Hello. I'm Richard Stewart from the Education Funding Agency.
Welcome to this presentation on forecasting and budgeting over a
longer period of between three and five years.
To begin with, let's focus on why this is so important.
Good long-term financial planning is the underpinning of an excellent
educational offer and the most effective leaders look at budgets and the
curriculum together and plan over a three to five year period.
This becomes particularly important in the context of schools and other public
services facing financial challenges. The government has protected schools
funding but schools will need to be able to respond effectively to pressures
resulting from inflation, national insurance and pay increases.
All schools must look at how they can find efficiencies over the next five years to
continue to deliver excellent educational outcomes.
This means reviewing curriculum design, making the most effective and efficient use
of staff and getting better value for money from procurement and all of that is
underpinned by effective planning, forecasting and budgeting.
Some may wonder why it's necessary to look so far ahead. Well, some improvements in
saving simply cannot be realised within a narrow short-term approach to budgeting.
Some of the most effective moves take a number of years to implement and have to
be planned for accordingly. With single year budgeting there is a risk that one
simply rolls forward last year's blueprint and that can stifle creative solutions.
Of course not every school will need a radical change of approach but multi-year
budgeting can also help with the sequencing and prioritisation of smaller improvements.
Ask yourself, is it really critical to progress immediately with a colourful
scheme or can it wait a year so you can implement some practical changes that will
already be providing financial benefits by the time you turn your attention to what
you originally had planned. Finally, good forward planning can actually prevent
some pitfalls from occurring in the first place. By budgeting a year at
a time and doing what just needs to be done to get by, a school might eventually
find itself falling into deficit but by recognising risks early, one can take
steps to avoid. Perhaps by investing to save, perhaps by restructuring to make the
most effective use of staff or perhaps for a series of small gains which might not
individually have seemed as critical when looked at on a year-by-year basis.
If we accept that three to five year budgeting is beneficial,
the next question is how to go about it?
Budget management in schools can be varied and complex, therefore it's important and
correct that the budgetary process sits firmly within the strategic leadership
framework and it should link to the overall management and planning cycle,
rather than being seen as a bolt-on activity that is the sole responsibility of
the Finance Manager. There are a number of practical tools already available to
help make the process as easy as possible and there are also a number of
organisations in the sector who can really help provide advice and guidance,
such as the Association of School and College Leaders, the National Association
of Headteachers, the National Association of School Business Management and the
National Governors Association. Links to some of these tools and organisations are
provided on the web page, next to the link for this film and indeed some of the other
modules in this set of film presentations draw on and illustrate the know how that's
out there. Earlier I mentioned Finance Managers and although budgeting is not
the sole responsibility of Finance Managers, it is vitally important to have
someone in the organisation with the required skills and if it is proving
difficult to employ somebody who can for instance analyse data and present
options in a way that helps the rest of the leadership team engage with this
important work, then it might be possible to share resources with another school.
To reiterate a point I made at the start, it is critically important
that budget setting is considered alongside and not in isolation from curriculum
planning, the two are inextricably linked. If you're aware of financial constraints
from the outset you can build a coherent and balanced curriculum within those
boundaries. If you start with an ambitious, albeit well-intentioned
curriculum and then attempt to retrofit it to available funds, there is a risk
that you make snap judgments to get that fit. There are of course two key pieces of
information you set a budget; income and expenditure. Let's start with the income.
The main element of a schools budget lies in the allocation of funding based
on pupil numbers and this represents about ninety percent of a school's
overall income.
At the most basic level you can forecast pupil numbers based on a projection from
prior year trends, however the accuracy of that forecast will be significantly
improved if you can add some local knowledge and context.
It is therefore a wise idea to develop and maintain good relationships with your
local authority and your feeder schools and nurseries.
It is also a good idea to keep abreast of the funding announcements that are
coming out from the Department and the Education Funding Agency.
The EFA bulletin is a good point of reference and you can also set up
Gov.uk to send email alerts about education announcements and notes on how to do this
are provided in a link on the web page next to this presentation.
You might not have a specific allocation at a given point in the year and we can't
guarantee what the funding landscape will look like in 4-5 years time but you
can make reasonable estimates of both. For instance, if you know your pupil
premium rates or you can estimate based on trends from previous years and you have a
good idea of pupil projections, then you can make a reasonable approximation of what
your final allocation will be. Once you've estimated your income, the next step is to
identify outgoings. Each school will already have its records of expenditure,
but as we talked about earlier, the important thing here is not simply to roll
that forward but to challenge, to look for savings and if necessary to make
adjustments to work within your budget. Financial benchmarking will help you
identify if your staff and non-staff costs are comparable with other similar
schools and can help to identify some of those potential savings.
Links to the Department's financial benchmarking tools, which we are always
looking to update, can be found on the web page where you access this video,
together with guidance on how to use them. The last question I would like us to
consider is what to do if you're forecasting points to a deficit position.
Ultimately the school is responsible for managing within its budget.
If your initial forecasting shows that you're likely to go in to deficit at
some point in the future then there are a range of options a school can
consider to help avoid that eventuality. Firstly, staffing costs.
These will represent the largest portion of a school's expenditure so it's well
worth taking time for detailed consideration in this area.
It doesn't necessarily mean cutting staff but it does mean asking yourself if
you're making the most effective use of the staff you have.
Secondly, look for opportunities to generate additional income such as
renting out facilities. Thirdly, consider whether there are opportunities to
invest to save. New tools, infrastructure and indeed repairs have an up-front
cost but these will reap benefits further downstream if you're looking ahead over
a number of years. As I have said, don't forget to benchmark.
Your non-staff costs, for instance, can identify other potential savings especially
around procurement. The Department has produced its own procurement framework and
this could help you get started in this area.
The procurement framework is once again available on the web page.
If necessary, revisit your curriculum design and those assumptions you've made
about your pupil-teacher ratios and contact time.
Finally, as I mentioned earlier, you can consider sharing resources with a
neighbouring school to achieve savings through economies of scale and
collective purchasing. Thank you for taking the time to
watch this film and good luck with your budget setting.