www.ajbms.

org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

AN ASSESSMENT OF THE EFFECT OF ACCOUNTING PRACTICES ON THE MANAGEMENT OF FUNDS IN PUBLIC SECONDARY SCHOOLS: A Study of Kisii Central District, Kenya Nyakundi Nyanyuki Faculty of Commerce, Department of Finance & Accounting, Kisii University College. P.o. Box, 408-40200, Kisii. E-mail: finyanyi@yahoo.com Dr. Charles Okioga Faculty of Commerce, Department of Finance & Accounting, Kisii University College. P.o. Box, 408-40200, Kisii. Dr. Patrick Ojera School of Business and Economics. Maseno University. P.O. Box 333 Maseno. E-mail: pbojera@gmail.com Robert Nyamao Nyabwanga Faculty of Commerce, Department of Finance & Accounting, Kisii University College. P.o. Box, 408-40200, Kisii. Corresponding author: nyamaonyabwanga@gmail.com Tom Onsare Nyamwamu Kisii University College, Department of Business Administration P.O. Box, 408-40200, Kisii. E-mail:tnyamwamu@yahoo.com

ABSTRACT In Kenya, Secondary education expenditure has over the years increased with the Ministry of Education statistics indicating that the expenditure increased from 21.7% to 27% of total education budget in the financial years 2004/2005 and 2007/2008 respectively. Despite this increased funding, concerns over the accuracy of fees arrears continue to be raised, questioning the management of funds in public secondary schools. By 2008, public secondary schools arrears from fees collection had accumulated to kshs.15.5 billion. Th is study therefore sought to establish the effect of accounting practices on the management of funds in public secondary schools in Kisii Central District, Kenya. The study employed a survey design using 90 respondents, consisting of 45 Principals and 45 Bursars. Closed-ended questionnaires were used to collect primary data which were analyzed using frequency distributions, weighted means, Pearsons correlation coefficient and regression analysis. The study revealed that the level of Management of Funds in public secondary schools is positively correlated to the extent of use of Accounting Practices at 0.01 significance level. The coefficient of determination (R2) indicated that 92.1% of the variations in Management of Funds could be explained by changes in accounting practices with the F-Statistic (899.091) significant at 95% confidence level indicating that management of funds is influenced by the accounting practices. The study concluded that accounting practices have an influence on management of funds in public secondary schools and recommends the use of such accounting practices to a very large extent and recommends the mandatory use of accounting practices so as to improve the general management of funds in public secondary schools in Kenya. Keywords: Accounting Practices, Management of Funds, Schools.

Society for Business Research Promotion

| 34

www.ajbms.org ISSN: 2047-2528 1.1 INTRODUCTION

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

The growing demand for education and increased literacy has led to massive expenditure on education all over the world. Education in developing countries is the key to any meaningful socio-economic development and reduction in poverty level. According to UNESCO (1961), African countries resolved to provide free, universal and compulsory primary education, increase secondary education by 30% of the children who complete primary education, increase higher education by 20% of students who complete secondary education, and improve the quality of schools and universities. In order to provide education opportunities to their citizens, developing countries have had to increase their public expenditure on education, which at times exceeds the overall growth in gross national product. This normally exerts a lot of strain on other sectors of the economy. It is therefore important to control the expenditure on education so as to achieve a balanced growth in all sectors of the economy. Since independence in 1963, the secondary school financing has been increasing with an expansion in enrolment. For example, student enrollment in secondary schools increased from 30,000 in 1963 to 926,149 in 2004 with government spending up to 29 percent of total government budget on education sector in 1998 and has remained high at 27 per cent in the fiscal year 2004/2005 (Republic of Kenya,2006). The expenditure on secondary education alone in 2004/2005, as a percentage of GDP and total education budget was 1.6 percent and 21.7 percent respectively (KIPPRA, 2007). Through the Bursary Scheme, which was introduced by the government, disbursements to secondary education have been on an increasing trend. In the FY1998/1999, Kshs.0.25 billion were disbursed and by the FY2005/2006, this had been increased to Kshs.1.428 billion (Oyuke, 2007). Between 2003 and 2008, donors and the government paid Kshs.28.3 billion for infrastructural improvement in schools (Republic of Kenya,2008). The parents and communities too have been meeting a substantial proportion of the cost of secondary education. For example, before 2008, parents contributed up to 55 percent of the cost of secondary education (Ngware et al, 2007). The secondary school enrollment is expected to increase to 2.7 million in 2015 (KIPPRA, 2007). At this projected enrollment, the expenditure in education is expected to increase further requiring increased resource mobilization and efficient use of the available funds. With the increased secondary school financing and possible financing prospects from the government and other stakeholders, the secondary education in Kenya stands a big challenge on account of accountability and effective utilization of funds (KIM, 2010). The problem with Kenyan schools management systems is its `anarchic nature (KIM, 2010). Teachers and board of governors (BOG) without relevant skills have been left in charge of important management processes like accounting, planning, procurement and project management (KIM, 2010). Although secondary school Principals are regarded as financial controllers and accounting officers at school levels, most of them have no professional qualifications to enable them execute their duties effectively (Langat, 2008). They therefore require initial and regular inservice course in financial management so as to be fully conversant with school accounting and book-keeping procedures and must be capable of supervising and controlling the work of the bursar and the accounts clerk (secondary schools Heads manual, 2005). School bursars and accounts clerks are expected to give principals assistance in handling accounting or financial matters (Langat, 2008). They are supposed to use the accounting instructions issued by the MOE to maintain proper accounting records for all the schools revenues and expenditure (Republic of Kenya,2003). With the increased funds being channeled to secondary schools by the MOE through such schemes as FSE, bursary scheme and other infrastructural funding programmes, incompetence and unaccountability at the dissatisfaction of parents and students continue to be an area of concern. School creditors and debtors continue to accumulate at an increasing trend. For example, by 2008, secondary school creditors had accumulated to Kshs.5.5 billion against the schools arrears from fees collection and other debtors of

