit”.
School governing bodies need to show ongoing compliance with:
The members of the governing body cannot afford to fail to understand or ignore the school finances that they approve or be complacent in their roles. In a nutshell, your school’s governing body is accountable for the education and the care of children and for the provision of sufficient resources to ensure that this requirement is fulfilled.
If the school does not get its finances right and show that it is using government funds for the purposes for which they were given, not only will this affect the students and their overall education but governing body members and school leadership could be held legally accountable and even face criminal prosecution.
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