The importance of budgeting in your estate strategy

This guidance can help to ensure your school is budgeting correctly to deliver your estate strategy 

CREDIT: This is an edited version of an article that originally appeared on gov.uk

Budgeting for the strategic management of the estate is an integral part of the budget planning cycle – it should not be treated as a standalone item. Assets recorded in the balance sheet need to match the value of assets in the asset register, and any planned additions need to be included in the financial plan to the extent that full funding is already secured.

Any planned disposals should be included if the disposal is contractually secured. If a significant disposal is included, but the value and timing of the disposal is uncertain, an alternative plan which does not include the disposal should also be produced.

To get the right combination of costs and benefits, you need to:

• understand how all your resources are used;
• challenge yourself to use them more efficiently;
• get value for money from the estate.

Thinking about the estate strategically will help you do this by:

• providing a framework to identify issues and recognise risks early;
• forecasting investment need in the short, medium and longer term;
• identifying capital budgeting requirements, enabling consideration alongside revenue budget planning;
• helping you sequence and prioritise works to maximise outcomes;
• co-ordinating the efficient procurement of services.

Capital and revenue budgets

The operation of the estate will impact both capital and revenue budgets. Capital projects could include:

• internal alterations;
• extensions or new buildings;
• invest-to-save schemes;
• improvement works to ensure the sustainability of the estate through asset change.

Revenue costs are associated with the operational running of the estate, including facilities management costs.

You should know the full cost of occupying the estate. This can be a challenge if you have:

• inconsistent budget recording;
• fragmented responsibilities and data-recording.

Understanding the financial implications of proposals as a whole supports:

• better decision-making;
• delivery of best value for money.

You should consider the revenue implications of any investment in the estate in the short, medium and long term.

Capital projects may have revenue implications that you need to consider in your decision-making. You should consider invest-to-save projects, which could reduce revenue expenditure in the future.

Effective practice point

Monthly management accounts do not always provide adequate information on capital budget performance (actuals versus approved plans). Have a look at your management accounts to see if this is covered well in reporting. Further guidance on management accounts and good practice is available.

Prioritisation

Prioritising work is important to make sure your budget is used to deliver best value for money overall. Taking a strategic approach identifies investment needs across the whole estate. This will help you to:

• plan your budget;
• avoid unexpected budget pressures.

Working this way makes sure that decisions on prioritisation are made in a consistent and transparent way.

Risk management

The budgeting process and prioritisation of funding should take account of risk management – whilst risk cannot be completely avoided, recognition of the risks, and their impact, should be a factor when prioritising expenditure. In addition to financial risks (both capital and revenue-related), consideration should be given to:

• risks around statutory compliance;
• educational delivery risks;
• strategic risk;
• reputational risk.

Determining value for money

When determining value for money from investment, and the management of the estate, you should consider the:

• potential to reduce revenue expenditure by investing in the estate – this could include invest-to-save projects;
• options to deliver savings through rationalising the estate – this could include disposing of surplus capacity, releasing costly assets or acquiring more efficient space;
• potential to generate income through the estate which could include letting parts of the estate for occasional community use, or the longer-term release of surplus space;
• options to procure services differently, which could include grouping all your requirements into a single contract or using frameworks for professional services.