0.1 Literature review  (Page 5/19)

• Asset Management includes: Safe guarding of Assets; Annual Stock Takes; Board of Survey and if necessary Board of Enquiry
• Reporting must include as a minimum requirement: Monthly Budget Variance; Monthly Income and Expenditure to the Circuit Office; Quarterly Income and Expenditure AND Budget Variance to the Education District Office; Audited Annual Financial Statements to the Provincial Head Office

Corporate governance

The King Report on Corporate Governance made recommendations relating to corporate governance and ethical standards for South African entities and included a set of guidelines and principles for good governance. Compliance with the King Report should be an integral part of the modus operandi of all public sector institutions. The King 2 Report incorporated, inter alia, recommendations on a Code of Corporate Practice and Conduct applicable to all public institutions – the focus was on the functions, duties and responsibilities of governors to ensure effective governance of their institutions (schools). The “King Code” includes four basic principles namely fairness, accountability, responsibility and transparency. Corporate governance therefore describes the overall management of the institution and the King Report states that corporate governance should form the basis of financial management in the public sector. Fakie in Van Wyk (2004; 413) supports the views of the King Report by stating that corporate governance deals with controls, decision making and structures for accountability that will assist in ensuring that the objectives of sound financial management practices are achieved. One of the objectives of corporate governance is to ensure that public service entities (including schools) deliver services in an efficient, effective and economical way.

Van Wyk (2004; 414) adapted states that the implementation of sound corporate governance and financial management principles is hindered due to various managerial shortcomings which include but are not limited to:

• a lack of skilled and qualified staff
• responsibilities not being clearly defined
• a lack of knowledge of the PFMA
• a lack of training
• a lack of structured policies and procedures
• existing systems not supporting the requirements of the PFMA
• outdated accounting and information systems
• inadequate control systems
• the poor flow of documentation and information
• non integration between budgets and strategies

Van Wyk goes on to state that the above shortcomings can be grouped into three broad categories: (i) inadequate and unknowledgeable staff; (ii) poor integration of budgets and strategies and (iii) outdated control and reporting systems and suggests that financial management will only be effective if: (i) line managers are competent and committed; (ii) outcomes based budgeting is applied and (iii) accrual-based reporting is introduced into the public sector. Wheeler in Van Wyk (2004; 415) emphasises the need to find solutions to one of the most pressing needs in South Africa – an honest and sound financial system. Van Wyk (2004; 415) concludes by stating: “With a few exceptions financial administration in the public sector is not a pretty sight due to a lack of up-to-date technology, financial restraints, inadequate financial training and poor internal control systems.”