FINANCIAL MANAGEMENT IN EDUCATION

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10 Νοε 2013 (πριν από 3 χρόνια και 7 μήνες)

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FINANCIAL MANAGEMENT

IN EDUCATION

Definitions


Capital/revenue


Usually refers to major durable items, such as
buildings, land, large items of equipment, and
often including major renovative or
enhancement programs


They are normally excluded from the annual
budget


Virement


It is the authorization to switch expenditure
from one budget heading to another.


Cost centers


The characteristics of a cost center are that it is
responsible for its own budget and that all expenditures
incurred by it are debited to it


Costing


It is the art of measuring the consumption of resources
in financial terms.


Opportunity costs


Every expenditure and transfer of resources has its
opportunity cost


the next
-
best alternative use for these
resources


Direct and indirect cost


Direct costs are costs that can be easily
identified with a cost center


Indirect costs are costs that cannot be identified
and have to be apportioned (sometimes called
overheads)

The Three Es of

Financial Management


Economy


It can be defined as careful use of resources, frugality,
and good housekeeping


Examples: Repair of equipment rather than a new
purchase, effective arrangements for stock
-
taking and
etc.


Efficiency


It is the fullest possible attainment of specific objectives
or standards


Examples: An air
-
conditioning system brings all rooms to
the desired temperature, a timetable which deploys staff
fully, and etc


Cost
-
efficiency


It relates efficiency to its cost. X is more cost
-
efficient than Y because it achieves greater
efficiency at the same cost or same efficiency at
lower cost


Examples: A new air
-
conditioner which provides
the same cooling system more economically,
preventive maintenance of buildings which
avoids long
-
term maintenance costs, and
purchase of slightly more expensive equipment
which stands up better to wear, and etc.


Effectiveness


It is the fullest possible attainment of the goals and
objectives of the school


Examples: Improved performance, improved student
attitudes and behavior, better parent and community
relations and etc


Cost effectiveness


It relates effectives to the cost incurred


Examples: Expenditure on the promotion of schools
brings increased enrolment, peer tutoring improves
student performance with little extra cost, and etc




The three Es can be in conflict, but how?

Cost Characteristics of

Schools


Most schools are non
-
profit organizations.
Therefore:


There is no single objective criterion to use in
measuring performance


There is no way to estimate the relationship
between inputs and outputs


Schools are service organizations and perform a
social as well as an economic function.


This makes measurement and costing of their
output difficult


School cost structures are very stable (Schools
are conservative institutions).


School unit costs tend to rise when education
becomes more technical and science
-
centered,
when it deals with older students, and when
there is greater concern for quality


Schools are very labor
-
intensive


School calendars cause high costs


School Financial Management Model

(Knight)


Features of the model


Finance triggers and controls the system


An individual component, be it financial resources or human or
physical resources, are only part of the system.


The further away from the initial financial input, the more its direct
impact is reduced


The whole system is susceptible to good management


Financial management has two faces: money management and cost
management


Cost management not only dealing with identifying costs and
reducing them, but also covers time utilization, the educational
process and its outputs, and alternative educational strategies, and
etc