Prioritising strategic school financial leadership
School leaders have so many things to focus on. While the summer break is tantalisingly close as we write this, aspects of your planning for the new academic year still need to be finalised. A year of more change lies ahead; what’s new?
Well, you could see a sudden change to your budget for 2017-18, and for many of you it won’t be for the better. This is a period of uncertainty, with little information on how the changes might affect your school.
There is plenty of advice out there on teaching methods, leadership of education, curriculum matters, use of data, getting the most out of your staff and so on. There are forums, blogs, best practice case studies, communities of practice, professional associations and local, regional or national organisations all providing support on educational content and pedagogy.
One area where it’s more difficult to find advice and support is strategic financial leadership. School business managers are an essential resource in today’s complex world of school finances, and they have strategic awareness and technical expertise which will keep you on the right path. Wise headteachers have their SBM on the senior leadership team, to ensure there is a strong link between the educational vision and the resources that will make it happen.
But the buck stops with the headteacher, through delegated authority from the governors and the conditions of the Scheme for Financing Schools (for LA schools) or Academy Financial Handbook and funding agreement (for academies). The whole school looks towards a headteacher for leadership, and financial leadership is part of this expectation.
What is strategic financial leadership?
You won’t find reference to this concept in the Scheme or Financial Handbook mentioned above. They are more about compliance and accountability.
Strategic financial leadership involves creating a vision for how the resources available to your school will be used to achieve your aims in the longer term, and implementing that vision in a way that creates the conditions for sustainable improvement. School improvement, curriculum, staffing and budget plans are all linked, to create a well informed and mutually compatible set of planning documents, which together form a blueprint to drive the school forward.
It also involves coordinating all the strands of value for money in a cohesive approach, eliminating waste, maximising efficiency and ensuring that spending is targeted on the activities that have the greatest impact on outcomes.
But this aspect of leadership isn’t the sole preserve of the headteacher. It needs a team effort across the whole school, each playing their part to create a unified approach, moving in the same direction. If the team is the orchestra that plays the music, the headteacher is the conductor, choosing the music, prompting the sections when they need it and turning the volume up or down as appropriate to create the right blend. But it’s the team that creates the culture, just as the orchestra creates the sound.
Financial leadership – Cinderella at the headteachers’ ball
This aspect of school leadership has an alarmingly low profile. If you are a headteacher, how did you feel when you took up your first headship and were handed responsibility for several million pounds? Did you feel you had sufficient preparation for it? If you are a member of SLT, a middle leader or a head of department, how much training have you had to help you discharge your budget responsibilities? Do you understand how your spending drives outcomes? Are all the staff working in the most efficient way?
All senior leaders responsible for taking decisions in a school need to be fully aware of the resource implications of those decisions. If resources (in the broadest sense, such as money, people, buildings, equipment and educational resources) are insufficient, or if they are not directed to the right places, a school may find it difficult to achieve sustainable improvement.
Being strategically aware, targeting funding to priorities and anticipating the need to adjust expenditure as your funding changes are all important skills for anyone involved in leadership of a school, including the headteacher, SBM, the leadership team, Chair of Governors and the Chair and members of the Finance Committee.
We wonder why there isn’t a stronger focus on training in school financial leadership in all the courses available to aspiring headteachers, deputies and assistant headteachers. The NPQH has a financial module but we wonder if there is a strong enough focus on it in the delivery of the course; is it given the same importance as other modules? Where are the forums for senior school leaders to access advice, support and sharing of effective approaches to strategic financial planning? Or do they leave all that to their school business managers?
Many local authorities now have limited capacity to provide in-depth support, and academies make their own arrangements for finance services. But do they include strategic finance, or just the nuts and bolts of budget preparation and monitoring?
In most Ofsted inspection reports, you would be hard pressed to find any solid analysis of the school’s approach to the use of resources or its strategic financial planning. We have even read reports where the fact that the school had a huge deficit was blithely ignored by inspectors, yet there were a significant number of recommendations to be actioned. Didn’t it matter that the school had no money to fund these?
Ofsted can’t even verify the accuracy of the financial position presented by a school. In December 2013, the Ofsted report for a school with a deficit of £2.8m at the previous March contained the following comment: ‘the budget has been brought back into balance from a very large deficit’. What happened to that school’s balances at March 2014? It recorded a deficit of £3.1m, the highest in the country.
