Yet other schools just don’t have enough expertise to conduct proper financial oversight. Such schools lack even basic management tools and controls – even though there are so many effective policies and practices that schools could and should be using. They are easy to learn and simple to put into practice.
For example, coherent and informative quarterly financial and cash flow reports are critical to proper financial management. Included in such reports should be a variance analysis to the comparative periods in the budget and prior year. Other important steps schools can take include utilizing tuition management and analytical tools, conducting payroll oversight and reasonableness testing, among other effective controls and procedures. When a school’s management is equipped with the proper financial skills and techniques, it will be able to:
* Discover problems and find corrective actions through proper analysis of financial reports.
* Use the reports to make projections that act as goals and standards for upcoming periods.
* Assess performances against these projections at the end of the fiscal period.
* Work more effectively and cohesively with the lay leadership in achieving better governance and decision-making.
* Respond intelligently to financial inquiries and issues raised by board members, parents, donors and other third parties.
There is another, no less important, reason why schools should ensure that administrative staffs are trained in using effective internal controls and best practices in corporate management: It inspires greater confidence in the parent body and generates a greater willingness in donors to give more. The Shulchan Aruch notes that one should not give tzedakah to an organization unless he knows “shehamemona aleha ne’eman veyode’a linhog ba keshura” (Yoreh Deah 249:7). Roughly translated this means tzedakah should only be given to those organizations with reliable management and the necessary expertise to manage the funds properly.
To be sure, schools that suffer from financial issues generally do so not from malfeasance but from a lack of the financial sophistication necessary to operate the school efficiently. Still, it is inexcusable for such schools to manage their assets irresponsibly and carelessly. Their ship is full of holes and it would be unwise to talk about improvement in fundraising and development before repairing and strengthening the administrative foundation.