Cheryl Campbell, Kemi Arogundade and Husham Khan from ABBLed join me for the first in a special series of podcasts discussing the hot topics that SBLs are dealing with right now.
In Part 1, we’re talking all things post-Covid finance and we’re digging into insurance, contracts and lettings as well as risk management, pupil numbers and contingencies. It’s a good one!
The episode at a glance:
[2:04] –Not sure what ABBLed is about? Cheryl fills us in!
[6:00] – We get stuck in to the detail and talk around all things income and expenditure
[11:10] –We take a closer look at risk management and risk registers and how these tools can help SBLs
[15:40] –We talk about the impact of COVID on staff wellbeing and how we can factor this into budget setting
[27:17] –Husham explains the ABBLEd ratio, how it can be used to measure your school’s exposure to the commercial sector and what this means for your organisation in terms of risk
[32:28] – Cheryl emphasises the importance of an appropriate contingency for your school
[41:50] –We discuss how wide-reaching the role of SBL is and why it’s important that SBLs are involved in strategic discussions
[48:30] –Is there such a thing as COVID-proof finances? The panel forms a conclusion…
[52:18] –Husham sums up the top take-aways from this episode
You know I love to hear from you so please pop me an email or get in touch on social media to let me know what you think of the show and what you’d like to see in the future!
Micon Metcalfe, School Business Professional and MAT Executive Leader, returns to the show to talk about all things financial benchmarking. Is it worth it? How does it work? What info should you be looking at? This episode has all the answers!
And because it’s us… we didn’t stop there (again!) We also talk about governance, Ofsted, the ESFA, the DfE, the SRMA role and MATs in terms of growth, central team structures and what we think the future holds for education generally…
Really, there is nowhere we won’t go!
The episode at a glance:
[2:15] – Micon shares her views on financial benchmarking, how and why this has shifted over time and the role of the SRMA
[29:04] –Micon discusses Ofsted inspections from a MAT perspective plus how she feels about scrutiny, GAG-pooling, and much more!
[40:27] –Micon shares her advice for those SBLs who aren’t ‘allowed’ to observe or participate in critical strategic discussions
[46:22] – Micon talks about how you can get started with financial benchmarking
[01:02:02] –Micon talks about the challenges in the sector both now and moving forward and what we can do to weather them
You know I love to hear from you so please pop me an email or get in touch on social media to let me know what you think of the show and what you’d like to see in the future!
In the second episode of the Summer of CPD podcast series, Marcus Peedell and Sean Clark from School Business Services join me to talk about the things you need to consider when setting your budget and monitoring your expenditure.
We talk about why consistency is key, why change is inevitable and how we can make sure we’re flexible when it counts.
And if you’re listening to this episode and feeling a little bit lost, stay tuned until the end to find out how I can help!
The episode at a glance:
[1:28] –Marcus and Sean discuss overwhelm and the importance of planning and tracking finances.
[7:42] –We talk about how to share financial information effectively with the SLT and school governors
[8:43] – We talk about what’s coming in terms of financial planning and financial returns
[12:25] –We talk about the impact of COVID on financial processes
[15:46] –The pair share their top tips for school financial management
You know I love to hear from you so please pop me an email or get in touch on social media to let me know what you think of the show and what you’d like to see in the future!
In terms of hard data, your pupil numbers, curriculum model and financial bottom line provide you with more than a firm steer towards what your staffing structure should look like.
Whether you need to undertake a full restructure or simply make a few tweaks, your staffing structure is the nerve centre of your school and it requires almost constant attention.
The truth is, schools are always in the process of restructuring their staff – but by doing it with a long enough lead time, it becomes a change management process rather than a wholesale HR operation to be completed in a half term.
In the current climate of continuous change:
How do you make sure that not only is your staffing structure value for money but also fit for purpose?
How do you make sure that good on paper is good in practice?
Below is a three-phase self-evaluation tool designed to help you achieve just that.
Phase 1: Determination – Where do you need to be and what might stop you getting there?
It’s essential to determine your ‘destination’ before you set off on this journey or you are risking the wheels coming off along the way.