Society for Business Research Promotion

| 35

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

Kshs.15.5 billion (Republic of Kenya, 2008). In Kisii Central District (KCD) alone, secondary schools arrears from fees had accumulated at percentage increases of 7.28, 8.90, 12.60 and 15.18 in 2005,2006,2007 and 2008 respectively (KCD Audit Unit, 2009). Complaints have been raised by parents, form four leavers and the government over the accuracy of such fees arrears leading to retention of KCSE certificates. According to the study conducted by KIPPRA (2007), in some cases school leavers were denied their KCSE certificates over non-existent arrears, with some parents accusing the schools of making fictitious fee balance claims. The study indicated that day schools were overcharging parents by an average of Sh.3, 200 annually. This brings into sharp focus the operation of accounting practices in Kenyas public secondary schools. It is not clear if the existing accounting practices are operating effectively in the provision of accurate financial information for proper decision making by the school principals. Studies have been done on the effects of decentralization of school funds, parental contribution and the impact of government instructions on financial management in public secondary schools in Kenya, but little empirical literature does exist done on the effects of accounting practices on the management of funds in public secondary schools. It is against this background that this study sought to establish the effects of accounting practices on the management of funds in public secondary schools in Kisii Central District. More, specifically, the study sought to determine the extent of use of accounting practices in public secondary schools, the level of management of funds in public secondary schools, and the relationship between the extent of use of accounting practices and the level of management of funds in public secondary schools. 1.2 LITERATURE REVIEW Cadwell (1994), was concerned with the effects of sch ools resource management on the learning outcome. Principals interviewed reported that with decentralization of authority, responsibility and accountability to schools, the management of schools improved and consequently an improvement in the learning outcomes. He also researched on the links between elements of reforms and learning outcomes. He noted that of importance are the paths of indirect effects, illustrated for planning and resource allocation benefits which are mediated in respect to its effect on curriculum and learning benefits through personnel and professional benefits and confidence in attainment of school of the future (SOF) objectives. Therefore realizing the expected benefits of better resource management, clearer sense of direction, increased accountability and responsibility, greater financial and administrative flexibility, and improved long term planning, will have no direct effect on curriculum and learning benefits but will have an indirect effect on the extent they impact on personnel and professional benefits which in turn have a direct effect on curriculum and learning benefits. Winkler et al (2007) reviewed literature from Chile, where the central government started a policy to fund school development project as a strategy of activating greater management and parental participation at the school level. A study of 50 Chilean school found that schools with school development projects had better student performance, but those in municipalities that fund a higher share (less participatory) of total education expenditure did worse. Ikoya (2005) carried out a study on centralization and decentralization of schools physical facilities management in Nigeria and from his findings he concluded that decentralization is a more efficient method of managing schools infrastructure because it promotes accountability and reduces official corruption in schools administration. His study shows that non-availability of physical facilities in many schools may not necessarily be due to inadequate funds, but to inefficient management of available funds. With decentralization of the Principals roles accounting books are likely to be continuously reviewed by an independent organ through increased frequency of extraction and application of the trial balance making them more accountable to their staff, parent, community as well as the ministry of Education thus enhancing judicious use of school funds. Galiani et al (2004), did a study in Argentina, on secondary school education and tested the

Society for Business Research Promotion

| 36

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

relationship between educational outcomes, measured by test scores, and decentralization. The findings show that the provinces exhibiting good public sector management, which was proxied by size of the fiscal deficit, experienced significant and positive gains in test scores. The reverse was true for provinces with poor public sector management. This led to the conclusion that decentralization increased school performance but at the cost of greater inequality. Koross et al (2008) conducted a study on the principals and students perceptions on parental contribution to financial management in secondary schools in Kenya. Financial management outcomes basically involved looking at whether finances had been well managed with no or minimal cases of financial misappropriation. Most of the principals were of the opinion that parental involvement in the area of finances in secondary schools had strong influence on financial management outcomes. They noted that parental involvement will not have direct effect on academic performance of schools but will directly affect financial transparency in schools through the preparation and application of financial statements. The schools financial transparency could be improved through increasing parental activities on schools financial management such as development of budget, budget execution, fund raising planning and project implementation among others. Liang (1996), noted that parent teacher and school monitoring committee meetings held on regular basis provide support in addressing school issues and they succeed in enforcing some level of accountability in the system. In Armenia, he identified the role of parents in education finance and management to be that of raising funds for different purpose and support in after school activities and also support the progress of children in school like increasing supplies that support learning. He also conducted a study in Bangladesh, on a female secondary school assistance project used mechanisms to encourage direct involvement of both parents and community members in the process of changing community mindsets towards the education of women. From this project, it emerged that assignment of meaningful responsibilities and control over project resources to parents and community members led to accountable systems that had long term sustainability. Such accountable systems results to improved maintenance of books of accounts, extraction of trial balances, preparation of financial statements and improved budgeting process in schools. Langat (2008), conducted a study on the impact of government instructions on financial management in public secondary schools in Kenya, a case study of Nakuru Municipality, using an ex post facto research design. His objectives were to asses the impact of government financial management instructions on: financing physical facilities, investment activities, financing staff training, recurrent expenditure and establish the challenges facing public secondary schools in implementing the government financial instructions. He targeted 18 public secondary schools' head teachers within Nakuru municipality. His findings were that the government financial instructions had limited the power of the school heads to arbitrarily determine and control the financing of physical facilities. However the instructions had regulated investment activities in the schools to avoid wastage of resources and ensure high returns and accountability. He also found that the government instructions had well regulated staff training in the schools to match their needs and resources. They also facilitated the processing and update of information in the financial statements as evidenced by improved management, transparency and accountability in the schools recurrent expenditures. Langat noted that lack of adequate resources and flexibility was the major challenge to the implementation of government financial management instructions and fees guidelines in the schools. He recommended for the need to properly educate and train the head teachers (schools chief executives) on the importance and implementation of government financial management instructions and fees guidelines. Okumbe (1998), dealt with the cost of education and sources of income to meet the educational costs. He was also concerned with spending of income in an objective, efficient and effective manner in order to adhere to educational objectives and beliefs. From his study he established that budget preparation was common in most schools but was not strictly adhered to. In 1988, the government of Kenya under the structural adjustment

