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How To Get All Staff Involved In The Financial Wellbeing Of Your School

October 14, 2020 No Comments

As a Headteacher, your role requires you to know your budget inside and out. You, your governors and your SBM probably spend many hours discussing it and making decisions supported by the financial information that you have.

With the funding situation being so dire, you probably also find yourself in many situations where you have to say no to staff funding requests and try to balance the needs of your students with the constraints on your bank balance.

I don’t know anybody who signed up for the role of headteacher looking forward to, or feeling ready enough, to take on this level of financial accountability but this burden isn’t yours to carry alone. Sure, your name may be over the door but like Health and Safety, financial management is a whole school responsibility. Everybody has their part to play and everyone can contribute to the financial health of the school, it’s just a matter of teaching them how.

Ensure your School Development Plan is costed: Every decision you make as a Headteacher has a financial implication. One way or another, all roads lead back to the budget. When you’re developing your SDP with your SLT, use it as an opportunity to show them exactly how this works. An SDP should be ambitious but if the numbers don’t add up, it’s simply an undeliverable vision. It will also help your leadership team to understand your rationale in terms of decision-making. While they may be thinking of the short and mid-term objectives, you need to show them why the long-term objectives are just as, if not more, important and how strategic financial management supports this.

Weave financial management into regular meetings and discussions: Introduce half-termly budget discussions into your SLT meetings where you or your SBM talk through the management accounts and highlight areas of both capacity and concern. Learning how to read and interpret a set of management accounts is a key skill that all senior leaders should develop; sooner rather than later! Provide cost centre reports to middle leaders to discuss with their teams. When staff come up with ideas, ask them if they have investigated the cost of implementation. Today’s middle and senior leaders are tomorrow’s headteachers so exposing them to this level of financial knowledge and accountability will stand them in good stead for the future.

Promote the role of your School Business Manager: The perception of the school business manager can often be negative. They can be seen as ‘the person that says no’ or ‘blocks’ whatever it is that teachers want to do. By promoting the role and giving a clearer understanding of what it is that they do will add both context and support to the financial management of the school. Direct your senior and middle leaders to discuss their plans with the SBM before bringing them to you. Ask them to regularly evaluate their expenditure and support the school through cost-saving and income generation activities. With your SBM supporting the decision making processes of your staff, you will find yourself saying no a little less often!

Ask leaders to attend LGB and/or Board meetings to observe: Many senior and middle leaders are not aware of the level of scrutiny a school faces in relation to financial management and accountability. By inviting them to observe this process in action, it will add context to the financial aspects of school management and help them to understand exactly what must be taken into account when making financial decisions. Also, it will give them an awareness of financial accountability to external stakeholders in terms of audit and compliance.

Involve leaders in the budget setting process: Putting together a budget is a complex task. There are many factors to consider including revenue and capital income, staffing costs and on costs, ringfenced and lagged funding and so on. By involving your leadership team in the detail of the budget setting process, you are actually showing them the bigger picture. This will enable them to operate more effectively on a day-to-day basis.

Make finance a whole staff topic: Include a slot on your INSET days to deliver a brief financial update to staff. The more that staff understand the financial position of your school, the more mindful they will be when making budget requests. Once a year, ask your SBM to do a more detailed presentation to staff about the budget, how it fits together and, ultimately, how the final figures are reached. Show your staff just how much money is left after staffing, building, utilities, catering and compliance are allocated. Increasing their awareness of the financial context of your school will help them to support you to achieve not only financial efficiency but also value for money.

Being a headteacher can be lonely at the best of times and the added weight of financial accountability can make it feel even more so, especially if your school is struggling.

Through educating your staff, you can create a support system and structure around you to help both lighten the load and reach your strategic objectives.

