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Setting the budget
Who is responsible for setting the budget? Schools can decide the level of involvement that the chair of the finance committee has in setting the budget. We suggest questions governors could ask to monitor the budget setting process.
Responsibility for setting the budget
It is usually the school business manager (SBM) who leads on setting the budget. In schools without an SBM, the headteacher or bursar may take this task on. We spoke to two of our associate education experts, Martin Owen and Graeme Hornsby, for further advice on responsibility for setting the budget.
Setting the budget should be done through a process of co-operation and discussion with budget-holders
Martin said that although the SBM might be leading the process, setting the budget should be done through a process of co-operation and discussion with budget-holders and the leadership team.
SBMs are separate from the "sharp end" of teaching and learning, and so should act as an integrity check, asking questions such as "Is this expenditure appropriate?" and "How can we go about this? How can we achieve this?".
Graeme agreed. He added that SBMs should be there to advise decision-makers (e.g headteachers and governors) on the implications of going down one route or another. There will never be enough money to do everything you want to do, so you need to concentrate on putting resources where they're needed.
Refer to scheme of delegation document
In maintained schools, responsibility for setting the budget may be set out in a local authority (LA) scheme of delegation.
For example, Salford City Council’s scheme of delegation says:
The headteacher, in consultation with the governing body is responsible for the preparation of the annual budget plan.
Academies could also refer to their scheme of delegation document.
On page 12 of its financial procedures manual, The Westwood Academy in Coventry says the finance director and SBM compile the draft budget for the governing body and appropriate committees. This is submitted to the finance committee for their review, discussion and amendment if appropriate. The budget is then submitted to the full governing body for formal review and approval.
An article from The Key links to further examples of responsibilities that are delegated to committees and individuals in maintained schools and academies.
DfE: normally no direct role for finance committee chair
A representative confirmed that there is no rule on the level of involvement that the chair of the finance committee should have in setting the budget; this is for individual schools to decide.
The chair of the finance committee does not normally have a direct role in writing a draft budget
He noted that the chair of the finance committee does not normally have a direct role in writing a draft budget. However, he or she may support the headteacher and SBM in developing it by asking questions and offering direction.
In section 5 of this article, we suggest questions to ask in order to monitor the budget setting process.
Budget procedures from schools
The finance policy from Toll Bar Primary School in Doncaster says that one of the headteacher's responsibilities is:
To prepare the annual budget, based on realistic estimates of expenditure and income, sufficiently in advance of the financial year for consideration and approval by the governing body...
It also says that the SBM will assist the headteacher in preparing the annual budget.
The Kite Academy Trust is a multi-academy trust (MAT) in Surrey. Its finance policy includes a table of budget-related responsibilities.
This says the draft budget for each academy in the trust will be prepared by the chief financial officer and SBM, and will be presented to the executive headteacher and head of school.
The finance director will produce the central budget for the MAT.
Download the policy here.
Newport Community School Primary Academy in Devon says that the SBM, in liaison with the headteacher, is responsible for preparing the annual budget and a “supporting report”.
Methods for allocating departmental budgets
We asked the National Association of School Business Management (NASBM) about methods schools use to allocate funding to curriculum departments. An associate practitioner explained that there are a couple of different ways schools can allocate budgets to departments within the school.
Using a formula
The practitioner said that many secondary schools use a formula to allocate funding to school departments.
Many secondary schools use a formula to allocate funding to school departments
The number of pupils taking a subject is multiplied by the number of periods (or classes) of that subject to be taught over the time frame. The school can choose the time frame.
Each subject is also given a weighting. Subjects that require a lot of specialist equipment, such as science or technology, are given a higher weighting than subjects that require fewer and less expensive resources, such as English or maths.
Using negotiation or bidding
The NASBM practitioner also explained that some schools prefer to negotiate budgets directly with heads of department, or have heads of department bid for the funding they need.
She said department heads may then feel more satisfied with the resulting allocations, because they have had greater input in the decisions.
Using this method also means that additional factors can be taken into consideration when making budgeting decisions. For example, the school might want to consider whether extra expenses are needed to prepare for and manage a change in the curriculum for a subject.
Combining a formula with a bidding system
We also spoke to another of our associate education experts, Jonathan Block, about allocating departmental budgets.
Jonathan said that allocating departmental budgets using only a formula may mean that there is no money left over to address any unforeseen expenses. He suggested that schools could combine the use of a formula with a bidding system.
Schools could combine the use of a formula with a bidding system
For example, the school could use a system whereby 60% of its curriculum funding is allocated through a formula, with the remaining 40% open to bids.
Discussing the budget ahead of approval meeting
We asked Jaimini Lakhani, an experienced SBM, whether the chair of the finance committee should meet with staff before the meeting to approve the budget.
Jaimini advised that individual governing bodies should find a process that works well for them. She said if the committee chair feels that having a short discussion about the contents of the report prior to the meeting would be useful, then he/she could arrange that. This may be helpful if the committee chair is relatively new to the role.
Alternatively, the committee chair (and committee members) could use email to ask the person in charge of drafting the budget (usually the SBM) any questions they have about the report prior to the meeting. The member of staff could then answer these questions in advance, or bring further information to the meeting if required.
Jaimini also recommended that the person who drafted the budget attend the committee meeting in person to present the finance report. This is important, as he/she is familiar with and accountable for the information in the report. It also means that any questions raised at the meeting can be answered immediately.
She explained that in some schools this person also attends the full governing body meeting so that he/she can present financial information instead of the chair of the finance committee.
Taking a strategic approach to setting the budget
In a video from The Key's Strengthening leadership and governance event on 4 June 2015, Justine Berkeley, managing director of SBM Services Ltd, explains how to take a strategic approach to drafting and approving the budget.
Questions to ensure effective budget setting
A chair of a finance committee asked us how to challenge senior leaders to make sure the budget is set effectively. We spoke to Graeme Hornsby about this.
Graeme said the person responsible for putting the budget together should present the budget to governors with a commentary explaining the different points.
He suggested that governors ask:
- What is the process for budget planning? How robust does the school feel this is?
- Has the school checked the accuracy of the predicted income from the local authority (LA) or Education Funding Agency (EFA)?
- Does the school allocate funding based on the school improvement priorities?
- Has the school included information on the projected spending of:
- The pupil premium?
- The sports premium (in primary schools)?
- Non-staffing overheads?
- Capital projects?
- How have the projected staffing costs been predicted? Has the school taken into account any potential pay rises?
- Has the possibility of dealing with cuts to funding in the future been taken into account?
- Does the school benchmark its spending against similar schools?
- Are there costs that are not in the budget? How are they managed?
- How accurate does the school feel its forward financial projections are?
Approving the budget
Graeme Hornsby is an education consultant with significant experience of school business management at a senior level. He has particular expertise in strategic financial planning, human resources and governance.
Martin Owen is a chartered accountant (CPFA). He has more than 20 years of significant experience working with academies and schools to improve their governance, leadership and management of financial, business and operational processes.
Jonathan Block has extensive experience of school leadership as an interim head and education consultant.
An experienced accountant and school business manager, Jaimini Lakhani is a consultant who supports school leaders and governors in implementing effective financial systems.
This article was updated in response to a question from the vice-chair of governors of a large urban secondary school in the east of England.
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