Society for Business Research Promotion

| 37

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

programme implemented the cost-sharing policy in the provision of the social services including education (Okumbe 1998). Although the policy was meant to revitalize planning and management of education, it created many problems including the determination of the amount of fees to be charged in schools. Although many parents complained of mismanagement of school funds, very few corrupt or inept head teachers were disciplined. The result was that most finances raised from parents did not in the final analysis improve the quality of teaching or students welfare (TIQET, 1999). In secondary schools, an annual turnover of ten million Kenyan shillings is managed by accounts clerks and some head teachers have little knowledge in financial management. The same managers may not have skills in project management, though they are charged with planning and implementing expensive projects in schools (Okumbe,1998). These projects normally collapse due to poor supervision and misappropriation of funds. To this end the government in 2003, reviewed and released financial management instructions for educational institutions to manage their resources efficiently. Despite this, an impact on financial transparency and accountability in the management of secondary schools finances is yet to be felt. In summary, from the review of the existing literature, it is clear that various aspects of improving transparency and accountability in the management of school finances have been explored. However, such transparency and accountability in the management of school finances have not been attained to the satisfaction of stakeholders. Little research has been done on the effects of accounting practices on the management of funds in public secondary schools in Kenya. It was against this background, that this study sought to establish the effects of the extent of use of accounting practices on the management of funds in public secondary schools in Kisii Central District, Kenya. 1.3 CONCEPTUAL FRAMEWORK It was conceptualized that, the extent of use of accounting practices was expected to cause an effect on the level of management of funds in public secondary schools. Where adequate accounting practices are in place and extensively used, the level of management of funds is likely to be higher in such schools and vice versa. The various elements of accounting practices have to interplay with the various elements of management of funds for meaningful relationship to be interfered between the two variables. The interplay among the elements of the two variables is as shown in the figure below: Independent variable Dependent Variable

Accounting Practices
Book keeping. Trial Balance. Financial Statements. Internal controls. Fund Accounting. Computerized Accounting

Management of funds
Nature of Audit Reports. Effectiveness of Financials Reports. Satisfaction Level of Budget Management. Satisfaction Level in School project Investment

Source: Self -Conceptualization, 2011 1.4 RESEARCH METHODOLOGY The study adopted a survey design to investigating into the effects of accounting practices on the management of funds in public secondary schools. The target population was 45 Principals and 45 bursars in the 45 public secondary schools in Kisii Central District. Census sampling technique was used to include all the principals and bursars in the

Society for Business Research Promotion

| 38

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

sample. A structured questionnaire was used to collect primary quantitative data. The questionnaire was piloted to ten public secondary schools in the adjacent Masaba North District. Pearsons Product Moment Correlation Coefficient was used to test the reliability of the questionnaire items and a coefficient of 0.73 was obtained and considered adequate enough. Data was analyzed using descriptive statistics such as weighted mean, percentages and frequency distributions. It was presented by use of tables. A simple regression analysis was used to establish the relationship between the extent of use of accounting practices and the level of management of funds in public secondary schools. The regression model used was: Y= a+bx where: Y= level of management of funds in public secondary schools. x=accounting practices used in public secondary schools. a, b are constants. 1.5 RESULTS AND DISCUSSION 1.5.1 Extent of use of Accounting Practices in Public Secondary Schools. This section summarizes the findings on the extent of use of accounting practices in public secondary schools in terms of book-keeping, update of the books of accounts, 1.5.1.1 Bookkeeping With regard to book-keeping, the results of the analysis as shown in Table 1 established that cash books and the receipt books were maintained very often as indicated by their weighted averages of 4.75 and 4.78 respectively. The ledger book, the journal voucher book and the general ledger book are often maintained as shown by their weighted averages of 4.44, 3.92 and 4.08 respectively. The finding shows that public secondary schools often do maintain adequate books of accounts an indication that book-keeping is being used to a larger extent in secondary schools. This finding is in line with the finding of Liang (1996) who established that assignment of meaningful responsibilities and control over project resources to parents and community members improved maintenance of books of accounts in schools. Table 1: Book-keeping Accounting books Never 1 Cash Book 0 Ledger Book 2 Receipt Book 0 Journal Voucher 8 Book General Ledger Book 6 Source: Survey data,2011

Rarely 2 0 2 0 7 7

Sometimes 3 5 10 5 11 9

Often 4 10 10 7 10 10

Very often 5 64 55 67 43 47 79 79 79 79 79 375 351 378 310 322

wi

4.75 4.44 4.78 3.92 4.08

With regard to update of books of accounts, results of the analysis as shown in Table 2 below show that accounting for money received from fees and other sources was found to be used very often in updating the books of accounts as indicated by its larger weighted average of 4.57. Journalization of the school transactions was found to be least used as indicated by its lower weighted average of 4.04. This finding shows that public secondary schools in Kisii Central District do often update their books of accounts, an indication that the information contained in the books of accounts is accurate and reliable. This finding was in line with Langat (2008) who asserted that update of information in the financial statements led to improved management, transparency and accountability in the schools recurrent expenditure.

