Posted by Tracy Lewis on April 12, 2017
Academy information sheet
In the absence of significant additional funding from the government, academies are being forced to manage tighter and tighter budgets, this coupled with significant changes to the national funding formula means it is more important than ever to have an accurate and realistic budget. In our experience some academies have in the past been too pessimistic in their budgeting and therefore it is a good idea to look at worst and best case scenarios. However it is also the case that nearly 20% of schools will be running a deficit this year.
Planning and preparation
To give yourself the best chance at setting a realistic budget which alerts the senior leadership team and trustees of any potential funding shortages, it is vital that you take your time when setting the budget.
To prepare for this process you should have available previous budgets together with actual results to look at past performance. Comparing your budget to actual results from the previous year as well as to other similar schools can highlight any areas of concern in a budget and potentially generate significant savings.
Easily the largest expense an academy suffers is salaries so monitoring staffing requirements is key. Being aware of changes to pay scales, pension contributions and national living wage increases well in advance of setting the budget will help ensure over or under staffing is avoided. By planning ahead you can take advantage of opportunities, and perhaps plan for potential supply cover and termination payments. Our latest benchmarking survey shows that staff costs are not being covered by government funding alone which means cost savings on top of those already made will need to be found in many schools.
You can see our latest benchmarking report here.
Pupil census numbers will also be key to demining core funding as well as those at feeder schools, however it is also worth considering that any changes in admission policies in neighbouring schools may have an impact on pupil numbers and therefore funding in the future.
Make your budget work for your SIP
It is important not to focus only on how you have budgeted in the past, but also to look at what your school improvement plan sets out as the main objectives for the coming years. Then tailor this to the money actually available. This is particularly important with regards to capital projects where alternative funding may need to be sought.
Ideally a 5 year budget should be produced to reflect changes in priorities as well as long term affects to any restructuring which might be in progress.
We all know that funding is being squeezed like never before and so it is important that you understand the different funding streams you receive and consider which of these are most vulnerable to change, ESG and pupil premium for example.
Large MATs will receive School Condition Allocation funding based on a prescribed formula instead of applying for Condition Improvement Funding. Although this will be easier to budget for, it may in turn mean that a trust cannot put in a bid for a specific capital project which may mean it is worse off in the long run. You can find the details of SCAs as well as the devolved formula capital allocations for 2015 to 2018 here.
Value for money
Although a smaller proportion of expenditure, non staffing costs may still provide cost saving opportunities. Each service level agreement should be reviewed and challenged to ensure best value for money is received and no wasted opportunities arise to reduce the costs in the budget.
You can also look at joint buying with other schools to have greater purchasing power.
Ensure the resulting surplus or deficit is in line with plans to either build up reserves to fund future school development plans or to recover from an overall deficit position.
Any deficit revenue budget must be reported to the EFA within 14 days of it being formally proposed. This is after unspent funds from previous years are taken into account.
It is important to stay on track and closely monitor your trust’s current position. This ensures effective financial management and highlights any discrepancies. The senior leadership team and trustees/governors can use this information to allocate or reallocate resources as necessary.