How selected primary schools in rural New Zealand manage their financial resources of limited go

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June 2010,Vo1.6,No.6(Serial No.61) Journal of Modern Accounting and Auditing,ISSN 1548—6583,USA How selected primary schools in rural New Zealand manage their financial resources of limited government funding in order to effectively meet their schools obj ectives 

Crabtree Jen,France Adrian (School ofBusiness,Waikato Institute ofTechnology,Hamilton 3240,New Zealand) 

Abstract:This study evaluates the extent to which primary schools in a region of New Zealand are challenged by limited funds to enable the effective management and performance of their schoo1.The study involved interviews with school principals and analysis of their schools’financial statements.The aim of this project is to gain a current understanding of the issues and challenges facing primary schools in a defined region (Waikato)to see whether the trends identified in national research studies,confirms the problem that schools are underfunded.The results of the current study identified the issues experienced by the Waikato schools and in most cases supposed previous research findings.The findings of the current study also suggest that schools share the dilemmas associated with limited government funding and rely significantly on local funding sources to achieve their basic obj ectives.Although schools may be effective in the management of their school objectives,there is more govemment funding required to relieve the pressures and challenges. Key words:schools;budgets;funding;management;finance 

1.Introduction Since the decentralization of school management from the introduction of tomorrow’S schools f 1 989)there has been much recent discussion about how schools are underfunded by the government.HOW do primary schools deal with the challenges that arise as a result of limited government funding to enable the effective management and performance of their school? A number of New Zealand research studies about how schools manage their finances have been undertaken in recent years.For instance Wylie(2007a,2007b),on behalf of the NZ Council for Education Research,has discussed her findings and identified pressure points facing schools in their financial management.The most underlying aspect of the studies showed that underfunding of schools was a paramount concern facing stakehOlders in school education. 

2.Literature review 

Crabtree Jen,School of Business,Waikato Institute of Technology New Zealand;research fields:management and organization of public schools. France Adrian,School of Business,Waikato Institute of Technology New Zealand;research fields:management accountants, accountants in the media,development of research and the activities conducted by researchers. 

14 How selected primary schools in rural New Zealand manage their financial resources of limited government funding in order to effectively meet their schools objectives

Over the last 20 years,the effects of the tomorrows schools reforms have played out their part in how schools manage the financial constraints imposed and how they have dealt with them(O’Neill,1 998).During 1 990 to 1 997 studies were conducted on the application of government funding of schools and what was happening with that funding.There was a decline in government funding that did not cover the additional costs of administrative workload.A trend emerged of a rise in parental expenditure on children’s education and expenditure diferences between parents in professional occupations and others.There came to be what is known as the“user pays’’ system that reinforced the institutionalized comparisons between those who were well—ofr and those who were not Schools were split into decile groups of which lower decile schools were limited by their parent’s capacity to donate and contribute,while higher decile schools had a greater capacity of parents to spend(0’Neill,1 998). With the introduction of the New Public Financial Management procedures in the 1 990s,the reforms’impact on the NZ education system meant that education providers had to be more responsive and accountable for the efficient and effective use of their resources(ERO,1 994;Picot Report,1 988;Tooley&Guthrie,2003).How schools were actually behaving in response to those reforms was evaluated in a study by Tooley and Guthrie (2003)that identified aspects of schools’budgeting systems and decision—making practices.That study identified issues of lack of funding,changing roles of principals from leadership to managerial roles,and the notion of school’s budgeting philosophy of“running an operating deficit to let government know we are not getting enough money”(Tooley&Guthrie.2003). In the last five years an issue in education research has been how effective schools were managing their finances.An important finding of the studies conducted in 2004 found that although schools were effective,this was dependent on the hard work,dedicated staff and expertise available through boards and financial and property advisors(Wylie&King,2004).Schools were becoming dependent on funds,they were able to raise from local fundraising and this became far more prevalent since decentralization of schools. Financial pressure points that impacted negatively on a school’s performance included:the affordability of good support staff,employment and/or retention of good quality teachers,IC property maintenance, depreciation costs and allowing for teacher non-contact time(Wylie&King.2005). While government funding of schools had increased compared to previous years,the increase was not enough to keep up with CPI increases.Furthermore,higher decile schools were found to be relying more heavily on parental funding such as donations.increased school fees more so than before.What was also significant was that a new trend began to develop-parents were becoming reluctant in paying voluntary donations(Wyle&King. 2005). The Education Review Office(ERO,2006)released a report on its investigation into how schools used their operational funding.Patterns of income and expenditure and the processes used by schools to manage their operations grant and sources of income were evaluated by the ERO.The study found that the ways schools used their government funding was influenced by a number of factors.These factors included the amount of local fundraising they generated,the overheads associated with running their school,the community expectations,the financial and strategic capability to which the schools have access and the amount of TFEA(Targeted Funding for Educational Achievement)they received as part of their operations grant.Some schools that were medium and high decile in the evaluation were dependent on locally raised funds for their day-to—day operation,whereas low decile schools received additional funding through the TFEA system. Further to the investigation in 2006,the ERO released a further report on how some of the schools made