CHAPTER ONE
INTRODUCTION
Background of the Study
The success in education (tertiary, secondary or primary education) in any country depends largely on the level of financing. Currently in Nigeria, the financing of education is a joint venture among the Federal, State and Local Governments, with the Federal Government providing a greater percentage of the funds (FGN, 2013). This is only the case in public educational institutions (primary, secondary and tertiary institutions). Incidentally, this arrangement is not the same for private educational institutions which are also part of this study. Good schools and educational programmes are more likely to succeed when sufficient funds are made available to them, and are well managed. Indeed, effective and efficient financial management is a very important element in the implementation of educational programmes.
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Management is a process involving a chain of command, equity, efficiency, stability and the allocation of resources based on generally accepted principles. The principles include division of labour, authority, discipline, unity of command, order and equity. According to Hoy and Miskel (2008), the tasks in business, social and political organisations are too complex to be performed by a single individual, which among others require division of labour. The enormous task of management in educational institutions, for example, secondary schools is collectively carried out by the school head, subject teachers, administrative staff and other support staff (Kaguri, Njata &Thiane, 2014). The management of public education system in Nigeria is structured on Weber’s hierarchy, starting from the minister/commissioner of education, directors, chairman of boards, headteachers to classroom/subject teachers as well as the administrative and support staff. This is also the case in the management of private schools except that the funding is largely born by the parents and the school proprietors. However, the school head (the principal, in case of secondary schools), in either system (public or private) is in charge of the general internal management functions in the school. The principal as the chief executive in any secondary school is also the chief accounting officer of the school. Among the basic management functions of the principal of a secondary school is the financial management of the school.
Organisations and institutions utilize financial management strategies as an essential means for achieving organisational objectives. Financial management is generally concerned with financial procurement, allocation and control of financial resources in an organization. It is a way of keeping an organisation’s income and expenditure in proper shape. Financial management can be defined as the process of properly allocating and controlling the financial resources, including accounting and financial reporting, budgeting, collecting account receivable, risk management and insurance of a business. Chuke (2001) defined financial management as a managerial activity which is concerned with the planning, acquisition and control of financial resources of a firm in order to achieve the goals of the firm. Financial management encompasses the full range of a company’s finances, from setting out the financial objectives and identifying the sources of fund, analysing data and making financial decisions to tracking the variability between actual and budgeted results, and identifying the reasons for the variance. Osuala (2004), however, described financial management as the series of actions taken to create a financial strategic plan, which is designed to achieve the organizational objectives. Roseberg (2010) defines financial management as the function of raising and providing funds for capital purchases. Birgham (2000) regards financial management as involving rational decision-making in financial matters. Birgham further maintains that the work of the financial manager is to raise money needed to purchase the required plants, equipment and inventories. Financial management in this study is the controlling, planning, organizing and co-ordination of financial activities of an organisation in order to achieve the desired goals and objectives.
The school manager requires a sound knowledge of financial management practices in order to realize set educational goals. The financial management of educational institutions in Nigeria especially, the public institutions is based on agency theory. The agency theory implies that, one party called the agent makes decision and acts on behalf of another, called the principal. Agency relationships are common in the public and private educational system in Nigeria due to the nature, arrangement and management of the education industry. For instance, when the principal manages the financial affairs of a secondary school on behalf of the government or the school proprietor, an agency relationship exists. The agency theory also applies in secondary schools, whether public or private secondary schools, when the school finances are used and controlled by the bursar, classroom teachers and or other support staff on behalf of the principal or proprietor of the school.
The financial management of secondary schools, like other educational institutions in Nigeria is the application of the general management principles to the financial resources of the schools. It involves the planning (budgeting), organizing, directing and controlling (auditing) of the financial activities such as procurement and utilization of funds managementstudy guide. The study guide states that the objectives of financial management at any setting is to ensure regular and adequate supply of funds; adequate returns to stakeholders (In case of schools in Nigeria, parents, the government, parents, students, teachers and the general public); optimum fund utilization, safety of investment and sound capital structure.
Financial management plays a very crucial role to the development of education. This is because it provides the financial managers the means for ensuring optimum utilization of funds, determining the capital requirement of an institution and making choices of sources of funds for financing the institutional programmes. The financial management strategies utilized by organisations such as secondary schools include: financial procurement, financial resource allocation and financial control strategies.
Financial procurement can be defined as the process of obtaining money or funds for the purpose of managing a business. In schools, financial management involves the planning, mobilization and utilization of financial resources to achieve educational objectives. School heads are therefore, duty bound to undertake effective financial management strategies to ensure the wellbeing of teachers, pupils, school plant for efficient service delivery. Some of the financial procurement strategies that can be utilized by an educational institution, according to Osuala (2004), includes: Statutory allocations from government, collection school fees and levies, taking loans from banks and other specialized financial institutions, trading and school farm proceeds, and other financial windows. Similarly, Wamunyu (2012) stated secondary school heads can generate money internally through the hiring of school facilities such as buses, school halls and compounds among others for social functions. Olu (2012) also corroborated by maintaining that the fact that government cannot adequately fund secondary education alone implies that principals must look for other sources of revenue to finance school programmes. However, the author emphasised that after the funds have been sourced they have to be judiciously allocated to the varying school projects and structures to maximally achieve the objectives of the schools.
Financial resource allocation is another financial management strategy utilized for the effectiveness of organisational activities. According to Zain Book.com (2012), financial resource allocation is concerned with the distribution of financial resources among the various projects, business units/departments, facilities and structures in an enterprise. The plan has two parts firstly, there is the basic allocation decision and secondly there are the basic contingency mechanisms. The basic allocation decision is the choice of which items to fund in the plan, and what level of funding that each should receive and which to leave unfunded. The resources are allocated evenly to all items. The contingency allocation mechanisms are in two ways: priority ranking of items excluded from the plans, showing which items to be funded if more resources should become available, and priority ranking of items included in the plan, showing which items should be sacrificed if total funding must be reduced. Educational institutions and other standard organizations allocate their financial resources to the educational facilities and materials based on need and the level of finance that is available.
Another strategy that is indispensable in financial management is financial control. Financial resource control involves planning, performance, evaluation and co-ordination of financial activities aimed at achieving desired return on investment. Financial control strategies are seen as plans, sequence or actions used to monitor and measure performances in an organization. Some of these financial resource control strategies include: the preparation of financial statement, budgeting and budget controls, ratio analysis, marketing controls, human resource control, and information and communication technology among others.
The financial management of a school is all about getting the most from the financial resources of the school. School financial management is the execution by a person in position of authority those management functions related to the financial resources belonging to the school. Joubert and Bray (2007) described a school’s financial management as the sourcing, use and controlling of the financial aspect of a school to attain the set educational goals. The management of school finances, according to Clarke (2007), involves the task of planning (budgeting), coordinating (communicating) and controlling (auditing). The financial management of a secondary school, public or private, is aimed at using and safeguarding the financial resources available to the school to improve the existing structures and other resources as well as providing new ones to achieve the purpose of the school. It involves implementing the resource management procedures and control available to the school (Brealey and Myers, 2001).
