CHAPTER 4 : Finance
WAB is a non-profit educational institution. It has no founding investors,
and does not distribute returns or declared dividends of any kind
or in any form to contributors to the school or its Owner.
WAB founds its operations from the collection of student tuition, capital
levies, and other funds details below. They are used exclusively to
provide:
- quality educational and related programs and services.
- for the long-term stability and financial health of the School.
- for the on-going development, expansion and renewal of
capital assets including facilities.
The sources of these funds are:
- Tuition Fees
- Capital Levy fees
- Application fees
- Transportation fees
- Interest Income
- Donations, grants, contributions
- Any other funding sources as approved by relevant Chinese
laws and regulations
A one-time application fee of USD200 is chargeable upon application for
enrolment with the school. These fees are due and payable upon application. It
is non-refundable if the parents decided not to enroll their child
at the school.
These fees are used to defray costs in relation to processing each student’s
enrolment, administration of assessment evaluation and appropriate
placement of student at the school.
Any change to the application fees has to be formally approved by the Board.
Tuition fees are established to cover operational costs in running a quality
educational programme. Tuition fees are based upon instructional costs
and vary with each grade level.
All fees are fully payable in advance prior to the commencement of each
school year, by cheque or telegraphic transfer in US Dollars or
its equivalent in Chinese Yuan at the prevailing exchange rate.
A finance related service fee equal to the Bank of China’s service
fee rate will be levied on all US dollar cash payment of tuition
fees.
In cases where full tuition fees are borne by the parents personally, installment
payments may be arranged. The Director has the discretion to accept
payment by installments.
The Board will adopt changes in payment procedures to meet operational
requirements. All changes to tuition and related fees require the
formal approval of the Board.
Groups drawn primarily from the community served by WAB may be
permitted to use facilities for worthy purposes, provided that
such uses do not contravene Board policies, do not interfere with
the school program, and do not impose unwarranted burdens on school
personnel.
WAB facilities will only be rented for non-profit purposes.
The Director is authorised to establish regulations for such use
and to give specific permission for each case. He/she will establish
a scale of fees to be charged in light of services rendered and
the nature of the groups involved.
Annual capital levy is collected on an annual and per student basis to
cover the capital expenditure and development needs of WAB. The
amount of levy collected varies with each grade level.
Upon collection, all capital levy funds become part of the Development
Fund (see policy 4.151)
Capital levy fun can be used to meet:
- The School’s annual capital asset and expenditure
requirements, including those for capital-budget educational
supplies, equipment (maintenance, replacement, acquisition),
and related financing expenses where appropriate. This
funding is applied for by the School and approved by both
the WAB Board and the Owner on an annual basis.
- Longer-term development requirements, including the establishment
of new educational programs, the planning and constructing
of new facilities and any major facilities-related upgrades
and replacements, and related financing expenses where appropriate.
Capital levy is fully payable in advance before the commencement of each
school year. The full amount of capital levy is payable regardless
of time of enrolment in the school. Capital levy is not refundable
after May 15th of the given school year for which the refund is
being requested.
Capital Levy fund cannot be used for purposes unrelated to WAB without
the formal agreement of the WAB Board.
Any change to capital levy amount, policy or practice requires the formal
approval of the WAB Board and the Owner.
The first Capital Levy Prepayment Scheme (CLPS) was started in 1994 to
raise the capital to start the school. Participating companies enjoy
priority of student enrolment in the school up to the number of
CLPS places bought. The
CLPS expires in 1999/2000 academic year. After the expiry date, any
funds remaining in the CLPS may be applied, at the participating
company’s
discretion, against any capital levy payments due, at prevailing
rates, or donated to the school. Refunds are not
permitted.
The capital levy rate set for the CLPS for these 6 years are:
| Nursery |
USD500/- |
| Kindergarten/Pre-K |
USD1,000/- |
| Elementary (Including Gr 6) |
USD1,500/- |
| Other Grades |
USD2,500/- |
Any change or new implementation of CLPS require the formal approval
of the Board.
The school provides limited financial assistance under WAB Financial Assistance
Program to students whose parents have difficulty in making full
or partial payment of the school fees. This program is provided to
ensure that children with true need, i.e. those who would not normally
be able to attend the school due to the financial circumstances
of the family will be able to do so.
