The role of the governor in forward financial planning
The role of a school governor is three-fold:
- To provide strategic leadership
- To ensure accountability
- To act as a critical friend to the school leadership
When it comes to forward financial planning all three elements of the role come into play.
Forward financial planning is critical to a school’s strategic leadership to ensure:
- Continuous school improvement which promotes positive pupil outcomes
- Intelligent school planning
- Financial sustainability/avoiding deficits
- Early preparation for potential funding reductions
Continuous school improvement which promotes positive pupil outcomes:
Governors are responsible for ensuring that the school’s strategic leadership secures a trend of continuous improvement in all aspects of school life, and in particular in promotes positive pupil outcomes.
Schools’ performance data is scrutinised by governors, who should then challenge school leaders to ensure effective strategies are deployed to give children the best possible chances of success.
The School Development Plan will prioritise actions in different key areas, but all priorities will ultimately have the same objective: to maximise pupil outcomes and improve life chances for children.
Intelligent school planning:
The direction of the school and agreement of priorities for improvement are fundamental to the governing body role. But a School Development Plan is futile if it is not carefully linked to other key planning documents such as the curriculum plan, staffing plan and importantly the school budget. If the resourcing required to achieve the priorities cannot be afforded, then the plan becomes unrealistic and unachievable.
It is expected that a School Development Plan will span multiple years. School financial planning should also be based on a medium term approach, although senior leaders can be reluctant to attempt this as it can be a difficult exercise. Schools do not receive multi-year budget allocations; when you take into account the uncertainty of the NFF and increasing cost pressures, it is easy to see why schools would shy away from attempting to plan their budgets into the future. Yet this is clearly an essential and fundamental part of school strategic leadership.
Financial sustainability/avoiding deficits
Schools are not allowed to set deficit budgets; planned expenditure must come within the funding allocation. By linking funding intelligently to the School Development Plan, you can ensure the best possible provision of education to pupils.
School funding is public money and schools are accountable for its use. It is therefore a professional responsibility to plan the use of this funding wisely in the short, medium and long term future. If schools do expect a reduction in funding or believe this to be a possibility, they must plan for this scenario in advance, in order to employ strategies to avoid financial collapse.
Governors should be aware of the school’s current financial position and future potential budget scenarios in order to provide adequate challenge and support to schools to ensure financial sustainability into the future. More experienced governors may have built up awareness over time, but all governors need to keep up to date with changes which come thick and fast in the world of education finance.
Training for governors can come from a number of sources, from within an individual school, to LA hosted briefings and training events and even externally provided courses and events although these may come at a cost. A school may be willing to cover these costs if it is seen as beneficial to the governor, governing body as a whole and ultimately the school and the pupils. A school’s membership of an association such as the National Governors’ Association (NGA) will help to disseminate up to date information to the Governing Body via a monthly magazine and brings about other benefits such as discounted course and event fees.
Early preparation for potential funding reductions:
The largest area of expenditure in a school budget is staffing. This area cannot necessarily be reduced quickly in order to realise savings immediately. Staff reduction consultations take time, cause turbulence and can impact negatively on student outcomes if they are not carefully planned and intrinsically linked to all other strategic planning documents in school such as the School Development Plan and curriculum plan.
So it is critical that schools and academies look ahead to future funding changes and plan their expenditure within those means well in advance. Of course, the further ahead you look, the less accurate predictions become. Multi-year budget planning should be updated and refined year on year to ensure it is as meaningful as possible and not out of date.
The more prepared schools are; the more time they have to consider different strategies if the likelihood is that funding will reduce. It could be that staffing reductions can be avoided, if the reduction would impact negatively on student outcomes. It can take considerable time to identify alternative strategies to make savings, implement them and see the results. If you don’t start planning early enough, more extreme decisions may have to be taken quickly; these could have a significant detrimental effect on the performance and ultimately the reputation of the school.
The governor role in staff reduction consultations is critical, ensuring strong leadership, appropriate challenge and correct protocol. The headteacher will appreciate this support.
Governors are responsible for holding the head teacher to account. Statutory financial requirements will differ from school to school depending on school type, i.e. academy or maintained school, so it is important that governors understand the financial framework that the school operates in and have knowledge of funding arrangements and funding streams.
The governor role is to understand the principles and processes that surround budget setting and budget monitoring, in order to be able to interpret this information in a useful way and communicate to interested parties when necessary. However, it is important not to stray into operational matters that have been delegated to the school’s management team.
It is a key role of the governing body, specifically the finance committee, to ensure that forward financial planning takes place in your school in a meaningful way. Looking at the year ahead is obviously important and will take a substantial proportion of your meeting time, but forward financial planning should be at least an annual agenda item, allowing you to discuss multi-year budget plans demonstrating scenarios for three to five years into the future.
With the current uncertainty of the educational financial landscape and the increasing cost pressures that all schools are facing, it would be sensible for governors to be considering forward financial planning on a more regular basis than just annually. There are tips on how this can be achieved later in this post.
To act as a critical friend
The term ‘critical friend’ is often heard among governing bodies, but how often is its meaning properly understood? As the name suggests, this element of the role requires you as governors, individually and collectively, to play a significant and essential role in supporting the school, to be decisive in key areas and to act in a supportive way whilst still holding school staff, and in particular the head teacher, to account.