Society for Business Research Promotion

| 39

www.ajbms.org ISSN: 2047-2528 Table 2: Update of Books of Accounts Never Rarely Aspect 1 2 Reconciling cash and bank accounts Accounting for money received from fees and other sources Payment of creditors and other payables Journalization of transactions school 2 1 1 0

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

Sometimes 3 17 6

Often 4 14 18

Very often 5 45 54 79 79 336 61

wi

4.25 4.57

2 5

1 6

10 13

19 12

47 43

79 79

345 319

4.37 4.04

Making entries for purchase or disposal of fixed assets Source: Survey data, 2011. 1.5.1.2 Trial Balance

13

13

45

79

332

4.20

Table 3 below, summarizes responses on how periodic secondary schools extract the trial balance from the ledger books. A greater percentage, 33% (26), of the respondents indicated that they did extract the trial balance on quarterly basis. This was followed by yearly 28% (22), monthly 21% (17) while the remaining 18% (14) extracted the trial balance on semiannually basis. As such, the quarterly period was most frequently used in the extraction of trial balances in schools. The findings shows that trial balance extraction, as a tool to management of funds in schools is rarely used to test for completeness of accounting records amongst public secondary schools in Kisii Central District. This was in contradiction with Ikoya (2005)s finding that decentralization increases the frequency of trial balance extraction and therefore continuous review of books of accounts. Table 3: Trial Balance Extraction Period Not at all Monthly Quarterly Half yearly Yearly TOTALs Source: Survey data, 2011. Further, respondents were requested to indicate the extent to which they applied the trial balance in proving the authenticity of the records in the books of accounts- to search for and correct errors. The results of the analysis as shown in table4 below show that the trial balance is applied in authenticating the entries in the books of accounts to a large extent. However, the equality test of debt and credit totals of the trial balance was commonly used in authenticating entries in the ledger books as indicated by its larger weight of 3.85. Classification of the transactions into debt and credit entries is least often used as indicated by its lower weighted average of 3.59. As such the trial balance is used to a larger extent to authenticate the information contained in the books of accounts among public secondary schools in Kisii Central District. This implies that the information contained in the books of

Frequency 0 17 26 14 22 79

Percentage 0% 21% 33% 18% 28% 100%

Society for Business Research Promotion

| 40

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

accounts is accurate, correct and reliable for decision making. The finding was in line with Ikoya (2005), who noted that the application of the trial balance will enhance the principals accountability to stakeholders. Table 4: Trial Balance Application Not at all Events Debt and classification. credit entry 1 6 Less extent 2 3 Moderate extent 3 24 Large extent 4 30 Very large extent 5 16 wi

79

284

3.59

Debt and credit entries totals balance Search and correct errors Source: Surveydata, 2011.

3 4

3 12

19 14

32 29

22 20

79 79

304 286

3.85 3.62

1.5.1.3 Application of Financial Statements. Table 5 summarizes responses in regard to application of financial statements in public secondary schools. The results shows that the financial statements are applied to a large extent for comparison purposes and preparation of financial reports to stakeholders. However, the statements are to a more large extent used in the preparation of financial reports to stakeholders as indicated by its larger weighted average of 3.94. This implies that financial statements are a basis for decision making in public secondary schools. This finding was in line with Koross et al (2005), who asserted that preparation and application of financial statements enhances financial transparency in schools. Table 5: Application of Financial Statements. Aspect Not at all 1 For comparison purposes. In preparing financial reports to stakeholders Source: Survey data,2011. 1.5.1.4 Internal Controls Table 6 summarizes responses in regard to level of satisfaction in the use of internal controls in executing the school operations. The findings were that the use of internal controls in executing schools operations is generally satisfactory. However, such internal controls are more satisfactory in the recording of cash receipts and payments as indicated by its larger weighted average of 4.30 and least satisfactory in ordering, receiving and issuing materials from store as indicated by its lower weighted average of 3.99. This finding implies that secondary school operations are executed in an efficient and orderly manner. The finding was in line with Liang (1996), who noted that parentalteacher and school-monitoring committees' meeting held on regular basis provided support in addressing school issues and they succeed in enforcing some level of accountability in the system. 2 3 Less extent Moderate extent 3 15 12 Large extent 4 26 27 Very large extent 5 26 30 79 79 301 311 3.81 3.94 wi

2 10 7

Society for Business Research Promotion

| 41

www.ajbms.org ISSN: 2047-2528 Table 6: Internal Controls

Item Not at all 1 Less satisfactory 2

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

Moderately satisfactory 3

Satisfactory 4

Most satisfactory 5

wi

Recording cash receipts and payments. Ordering, receiving and issuing materials from store. Payment of salaries and wages. Safeguarding of fixed assets of the school. Source: Survey data,2011. 1.5.1.5 Fund accounting