As a general rule, assistance will not be provided if the total annual
school fee expenses for all the children in the family are less
than 70%
of the sum of the family’s combined worldwide disposable annual income
and 5% of net assets. There is no automatic carry-over of assistance
from one academic year to the next. If continued assistance is desired,
the family must reapply. Total assistance provided should not exceed
90% of school fees.
A minimum of 2% of the school’s budgeted tuition income is allocated
to provide need-based assistance under this program. The Director
must seek Board approval for any request for assistance in excess
of this 2%.
The Board is responsible for the evaluation and approval of the Financial
Assistance Policy and Program. The Director is responsible for the
administration of the Program. All specific assistance decisions under
the Program and within the context of the program’s goal of providing
tuition assistance based on need are to be made by Financial Assistance
Committee comprised of the Director and 2 Board members or other
persons designated by the Board.
The School contracts for bus transport for the students as a necessary
service. Determination of the bus fees shall be based on the forecasted
total expenditure, including costs of contract(s) with the bus service company,
bus monitoring, and associated insurance cover.
The School shall obtain prior agreement of the subscribers that any surplus
may be applied to a previous year's bus service deficit, and when
there is no deficit, such surplus shall either be refunded, or donated
to a legally registered charitable institution (through the School's
Charity Fund).
(See also Charity Fund policy)
The school has other ancillary income which are accounted for as additional
revenue to the school.
Interests earned on deposits placed in the money market is one source of
such income.
Surplus from proceeds of sale of school photos are also considered and
accounted for as additional revenue to the school.
Any other ancillary income would similarly be classified as other
sources of income to the school.
All disbursements of funds must be in accordance with established
financial procedures, approved by the relevant approving authority,
supported by the necessary quotations, approved purchase order
and valid bill. Such disbursements are to be made for authorized
expenditure only.
All disbursements must be immediately updated in the accounts
in accordance with generally accepted accounting principles.
All budgeted expenditure with individual value exceeding US$5,000 must
be supported by 3 quotations. Quotation requirement for expenditures
not exceeding $10,000 can be waived by Finance & Administration Manager. Quotation
requirement for expenditures in excess of $10,000 can be waived
by the Finance Committee. Purchasing person needs to provide waiver
request and justification in writing. An official purchase order must
be completed and approved in accordance with established procedures.
Any expenditure exceeding US$50,000 require final approval of the Finance
Committee or Treasurer, or Owners Representative for expenditures
on projects under direct supervision of the Dual Boards. In case of
an emergency as determined by Finance Manager, if neither of the
above is available, Legal Representative can approve payments.
Expenditures not exceeding US$50,000 require line manager approval and
Finance Manager’s budget verification and approval. All payments
require Director’s (or Deputy Director) sign-off.
Unbudgeted expenses need to follow “Out-Of-Budget Request Process”.
The “Out-Of-Budget Request Process” requires that requestor
prepares “Out-Of-Budget Expenses Request” form and submits to
Finance Manager who provides financial justification and analysis. Out-Of-Budget
Requests within “Out-of-Budget Reserve” need to be approved
by School Director, Finance Committee and WAB Board. Any Out of Budget
Requests outside of “Out-of-Budget Reserve” will require WABEF
approval.
Payments are made to authorized employees for actual work performed in
accordance with the terms of their contracts.
The capital levy rate set for the CLPS for these 6 years are:
- Written authorizations from responsible persons outside
the payroll department are required for:
- Addition and deletion of names from payroll and other changes.
- Changes in contractual terms, salaries or allowances.
- Time cards or other documents of time worked as basis for payroll
preparation.
- Cut-off procedures must be established to ensure that payrolls
are accrued in the proper accounting period.
- Monthly Payroll
Register must be maintained.
- Net payroll amounts must be reconciled to the monthly bank transfers
to individual accounts.
- Procedures must be established to control unclaimed wages.
- The Director reviews the monthly payroll.
- Individual pay slips must be prepared and acknowledged by staff.
- Proper
authorization is required for all entries and adjustments for
payroll.
The banks are operated by authorized signatories appointed by the Board. Normally,
the authorized signatories are officers of the school.