Curriculum led financial planning and benchmarking are key cornerstones of school budget management but other factors need to be taken into account before you start reshaping your staffing structure.
It’s easy to delete lines from spreadsheets and merge classes in SIMs but when it comes to dealing with people, assessing, evaluating and implementing the changes you need to make isn’t as straightforward.
Considering the current context, wider picture and long-term goals of your school is the starting point of any staffing review.
Ask yourself:
Is our vision, mission and strategic plan reflective of what needs to be done and where we need to get to?
Are there any external threats to our organisation that need mitigating?
Could upcoming legislation changes impact our capacity or hinder progress towards our objectives?
How can we ensure that accountability lines remain clear in the face of upcoming change?
How can we protect the continuity of operation and facilitate knowledge sharing to mitigate the impact of turnover?
What skills are we lacking that we’re going to need over the next year?
What knowledge do governors need and what role should they have in relation to any changes that we need to make to our staffing structure?
Phase 2: Assessment – What do you already have, what else do you need and how can you fill the gaps?
Determining your destination will almost certainly have flagged a number of issues that need your attention.
Recruitment or redundancy is often seen as the obvious way forward but both options can prove costly and therefore should only be undertaken if all other angles have been explored. It’s at this stage where marrying together as much as possible the ambitions of your staff and the ambitions of the organisation can really bear fruit.
The more you know about your staff and where you need to be – and the sooner you know it – the better you will be able to implement the changes you need to make. It may even be the case that upon assessing your current position, you re-evaluate your final destination.
The future is not predetermined so go through as many draft versions as you need to.
Ask yourself:
Do we have accurate and up to date information about our staff in terms of pay scales, job descriptions and skillsets?
Are the jobs being done across the school being done by the right people?
Are all the jobs being done needed to be done? Can they be done a better way?
Do we have capacity and is it in the right place?
Would a review of job descriptions, an investment in CPD and appropriate remuneration mitigate the need to recruit and secure best value from existing staff?
How can appraisal inform our thinking in terms of skills and talent management?
Could leadership roles be redefined across the school to reduce head count and cost but also foster talent management and create new progression pathways?
What impact will these changes have on our support staff and operational capacity?
Would a service level agreement or local collaboration be a preferable option?
If we need to recruit, what terms and conditions will suit both the role and need of the organisation best?
Phase 3: Evaluation – What risks come with your proposed strategy and how are you going to communicate it?
When it comes to staffing, there’s always going to be a curve ball that you didn’t account for. A maternity leave, a resignation or a long-term illness.
This phase is about both testing and safeguarding your strategy in as many ways as you can. Determine if this is a process that can be managed over time or if it needs to be implemented quickly.
Ask yourself ‘what if’. Think of your Head of English, Business Manager, Deputy Head and your Union representatives and what they could say about your plan. Think about would worry them, what would make them anxious and what questions they might have. Now think about what answers you would give them.
Ask yourself:
Will our proposal achieve for us what we need it to?
Are the reasons we have decided to make changes to our staffing structure sound and objective?
Are there any factors that are non-negotiable?
What are the main risks with the changes we are proposing and is our risk management process robust enough?
Have we truly exhausted other options and are we able to justify our decisions?
What is the best way to communicate these changes?
How can we include feedback from stakeholders in a meaningful way?
How can we be sure to demonstrate fairness and transparency throughout change implementation?
Top Tips
Beware the ripple effect– one seemingly small change can create a lot of problems. Don’t assume anything and always think at least two steps outside of the immediate ‘impact zone’ when it comes to adding, removing or changing any roles.
Have a contingency– don’t hang your strategy on one person or one plan. Have an alphabetised file of back up plans. ‘Just in case’ never hurt anybody!
Don’t be held hostage – if you do end up caught out, negotiate on your own terms. Don’t get panicked into a ‘knee jerk’ – and likely costly – response. Remember that hostage situations can be negotiated.
Consider intelligence, not just evidence– do your homework. Don’t just rely on hard data. Triangulate your knowledge with numerous sources before committing to anything.
