School budgets: planning and implementation

Responsibility for a school’s finances is shared by several key stakeholders; what processes are used for successfully planning and implementing a school budget?

CREDIT: This is an edited version of an article that originally appeared on Schools and Academies

The financial responsibilities of a school can be as different as simply handling petty cash to more complex projects such as integrated curriculum and financial planning. The focus is to always stay within budget while retaining the ability to provide the best service for students, which means good financial planning and management is a must for those involved. 

The principles of school budgeting

Three steps for preparing a budget:

• Budget implementation.
• Securing value for money.
• The principles of school budgeting.

There are four different streams which generally fund schools:

• Capital funding: a type of funding used to improve a long-term asset, such as a building or IT network.
• Delegated funding: this is usually a ‘no strings attached’ type of funding. A good example is a dedicated schools grant.
• Devolved funding: this type of funding comes with conditions on spending options – for example, devolved capital funding can only be spent on long-term assets and pupil premium money would require evidence that it has been spent to the benefit of target students.
• Revenue funding: is used on things such as heating, stationery, repairs and salaries.

These types of funding are all subject to change, which means any future budget that relies too heavily on any one strand may suffer. Use the breakdown of what kind of funding your school receives to design an appropriate budget for the future.

Three steps for preparing a budget

Step One: reviewing past performance

Schools have a wealth of historical data to sift through which enables those responsible for budgets to view how performance fared against budgetary spending, and vice versa. Budget overseers can:

• Determine the accuracy of past budgets.
• Identify overspending and underspending concerning performance.
• Discover in which areas budgets have most been weighted to cover in the past.
• Determine which areas may need extra funding, based on past exam results.

Carrying out this analysis will give you better oversight into your new budget and help you to review expenditure. If possible, you can also benchmark your school’s performance against similar schools in the area to put past spending into context.

Step Two: planning for requirements

The focus in this step will be to determine what the school requires, going forward, based on a range of income and cost scenarios, influenced by historical and current data. For example, you might provide considerations for:

• Procurement.
• Development plans, such as asset management or construction.
• Inspection reports.
• Class sizes and pupil numbers.
• Changing funding (sources, revenue, capital income).
• Price increases for goods and services.
• Staffing requirements.
• Local government plans.

Step Three: predictive forecasting

If possible, develop a budgetary forecast that accounts for three-to-five years into the future. While it’ll be difficult to accurately predict changes in things like future funding and staff requirements, it’s worthwhile to model scenarios based on hypotheticals, and what you know is likely to occur, such as local planning and internal development. To proceed successfully, you need to maintain an active presence within your local and national educational communities, both of which can help provide insights into future changes to things like funding.

Try to model as many scenarios as possible in order to assess financial impact based on varying factors that affect a hypothetical budget, such as inflation or salary increases. At this point you can begin to utilise ‘what-if’ scenarios that help in modelling trends that fit into wider historical data, meaning you can capture scenarios with the highest probability of occurring.

Budget implementation

Once a budget has been approved it can be implemented. This implementation should include monitoring and evaluation that should continue throughout to correct any issues which arise and provide a solid basis for improvement the next time a budget needs to be created. Monitoring and evaluation should be pursued on a month-by-month basis, making it far easier when submitting budget reports to the relative authorities.

During implementation this kind of evaluation acts as a head start on the following year’s budgeting reviews, helping to ease forecasting tasks and providing evidence for anything that has been done right. It also helps to identify what could have been done differently, or more efficiently, next time around. 

Securing value for money

Due to many reasons – for example austerity, Brexit uncertainty and COVID-19 – the public sector has never found it harder to secure funding and so value for money has never been more important. Price comparison is a worthwhile task to focus on in order to secure the best deals, whether related to procurement or purchasing pens and pencils. Furthermore, schools also need to look into purchasing models. This could include:

• Buying in bulk.
• Partnering with other schools in purchasing.
• Annual contracts.
• Day-to-day purchasing.
• Leasing equipment.

Similarly, work to identify how securing value for money affects overall budgetary spending, based on how purchases and money-saving impact budget segmentation and performance. For example, have there been any cheaper purchases where a more expensive option might have delivered better results?

Essentially, determining the value for money of a specific investment depends on contextual economic factors, efficiency gains and effectiveness. Was the purchase the best quality for the lowest cost? How were results affected? Answering these questions gives you a better sense of value for money than simply looking at the price of services.

Once a budget is finally in place, the ongoing use and implementation of that budget is a hallmark of success, and is critical to overall school success. In a world where expenses represent a fine line between healthy and unhealthy finances, rigorous, robust and accurate budgeting is completely crucial.