The authorization limits are:
Any change to the application fees has to be formally approved by the Board.
| Up to US$5,000/- and its equivalent in RMB |
Director and Finance Manager |
| Above US$5,000/- and its equivalent in RMB |
Director
Board Treasurer and Board Chair or any other authorised board member
signatories |
The Deputy Director will sign cheques during the extended absence of the
Director.
No authorized signatory is allowed to sign cheques where he/she is the
beneficiary of the cheque, except for payroll and reimbursable expenses.
Signing of a blank cheque, i.e. with the payee and amount left blank is
strictly disallowed.
A petty cash float of US$ 2,000 and RMB15,000/- is kept on an imprest
system.
The US$ petty cash is derived primarily from application fee receipts and
is used to defray substitute teachers’ salaries, advances and US$
petty cash claims.
All petty cash are kept in metallic boxes locked in the safe in the Finance
Department.
RMB petty cash reconciliation and cash count is conducted as and when the
float needs to be replenished.
US$ petty cash reconciliation and cash count is conducted on a monthly
basis.
The following requires the formal approval of the Board:
- Opening and closure of bank accounts.
- Negotiations with international banks.
- Financing in other than local currency.
- Financing repayable in more than one year, including revolving
credits whose terms are renewable beyond one year.
- Mortgaging and pledging of assets.
- Bank guarantees.
Various categories of interest-free loans are available to employees. Except
for the loans specified hereunder, the prior written approval of
the Board is required for all other loans including guarantees
and obligations of employees.
Advances and loans administrated and approved by the Director at his discretion
are:
- Computer loans up to RMB 16,000
- Maximum of 10 loans at any one time.
- Repayable over 6 months or until
end of current contract or before end of current academic year
whichever is earliest.
- Employee Advances of up to one month’s
salary
- Repayable in the following month via deduction from salary.
- Cash advance for purchases
- Advance to staff for purchase of supplies or any other
business on behalf of the school
- A purchase order
must be completed and approved before advance is allowed.
The following interest-free loan requires the block approval of the
Board at the beginning of each school year :
- Car loans of up to RMB 60,000
- Entitled to teaching staff only.
- Maximum of 5 loans at any one time.
Repayable in 6 equal monthly installments or until end of current contract or end of the current academic year whichever is earliest.
1) Fundraising for /making_Donations to non_WAB Entities
and Causes
The
School may organize internal fund-raising for charitable purposes,
e.g. earthquake and other disaster relief. Where appropriate, the
funds shall be collected directly by registered charities entitled
to solicit funds.
The School may provide use of its facilities to charitable and non-profit
social service organizations for such fund-raising. The School will
not retain any portion of funds so raised.
2) Receiving Donations
While the School seeks to provide quality educational service, it
welcomes corporate, organization and individual contributions in
cash and / or in kind for the improvement and development of the
School, and is aware that such donations qualify for various tax
exemptions under Chinese law.
Upon receipt of any such donations, they will automatically become part
of the Development Fund (see policy 4.361). If cash donations are
tied to the procurement of capital goods or educational development
service for the School, they will be so designated and the procurement
will occur from out of Development Fund monies. The WAB board has
sole approval and decision-making authority over any/all donations
made and tied directly to WAB, the School.
3) Recognizing legal constraints involved in fund-raising,
- The School will not permit others to use the School’s
name for fund raising purposes without prior written permission
from the WAB board and its Owner as appropriate and required.
- The
School encourages all who wish to raise funds for or to encourage
the giving of donations to the School to consult with the School
regarding appropriate measures.
- The School reserves the right to decline
any donation, in case or kind, which is subject to any requirement
that is not fully in line with the School’s Philosophy,
mission, and Aims.
Whereas charitable works are a part of The School's philosophy;
And whereas the School is a non-profit institution entitled to receive
tax-free donations,
The School shall maintain a Charity Fund consisting of donations and other
funds, including any surplus from bus fee income, which subscribers have
agreed to donate.
All use of the Charity Fund shall comply with the Donations Law, and be
subject to prior review and approval by the School's Share The
Planet Committee (STP), or other group designated by the Board.
The STP (or other designated
group) shall formulate detailed procedures for application and
use of the funds.
The Owner has mandated that the School should maintain adequate emergency reserves and cover the handling of sudden, unanticipated and/or unavoidable emergencies outside of the school’s control.