0 0 0

2 5 5

12 12 10

30 41 25

36 21 39

79 79 79

340 315 335

4.30 3.99 4.24

14

30

31

79

325

4.11

Table 7 below gives a summary of responses in respect to fund accounting. The results were that fund accounting is used in public secondary schools to a large extent. However, the segregation of accounts into specific vote heads is a commonly used fund accounting aspect in public secondary schools as indicated by its larger weighted average of 3.99 whereas, accounting for funds allocated to specific vote heads is least used as indicated by its smaller weighted average of 3.96. This finding implies that accounts are segregated into specific vote heads without necessarily having funds allocated and accounted for in respect of each vote head. This was in line with Leon (1970), who asserted that a fund is a selfbalancing set of accounts, segregated for specific purpose in accordance with regulations or specific restrictions and limitations. Table 7: Fund Accounting Not Aspect all 1 segregation of accounts into specific vote heads Allocation of funds to specific vote heads. 3

at

Less extent 2 3

Moderate extent 3 19

Large extent 4 23

Very large extent 5 31 79 315

wi

3.99

5 4

17 19

28 26

28 29

79 79

314 313

3.97 3.96

Accounting of funds allocated to specific 1 vote heads. Source: Survey data,2011.

1.5.1.6 Computerized Accounting. Table 8 below summarizes responses in regard to computerized accounting in public secondary schools. The results were that computerized accounting is sometimes used in public secondary schools. However, the results of the study show that computers are mostly used in the preparation of periodical fees balances to students and parents as indicated by its larger weighted average of 2.71. Such computers are least used in generating source documents and making entries in ledger accounts as indicated by their smaller weighted averages of 2.52 for each. This finding implies that computerized accounting, like the use of such programmes as quick books, is not well established in public secondary schools. The study established that schools using computerized accounting systems have a high level of management of funds. This finding was in line with the finding of Koross et al (2008), who noted that parental involvement in school finances will not have direct effect on academic performance of schools, but will directly affect financial transparency in schools.

Society for Business Research Promotion

| 42

www.ajbms.org ISSN: 2047-2528 Table 8: Computerized Accounting Never Accounting activities 1 Generating source documents Making entries in ledger accounts Preparation of financial statements Issuance of periodical fees balances Source: Survey data, 2011. 35 37 37

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

Rarely 2 10 6 6

Sometimes 3 8 10 7

Often 4 10 10 12

Always 5 16 16 17 79 79 79 199 199 203

wi

2.52 2.52 2.57

33

10

20

79

214

2.71

1.5.2 Management of Funds This section presents descriptive findings of the study, which is linked to the second objective of determining the level of management of funds in public secondary schools. 1.5.2.1 Audit Reports Table 9 summarizes responses in regard to the auditors opinion on the financial statements and underlying books of account in the schools. The respondents indicated that generally auditors have been expressing a unqualified opinion on the financial statements and books of accounts prepared in public secondary schools, over the last three years as indicated by the 30 respondents for 2007, 27 for the year 2008 and 25 for the year 2009. However, such an opinion was more expressed in the year 2007 as indicated by its larger frequency of respondents and less expressed in the year 2009 as indicated by its lower number of respondents. The finding implies that financial statements prepared do not agree with the underlying books of accounts and that there has been no improvement in the preparation and presentation of financial statements, hence not portraying a true and fair view of the financial position of public secondary schools. This finding implies that intensive auditing is not carried out in Secondary schools in Kenya hence supporting assertions by Okumbe (1998), who indicated that intensive auditing of school books of accounts is likely to improve the accounting systems in public secondary schools hence improve financial management. . Table 9: Auditors opinion. 2007 2008 2009 Average Adverse opinion 9 (11%) Disclaimer opinion 7(9%) Except opinion 12(15%) Subject to opinion 21(27%) Unqualified opinion 30(38%) Source: Survey data,2011. 1.5.2.2 Financial Reports Table 10 below shows a summary of the responses on the effectiveness of financial reports. The findings were that financial reports are effective in public secondary schools. However, such reports were more effective in decision making as indicated by its larger weighted average of 4.10 and least effective in timeliness as indicated by its smaller weighted average 27(35%) 25(32%) 20(25%) 24(30%) 18(23%) 12(15%) 5(6%) 4(5%) 9(11%) 14(18%)

Society for Business Research Promotion

| 43

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

of 3.84. This implies that financial information produced by the existing accounting practices can be relied upon by managers of public secondary schools. This finding was in line with that of Langat (2008), who asserted that government instructions on financial management had improved decision making by management, transparency and accountability in the schools recurrent expenditures. Table 10: Financial Reports. Not at all Less Aspect effective 1 2 Accuracy. Timeliness. 0 0 6 8 4

Moderately effective 3 13 18 16

Effective 4 37 32 27

Most Effective 5 23 21 32 79 79 79 314 303 324

wi

3.97 3.84 4.10

Decision 0 making. Source: Survey data, 2011.

1.5.2.3 Budget Management Table 11 shows a summary of responses in regard to the level of satisfaction in respect of budget management in public secondary schools. The finding was that budget management is satisfactory in public secondary schools with a high level of satisfaction in the approval of budgets on yearly basis as indicated by its larger weighted average of 3.86 and low level of satisfaction in sta keholders involvement in budget preparation as indicated by its lower weighted average of 3.34. This finding indicates that budget estimates are on average adhered to in most public secondary schools in Kisii Central District. This finding was partly in line with Okumbe (1988) who had established that budget preparation was common in most schools and partly in contradiction with his finding that budget estimates were not strictly adhered to. The finding was also in contradiction with Koross et al. (2008) who had established that parental involvement in the area of finances in secondary schools had a strong influence on financial outcomes. On the contrary, stakeholders including parents were least involved in budget preparation according to this study. Table 11: Budget Management. Not at Indicator all Involvement of stakeholders in budget preparation. Approval of budgets on yearly basis.

