New Year, New Budget
A budget timeline for schools and academies to stay ahead of the game
The lead up to Christmas is always a busy time for schools. Whilst the perception may be one of a festive atmosphere and sparkly productions, the reality for school leaders is often an intense time of mid-year planning and ensuring everything is on course for the spring term. Combine this with the challenges of increased staff absence and inclement weather, and it can feel anything but merry and bright.
For leaders responsible for budget planning, December and January are critical months. Whether an academy or maintained school, there is much to be done before final allocations – General Annual Grant (GAG) for academies and School Budget Share (SBS) for maintained schools – become known at the end of February.
Our SFS budget calendar offers a clear timeline for all schools and academies to help leaders stay on track and prepare early for any potential challenges ahead. For a more in-depth guide to the whole budget process, watch for our forthcoming book, School Budget Mastery, which will soon be available from our website and from Amazon.co.uk.
- June/July to September – SDP link to budget
The calendar starts with properly costed School Development Plan (SDP) priorities. If they are not reflected in the budget, they are unlikely to happen. Build them into the budget where new expenditure is necessary; some may use existing staff or redirect resources from elsewhere. Regular review of priorities is essential for continuous improvement.
- September – Information gathering
Start gathering information in September. Watch out for Schools Forum decisions, including the LA’s budget strategy, as they may affect your funding for future years, depending on funding reform decisions.
- September to December – Understand your school context
What do you know about your school in relation to the following? How can you find out?
|Admissions data, local demographic trends, local knowledge of families, sibling groups, parental preference and phase transition.|
|Pupil profile (deprivation/SEN/EAL etc)
|Census information and local knowledge of families|
|Staffing profile (age/staff structures/TLRs etc)
|Staffing structure, Salary analysis, HR information, MIS|
|Local issues – specific to local area or individual school
|School/LA records, senior leader colleagues, LA officers, previous trends|
|Historic issues (loans/deficits)
|School records, previous trends|
|School records, senior leader colleagues|
Your October census return data is used as the basis for school funding, so make sure it is accurate. If you have a nursery, the termly headcount will directly affect your early years funding allocation.
- October to March
Check your funding
Use the October census for an early estimate of your available funding. Your Schools Forum may receive information about the impact of any formula changes as they discuss options; either watch out for papers on the Forum website or ask your Forum representative if they have any information. Update this on receipt of your school budget share. In March, check receipt of all allocations and update the budget, estimating Pupil Premium (usually issued in June) and nursery funding (adjusted in- year).
Grant and ring-fenced funding
Keep clear records to show how grant funding and ring-fenced funding (for a specific purpose) is spent.
Understand the difference between income and funding; avoid double counting. Income targets should be realistic and achievable; not meeting them will cause an overspend.
Consider this area of your budget carefully. A well-constructed income strategy could mean the difference between surviving and thriving. Our blog post ‘Schools generating income: a risky business?’ details the types of income, associated risks and practical advice on how to mitigate them.
Current year prediction
Start to prepare a current year outturn prediction. Be mindful of the differences between one-off variances and ongoing variances where the budget is not a true reflection of need. Do you need to alter future budgets to reflect different activity levels, especially changing pupil numbers? Analyse spending to understand your unit costs and how they behave when circumstances change. Have you considered stepped costs, i.e. having a clear understanding of how many pupils can be absorbed before you need an additional class, extra staff or more resources? Can you educate extra pupils at a marginal cost rather than full cost? Remember that for low level growth in the new academic year, you won’t receive extra funding until the following financial year (unless you are an academy funded on estimates).
Check that your budget planning software correctly reflects the national and local context for staff pay. Are oncosts and assumptions for staff movement through the pay ranges applied correctly? Do you check individual details for every member of staff?
Ensure you have a sound understanding of current staffing structures, how they may change in the future and any potential movement of staff through the relevant pay ranges.
For teaching staff, this has become more complex since the introduction of performance related pay. We offer detailed advice on how to approach this in our blog post at https://schoolfinancialsuccess.com/ten-top-tips-for-forecasting-teacher-pay-budgets/.
There will always be some unknowns at the time of budget setting. The safest approach is to assume the most expensive scenarios, but your professional judgement is important, ensuring that assumptions are realistic as well as cautious, especially when funding is tight.
Consider your approach to covering absence: agency or directly employed cover staff, and staff absence insurance. Whatever your set-up, ensure each element is accurately costed, taking previous year trends into account.
Annual review of services, contracts and buybacks
To ensure value for money (VfM), review all services, contracts and buybacks at least annually. A renewal calendar can support a rolling review, promptly identify any need for change, and ensure sufficient time to make alternative arrangements. Use your negotiation skills to get the best deals for your school.
If you are part of a MAT or existing collaborative group set-up you may already benefit from central or shared services. If you are not, you may want to explore the possibilities for this with other schools on an informal basis. There may be significant savings to be had for all involved.
Premises and operational costs
Ensure your budget reflects:
- changes in contracts, e.g. task frequency, labour hours
- changes to energy consumption and prices
- repairs and maintenance
Do you have a regular programme of refurbishment? Do you have a new extension to the building or is one planned that will affect your costs in the next year? Do you have any special circumstances such as PFI and if so, do you have information on the inflationary uplift that will be applied?
Use financial benchmarking tools to compare your spending to other similar schools. Check significant differences through a deeper analysis to justify spending or evidence need for change. Contact other schools that seem to be getting similar or better results at a lower cost to check if they have any tips to help you improve your value for money.
Use of balances
Have a clear plan for using balances and keep it under review. Ensure that you know about any change in plans where balances have been earmarked for specific projects, as costs or the timing of them might change. Are your year-end predictions robust enough to rely on them? How accurate have they been in the past?
What if the budget doesn’t balance?