The purpose of the Emergency Reserve Fund is to ensure that the school may continue to maintain emergency-level operations and be able to take any/all necessary protective precautions for its personnel, students, and physical assets.
The Emergency Reserve Fund forms part of the Development Fund (see policy 4.361). The funds allocated to this Emergency Reserve may not be used except for the purposes as specified within this Policy. These monies may not be reallocated within the Development Fund except when/if WAB permanently ceases operations, and the entire Development fund is disbursed (see policy 4.361).
The amount of funds to be kept within the Emergency Reserve will be determined by:
- The number of students and personnel at the School,
- An estimation of funds needed to maintain emergency-level operations and to take necessary protective measures as determined by the School and boards
- The amount and extensiveness of insurance coverage that is available to the School that directly mitigates the degree and amount of Emergency Reserves the School must maintain.
On an annual basis, the School will review and propose to the WAB board for approval the level of Emergency Reserves to be maintained by the school. For financial planning purposes, this proposal should cover a minimum 5-year period, with the annual review providing an opportunity for adjustment.
Outside of this annual review and approval, any changes to the approved amount of Emergency Reserves to be maintained by the School can only occur with the formal approval of the WAB board and Owner.
Fiscal Year
The fiscal year runs from 1st July to 30th June each year.
.
Method of Accounting
Financial statements are prepared using the accrual method of accounting for each reporting during the year as well as for the year as a whole.
The accrual method of accounting records revenues earned rather than when
cash is received; costs and expenses recognized and recorded rather
than when it is paid. This method appropriately matches revenues earned
with costs incurred in the same accounting period.
Accounting treatment should be based on local generally accepted accounting
principles, statutory requirements and taxation regulations.
Records Retention Policy
An effective accounting records retention program is required to conserve space with minimum expenditure in maintaining the necessary records required by taxation authorities and other government organizations.
A list of accounting records and forms should be kept, adding or deleting
as conditions warrant. This list should be reviewed and revised annually.
Capitalization Policy
The minimum capitalized amount is RMB2,000/- or its US dollar equivalent of US$250/- which is in accordance with current PRC taxation laws
Depreciation Policy
In accordance with PRC laws, depreciation commences the month following date
of acquisition and are calculated on a straight line basis. The amount of depreciation
that should be charged to income is equal to the cost less salvage value over
the estimated useful life of the asset
The estimated useful lives of the following assets are :
| Assets |
Time |
| Facility Improvement |
10 years / life of the lease |
| Furniture And Equipment |
4 years |
| Information Technology |
4 years |
| Vehicle |
4 years |
Disposal Policy
Capitalized assets that are beyond economic use may be disposed of by raising a disposal request. The approval limits are as follows :
| Net Book Value |
Approving Authority |
| < US$10,000/- |
Director |
| > US$10,000/- |
WAB Board |
This policy outlines the criteria for capitalization of interest costs
relating to acquisition or construction of capital assets which
take place over an extended period.
Interest costs shall be capitalized as part of historical acquisition cost
on the following conditions :
- Assets require a period of time to get ready for their
intended use.
- It is actively undergoing readying process. Examples
are construction of building and facilities.
- If the effect
of interest costs compared to expensing interest is material.
- Interest
costs eligible for capitalization shall be interests recognized
on borrowings and incurred during the period required to complete
the asset.
- Interest rate for capitalization purposes would be based
on the rates of the outstanding borrowings.
Eligibility
To be eligible for interest costs to be capitalized the following criteria must be met :
- The asset or project must be expected to last more
than one year from date of first disbursement of major expenditure
to the date the project is to be put into use. Depreciation
will commence from the date the asset is put to use.
- The total capitalized cost of the asset excluding interest
must be greater than one million U.S. dollars.
Capitalization of interest costs must be approved in writing by the Board.
Long term land lease will be capitalized and recorded in the balance
sheet as an asset.
The capitalized amount includes direct costs incurred in negotiating and
consummating the lease and interest costs incurred on borrowings
to acquire the lease.