You don’t need to be a mystic, just be aware– it’s not just about planning for the future; you can only plan so far after all and as we’ve said, the unexpected can and usually does happen. It’s how often you review your plan that enables you to be agile when you find yourself on shifting sands.
As school leaders, risk is something that we are incredibly familiar with. We have processes in place to ensure safety on school trips, that our site is secure and that the staff who work for us are screened in accordance with safeguarding legislation.
These systems are woven into the fabric of school life, often without issue or incident.
However, there are other types of risks to our schools – beyond the operational – that require more consideration and focus to allow us to mitigate them appropriately.
By taking a strategic approach to risk management, your school can be proactive and make well-informed and timely decisions.
What does risk management involve?
The process of risk management involves six steps; identification, assessment, measurement, management response, monitoring and reporting.
As an organisation, you should have a process that outlines how you follow these steps to ensure that the management of risk is clearly articulated, understood and implemented by key stakeholders.
At a strategic level, risk management should be linked to your school development plan and its objectives; specifically the risks that will impede you from implementing your plan effectively.
What types of risk are there?
It’s easy to fall into the mindset that everything is a risk i.e. an accident on a school trip or a break-in at school. While these are all risks, as outlined above, they will likely already have comprehensive mitigation measures in place.
Unless you have reason to believe that your measures are not working or are out of date, an audit identifies areas of concern or some other variable factor has changed, then these types of risk need not feature on your strategic and ‘live’ risk register (or similar document).
Risk management does not equate to voiding risk altogether as this is often not possible. It’s about forward thinking, taking appropriate action at the right time and ensuring that you’ve done all that you can to reduce the impact of any risk.
If your management actions are effective and the risk can be deemed ‘low’ then you are managing risk effectively.
Strategic risks usually fall into five main categories; governance, educational, financial, external and compliance.
Operational risks, as outlined above, may be incorporated into your risk management process but only if there is a significant impact upon your progress towards your strategic objectives.
Chances are, serious operational risks would be covered under one of the other five types of risk. Here are some examples of risk for each category:
Governance Constitution or structure of your LGB (numbers, attendance, committees), capacity of the LGB in terms of skillset and time, conflicts of interest.
Educational Outcomes, Ofsted, curriculum, provision, staffing etc.
Financial Limited income, insurances, procurement, internal controls, cash flow, inadequate information or reporting, asset management.
External Reputational, demographic changes, pupil numbers, community, changes in government policy.
Compliance Failure to meet legislative requirements, poor knowledge of responsibilities and regulations, audit issues.
How do we manage risk?
Where a risk has been identified, you need to be able to quantify both its probability of occurrence and the relative impact if it does occur.
When you have identified the measures you are going to put in place to mitigate the risk, you should then assess what effect these measures will have on both the likelihood and impact.
You should expect a lower probability of it happening or a lesser impact if it does after you have taken management action.
In the academy sector, this risk assessment process is documented on a risk register. In the maintained sector, you may have an LA risk register template that you use or you may record it in another way.
There are four main approaches to risk; tolerating (accepting and managing), treating (controlling or reducing), transferring (contracting out or insuring) and terminating (avoiding). The approach you choose to manage each risk will depend on your context and your resources.
To be clear on accountability and responsibility, you should determine who ‘owns’ each risk. This will likely be the person who is responsible for implementing the mitigating actions. While we know that the ‘buck’ stops with the headteacher, risk management is everyone’s responsibility. Line management and reporting to your LGB should incorporate the risk management process, ensuring that the accountability chain is robust.
How can we make sure our risk management process is fit for purpose?
When a risk has been successfully mitigated to what you determine to be an ‘acceptable’ level, there should be a point where this risk is removed from the risk register.
This means that the focus of risk management is not diluted and that priority is given to current and ‘live’ risks. In the future, it may be that some risks ‘return’ and at that point, they can be revisited.
When it comes to managing strategic risk, it’s important that the process is integrated into existing structures and systems. This ensures that it is a regular topic of discussion.
The more people that are involved in the identification, assessment and management of risk, the less likely it is that the process will become subjective or overlooked.