We wouldn’t expect inspectors to go into the details of the school’s budget monitoring processes, but an in-year recovery of that order sounds improbable. If a school claimed this was achievable, surely it would be indicative of a leadership either in denial or without a grasp of the true situation. It is therefore questionable whether inspectors have a deep enough understanding of value for money or budget management to be able to ask searching questions or make robust judgements about this essential area.
A school can have outstanding results, but if they are built on small class sizes and high teaching costs that are causing a massive overspend, it is extremely unlikely that standards can be sustained in the long term. At some point a recovery plan has to be put into action, and spending will have to be reduced to a sustainable level.
What lies ahead
The profile of school funding is about to experience a meteoric rise. The forthcoming reform of school funding involves the introduction of a National Funding Formula (NFF), with the aim of achieving parity of funding between similar schools across the country. There will be a redistribution of funding between schools over a period of time, with some losing funding in order to allow others to gain.
The speed of transition to the new levels will be governed by the minimum rate of funding per pupil (the Minimum Funding Guarantee) that the DfE sets. Anyone whose funding would fall below this according to the NFF calculation will receive a top up to get it to that level. Under the current guarantee, the minimum funding level per pupil drops by 1.5% each year, but a faster reduction will probably be imposed for the new formula. Even if your school is set to gain, you might not get all the increase due to you: some of it will be deducted before your allocation is finalised, in order to fund the protection for others.
So far all we know are the principles and structure of three of the four elements within the Dedicated Schools Grant (Schools, High Needs and Central Schools Blocks). No information has yet been published for the Early Years Block.
We won’t find out about the detail of the changes until after the EU referendum, because we are currently in the purdah period when no policies can be announced by the government. Even when the next documents are published, any values announced will only be for consultation. The final outcomes will also depend on the census data for October 2016.
If you don’t feel well enough informed about what lies ahead, you can sign up for our summary of the proposals outlined in the DfE’s first stage consultation on our home page at www.schoolfinancialsuccess.com. You will also receive a regular newsletter about current school funding issues.
Areas of concern
The new funding arrangements will bring considerable challenges for schools:
- The timescales for consultation and decisions mean that you won’t know your new levels of funding until January/February 2017.
- You can’t afford to wait until the exact impact is known to take action. You need to start early, because where staffing reductions are needed, you may have to allow for consultation on any restructures as well as notice periods.
- All schools are currently managing unfunded cost pressures, but these will be made doubly difficult where schools are facing declining budgets.
- If you are starting with a deficit, the challenge will be even steeper.
- Many current headteachers won’t have experienced a time of financial austerity, but now they could have to navigate their way through fundamental budget cuts and a re-imagining of their financial strategy. This needs a different approach compared to the ad-hoc ‘salami slicing’ that can be undertaken for small adjustments to budgets.
- Responding to funding reductions will require engagement from all members of staff, but particularly from the leadership team. Succession planning will be particularly important; involving middle leaders will help them prepare for headship, encourage creativity and share the load.
We believe it is essential to start planning early if you suspect that you may be subjected to funding reductions. Even though you won’t know the level of your budget share for 2017/18 until the turn of the year, you can estimate a range of funding scenarios and start to explore what they might mean. Calculating a range of savings targets and considering how you would achieve them is best done when you have time and space to think creatively, not in a rush when you are under severe pressure to take vital decisions.
We advocate a structured process, to produce a financial sustainability plan which you can present to staff and governors. This will help them to understand the risks and debate the options for restructuring the budget. It will also allow you to demonstrate your financial leadership in setting out a plan to address a potential reduction in funding, while keeping your educational vision and priorities at the forefront of any proposals.
We are currently putting the finishing touches to our first e-book, A Helping Hand to Secure a Sustainable Budget. This will explain in more detail the potential impact of the National Funding Formula, and guide you through a step by step process to calculate a range of funding scenarios.
The book will include downloadable tools and templates to make it easy for you to develop the content for a Financial Sustainability Plan. If you need a more detailed guide, there will also be an online course which walks you through the completion of the workbooks and report appendices. By working through our process, you will be in a much better position to implement a well-thought out plan when you know the reality of what your funding will be for 2017/18 and beyond. As more information becomes available, you can update the plans. By having your medium-term strategy in mind, it may also be possible to take advantage of staff turnover or other changes, to bank some savings early.
Keep your eye on our website and Facebook page for updates; we will be analysing the second consultation when it is published (after the EU Referendum). In the meantime, we will be sharing our views on different aspects of the proposals in this blog, and starting to explore what they could mean for you. You don’t need to go through it alone; join our community and share your concerns, ask questions and engage in mutual support. We are here to help, in the interests of a better education for every learner.