Financial omnipotence; school financial reporting

How effective is your school’s financial reporting system? We shine a spotlight on government and statutory financial reporting requirements and speak to the experts to identify the technology available to keep school business leaders ahead of the curve and ensure you’re equipped to analyse and overcome budget uncertainties – present and future

Love it or loathe it, whether in a school or academy, a SBL or finance director, you are responsible for managing and reporting on your school’s finances. While financial reporting is something you are, no doubt, well-versed in, it’s a changing game. Case in point: in her September 2017 announcement the national funding formula former education secretary Justine Greening pledged that, from 2020, funding will go directly to schools, rather than through a formula decided by local authorities; schools will be in full control.

Additional responsibilities are inevitable for those holding the purse strings – something school business leaders have already begun to embrace. Responsible for public funds, and tasked with delivering efficiencies whilst ensuring standards meet increasing expectations, some tight reporting is required to provide the insight and the foresight needed to spend cleverly and implement a range of efficiencies to benefit your school or academy in the long-term.

Schools vs academies

Schools and academies hold a different legal status and, therefore, are subject to different financial reporting requirements. Maintained schools are subject to the consistent financial reporting (CFR) regulations introduced in April 2003 – and accountable to their LAs and their financial reporting procedures – while academies are charitable trusts and companies limited by guarantee. They’re required to submit audited annual financial statements to Companies House – as set out by the Companies Acts and the Charities Statement of Recommended Practice (SORP). With so much information to collate and communicate it’s vital to ensure you have an efficient financial reporting system which streamlines processes, is secure, easy to audit and, importantly, presents information in a format that is as easy for a teacher to read as it is for the trained eye of a SBL.

A financial reporting system for the many – not the few

Although Ms Greening’s announcement brought positive news of a fairer funding formula it remains to be seen whether this will plug the funding gap; questions were immediately raised over the issue of ‘recycled’ money – schools and academies remain in uncertain waters. “In uncertain times, budget planning needs to be flexible and collaborative,” Teresa Paredes, marketing operations manager at HCSS Education, advises. “Budget managers should work closely with department heads and get everyone invested in the common cause of meeting budget targets.” A financial reporting system that facilitates this will support strategic planning as school leaders can then monitor budgets closely, model different outcomes, plan up to five years into the future and call up this information in easy-to-read reports suitable for both internal and external stakeholders.

“As schools have more financial freedom, keeping on top of spending is more important than ever; this works best when everyone fully understands what role they play,” Graham Cooper, head of education at Capita SIMS, explains. This, he notes, involves a whole school approach – not only the finance team and SLT, but heads of department and teachers, too – they should be able to monitor their own budgets. “A financial system should enable its users to instantly access the information relevant to their role and present it in a way that they understand – whether that is a spreadsheet, pie chart or graph,” he says.

Absorbing change – flexible systems

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Flexibility is key to absorbing the cost of change – not only in terms of school management but also in terms of financial management. For this reason, having a reporting system that is flexible and responsive to change is essential. “It’s important that budgeting is seen as a rolling process, where assumptions are updated frequently and actual spend is regularly tallied against budget projections,” Teresa says, adding that this enables you to discern the ‘direction of travel’ and spot potential deficits early, giving schools enough time to make necessary adjustments.

Your financial reporting system should enhance current business processes and provide assurance – through data security, auditability and process automation – advises Andi Brown, director and co-founder of SAAF Education. There are some key functions that Andi says need to be considered – for example, your system should have the ability to analyse finance data in different reporting categories; this enables statutory returns – such as the academies budget forecast return – to be autogenerated and can provide user-defined management reporting. The system should also have the ability to integrate with your school’s other systems – for example, MIS – enabling staff to report on vital information such as key performance indicators which, in turn, supports benchmarking and can help make informed decisions prior to taking action.

If you are in an academy having software that can grow with you is key. Ensuring systems can generate both VAT 100 and VAT 126 returns is an important feature to have. “Most academies start out falling under the VAT 126 scheme but may be required to register for VAT if they expand to become a multiacademy trust,” Andi explains. Further, having a system that allows you to analyse finance data in different reporting categories is extremely useful when organising statutory returns such as the Academies Budget Forecast Return which, Andi says, can be auto-generated. This will also help in terms of charity compliance as you can easily analyse different types of funds. “This will support the creation of year-end statutory account disclosures such as the Statement of Financial Activities (SOFA),” Andi adds.

Reporting for tomorrow, today

When selecting a financial reporting system, or when reviewing your existing solution, Graham advises that you make sure your supplier is committed to ongoing developments. “A financial system in a school can’t stand still; it needs to adapt to the school environment, which is an ever-changing landscape,” he says. If you are thinking about a new system it might be worth considering its sustainability; for example, can your finance system adapt to a paperless way of working?

“HMRC now accept electronic invoices as evidence, so choose a system that allows you to attach images/electronic documents to your transaction data,” Andi suggests. For those who want to reduce their school’s carbon footprint (and their office supplies’ bill) – as well as optimising office space by reducing the amount of documentation stored in-office – this may be the way forward. Ultimately, financial reporting can be a burden made lighter by effective and efficient management. With the right system, providing you with the right information, at the right time, it can be a resource that makes your life a great deal easier.

This article featured in the February issue of Education ExecutiveSubscribe now to keep up-to-date with the latest in school business management and leadership.

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