Less Satisfied 2 12

Moderately Satisfied 3 13

Satisfied

Most Satisfied

wi

9 3

33 19 23 28

12 27 13

79 79 79

264 305 269

3.34 3.86 3.41

5 10 22

Adherence to budget 6 estimates. Source: Survey data,2011

1.5.2.4 Investment in School Projects Table 12 below summarizes responses regarding the level of satisfaction in investment in public secondary schools. The finding was that involvement in school projects was satisfactory in public secondary schools with such satisfaction being felt most in the allocation of funds to school projects as indicated by its larger weighted average of 3.85 and less felt in the completion of projects within the scheduled time as indicated by its smaller weighted average of 3.42. This finding implies that allocation of funds to school projects could be perfect but not a guarantee to have such projects completed within the scheduled time. This possibly explains the many incomplete projects in most public secondary schools. This further implies that accounting practices are not strongly felt in

Society for Business Research Promotion

| 44

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

controlling and monitoring projects to completion. This finding was in line with Okumbe (1998), who asserted that school managers have no project management skills, though charged with planning and implementing expensive projects in schools. However, this finding is at variance with the findings of Langat (2008) who established that the government financial instructions had limited the power of the school heads to arbitrarily determine and control the financing of physical facilities and had regulated investment activities in schools to avoid wastage of resources and ensure high returns and accountability. Table 12: Investment in School Projects. Not at Less Aspect all satisfactory 1 2

Moderately satisfied 3

Satisfactory 4

Most satisfactory 5

wi

Prioritization of projects in the school.

18

31

21

79

299

3.78

Allocation of funds to 2 school projects. Completion of projects within the scheduled 3 time. Source: Survey data,2011.

17

34

21

79

304

3.85

18

15

29

14

79

270

3.42

1.5.3 Relationship between the use of Accounting Practices and the level of Management of Funds This section presents findings linking the third objective of establishing the relationship between the extent of use of Accounting Practices and the level of Management of Funds in public secondary schools in Kisii Central District. 1.5.3.1 Pearsons Correlation Analysis Table 13 below shows that, Management of Funds has a very strong significant positive relationship with Accounting Practices with a Pearson correlation coefficient of 0.960. This finding is in line with Langat (2008), who asserted that financial management had a positive correlation with government instructions. Table 13: Pearson correlation coefficient. Accounting Practices Accounting Practices Management of Funds Pearson Correlation Sig. (2-tailed) Pearson Correlation Sig. (2-tailed) N Correlation is significant at the 0.01 level (2-tailed). Source: Survey Data,2011 1.5.3.2 Regression Analysis Table 14 below shows a coefficient of determination R 2 = 0.921 which indicates that 92.1% of the variation in the Management of Funds can be explained by the changes in Accounting Practices. A variation of 7.9% remains unexplained, meaning this may be explained by the intervening variables or other variables not under study. 1 .960 .000 79 Management Funds .960 .000 1 79 of

Society for Business Research Promotion

| 45

www.ajbms.org ISSN: 2047-2528 Table 14: Model Summary Model R 1 .960

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

R Square .921

Adjusted R Square .920

Std. Error of the Estimate 1.75608

Predictors: (Constant), accounting practices. Dependent variable: management of funds. Source: Survey data, 2011. Table 15 below reveals that the Accounting Practices can significantly predict the Management of Funds in public secondary schools (F(1,77) = 899.091, P<0.05). This was in line with Geller (2009), who asserted that ANOVA can be used to test the significance of variation in the independent variable that can be attributed to the regression of one or more independent variables. Table 15: ANOVA Summary Sum of Model Squares 1 Regression Residual 2772.623 237.473

df

Mean Score

Sig.

1 77

2772.623 3.084

899.091

.000

Total 3010.076 78 Predictors: (Constant), accounting practices. Dependent variable: management of funds. Source: Survey data, 2011. Table 16 below shows that the T-test values for the regression coefficient are significant at 95% confidence level (p<0.05). This implies that Accounting Practices were making a significant contribution to the Management of Funds model. The unstandardized regression equation is therefore; Management of Funds = 5.258 + 0.338*Accounting Practices The standardized Beta coefficient indicates that a unit change in Accounting Practices results to a change of 96.0% in the Management of Funds. These findings indicate that Accounting Practices have influence on the Management of Funds in public secondary schools. The simple regression findings show that the extent to which Accounting Practices are used in public secondary schools, has a significant effect on the level of Management of Funds in these schools. Table 16 Regression-coefficients Model Unstandardized coefficients

B Std. Error T Constant 5.258 1.286 4.089 Accounting .338 .011 .960 29.985 practices Predictors: (Constant), accounting practices. Dependent variable: management of funds. Source: Survey data, 2011 1.6 SUMMARY, CONCLUSION AND RECOMMENDATIONS 1.6.1 Summary of Findings and Conclusions

Standardized Coefficients Beta

Sig. .000 .000

The study established that adequate books of account were often maintained in public secondary schools and that they were often updated. It was concluded that book-keeping, as an aspect of accounting practice is being practiced to a large extent in public secondary schools and that the information contained in such books could be relied upon for decision making as it is tested for absoluteness often. It was established that, Society for Business Research Promotion | 46

