Top ten tips: finance for head teachers
At last we have confirmation of the September 2018 pay award for teachers. It involves uplifts to the minima and maxima at 3.5% for the main pay range, 2% for the upper pay range and 1.5% for the leadership pay range.
The government has claimed it is a fully funded award, but this may not be true. Schools will be expected to fund the first 1%, since Ministers say they would have already planned for this, and a pay grant will be made available for the remainder, to the tune of £187 million in 2018-19 (part year from September) and £321 million in 2019-20.
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The use of a grant (which may or may not be ring fenced) gives the government a choice as to whether this is mainstreamed, i.e. built into core funding, from 2020/21 (it won’t automatically be in the Dedicated Schools Grant baseline). However, we don’t yet know how the pay grant will be distributed. DfE has set the amount that’s available before they know what schools have decided to offer, so there are two potential problems: firstly, a risk that the funding won’t follow the costs exactly, causing winners and losers, and secondly that schools could wait to see how much they get before taking decisions; neither of these is a palatable situation.
We are also waiting for two further pieces of information: details of the 2019/20 increase in employer contributions to the Teachers Pension Scheme, and Ministerial decisions about tweaks to the National Funding Formula for 2019/20. DfE has told LAs that the NFF information would be announced in July, so time is running out – but we did once have an April that lasted 63 days!
However, there was one interesting piece of news last week: Local authorities will still run a local formula to distribute funding between schools in 2020/21. This gives a year’s extension to the ‘Soft NFF’ from the original plans. It’s not surprising; Brexit has crowded out the legislative calendar and it would have been virtually impossible to get the necessary primary legislation through to allow DfE to fund all schools and academies directly. For such an important announcement, it was somewhat astonishing that it was buried inside a pdf document analysing the LA formulae for 2018/19, at https://www.gov.uk/government/publications/schools-block-funding-formulae-2018-to-2019.
All of this means that there are still considerable uncertainties around the basis on which schools and academies can construct three-year budgets. We’re working on our next book, ‘Forecasting Your School’s Funding’, which will provide a system for scenario planning, i.e. calculating best, middle and worst-case scenarios for the amount of funding you might receive (the missing piece of the multi-year budgeting jigsaw).
You are welcome to join our mailing list via our home page, to hear about our planned timescales for this book, as well as government announcements and news stories about school funding.
Coping with the uncertainty
Experienced school leaders will be used to being kept in the dark by the government. But a recent tweet from someone taking up his first headship in September made us think about what it’s like for those making the leap. Being handed responsibility for possibly several million pounds must be daunting, without having to cope with all this uncertainty.
Finance isn’t everyone’s strongest suit, and even if a talented School Business Leader is waiting to greet them, the head teacher is still the one who has to bear the ultimate responsibility. It can be tricky too for an existing head moving to a new school. We probably all know of a case where a previous incumbent has used up all the reserves, and the new post-holder arrives to find the cupboard is bare.
So, we thought we’d offer our ten top tips for handling finance. They don’t all require your personal action; for some it’s more a matter of checking they’re in place. We’ve written them with new leaders or those moving to a different school in mind, but we hope any head or academy principal with delegated financial responsibility will find them helpful.
Ten top tips: finance for head teachers
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Here are some areas we hope will help you to feel less overwhelmed about finance as you start your leadership journey, or if you are an existing head moving to the next stage in another school. There are so many things that you could spend time thinking about, but these are the areas we recommend you focus on. Keep your involvement at a high level, and where you delegate more detailed tasks, make sure you have a system of light-touch monitoring so that you protect your own position by knowing they’ve been done.
Control what you can, and don’t worry about the uncontrollable
Make a list of the financial elements you can control, and those you can’t control. Try not to worry too much about the latter, such as the government or your LA’s plans for the funding formula in the next three years. You will be able to make assumptions and tweak them to handle the reality at the appropriate time.
Make a list of the aspects of your financial situation that you can control, keeping these at a high level. They might include your priorities, your decision-making process for allocating the available funding between them, and the messages you send to staff about how the money should be spent. Our other nine tips give you plenty of ideas on these issues. Think strategically about how to handle them, letting others manage the details.