Risk management may appear to be an onerous administrative process but when it’s well implemented, it can help you to protect your school, staff and students as well as save money, provide stability and help you to make smart decisions about the use of time and resources.
Risk Management: Self-Evaluation
Do we have a formal risk management process?
Is it explicitly linked to our strategic objectives?
How do we categorise risk?
Is our assessment of risk robust?
What is our approach to risk?
Are accountability lines clear in terms of risk management?
How do we communicate management action in terms of addressing risk?
How does our governance structure support risk management in terms of scrutiny and challenge?
How do we keep our risk management process objective?
How do we determine whether a risk should be removed from the risk register?
In the world of Academies, GAG pooling is seen as something of a taboo. Though it first featured in the Academies Financial Handbook in 2013, it has been until recently, largely ignored.
With the increasing financial pressures on the sector and the depletion of resources throughout the system, it has steadily risen to the top of the agenda.
The DfE, the ESFA and numerous financial experts all cite the process of GAG pooling as a way to further increase efficiencies and improve the effectiveness of MATs.
“To enable financial governance to continue to improve it is essential that MATs become more centralised. This will, in turn, facilitate GAG pooling which will enable MATs to ‘look after‘ the financially weakest schools in the system.”
In a letter to auditors in June 2018, Theodore Agnew, the Parliamentary Under-Secretary of State for the School System said:
“I would like to share more widely across the audit sector several key points that will help boards govern more effectively and make best use of the freedoms they have. We are aware that a substantial proportion of trusts are still hesitant about implementing some of the freedoms and mechanisms to enable this.”
He encourages auditors to discuss these freedoms with their clients; GAG pooling being at the top of the list.
He said:
“This is one of the greatest freedoms a MAT has. The opportunity to pool GAG is particularly valuable, in particular, to simplify the provision of support to weaker schools in a MAT until they can grow their pupil numbers. It is worth remembering that a MAT is a single financial entity.”
Interestingly, out of the 350 Trusts represented in the Kreston report, only 3 are currently GAG pooling. In the opinion of Kreston, it is clear that ‘there is something holding the sector back’.
There’s no doubt that moving to a GAG pooling model requires a significant shift in both the mindset of leadership and governance and the culture, systems and processes of the organisation.
But with approximately 50% of MATs showing an in-year deficit, an increasing number of MATs having a cumulative deficit and continually depleting reserves sector-wide, why are so many MATs reluctant to GAG pool?
The Kreston report states that MATs said they were not GAG pooling because:
The politics were challenging (SLT, Trustees, LGBs) 46%
Financial position 22%
It was too difficult to implement 14%
They will do it or are seriously considering it 5%
Other reason 13%
The issues surrounding the ‘politics’ of GAG pooling include:
The belief that school-level funding allocations are for the benefit of the students in a specific school and therefore should not be redistributed
The concern that the deployment of resources from a central perspective would disadvantage individual schools and students
The reduction in the autonomy of schools, Headteachers and Local Governing Bodies
If the financial landscape was rosier, it’s clear that GAG pooling would remain an overlooked clause hidden in the depths of the Academies Financial Handbook. But with the financial future of the sector looking increasingly bleak, MATs may find themselves having to grasp this nettle.
If you’re open-minded to the concept or are actively considering GAG pooling and you’re wondering how best to approach it, then I’ve put together a list of frequently asked questions to help you navigate this largely uncharted territory.
What options do we have in relation to GAG pooling?
In truth, though the concept is outlined in the Academies Financial Handbook, the actual ‘how’ is not so clearly defined. GAG pooling can mean any one of the following:
Receiving all school funding centrally and allocating resources to individual schools and to the centre (removing the need to top-slice a ‘management fee’)
Allowing school allocations to continue at a local level but pool reserves and other specified incomes streams (whilst continuing to top slice a ‘management fee’)
In addition to the top sliced ‘management fee’, top slice an additional specified amount for central reserves/contingency
Increase the percentage of the management fee and from this, create a centralised reserve
How could we use these pooled funds?
