Thriving – not just surviving
How to lead a school budget review to make the best use of resources
Rising costs combined with funding reform have brought about a turbulent storm for school financial management. At worst, some schools face financial catastrophe over the forthcoming years and at best a worrying uncertainty looms. Many have been struggling in recent years; the latest publication of local authority school income and expenditure reveals that the proportion of schools with a deficit has increased from 6.0% in 2015-16 to 9.1% in 2016-17. Permanent Secretary at the DfE, Jonathan Slater, recently told the Public Accounts Committee that he expected a similar trend for academies.
In our last blog post, ‘When a plan comes together’, we shared with you our individual and mutual motivations for supporting schools and introduced our publication ‘School Budget Mastery’ as the first in a new series of school funding guides. Previously, in 2016 we published ‘Secure a Sustainable Budget’ which was an Ebook and toolkit, a product to make it easier for schools to compile best, middle and worst-case scenarios for their future funding.
We have been especially busy recently, and we are very excited to introduce the second publication in our new series, ‘Leading a School Budget Review’, due to be published shortly.
At School Financial Success, we want to provide every school with the information, knowledge and tools they need to ride this turbulent storm and continue to thrive and flourish throughout. Schools are facing many other pressures while trying to achieve the best possible outcomes for pupils. Regardless of their current position, all schools need to demonstrate outstanding financial leadership to drive overall improvement in these difficult times.
Whilst we continue to battle against the bigger picture of school funding, we believe there are things that all schools can and should be doing to prepare themselves for the financial challenges ahead.
So, what can ‘Leading a School Budget Review’ do for you and your school?
This book is aimed at any school leader who is charged with undertaking a school budget review. It gives practical advice and guides you through how to lead the review in a logical step by step format.
The aim of a school budget review is to make savings, either through reducing waste, reducing costs or increasing income.
But the reasons a review is needed will differ from school to school. This book allows you to contextualise your budget review to your own school’s situation and ultimately achieve your personalised objective, whether that be to recover from a deficit position, make savings to prevent a deficit position, or release funds to be re-focused on a key area for improvement. You may just want to make sure that you are operating in the most efficient and effective way to deliver value for money education, putting you in the best possible position for whatever challenges lie ahead.
We offer advice on how to review pay and non-pay budgets as well as considering ways to ensure you are making the most of existing income opportunities.
I firmly believe that every school can make financial changes for the better and that these opportunities are often only seen when we really stop and look for them. In my own school, I have lived and breathed this process for the last 18 months and have secured annual recurring savings in excess of £250k, all from non-pay budgets.
One of the most important considerations I have found, in an exercise such as this, is the leadership of change to alter people’s behaviours in a way that is positive to both the review itself and their daily working lives. This is why leadership of cultural change is a key theme throughout the book.
You may have been asked to undertake a budget review for your school or you may be proactive in suggesting it for your school. Either way, success in this area will demonstrate your ability to lead people, manage systems, shape policy and impact positively and significantly on whole school improvement across all aspects of school life. It might be the lever you have been looking for.
Here is a short extract from Leading a School Budget Review:
If you’re reading this book, it is likely that you are either leading a budget review yourself or you are expecting someone else to. Whatever your purpose, you will learn why budget reviews are needed, how they are carried out and what they can achieve, all presented in an easy to understand and logical format. You will deepen your understanding of influencing factors, related roles and responsibilities and the importance of effective change management for a review to be successful.
The best thing is, it’s not all theory. Practical advice for implementation and relevant examples of scenarios make it easy for you to lead your own budget review, or guide someone else to do so.
Why is a budget review necessary?
Schools are responsible for public money, and with that responsibility comes accountability. Achieving value for money (VfM) is crucial for both the school’s financial health and positive outcomes for pupils. Promoting VfM is therefore a professional and moral responsibility for all school staff, and especially for those leaders who are responsible for financial management in schools.
The current financial climate in education is challenging and uncertain. The implementation of a National Funding Formula (NFF) is at last becoming a reality, but the government can only make information available for the first two years, 2018/19 and 2019/20, and the ultimate impact on school budgets will still depend on local decisions. Understanding the national context of school funding reform is important, if you are to ensure your budget is responsive to changes in the overall amount of money you are likely to have in the coming years.
Despite the government’s announcement in July 2017 that there would be enough funding in the system to achieve an increase of at least 0.5% per pupil for every school, the guidance to local authorities for 2018/19 makes it clear that schools can still experience a reduction in funding of up to 1.5% per pupil per year. This can happen where there are changes made to the local formula and/or where the local authority does not receive sufficient funding for some costs that sit outside the NFF. All schools are experiencing increasing costs, particularly in relation to staffing, and there is a question mark over whether even those gaining from the NFF will receive sufficient to cover cost pressures.