Set the right tone
Financial leadership is the key to your school thriving. We provided a quick guide to this in a post last year at https://schoolfinancialsuccess.com/a-quick-slt-guide-to-financial-leadership/. Part of this is about setting the culture for the use of resources (in the widest sense), and being a role model for the expectations you have of everyone else in the school.
Think about your attitude towards money and how you handle your personal finances. You will be able to draw some parallels with managing the school’s money. Consider the high-level messages you want to send to staff in order to avoid waste, make good spending decisions and get the best outcomes from the resources available. What behaviours will you model to encourage others to follow suit?
Recognise that autonomy comes with responsibility
Whether your funding body is the local authority or the Education Funding Agency, you have legal obligations, which basically are to set a balanced budget over time and follow the relevant rules (the LA Scheme, or the Academies Handbook and your funding agreement).
Make sure that you are familiar with the basics and ensure that relevant staff a) have a thorough working knowledge of all the requirements and b) can provide the necessary assurance and evidence that they are followed.
Express your vision through your budget
Your budget is the means by which you achieve your vision; you can have the best development plan in the world, but if the activities aren’t costed and built into your budget, it’s unlikely that they will happen, given the scarcity of funding nowadays.
You should make sure that your key planning documents (e.g. SDP, curriculum plan and staffing plan) are all linked to the budget. Review them regularly, ensuring the budget continues to reflect your priorities.
Have a high-level medium-term plan
You don’t know how much funding you’ll have in future years, but you can make a set of assumptions and build best, middle and worst-case scenarios. Then ask your finance lead to use these as the basis for three options in a medium-term budget plan.
Debating the assumptions can expose tensions and healthy differences of opinion, but the real value lies in raising awareness among staff and governors of what the range of options is and how you would respond to each scenario. As more information comes through, you can identify the most likely scenario and tweak it for accuracy.
Another benefit is that as events happen, such as staff turnover and expiry of contracts for goods and services, you will know how to respond in line with your plan. This might bring early savings which could help you to avoid compulsory redundancies further down the line.
Communication for financial success
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Make sure your financial reporting systems are clear, timely, accurate and easy for SLT and governors to understand. They provide a barometer for how well the budget is being controlled. It’s important to encourage colleagues and governors to ask challenging questions, and for leaders to answer them fully and honestly. Training in understanding the reports is vital.
Think about who needs to know what in terms of financial information, and when they need to know it. There’s a balance to be struck between secrecy and complete transparency; get it right and staff will feel trusted and will be motivated to help in achieving value for money (see our post at https://schoolfinancialsuccess.com/in-search-of-school-efficiency/).
Safeguard yourself with controls
Financial controls are absolutely essential. You only need to read some of the DfE’s reports at https://www.gov.uk/government/collections/academies-financial-management-and-governance-reviews or at https://www.gov.uk/government/collections/academies-financial-notices-to-improve to see what can go wrong when heads and governors aren’t vigilant enough.
Make sure there are written procedures for key financial processes, and that induction and ongoing training is in place, so no-one can claim they didn’t know what they were. Segregation of duties is key – make sure no single person can operate a complete financial task (e.g. to pay themselves).
Ask questions and consider whether the responses and evidence make sense, using your instinct. If staff know you are interested in the financial dimension of the school’s operations, they will pay more attention to their own behaviours around spending and controlling any budgets they are responsible for.
Use the DfE’s financial benchmarking website (with caution; it can be out of date). Is another similar school achieving more with less money? Talk to them and find out what they are doing differently. How and why is it working?
Unearth hidden talents
Find out your staff’s skills, experience and expertise outside of school: perhaps a past career, or activities outside of school, such as volunteering for local organisations, or practising crafts, music and sport. You might have someone with experience of grant applications on your hands, or people with practical talents that can be used for fundraising events. Use people’s natural creativity to solve problems.
Anyone can draft a budget plan, but unless you keep it under control, the best plans can go awry. Take a fresh approach by assigning areas to staff to champion, like supply cover, use of ICT/digital media, consumables, energy usage etc. Ask them to challenge wasteful behaviours and find innovative ways of saving money and getting more out of the available resources.
It’s a challenging time to be responsible for large budgets, and many other things will be competing for your attention. In the current situation, if finance becomes a big problem, everything else is likely to unravel. We hope these top ten tips will help you get things in perspective as you approach your new role. Good luck!