You should have a commitment to the school and the work of the governing body by preparing for and attending meetings, contributing to discussions and taking agreed actions. School visits and discussions with staff and students when appropriate will improve your knowledge of the school and increase the value of the contribution you can make. You should take advantage of governor training that is offered, as this will help you to develop your own knowledge, skills and understanding of school finance and will also help you to support new governors as they are developing. It is vital that you declare any pecuniary or personal interest as appropriate to the decisions being taken at each meeting, to avoid using your position for personal gain. This will ensure you maintain your own integrity.
A key skill for a governor with financial management responsibility is the ability to provide constructive challenge to school staff, and not just accept without question the information that you are presented with. It is these challenges, during meetings, which lead to a deeper level of discussion, which is beneficial for school staff and governors alike to deepen understanding and provoke thought and consideration in key areas. Understanding where to seek additional information from, when necessary, is also an important part of the role.
So what does constructive challenge look like in relation to forward financial planning?
Governors should take a long term view of all aspects on school forward planning and challenge where necessary to secure robust decision making. Sometimes governors may need to challenge senior leaders on whether the necessary information has been provided on which to base decisions.
So what might some of the key challenging questions be in relation to forward financial planning?
- Does the school have a multi-year budget plan spanning three to five years into the future?
- Does the multi-year budget plan take into account future changes to funding including the school, local and national context?
- Are stated sources of income/funding guaranteed?
- Does expenditure take any locally known changes into account, particularly linking to the School Development Plan, Staffing Plan and Curriculum Plan?
- Does expenditure take any externally driven changes into account?
- Has an estimated level of inflation been applied to appropriate areas of expenditure?
- Does staffing expenditure take into account known staff cost increases, estimated pay award increases and any likely movement up the pay ranges from the annual staff appraisal process?
- What do the in-year surpluses/deficits look like across the timeline of the plan?
- What is the cumulative impact of surpluses/deficits across the timeline of the plan?
- Does the School Development Plan reflect the financial plan? Are priorities affordable and realistic?
Why is forward financial planning more important now than ever?
The imminent changes to school funding through the introduction of the NFF, and the cost pressures that are starting to emerge make it more important than ever that schools and academies plan ahead, to be prepared for the challenges they may be faced with.
For some schools and academies, the NFF will mean a reduction in funding. As it stands, we have no idea how significant those reductions might be and over what period of time they will be phased. These schools need to be prepared to make some changes to their budget plans and reduce expenditure without impacting negatively on the quality of the education they provide.
Even schools and academies who may gain from the NFF need to plan ahead. They may not receive increased allocations immediately, depending on the logistics of implementing the NFF and even when they do, this additional funding must be planned and spent wisely to ensure maximum positive impact on student outcomes.
The point is, despite any speculation (of which there will be plenty) no school or academy can be certain of what the NFF will mean for them until more detailed information is announced. The delay of the second consultation brings frustration, worry and even more uncertainty for schools and academies. The only way to ensure your school or academy’s future financial success is to plan ahead, prepare early and allow yourself time to respond to future changes with informed wisdom, sound professional judgement and strong financial leadership.
What can governors do to get more involved and gain a deeper understanding in a manageable way?
Be sure to attend any local events which offer updates on any aspects of school finance. Speak to your fellow governors and share events between you if necessary. If one or two people attend and take notes, these can be shared amongst the wider team along with an update from the attendee at the next meeting. This will be a more efficient use of your collective time and your school’s Clerk to Governors should be able to disseminate the information for you.
At School Financial Success we have developed a link where anyone can sign up for free funding information. Simply visit our website: www.schoolfinancialsuccess.com and sign up when prompted or on the homepage. You will receive a fortnightly newsletter as well as special edition newsletters and funding summaries to reflect significant news, events and updates from the world of education finance.
We have also developed an eBook, toolkit and online course which walk you through a step by step process to produce your school’s own bespoke Financial Sustainability Plan, which includes a range of five-year budget projections. Our aim is to help your school prepare for future funding changes and increasing cost pressures, even before allocations are confirmed.
The process comprises a series of activities which support your school leaders to:
- consider current funding patterns for your school or academy
- consider your LA’s funding formula compared with those of all other LAs
- calculate a range of scenarios for per pupil funding and model future roll projections
- predict a range of funding scenarios including estimates of grants and other funding elements
- review all areas of expenditure within your budget to ensure value for money
Your range of five-year budget projections forms the basis of your bespoke Financial Sustainability Plan. But the plan goes a step further than the budget projections themselves, detailing your interpretation of those projections and most importantly your response as a school to the changes ahead. All of this leads into an action plan which is in effect your development plan for financial leadership.
The Financial Sustainability Plan acts as a planning tool for school leaders, but importantly for governors it is an ideal way to get involved in your school’s strategic financial planning.
The Financial Sustainability Plan provides insight and a deeper level of understanding and also demonstrates evidence of financial leadership by your school’s leaders. It is easy to update and refine and can therefore be used as a termly update to governors, ensuring that forward financial planning is a regular item on the governing body finance committee agenda.
We hope the e-book will help school staff, governors, LA officials and any other interested parties with school financial planning. The ebook and online course are on a special introductory offer until the end of September, so don’t delay!