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

public secondary schools extracted trial balances on quarterly basis and used it to check the arithmetic accuracy of the books of accounts to a large extent. This finding led to the conclusion that the information contained in the books of accounts was accurate and correct. Also it can be concluded that double entry system was adequately used in making entries in the books of accounts. The study established that the income and expenditure statement and the balance sheet were prepared regularly and applied to a large extent in the preparation of financial reports to stakeholders. It was concluded that the state of affairs and the financial position of public secondary schools in KCD are reported regularly and that sources and applications of funds in KCD public schools are properly demonstrated. Internal controls, in major operations of schools, were found to be satisfactory. From this finding, it was concluded that school operations were being carried out in an efficient and orderly manner. For fund accounting the study established that funds were segregated, allocated and accounted for in respect of vote heads to a large extent. However, accounting for such funds in respect of specific vote heads was found to be a least practice of all the fund accounting practices. From this finding it was concluded that funds are seldom accounted for in respect of each vote head and that fund accounting has not been fully implemented in public secondary schools in Kisii Central District. It only exists on paper but not in practice. For computerized accounting, the study established that it was sometimes used in most public secondary schools. However, this was found to be restricted to the issuance of fees balances to parents and students. It was concluded that computerized accounting programs like quick books have either not been introduced or fully integrated into accounting practices in public secondary schools in Kisii Central District. Generally the study indicated that accounting practices were in use to a large extent in public secondary schools in Kisii Central District. As per the second objective of the study, the findings and conclusions made were as discussed below: The study revealed that, the district auditors generally expressed a subject to opinion on the financial statements and underlying books of accounts in the majority of public secondary schools in Kisii Central District. Financial reports were generally effective in respect to accuracy, timelessness and decision making in such schools. Further, the study established that budget management, in respect to preparation and implementation, was satisfactory. It was also revealed that, investment in school projects in respect to planning and completion was satisfactory. Generally, the study established that to a high level funds were well managed in public secondary schools. According to the third objective, the findings were that there was a positive, very strong and significant relationship between the extent of use of accounting practices and the level of management of funds in public secondary schools as measured by accounting practices at 0.01 level of significance. Variations in the level of management of funds could be explained by changes in the extent of use of accounting practices. On the basis of these findings, the study concluded that use of accounting practices to a large extent enhances the management of funds while use of accounting practices to a small extent lowers the level of management of funds in public secondary schools. Hence there is need for public secondary school principals to embrace extensive use of accounting practices as a tool to improving management of funds in their schools. 1.6.2 Recommendations for policy and practice First, the study recommends that the government through the Ministry of Education (MOE) provides training programs, through seminars and workshops, in management accounting practices for school principals and bursars to improve the extent of use of accounting practices in their schools. Second, the MOE in collaboration with the Ministry of Energy should put in place measures that will ensure immediate supply of electricity to not only public secondary schools, but also to all institutions of learning. This will facilitate use of computers in public secondary schools and hence computerized accounting. To improve on the presentation of financial statements that exhibit a true and fair view of the state of affairs of public secondary schools, the Ministry of Education should consider setting minimum qualifications in accounting for specifically Bursars and accounts clerks.

Society for Business Research Promotion

| 47

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

This will inject professionalism and independence into public secondary schools accounting practices and therefore improve the management of school funds. Third, Secondary school principals and bursars should consider extracting the trial balance on monthly basis. This will improve the authentication of records in the books of accounts. The study further recommends that public secondary schools principals should be committed to the fund accounting practice fully and allows independent accounting for funds allocated to each vote head. The responsibility of accounting for funds in respect of each vote head should be vested on the bursar and his suggestions on how to improve the practice be taken seriously. They should also be encouraged to fully integrate computerize d accounting into the schools accounting practices. They should encourage their Bursars and the accounting clerks to acquaint themselves with computerized accounting programs like quick books. This will improve the recording of transactions in ledger books and preparation of financial statements in public secondary schools. 1.6.3 Suggestions for Further Research. First, data analysis was only based on the opinions of public secondary school principals and bursars. For more realistic results, it is suggested that further research be done that seeks the opinion of other stakeholders like parents, students, teachers and donors in both private and public primary and secondary schools so as to establish a meaningful relationship between Accounting Practices and Management of Funds. Second, data collection only provided cross-sectional data. Research of this nature would give clearer understanding of the relationship between accounting practices if longitudinal analysis was applied. It is suggested that further research studies that are of longitudinal in nature be undertaken using a case study design, so as to better establish the cause-effect relationship between accounting practices and management of funds in public secondary schools. Third, the research study was restricted to public secondary schools in Kisii Central District. For more conclusive results, a similar study should be done in another district with a number of national and provincial schools. REFERENCES Borg,W.R and Gall, M.D.(1998). Educational Research; an introduction: New York: Longman .Inc. Bullock, A. and Thomas, H. (1997). Schools at the centre: A study of Decentralization Routledge, London. Caldwell, B. J. (1994). School-based management: (2nd Edition) Hussein, T. and Postlethwaite, T.N. (Eds), international Encyclopedia of Education. Pergamon Press. Cole, G. (2004), Management Theory and Practice: (6th edition)Book power/ELST Davis, J.H., Schoorman, F.D. and Donaldson, L. (1997), Toward a Stewardship Theory of Management, The Academy of Management Review, Vol.22 No. 1. Donaldson, L. and Davis J. H. (1991), Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns, Australian Journal of Management. Galiani,S. Schargrodsky, E.and Gertler, P.(2004).Helping the Good Get Better, but Leaving the Rest Behind: How Decentralization Affects School Performance: Research Triangle Institute International, Washington, D.C. Geller, K. (2009). Statistics for Management and Economics: (8th Edition) South Western Cengage Learning. OH. Hanushek, E. A. (1996). Outcomes, costs, and incentives in schools: Hanushek, E.A. and Jorgenson, D.W. (1997). Improving Americas school; The role of Incentives: National Academy Press, Washington ,DC,Ch,3,PP.29-52. Ikoya, P.O. (2005). Centralization and decentralization of schools physical facilities in Nigeria: Department of Educational Administration and policy studies. Faculty of Education, Delta state University, Abaraka, Nigeria Jain, D.P. &Narang, K. L.(2007). Advanced Accountancy 1:(16th Edition) Kalyani. Publishers. Jay, B.B. and William, S.H.(2008). Strategic Management and Competitive Advantages: Pearson Prentice Hall. Pp273.