Double check everything for accuracy. Seek support from peers, LA or MAT officers, an SBL network or other collaborative arrangements.
If you really can’t balance your budget, you must alert your funding body and seek support and guidance on the next steps.
Multi-year financial planning
The best way to avoid a deficit is to plan 3 to 5 years ahead. Multi-year budgeting is essential to achieve outstanding financial leadership, an effective budget plan and a VfM culture.
Develop a range of scenarios for future years, buying time to identify issues and resolve them well in advance.
A multi-year financial plan can only be a high-level, broad brush estimate of funding and costs, but it is essential to help leaders and governors be aware of potential risks and consider how they would handle any significant changes.
Our blog post shares advice for effective multi-year budgeting: https://schoolfinancialsuccess.com/using-our-sfs-tools-a-real-life-experience/
Solutions might involve staffing reductions, re-negotiation of contracts or cultural changes in staff behaviours to reduce waste and make efficiency savings. Consider your income strategy. Undertake a full budget review. Our forthcoming book ‘Leading a School Budget Review’ offers advice and guidance for school leaders to do just that.
- March to June – Finalising your budget plan
Between the provisional and final budget plan, your previous year financial position will be finalised.
You may see some changes to staffing costs during this key recruitment period.
Organisation, forward planning and an understanding of every aspect of your school will drive your budget planning and ultimately lead to your overall school financial success.
Stay focused for 2018
It is clear that the winter period will be busy for those leading on budget construction in any normal year. But what else should you be looking out for as we move towards 2018?
The 2018-19 financial year (April to March for maintained schools and September to August for academies) will see the introduction of the ‘soft’ National Funding Formula (NFF). This represents the biggest change to school funding in decades and brings with it much uncertainty and worry for many schools.
For the next two years at least (2018-19 and 2019-20) local authorities (LAs) will still have the powers to make decisions at local level regarding the formula for their schools. The DfE has confirmed that LAs will receive an increase of +0.5% per pupil each year for these two years. If affordable an LA can agree a positive minimum funding guarantee (MFG) which is significantly different from the -1.5% MFG that schools have been accustomed to in recent years and which is still the default position according to the guidance for 2018/19. However, there are a number of issues affecting LAs which may mean this is not an affordable scenario and MFGs could still be as low as -1.5%.
The earliest timeline for the implementation of a ‘hard’ NFF, where funding is allocated directly from the DfE to all schools, via the relevant funding body, is 2020-21, although a Bill would need to be passed through parliament first.
Schools Forums would therefore be wise to model a range of scenarios for the 2018-19 year, from November 2017 onwards, with an eye on the likely picture for when the hard NFF is introduced. If an LA moves towards the hard NFF in stages, the effect on schools will be far less turbulent than should they face a cliff edge and severe change in funding at that point. Conversely, if funding is available within an LA to provide an MFG of +0.5% then it could be argued that this funding should be directly passported to schools so that the children benefit in the year the funding was intended.
Schools Forum meetings before the end of December provide an opportunity to consider funding models so that LA officers have a clear understanding of the group’s strategic direction before the DfE grant information is issued to the LA on 21st December. The turnaround for LAs to submit funding formula information back to the DfE is extremely tight – 19th January.
Taking the Christmas holiday period into account there is very little time to complete the process of finalising the local formula. By now, most LAs should have conducted their consultations with all schools on how far to move towards the NFF. By the end of this term, Schools Forums should have discussed the results of the consultation and had sight of the LA’s budget strategy, predicted DSG and potential formula results using local census data. Decisions should have been taken on central retention of funding from the Schools Block and any transfer from the Schools Block to the High Needs Budget to meet cost pressures.
How can school leaders participate, be proactive and plan ahead?
If you are a representative on your Schools Forum, you are in a great position to direct questions and challenge to LA officers in relation to the potential different funding models for 2018-19. If you are not, you should direct your questions and challenge via your representative on the forum. Anyone can attend a Forum meeting as an observer, which may be very useful to keep up to date, see and hear modelling information first hand, gain a deeper insight into local circumstances and get an indicative guide as to what their own school funding may look like.
Remember, at this stage this is just an indicative guide. The allocations issued by your funding body in the spring term represent an accurate view of your funding. Early indications are however, extremely important to aid your strategic financial planning. Know which factors are the most significant in driving your funding, and identify whether they are likely to change, so you can anticipate the impact on your budget at the earliest possible point.
Gathering all the relevant information before you begin budget preparation in earnest will pay dividends. Your subconscious will start to work on it and it’s likely that you will start to identify areas that need extra work. Giving yourself ample time to talk to other members of staff or outside experts to resolve any issues is much better than racing around at the last minute, when people may not be available or have the time to help.
Get started with forecasting salaries and reviewing support contracts for goods and services and other areas of expenditure as early as possible. Remember to take into account any known changes to salary oncosts in your forecasting as well as any known changes to your staffing structure. You are in a better position to negotiate better deals for support contracts for goods and services if you are not facing time pressures for renewal. A rolling renewal calendar will help with this and could also help to spread workload throughout the year.
The more you know about what your salary and operational costs are likely to look like for the forthcoming year, the better prepared you will be to construct a first pass at the budget when you gather information about indicative funding scenarios.
We can’t emphasise enough the need for meaningful multi-year budget planning looking 3 to 5 years ahead. Considering your budget year by year in isolation could very easily lead to ineffective allocation of resources to meet the school’s improvement priorities, thus having a significant negative impact on student outcomes.
So, in the wind down to Christmas, wind up your budget planning and get yourself as prepared as possible for setting your new budget in the New Year. Put yourself in the best possible position to deal with any challenges you may face and importantly, allow yourself enough time to ensure the best allocation of the resources available to you, to drive your school forward and secure future success.