Amortization
The lease shall be amortized over the life of the lease term after deducting the expected salvage value, if any
The Director shall develop with the assistance of the Board a 1-year operating
and capital budgets for Board approval. The operating budget shall
seek to maintain bottom line fiscal health and the capital budget
shall ensure building maintenance and facilities improvement. The
1-year budget is a financial control device used for the following purposes:
- It necessitates planning and organization.
- It is the basis of agreement on policies and goals and a
commitment for operating performance.
- It is also a standard of evaluation of performance.
- It is realistic in that objectives represent expected actual
performance.
- It is acceptable as a standard and represents the probable
results for the budgeted year.
- It is acceptable as fair and reasonable by the Director who
has the authority and responsibility for planning and control
of the results.
- The Director is accountable for operating the school within
these budgets.
The process for budgeting for the following academic year shall commence
no later than October each year and should be finalized and approved
by end February. Guidelines will be established at the
beginning of the process to enable the school to prepare the budget
accordingly.
The 1-year budgets are reviewed and initially approved by the Board and
recommended to WABEF for formal and final approval.
Any subsequent revision of the WABEF approved budget affecting the following
conditions require only the formal approval of the Board:
- Any change that does not increase the total annual expenditure.
All other revision over and above the stipulated
conditions must be formally reviewed and approved by the WABEF
Board.
The Director presents monthly financial reports to the Board during monthly
Board Meetings. These reports formally communicates to the Board the
important operating issues and financial status of the school where
variances between actual and plan are reflected.
A fixed asset register must be maintained to record all assets acquired. Procedures
must be established for taking physical inventories of the School?|s
assets including property, all fittings, furniture and equipment.
Fixed asset inventory records must be verified through taking a complete
physical count of the assets annually. The complete physical inventory
must be conducted as a single project and over a limited period of time
and not piecemeal
on a cycle basis.
The school is required to appoint an independent firm of Certified
Public Accountants to examine all books and records of the school
and express an opinion on its financial statements at the close
of each fiscal year. The
accounts and the financial statements must be audited in accordance
with PRC laws and regulations.
- Each year, the school?|s external auditors express an opinion on the
fairness of the presentation of the financial results of operations
and cash flows in conformity with generally accepted accounting principles.
- The
external auditors communicate to the Board, the weakness in internal
control and irregularities that are noted during their examination
of the records.
- Management letters issued by the external auditors
are addressed to the Director with copies to the Board.
- The Management
is required to reply to each of the findings and recommendations
included in the Management Letter within 4 weeks from the date
of the letter.
Requests for appointment and change of external auditors
must be forwarded to the Board for approval
In order to safeguard the interests of WAB, all contracts and agreements
must be prepared and verified by staff who have competent knowledge
of the relevant laws and regulations.
The following policy shall be adhered to when preparing and verifying contracts
:
- Any contract outside of the legally reviewed template requires a legal
review.
Contracts are valid only if they are signed by duly appointed authorized
officers of the school appointed in accordance with the contractual nature
as follows :
- Employment of Director Legally appointed Representative of WAB
/ School Operator
- Contracts requiring the signature of the School's appointed Legal
Representative ("Faren Daibiao" ) shall be signed
by the "Faren Daibiao".
- All other contracts, including lease, building,
staff employment, service and Purchase Agreements shall be signed
by the Director.
All contested contracts shall be reviewed and handled by the appointed lawyers.
To maintain fiscal health of the school, appropriate insurance cover shall
be purchased to protect the school?|s assets. The School shall also
purchase the necessary and relevant insurance to provide coverage for the
following :
- Loss Of Income
- General Liability
- Medical Insurance
- Property Insurance
- Automobile Insurance
- School Leaders' Errors and Omissions Insurance
- Accidental Death & Dismemberment Insurance
The School's insurance needs shall be reviewed annually.
In order to provide against contingencies, during budget preparation and
during school operations, the School shall at all times provide
for and maintain a minimum emergency cash reserve / balance equivalent
to 3 months of emergency basic school operation, which equivalent
amount shall be determined each year during budget approval.
This reserve requirement may be waived only by special resolution
of the Dual Boards of WAB and WABEF.
An Annual Surplus occurs when actual annual expenditures fall below annual
income, with a resulting positive balance. Any year-old positive balance,
once verified and approved by both the WAB board and the Owner,
automatically becomes part of the Development Fund (see policy
4.361).
