This paper is relevant to senior leaders, business managers, governors, staff and officials involved in strategic financial planning and reporting. It applies to local authority (LA) maintained schools, academies and multi-academy trusts (MATs) in England.
A strategic plan clarifies direction and focus for governors, trustees and school leadership teams and ensures that everyone is working towards the same set of goals. It provides a roadmap for success and, in the current financial climate, solvency and survival. Strategic financial planning will ensure that the school gets the most out of available financial resources in a sustainable and effective way.
The guidance looks in detail at the following:
A strategic view allows governors and the leadership team to project a range of efficiencies for the future using the best information available at the time.
The process of strategic financial planning ensures that key financial information is not limited to one or two people in the organisation as this can present real risks (risk management is covered in Section 2 of this guidance).
“The most effective schools are those that think continuously about how to optimise their spending decisions to achieve the best outcomes for their pupils.” DfE Review of efficiency in the schools system, 2013.
The Department for Education (DfE) and the Education Funding Agency (EFA) provide advice, practical tips and strategic planning resources on their Schools Financial Health and Efficiency webpage.
Start with the end in view
At the beginning of the strategic planning process it is important to start with the end in view. Three key questions to consider to help determine what that end view will look like are:
What are the school’s core values and are they acknowledged and reflected in the strategic plan?
Does the school:
have a sound financial strategy
evidence good value for money
develop and maintain robust procurement and financial systems?
Is the school development plan aligned with available resources?
Roles and responsibilities
Governing body: responsible for ensuring that the school has a clear vision and strategic direction, as well as overseeing the financial performance of the school to make sure that its money is well spent.
Accounting officer (AO): The AO should be the senior executive leader of the trust. In standalone academy trusts it should be the principal. In MATs it should be the chief executive or equivalent. The AO is personally responsible to Parliament for the resources under their control. The role of accountin officer must not rotate between staff at the trust.
Chief Financial Officer (CFO): An academy trust must have a CFO, usually the business manager of finance director. The CFO takes both a technical and leadership role and leads on financial matters including risk management.
Academies: the academy funding agreement and The Academies Financial Handbook, set out the specific responsibilities of the board of trustees. The funding agreement includes a termination clause which defines the point at which an academy is deemed insolvent and when the Secretary of State must be notified. This clause includes details of the events that may lead the Secretary of State to terminate an academy funding agreement. Where the EFA has concerns about financial management and/or governance of the trust, it may issue a Financial Notice to Improve (FNtI). A FNtI automatically revokes the delegated authorities of the trust until the EFA are satisfied that the terms set out in the notice have been met and the FNtI is lifted. The Academies Financial Handbook contains more detail about what happens when an FNtI is issued.
LA maintained schools: The headteacher in a maintained school is responsible to the LA for the resources under their control. LA-maintained schools are subject to local finance regulations which have strict rules regarding any budget deficit. The governors, headteacher and finance lead need detailed knowledge of these regulations which will usually be accessible via the LA website.
Financial Reporting Cycle
The Academies Financial Handbook is updated each year and contains specific details of the financial reporting requirements for academies. The handbook identifies a number of ‘musts’ including:
must approve a balanced budget that is approved by the board of trustees and submitted to the EFA (the budget forecast return) by 31 July in preparation for the new financial year on the 1 September
must notify the EFA within 14 days if it is setting a deficit revenue budget that cannot be addressed after unspent funds from previous years have been taken into account
must provide information on financial performance to the board of trustees at least three times a year
must provide externally audited annual report and accounts, giving a true and fair view of resources, in accordance with accounting standards
must submit audited financial statements to the EFA by 31 December, following the year end at 31 August
must submit the Annual Accounts Return (AAR) to the EFA by 31 January
must publish financial statements and value for money statements to their website by 31 January
must establish a sound internal controls framework - see the Academies Financial Handbook for details of what the framework needs to include
must have a cautious approach to investment
must have a whistleblowing policy
The DfE guidance, the Consistent financial reporting framework (CFR) and the Schools financial value and assurance standard (SVFS), are updated annually and provide detailed guidance for school leaders and governing bodies on the financial reporting requirements for maintained schools. The guidance identifies a list of ‘musts’ and some best practice suggestions that will provide assurance to the LA that robust financial management is in place:
Must complete the SFVS assessment annually and submit to the LA.