The National Audit Office report ‘Financial Sustainability of Schools’, published in December 2016, cited an 8.0% real-terms reduction in per-pupil funding for mainstream schools between 2014-15 and 2019-20 due to cost pressures. The report identified that savings of £3 billion need to be made by mainstream schools by 2019-20 to counteract these cost pressures. Between 2012/13 and 2014/15, the proportion of secondary academies and maintained schools spending more than their income rose to approximately 60%. It is therefore clear that current funding is already insufficient to support many schools’ priorities.
Some schools may have depleted their reserves in recent years, or may already have a deficit. The danger is that positive outcomes are built on unsustainable spending, and when action has to be taken, there could be a risk to the standards that the school has achieved. While Ofsted focuses on the use of Pupil Premium and other specific grants, inspectors pay little attention to the use of the most significant element of a school’s funding, their budget share (or General Annual Grant for academies). Schools need to be their own watchdog, to ensure that funding is used wisely.
It is difficult to make a generalised assessment of whether the funding provided by DfE in future will cover ongoing cost pressures, as it depends on each school’s starting point and the way in which the NFF impacts on them. As most of the increased need to spend relates to the cost of employing staff, schools spending a higher than average proportion of their budget on staffing are likely to find it more difficult to manage.
Some local formulae may replicate the NFF in capping gains at 3% per pupil per year for 2018/19 and 2019/20, so schools that are due to gain from the new formula might not receive all of the benefit immediately. There could also be an impact on mainstream schools in areas which are only receiving a minimal increase in High Needs funding, either because money originally intended for school budgets might have to be transferred to cover High Needs pressures, or because LAs may look to place more children with SEND in mainstream schools rather than specialist provision.
A budget review is therefore likely to be an important tool in supporting a school’s future financial success; for some schools it may make the difference between surviving and thriving.
The purpose of a budget review is to reduce areas of waste and promote VfM across the many different aspects of school life. Undertaken properly, it will support a review of the school’s priorities, ensuring adequate funding is available to make those priorities happen.
For schools wanting to avoid or minimise staffing reductions which could impact negatively on pupil outcomes, our focus on review of non-pay budgets offers alternative solutions for cost reductions. Where this is insufficient to address the school’s financial problems, we also offer advice on reviewing staffing. Whilst we will be offering a future publication sharing our expertise on developing an income strategy, this book considers existing income opportunities and provides guidance to ensure you are getting the best out of the opportunities available to you.
Your completed budget review will provide assurance that everything is being done in your school to secure a sustainable budget, ensuring that governors, funding bodies, external auditors and others with an interest in the school’s viability can have confidence in the school’s leadership.
The ‘Soft NFF’ has given flexibility to local authorities in 2018-19 and 2019-20 to adapt the national formula at local level to achieve the best possible picture overall for their schools. For some local authorities, where a large number of schools would lose under the NFF, this may have led to a staggered approach towards the hard NFF to prevent their schools losing funding at this stage. If the ‘Hard NFF’ (DfE funding schools and academies directly) goes ahead in 2020-21 as suggested, the financial picture for schools may be very different and for some, especially in LAs that have not moved their formula towards the NFF values, it could represent a financial cliff edge.
Our advice for all schools is to plan ahead and prepare early. Here’s how:
- Prepare a range of multi-year budget plans to give you an indication of what your funding might look like in future years and how you would make changes to your budget to achieve financial sustainability. Use the available intelligence about your school and liaise closely with your LA to glean any indicative information that may be useful to you. Remember, at this stage you should treat any forecasts with caution. It is still extremely useful and important to have a feel for your school’s overall direction in relation to future funding scenarios. You need to be able to prepare early for any changes that may be needed to help you face the potential challenges.
- Ensure key personnel in your school have mastered School Budget techniques and are well equipped to respond to the challenges you may face.
- Proactively trigger high level discussions with governors to agree the strategic approach to any future financial challenges. This may also include setting the parameters for a School Budget Review so that the overarching objective for the review is clear and agreed by all before the review begins.
- Undertake a School Budget Review to inform your school’s financial strategy and make the best possible use of resources, regardless of your school’s current financial position or level of performance.
A School Budget Review should address economy, efficiency and effectiveness, the three key elements of Value for Money (VfM). It is an essential task for every school but it can appear daunting. In reality, it is realistic, achievable and is extremely worthwhile if done properly.
So, look out for our next book, Leading a School Budget Review, over the coming weeks. Print copies and Kindle versions will be available on Amazon and ebook/Kindle versions from our own website: https://schoolfinancialsuccess.com.
We would love to hear from anyone who has undertaken a school budget review. What did you achieve? Share your experience with us by emailing us at firstname.lastname@example.org.