Again, it depends on where the money comes from, how much of it is pooled and the overarching strategy of the MAT. Outside of school allocation, (however this is determined), the money can be used for:
Supporting the financially weaker schools in the MAT
Creating a contingency for cashflow, unforeseen emergency costs, building maintenance, ICT replenishment etc.
Increasing central resource and achieve efficiency savings MAT-wide (through centralisation and procurement)
Funding projects cross-MAT to support improvement and build capacity
In what situation would GAG pooling be most effective?
If there are clear inequities across your schools funding with surpluses and reserves varying to the extreme, you can argue a case for GAG pooling. The ESFA, though it monitors individual school performance, is more interested in the overall financial sustainability of the MAT as a whole. GAG pooling is one way to secure that. For financially vulnerable schools, joining a MAT should provide them with adequate protection rather than expose them to further threat.
If all of the schools in the MAT are running close to the red line, then you could argue that pooling these funds would not achieve much at all; like shifting the deck chairs around on the Titanic. If your central budget is not capable of generating surpluses either, then your MAT will likely need to consider a more drastic approach to bring things back into line and secure sustainability.
But redistributing funds away from the schools it was intended for is not right!
You could argue that having a ‘management fee’ does exactly the same thing as GAG pooling but is simply called something different. When you look at the size of or uses of the ‘management fee’ in some MATs, it could be said that they are GAG pooling already, with some reserves and contingencies sitting centrally. The difference with this is that the route to challenge and scrutiny by the schools is stronger and more defined in terms of quantifying the value for money provided by the MAT. In fact, I worked with a Head recently who said they felt the management fee that they paid their MAT was too low and they would gladly pay more to enable the MAT to do more for them.
If the MAT has a large amount of cash sitting in the bank but ‘cannot’ use it, it will merely be an onlooker as one or more of its financially weaker schools fail; thus negligent in its financial stewardship. In these cases, if the sole purpose of GAG pooling is to secure long-term financial sustainability of the MAT, then GAG pooling in some form should be a no-brainer.
So how do we reconcile the inequity that GAG pooling creates in the schools that are financially effective?
MATs need to decide how committed they are to GAG pooling and whether they are in it for the long term. Depending on the level of need and ‘pooling’ that needs to be done, MATs might consider some form of internal loan and repayment system to overcome short-term difficulties. If the GAG pooling mechanism is being used as a means to secure sustainability in the short term – either until funding becomes adequate, pupil numbers increase, or further local efficiencies can be achieved – then the MAT can account for the internal redistribution and repayment of funds. This mitigates the perspective of schools ‘losing’ or ‘giving away’ their reserves and being ‘penalised’ for their financial efficiencies. This option should be considered carefully, taking into account context, the level of need, the financial position and the long-term goals of the MAT. GAG pooling in any form needs to be articulated clearly in relevant MAT policies including the Reserves Policy.
What if there are other reasons that we need to use the reserves/pooled resources?
Implementing a transparent system around the management of these reserves is essential. If your MAT is pooling reserves to secure tighter financial control, it should implement a process whereby schools can apply for funds as and when they need it. The MAT should ensure that the criteria for decisions taken and the prioritisation of expenditure are clear so that no school feels like it has been unfairly treated. The Academies Financial Handbook states that an appeals process for such circumstances be articulated clearly in MAT policies. My advice is that the more specific you are around the allocation of pooled resource, the less chance there is that complications will arise further down the line. Ambiguity fosters distrust. If the MAT doesn’t have a robust process for managing GAG pooled resource and cannot justify its expenditure decisions, then appeals may be lost and the impact on the relationships within and the culture of the MAT may be devastating.
What about the National Funding Formula?
If the National Funding Formula achieves its goal to balance funding across UK schools, then this will ‘iron out’ any imbalance that the GAG pooling process is designed to achieve – thus making GAG pooling, at least at its extreme, redundant. Instead, the focus will shift back to the ‘management fee’ and value for money of the MAT.
Our MAT isn’t in financial difficulty – should we still consider GAG pooling?
