Who is responsible for financial management in schools?

Schools operate within strict financial constraints, with income largely limited to government funding and smaller income streams such as grants. Effective financial management is essential to ensure available funds are allocated properly and will stretch as far as possible — the budget will need to cover staffing costs, operational costs, infrastructure, unforeseen expenses and anything else relevant to the school.

It’s also important that financial management is tied to the school’s goals. If, for example, the school intends to upgrade equipment, provide new facilities within the next five years or run an ambitious recruitment programme that requires HR resources, full transparency is needed to align these with the budget.

Schools face many financial management challenges including strict regulations, the effects of inflation, rising staff costs and very limited budgets. Strong financial management practices can ensure the school does not overspend, avoiding falling into a deficit. Forming good habits around finances and budgeting will provide clarity and help prevent issues arising in future. Plus, it will be clear who is accountable for which areas of financial management and the school can take a joined-up approach to achieving its goals.  

Here are some of the key roles that take on the most accountability for school financial management.

Headteachers: Leading financial decision making

The headteacher is generally considered to be accountable for most financial activity and decision making. They will set the overall strategy for the school, ensuring that the budget aligns with educational priorities.  

The headteacher will generally delegate financial management tasks and responsibilities to an experienced finance manager or business manager. While these key team members will complete many of the required tasks, the headteacher will need to be up to speed with reporting and the state of the school’s finances. They will be accountable to the governing body and must always have a holistic understanding of the school’s financial health, as well as putting necessary controls in place to identify issues early and prevent escalation.

School finance and business managers: Overseeing day-to-day financial management

Schools may have a finance manager who is responsible for day-to-day tasks including budgeting, reporting, risk management, procurement, forecasting, cash flow management, payroll and more. Schools may also employ a business manager who has a wider remit including various aspects of HR, training, policy and administration, or the role may absorb all financial responsibility in place of having a dedicated finance manager. In many schools, business managers will also liaise with external auditors and vendors, ensuring compliance and overseeing regulatory processes. In short, these roles exist to support the smooth running of financial operations — roles and responsibilities will be laid out by the headteacher and governing body. 

The governing body: Ensuring compliance and regulation

According to Governors for Schools, governors are responsible for overseeing the management side of a school, enabling it to run as effectively as possible. Financial oversight, budgeting and three-year financial planning form a core part of the governors’ role, and they will hold the headteacher accountable for achieving high standards, ensuring funds are used appropriately and responsibly. They will also need to help align financial management with the school’s overall goals, and ensure sufficient steps are taken to mitigate financial risk. 

Local authorities and academy trusts: Providing financial oversight

Local authorities and academy trusts provide frameworks and controls to hold schools accountable, ensuring they are using funds appropriately and are not falling into a deficit.

In local-authority maintained schools, the relevant local authority allocates funding and monitors its use — schools will need to submit budgets in the correct format, and must adhere to the schools financial value standard (SFVS). To confirm this, governing bodies should complete the SFVS checklist annually, which the local authority uses to submit their assurance statement. Local authorities are also required to publish schemes for financing schools, laying out the financial relationship and setting out frameworks, guidance and controls. The local authority is also responsible for statutory external audits.

In an academy, accountability falls to the chief financial officer (CFO) and board of trustees. Academies must complete the self-assessment checklist, which is in place to helps ensure appropriate financial management and good financial health. They will be audited by independent external auditors. 

External bodies: Ensuring compliance and regulation

The Department for Education (DfE) sets out the standards for schools and local authorities to follow in order to manage finances successfully and remain compliant. The DfE provides a consistent financial reporting framework (CFR) for local authority maintained schools, which is a standard template to report income and expenditure. For academies, there’s the Academy trust handbook, which must be complied with as a condition of funding. The handbook provides a framework for implementing effective financial management and controls, consistent with the academy’s obligations. Academies will need to submit their budgets and academies financial returns to the DfE.

Follow these five key principles of effective financial management and ensure they are built into processes by the responsible parties. 

1. Full accountability and transparency

School leaders, governors and external regulators will need clear, accurate reports to assess and track financial health. They have accountability for financial management and will need to operate with full transparency to maintain integrity, build trust and demonstrate responsible spending.
To help maintain accountability across the school, roles and responsibilities should be clearly defined and documented, as well as reviewed and updated on a regular basis. Job roles can vary enormously between schools so it’s very important that each member of staff with financial and budgetary responsibility has a clear understanding of their remit.

2. Budget planning and forecasting

Finance professionals need to create clear, thorough budgets annually and track them throughout the year. They will need to provide income forecasts and record expenditure, making sure they can balance the books. Budgeting usually falls to finance and business management teams — they will often use budgeting software to automate processes and allocate resources effectively. Budgets will be signed off by headteachers and governors and must then be submitted to the local authority or DfE.

3. Cost-effective resource allocation

Schools have limited funding and budget holders must allocate resources strategically to maximise impact. They must understand their outgoings in intricate detail, ensuring they can cover essential costs like staffing and understand where there's room to invest further. Finance and budgeting software can help schools plan ahead with more accuracy so resources can be allocated effectively.

4. Compliance with financial regulations

Schools are highly regulated and they must operate within strict parameters to maintain financial compliance. Managing tax obligations, submitting budgets and forecasts, protecting data, looking after pensions and much more will see school financial leaders following strict processes to remain compliant and avoid penalties. Digital financial management systems can help automate reporting and ensure schools meet their statutory requirements. 

5. Long-term financial sustainability

Schools must develop sustainable financial strategies for the future, which can anticipate and overcome challenges as well as making the most of new opportunities that come to light. Headteachers and governors can plan for the future using forecasting tools that help them model different scenarios and fully understand the various outcomes.

Challenges are part of everyday life in a school — how they’re dealt with is what’s important. 
Common challenges might include:

• Managing costs, especially staff salaries.
• Changes to government funding.
• Rising operational costs.
• Unexpected expenses.

Putting good financial controls in place and managing costs takes careful planning, but these steps are essential to prevent challenges spiralling.

Software can help automate many aspects of financial management in schools, offering solutions for everyday tasks as well as sophisticated budgeting, forecasting and scenario planning. While software requires investment, it can save schools money long term through automated budgeting and holistic planning, helping to combat the challenges that come up. 

Effective financial management is challenging and those who are responsible often have to bear a heavy workload. Make financial management simpler — Access Education Financial Management Solutions provide schools and multi-academy trusts with powerful tools to streamline processes. Access Education Budgets and Access Education Finance can support budgeting, scenario planning, reporting, financial decision making and more.

Over 9,000 schools use Access Education software, taking control of their financial futures. For Sandal Primary School, finance software has improved reliability and led to better resourcing. Little Way Catholic Educational Trust has approached transformation with the help of a financial management solution, achieving improved visibility, more control and fewer errors.

How can the Access Education Financial Management Suite help you achieve greater efficiency and clarity?