Society for Business Research Promotion

| 48

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

Johnson, F.(2003). Financial Accounting for Local and State School Systems: The National Centre for Education Statistics. Kerlinger, F.N. and Pedhazur, E.J.(1986). Multiple Regression in Behavioral Research: New York: Holt,Rinehart and Wiinston. Koross, P.K., Ngware, M.W. and Sang, A.K (2008). Principals and Students perceptions on parental contribution to financial management in secondary schools in Kenya.: Egerton University. Kothari, C.R.(2004). Research Methodology: (2nd Edition), New Age International (P) Limited Publishers. Langat, G.K (2008). An Evaluation of the Impact of Government Instructions on Financial Management in Public Secondary Schools in Kenya. Egerton University. Leon, E.H (1970): Accounting for Governmental and non-profit Entities: (6th edition) Richard D. Irwin, Inc., Homewood, IL. Liang, X. (1996). Bangladesh Female Secondary School Assistance: Human Development Department, World Bank, Washington, DC. Malen, B., Ogawa, R.T. and Kranz , J. (1990).What do we know about site-based management; a case study of the literature-a call for research in Clune. Maslow, A. H.(1943), A theory of human motivation, Psychological Review,Vol.50,pp. 370-396 Mugenda, O.M. and Mugenda, A.G. (2003). Research Methods; Quantitative and Qualitative Approache:. Acts Press. Mwindi, D. (2005). Auditing: focus publishers, English Press, Nairobi. Ngware,M.W., Onsomu, E.N, Kiriga,B. and Muthuka,D.I.(2007).Free Secondary Education IN Kenya: Costs , Financing sources and implications : KPPRA Discussion. Paper, No.75 Kenya. Okumbe, J.A(1998). Educational Management Theory and Practice: Nairobi University Press. Olembo, J.O, P.E. & N.M (1992). Management in Education: Education Research Publications. Orodho, A.J(2003). Essential of Education AND Social Science Research Methods: Masola Publisher. Oyuke, A.(2007). Local Level Funding as a Poverty Exit Route; Experiences from Local Level Jurisdictions in Kenya: University of Nairobi. Pandley, I.M.(2008). Financial Management: (Ninth Edition) Vikas Publishing House PVT Ltd. Republic of Kenya (2003). A Handbook of Financial Managemesnt Instructions for Educational Institutions: Nairobi: Government Printer. Republic of Kenya (2006). Public Procurement Regulations: Government Printer. Republic of Kenya(2008). Radical Reform for Kenyas Educational Sector, Publication Management Instructions for Educational Institutions: (1st Edition). Nairobi; Government Printer. Roscoe, J.T. (1969). Fundamental Research Statistics for the Behavioral Sciences: New York: Holt, Rinehart and Winston. Ross, A. S., Westerfied, R.W., Jaffe, J. and Jordan, B. D (2009).Modern Financial Management :(8th Edition) McGraw-Hill Education (Asia) International Edition Thompson, D.C. and Wood, R.C.(2005). Money and Schools: (3rd Edition),Library Congress Cataloging-in-publication. Winkler, D.R. and Yeo, B. (2007). Identifying the impact of educational decentralization on the quality of education: working paper,Academy for Educational Development. Wonjae (2000). Regression Analysi:. Accessed at http://www.scipub.org. Wood, F. and Robinson, S. (1997). Book keeping and accounts: (4th edition) British Library Cataloguing in publication data, London-San Francisco. _____________ (1961), Final Report of the Conference of African States on the Development of Education in Africa. UNESCO _________ (1992). The Art and Practice of Learning organization: UNESCO. Paris Senge, P. The Fifth Discipline. __________ (2009). Financial Management: Strathmore University Study Text.

Society for Business Research Promotion

| 49

www.ajbms.org ISSN: 2047-2528

Asian Journal of Business and Management Sciences Vol. 2 No. 8 [34-50]

___________ (2010).Kenya Educational Sector Integrity Study(KESIS): Transparency Intrenational, Kenya. ___________ (2008).Kenya National Bureau of Statistics(KNBS) ___________ (2004). Kenya Institute of Public Research and Analysis(KIPPRA), Social Sector Division, Nairobi. __________ (2007).Financing Secondary School Education in Kenya; Costs and Options: KIPPRA Discussion paper No. 55 __________ (2010).Kenya Institute of Public of Management (KIM). __________ (1999).Totally Integrated Quality Education and Training(TIQET): a Report of the Commission of Inquiry into the Education System in Kenya, Nairobi: Government Printer. __________ (2005).Secondary school Headteachers Manual. __________ (2009).Ministry of Education Audit Unit, Kisii Central District.

Society for Business Research Promotion

| 50