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NFER Sept 2020
NFER Sept 2020

Drop the Defeatism and Deal with Your Deficit

September 6, 2019, 7:51 GMT+1
Read in 8 minutes
  • Stuart Fern outlines the steps that SBMs should take when faced with negative numbers on their balance sheet...
 Drop the Defeatism and Deal with Your Deficit

Even if your school’s finances are in the red, there’s no reason for them to be unmanageable.

Here, I’ll look at how to assess your situation as it currently stands, and then explain how to devise a workable plan that will let you fulfil your medium and long-term financial obligations, whilst still allowing you to deliver the pupil outcomes and daily operations your school should pride itself on.

Deficits can hit any school at any time, and for different reasons. They may be the result of demographic changes in your local area and the funding shortfalls that can accompany them, unforeseen staffing issues, or even the school roof blowing off!

A diligent SBM will tend to take their school going into a position of deficit personally, but please remember one thing – it’s not your fault!

Your role now is to ensure that the school’s decision makers – namely SLT and the governors – have to hand all the facts, figures and information they’ll need to understand what’s happened to put the books into deficit, make informed decisions, scenario plan and ultimately resolve the school’s deficit dilemma. Beginning with the first and most important tool of all…

The budget review

This will tell you how your school has got to where it is. You’ll have as a minimum your three-year budget plan (potentially a five-year one), which should have been regularly reviewed and scenario tested. You now need to do that reviewing again, and quickly.

There are many guidelines, sources of advice and resources out there for schools in relation to their financial health, especially from the DfE. These can include health checks, efficiency measures, checklists and other useful material – but at a time of deficit, it’s you and your SBM knowledge that really matters now, since every school is different, with its own unique expenditure, profile and staffing structure.

You’ll need to explore the detail behind every line of your school’s budget, and be especially mindful of making sure that current spending is factored in; some cost centres will already be on track to overspend, meaning that changes in your spending may only achieve partial savings this year.

Staffing expenditure

This is your biggest area of spend, and the one where the most difference can be made. Remember to review and challenge all areas – your job is to be objective, and to perform an advisory role for those making the decisions.

Be sure to focus on roles, not people. Look specifically at what roles are needed, not at who is deemed to always perform the best. Identify any temporary contracts, and consider what savings could be made now and in the future if those contracts aren’t extended.

Review any impending resignations or contracts nearing completion, and think creatively about how those posts could be covered with existing staff, without the need for ‘backfill’. Any staffing restructure will be expensive and amount to a medium term project in itself. It’s vital to ensure that once the school’s budget is back in surplus, your new staffing structure is effectively futureproofed and won’t simply push the school back into deficit over the coming years. Always tie back to the three- and five-year forecast and your School Improvement Plan, and judge any staffing decisions on their value, impact and potential savings.

Prioritise your spending

If you can identify the services you buy in light of their ‘educational benefit’, it will help you build a solid case for keeping them. However, be mindful that some services may not appear directly related to education, while still having a positive effect on pupil outcomes and whole school performance metrics. It’s your SBM knowledge that’s needed here to make those connections.

Watch out for any penalty clauses
attached to stopping services early. Forensically list all of the school’s contracts and agreements, and pass this on to the SLT for review and recommissioning.

When drawing up your new budget plan, beware of reducing your ‘fixed cost’ centres by too much. Your utilities costs are likely to be higher in each subsequent year, so don’t set them at a level in your new budget that can’t be realistically achieved. What might look like a saving now may well become an overspend in a tight budget later down the line.

Remember that unplanned expenditures will always happen – new health and safety requirements, for example – and that you need to make allowances for them. Tackle unplanned expenditure on a case by case basis, and review each expenditure request from a whole school viewpoint. What one colleague sees as ‘essential’ may, in reality, not be needed elsewhere.

With regards to capital spending, any planned projects yet to commence will have to be reviewed in light of your deficit, with serious consideration given as to whether to proceed with them. This may entail a ‘now or never’ decision from your SLT.

Don’t blame me!

The deficit may have been caused by a decline in the funding your school receives. If that’s the case, take the following course of action:

1. Assign whatever funding remains available solely to curriculum activities that underpin school performance. Your wider and extracurricular activities may be at risk, but they’ll need adding to a list that SLT will eventually have to make a decision on.

2. Examine all income generated by your school right down to the micro level. Will this income really cover the costs of the clubs the school runs and the visits it organises? Or will the fees charged for these need to increase?

3. Ensure that your debtors are chased and pay what they owe, at both parent and LA level.

As noted at the start, the deficit isn’t of your own making, but is everyone’s problem to solve. The process of taking a long, hard look at how your resources are being used doesn’t always have to be a negative one. Remember that in school business management, nothing ever stays the same – a thorough budget review and reforecasting, supported by well informed, knowledge-based scenarios, will be the key to solving your deficit.

Yours is the only role that ever gets to see the whole picture, from the finances behind how the school operates, to the pupils’ outcomes. Always align your budget with the school improvement plan, challenge all areas of expenditure, and always plan for the unplanned.

You can never relax, though. If you’re able achieve a surplus in one year, you may find that further cuts and reductions are needed in order to prevent a further deficit in future. The earlier such decisions can be made, the earlier they can take start taking effect.

Stuart Fern is finance director at One Education, specialising in business processes, data as information and leading growing organisations through periods of change and development; visit or follow @oneeducation

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