School and Academy Budgeting Guidance

Of course, the impact of Covid-19 created a number of additional challenges for schools, with budgets now stretched further than ever before. Luckily, schools will continue to receive their core funding allocations – as determined by the local authority for maintained schools and through the general annual grant (GAG) for academies – for the 2020 to 2021 financial year. This move should provide some reassurance for school finance teams, ensuring they can continue to pay staff and meet other regular financial commitments.

Despite the government’s promises of an additional £7.1bn in school funding by 2022-23, an alliance of headteachers, school governors, councils and unions is calling for a further £5.5bn a year to help schools in England to avoid financial difficulties and cuts - making effective budgeting even more of a priority.

 

Income

Academies and maintained schools are funded on a similar basis.

The bulk of school and academy income is made up of a grant. Maintained schools get a grant from their local authority and academies receive their funding, known as a general annual grant (GAG), from the Education Funding Agency (EFA).

Schools can access other income, like the pupil premium and capital funding, but this money generally needs to be spent on certain predefined goals. The pupil premium, for example, should be spent on assisting pupils who qualify for free school meals.

The bulk of the block grant is based on total pupil numbers, with an extra weighting to favour older pupils.

It’s vital for schools to get ‘bums on seats,’ because a few low intake years can have serious long-term budget consequences. When starting your budget plan, it’s important that you have accurate information on pupil numbers.

Audit your numbers regularly, checking census data and information held by the local authority as well as feeder school information. You should also keep an eye on other schools in the area. If a nearby school expands then it can have a knock on effect on your pupil numbers.

It’s also important that you have up to date information on which pupils qualify for school meals because this can impact on funding.

 

Staffing expenditure

Representing anywhere between 75 per cent and 95 per cent of overall budget spend, staffing costs use up a huge proportion of school and academy expenditure. Increases in payroll costs are cited by school leaders as the biggest financial pressure facing schools. 

While the government announcement of a teacher pay rise earlier in the year was welcomed by many, experts warn that this will absorb more than half of the extra funding promised for state schools in England.

With this in mind, you need to make sure that staff information is still accurate, and any changes in hours or pay scales have been accounted for.

As far as possible, you need to make sure you have budgeted for ‘known-unknowns’ like a proportion of new starters or a proportion of staff going on maternity leave.

You also need to make sure that your budgets and forecasts are up to date with the latest legislative changes. Even small changes to pay awards, pension provisions or the National Living Wage can wreak havoc on a finely balanced budget.

Other information that isn’t directly relevant to the budget can be useful at this stage and in other sections of the budget planning process.

Budget plans from previous years can give you a good indication of where you have under and over spent. Other information, like exam results, can give you an idea where the school is thriving and which departments need extra help.

Essentially this means that you should align your staffing profile as closely as possible with your curriculum requirements. When staff members move on or retire, you shouldn’t just replace them straight away on a like-for-like basis. Instead you need to really think about your requirements, and how you can replace the staff member in the most efficient way possible.

Can other staff members cover for the person leaving? Do you need another full-time staff member or could a part-time teacher fill the role? Could the department manage with a less experienced teacher or is the candidate required to be experienced?

These are all questions that you should be asking whenever an opening becomes available.  

If your three or five-year forecast suggests that a deficit is looming then you need to find cost effective ways of picking up the slack.

One of the biggest benefits of forward budget planning is that it allows you to make smaller changes over a longer period, instead of more severe cuts all at once.

 

Non-staffing expenditure

Non-staffing costs make up a smaller proportion of your expenditure, but in many ways these costs are easier to control, and can be split into educational and non-educational costs.

Educational costs are those that are directly related to running the curriculum and have a direct impact on learning outcomes.

A significant portion of your educational cost budget will be taken up by exam expenditure. So again, it’s essential that you gather accurate information about exam costs and entries.

Departmental budgets will make up another chunk of your educational costs. This is the money that you award to different departments to spend on resources.

There are different ways of setting departmental budgets. You can do it with a formula, awarding funds based on a department’s size, how many children they teach and how ‘hands-on’ the subject is.

This is a clean and fair way of setting budgets, but it can be more fruitful to speak to different department heads and ask them about their funding priorities. Different departments usually want to budget for different things, and speaking to the department heads can help ensure that you get good value for money.

Invariably, some departments will request more than their fair share, and some, more conservative department heads, won’t ask for much. It is up to you to balance these demands.

Speaking to department heads also gives you a good opportunity to tell them about budget forecasts. If you can foresee a budget deficit in the medium or long term, then you can stress the importance of departments making small cutbacks now, so that they can stave off larger cuts in the future.

This communication is crucial to getting department heads and teachers on your side, but you have to be careful not to scaremonger as this can lead to more problems.

Non-educational costs don’t impact on the curriculum directly but are still important. It can be easier to cut these costs without affecting pupil outcomes.

Non-educational costs include things like support contracts, office equipment and pastoral care. Items such as software licenses are easily forgotten about, but can result in thousands of pounds of waste if they aren’t being used.

One good way of keeping an eye on non-educational costs is benchmarking your expenditure against other schools. The Department for Education provides some benchmarking information, but it is often out of date and can be tricky to find a like-for-like comparison.

It can be beneficial to link up with similar schools in the local area and benchmark your costs against their costs to get good value for money.

 

Capital investments and school development planning

Capital investments and school development planning are the last two pillars supporting your school budget.

Capital investment is all about schools investing in their facilities. Investment can be small and large and it can be done for different reasons. Some schools may invest to boost efficiency, for example, by replacing filament light bulbs with LED bulbs to bring down energy costs.

Alternatively, investment may be geared towards opening up a new funding stream like building a new sports hall to be rented to the public.

There are different ways of securing investment. It can come from a grant, from reserves or from a Private Finance Initiative (PFI) scheme.

However the money is sourced, you need to make sure that any capital investment fits into your budget plan. And you need to make necessary adjustments to your forecasts.

School development or improvement plans are drawn up every year, usually at budget time. These plans sketch out your investment priorities over the following months and years.

Improvements may include things like redeveloping a block, or introducing a new marking policy. Each improvement has a cost implication attached to it and you need to make sure that plans are fully costed and affordable before breaking any ground on a project.

Your school development plan needs to align with the rest of your budget.

 

The right tools for the job

Whether you’re an experienced school budget planner or a relative beginner, it is important that you have the right budget planning tools.

Used by thousands of schools and academies across the country, the Access Education Finance and Budgeting software provides an easy to use system that allows you to forecast budgets up to five years in advance, automatically updates with the latest funding announcements to help your budgets stay on track and helps you better manage your finances.

Find out more about Access Education Budgeting Software.