Must set an annual budget in line with the CFR framework by 1 April.
Must submit to the local authority annually a financial statement based on the CFR framework and in accordance with local authority accounting practice, including a summary of the schools financial position at the end of the financial year.
Should profile the annual budget across the year.
Should provide monthly monitoring reports to school leaders and governors for comparison of actual income and expenditure against budget profile.
Should manage cash flow, avoid going overdrawn and reconcile bank accounts at least monthly.
Effective strategic planning gives governors and school leaders the opportunity to consider the best, most difficult and more likely scenarios resulting from changes to variable factors. Schools and academies will have to determine which factors constitute variables, but almost always the following will be included:
average teacher cost (ATC)
average cost of all other staff
inflationary factors including employer contributions to pensions and National Insurance
Areas of Expenditure and Key Performance Indicators (KPIs)
A strategic view requires knowledge of the different areas of expenditure of the budget. KPIs are quantifiable measures that are used to indicate an organisation’s success, and these should be agreed for the different areas of expenditure. Planned and actual expenditure can be measured regularly against KPIs throughout the annual budget cycle and the longer term strategic plan.
Area of expenditure
KPI - Suggested target spend as a % of total budget
Premises / infrastructure
In a static funding situation where costs are rising, the maintenance of these KPI levels will be a detailed and ongoing task.
School leaders and governors should understand and regularly assess the key risks that their school faces. It can be helpful to consider these as business risks where education is your business. The key areas of business risk in schools are:
governance: governing body lacks skill or structure is inefficient
operational: safety, insurance, staffing issues
financial: cash flow, dependency on grant, variable other income streams
internal: results, falling roll, consequential effect on recruitment and morale
external: demographic trends, external competition, alternative and new provision
fraud: misuse of public money
compliance: lack of knowledge of requirements
horizon-scanning: what might impact over the next three to five years
There are three key questions for school leaders and governors to consider:
What curriculum can we afford?
What must be included in the curriculum?
What do we want the school’s curriculum to look like?
In summary, staffing and curriculum planning decisions are informed by funding levels and realistic projections. Risk assess curriculum delivery against the impact of NFF.
Consider the link between curriculum delivery and funding and using the key variables and KPIs as targets:
a) How many teachers can the school afford now and over the next three to five years? Even a static staff will cost more each year as a result of performance-related pay and any cost of living rise.
b) How many teachers would be needed to deliver the curriculum that the school would like now, and over the next three to five years?
If a) and b) don’t match, what are the available options?
The meeting cycle
Arrange the annual meeting schedule around the financial, staffing and curriculum deadlines giving plenty of time for different scenarios to be evaluated and discussed. It is counterproductive to present a draft budget to the leadership team and governors for the first time, one week before the final budget needs to be submitted to LA/EFA.
Facilitating the discussion
Communication is key. Discussing expenditure on staff and resources needs to be in a common language at an appropriate level of detail. It should be a discussion with a ‘what are we going to do’ conclusion and not a discussion that results in splitting the team, or seeks to apportion blame. In particularly difficult situations it can be helpful to bring in an independent third party to deliver the message. ASCL can provide assistance with this, please email email@example.com for more information.
Benchmarking is a strategy tool that allows you to compare your spending patterns with other similar schools. Maintained schools will need to access the CFR Benchmarking website and academies should access the Academies Financial Benchmarking website (links to both sites are provided in Further information at the end of this paper). It can be useful to get in touch with a school that appears to demonstrate a radically different spending profile and ask them how they have achieved this.
Three to five year plan
Medium and long-term scenario planning allows your organisation to be proactive and in control rather than being reactive. Suppressing the symptoms of poor financial planning is time consuming and can result in diverting the senior leaders away from teaching and learning. Utilise a reputable budget management software package which has forecasting capability, or set up your own spreadsheets. ASCL can provide assistance with this, please email firstname.lastname@example.org for further information.
A medium or long-term strategic plan is not set in stone. It is a live document which must have flexibility, and be regularly referred to and updated to reflect known changes. It establishes a direction of travel for the school and boundaries for effective decision making.
ASCL Funding Specialist, Julia Harnden