Imagine that all your school activity funds are in a piggy bank on your desk. Can you tell how much money that bank contains? You probably can’t—unless it is made of glass. If the bank were transparent, you’d have a pretty good idea, and so would the people who are raising the money.

Transparent fund accounting has two significant benefits: stakeholders can easily monitor their activity funds and they can quickly spot improprieties. Those who handle school funds are less tempted to “lose” $20 here or $100 there if they know they are being watched. Transparency does not prevent improprieties, but it does limit their scope and frequency.

In a given year, schools generate on average more than $140,000 in transactions; most of those transactions are cash based. Few of the people handling those funds— teachers, principals, finance clerks, students, PTA members— have been trained in proper accounting processes and systems, which means they don’t follow the processes and procedures correctly or they don’t follow them at all. That’s why simple, automated accounting systems that provide increased transparency and accurate reporting are so important. Maintaining an accurate centralized system with appropriate oversight helps mitigate the potential for fraud at all levels within a school district.

The district has a fiduciary responsibility to ensure that all funds raised to benefit students are reported and accounted for in a professional manner. Districts that have no internal controls are headed for disaster. When establishing simple, transparent procedures for handling money, follow these simple rules.

Provide clear guidelines on the roles and responsibilities of everyone within your district.
Analyze your current methods and review policies, procedures, and responsibilities for everyone who handles money. Typically, those individuals are school financial clerks, teachers, PTA members, principals, accounting staff, and school business officials. Establish strict accountability guidelines at each level and offer training sessions to educate employees and others about acceptable processes and procedures. Communication and constant review are critical to ensure tight internal controls.

Adopt cash receipt systems at all levels within the cash management process (teacher to student, office staff to teacher, bank teller to office staff), and ensure that receipt numbers are recorded in the general ledger so there is an audit trail.

Request from principals the estimated revenue and expenses of clubs, teams, and events for the year.
Just as principals and superintendents project their curriculum expenses, school activity sponsors should project their activity expenses and revenues. This procedure creates an environment of transparency and accountability because school personnel have clearly defined financial goals and expectations, an action plan to reach those goals, and benchmarks for comparison.

Use modern solutions.
Many people erroneously believe that when data are entered into a computer program, warning bells sound automatically if the program detects a misappropriation of funds. The tools to “catch” those irregularities must be put into place; they are not automatically embedded in a program.

A Web application gives district officials centralized and wide-open access so they can query specific fields or data points, allowing them to monitor funds continuously and catch problems early. Because they are easily accessible, Web applications give districts the transparency required to monitor funds.

Imagine the power of “real-time” research that allows district officials to

• run modification reports of every alteration in school ledgers,
• research the amount of cash versus checks that are being deposited into the bank accounts,
• query multiple disbursements to the same recipient,
• generate stratification reports detailing all disbursements issued from the bank account in descending order, and
• monitor the log-ins and access for security.

Although we have an organizational climate in education where the districts and the state have an expectation of strong internal controls, the nature of schools and cash management is decentralized.

Web-based solutions can enable districts to move beyond a glass piggy bank. They can ensure that their accounting systems and processes generate accurate information efficiently and effectively.

Kim Vivian-Downs and Evelyn Eagle are the cofounders of KEV Software Inc., with offices based in Wilmington, North Carolina, and Toronto, Ontario. For a free copy of Best Practices: District Level Roles and Responsibilities, please e-mail info@kevgroup.com.