If your MAT is in a sound financial position but determines that it could add more value if it had more control over its funds, then this is where GAG pooling becomes particularly contentious; especially if you’re opting for Option 1 – total control over school allocation. In effect, it means that your MAT is saying that it will override the methodology of the funding formula and all its component parts and determine itself how much money each school needs – in other words, ‘acting like a Local Authority’ (Robert Hill). This is where the argument in relation to the autonomy of Headteachers and Governing Bodies grows strong. If a MAT opts for this type of GAG pooling, it indicates a significant shift in culture, operation and autonomy beyond what is currently common in the sector. These ripple effects will impact on the role of the Head, the management of the schools and the way in which the Scheme of Delegation operates.
Before going down this path, the Trustees and central team need to be clear about what they are trying to achieve and whether GAG pooling is really the best way to do it.
Our MAT is looking to grow – should we be looking at GAG pooling?
Much of your decision making in relation to GAG pooling will depend on the points made above. However, growth does pose both financial opportunities and threats to a MAT. If your MAT is looking to grow, GAG pooling is just one piece of the puzzle and should be considered in relation to the context, strategy and objectives of your MAT both in its current and future state.
For those MATs who are looking to grow or are already in a growth phase, download my Guidance for Growth Tool, written for Capita SIMS, to enable you to articulate your vision for growth, test and risk-assess your strategy and identify actions to implement your strategy successfully. Just click the image below:
So how do we move forward?
In summary, there isn’t a one-size-fits-all answer to GAG pooling. You’ll need to assess the current position of your MAT and identify your long-term challenges, priorities and goals to see if it is the right path for you.
For additional advice in relation to GAG pooling, get in touch with your auditors who will be able to provide you with bespoke, detailed guidance and support.
Monthly management accounts are the most useful financial tool a Headteacher has at their disposal. However, when presented with a spreadsheet full of numbers, for some, it can be difficult to know where to start or what questions they should be asking their Business Manager.
Here are the top five things that you should be digging into each month:
1. Analysing monthly performance
Your management accounts should clearly state your actual expenditure for that period (month) against the forecasted expenditure for the month. The forecasted expenditure is usually the annual budget distributed evenly across twelve months. By comparing this information, you should know if you are behind, on track or ahead of budget. You should know whether a variance is planned (i.e. an annual invoice) or if there is an issue that requires monitoring (i.e. an unplanned overspend). Your SBM should provide you with details on any significant variances for the month and outline any mitigating action if required.
2. Analysing year-to-date performance against budget
Looking at the year to date expenditure against the full year budget can indicate if any significant issues require attention. Quality management accounts provide a full-year forecast based on year to date expenditure which is based on the assumption that current spending patterns will continue. This data highlights how any overspend may impact your planned year-end position and also flag up cost centres that require additional control or are indicating significant underspend. An in-year budget reforecast based on this information is considered good practice and should be undertaken by your SBM in consultation with yourself and governing body or MAT.
3. Reviewing staffing and agency costs
Depending on the structure of your management accounts, your core staffing and agency costs may be lumped together. Ensure that you receive expenditure, forecast and budget figures for these areas separately to gain a concise picture of staff costings. Ask your SBM to further break down agency costs into vacancy cover, sickness cover, planned absence and training cover. This way you will gain further insight into your agency costs and whether any overspend can be offset against any underspend in areas of your staffing costs or whether you are heading for an overspend.
4. Track key expenditure lines
Ensure that income and expenditure lines for areas such as catering, uniform and school trips are accurate and regularly reviewed to determine whether there is a profit or loss in these areas. Ensure that any loss is forecasted and factored into the bottom line. Also ensure that if any expenditure is to be recharged to departments or teams (i.e. reprographics, hospitality, stationery) that this is undertaken on a regular basis and that department expenditure is reviewed and communicated with Heads of Department.
5. Reviewing planned expenditure for the year
Odds are that since you set the budget, you’ve had to purchase some items that you hadn’t planned for, or needed to pay some unforeseen maintenance costs. Sit down with your SBM and make sure that your planned budget is still realistic, and determine whether any of your plans need to change to accommodate your financial position.