Why you should educate your staff about finance

To prepare them for future roles by developing their knowledge and skillset.
To teach them how to be financially strategic when it comes to futureproofing and forward planning.
To secure collaborative working with key staff (your SBM) and external stakeholders (Governors/Trustees etc.).
To understand the level of scrutiny and challenge that your school faces in relation to financial management.
To understand the financial constraints of the budget and the rationale behind your decision making process.
To increase their awareness of the financial context of the school in order to improve their own decision making and increase focus on value for money.
So everyone can play their part to achieve financial efficiency and support the financial health of your school.

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Written for: Primary School Management Magazine (@primaryleaders)

Article, Finance, Leadership

Headteachers: How To Say No To Budget Requests

May 14, 2019 No Comments

As a Headteacher, saying ‘no’ to someone is a regular occurrence and more often than not, it’s easy. However, when it comes to budget requests, it can feel conflicting when you know that if you had more money, it would be something you would say yes to.

Everyone working in education knows that funding is dire but there are some ways you can mitigate the impact on your staff in those situations where you find yourself having to say no:

Don’t be bounced into a decision

It’s easy to find yourself on the automated ‘no’ train. If you’re caught at a bad moment, not able to take in the facts or you need more information then say so. Alternatively, refer the member of staff to your SBM to talk it through in more detail before formally submitting their request.

Consult your SBM

To ensure that your making sound expenditure decisions, make sure you have the latest information; especially if it’s a budget request you’d like to facilitate. Your SBM can assist you in looking at patterns of expenditure, funding priorities and perhaps cheaper alternatives.

Keep a long term view

Though you might have to say ‘no’ today, the financial picture will continue to shift throughout the year. Keep a list of budget requests that you receive that you can’t afford right now and review them each month with your SBM. What isn’t affordable today may well be in the future.

Provide an explanation

Saying ‘no’ and leaving it there can leave staff feeling unheard. If you provide an explanation as to why you’ve had to say no, your staff will feel that they’ve been listened to and that there is clear reasoning behind your decision. If it’s a budget request that you’d like to support but simply can’t, make this clear to your staff. Say something positive about their idea and where possible, offer some advice on how they can move forward.

Educate your staff

The more your staff understand the financial picture of your school, the more mindful they will be when making a budget request. Provide updates at appropriate meetings and encourage Senior and Middle Leaders to work with your SBM on their allocated budgets on a regular basis. This way, when you do you have to say ‘no’, it won’t be as much of a shock and the explanation will be straightforward.

Be firm

If you have to decline a budget request, you’ve explained your reasons why and you’re comfortable with your decision, it may be that the member of staff still continues to argue their case. Don’t be tempted to back down. If you have to say ‘no’ more than once, then do so and conclude the discussion politely and firmly.

Having to say ‘no’ when you’d like to say ‘yes’ is not easy but being honest and transparent with your staff will create a positive financial culture in your school in the long run.

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Written for: Primary School Management Magazine (@primaryleaders)

Article, Finance, SBM

SBLs: The Art of Saying ‘No’

April 30, 2019 No Comments

To feel comfortable saying ‘no’, you must first of all ask ‘is this person making a reasonable request?’ If it isn’t (let’s say it’s class tickets to Wimbledon), then politely explain your reasons (of which I’m sure there will be many) and be firm.

If the answer is ‘no’ and will always be ‘no’, it’s important that you respond immediately, politely and firmly. In these situations, be sure that you have the autonomy to make the decision. If you don’t, let them know that you’ll note their request and get back to them when you’ve spoken with the Head.

Of course, it get’s harder if you know that what they’re asking for is something that could really benefit the school and in a time where money wasn’t an issue, you wouldn’t think twice about saying yes.

In these situations, examine the request more thoroughly and ask yourself – has anything they’ve said made you reconsider the existing budget priorities? Is there anything that either you or they can do to enable you to say yes? Maybe there is a cheaper way of doing something or reducing expenditure in another area could create additional resource.

If you don’t know the answer to this off the bat, then don’t be afraid to say ‘I hear where you’re coming from, leave it with me and I’ll see what I can do.’ When you’ve investigated, make sure that you go back to them with a clear answer and explanation. If you try and you fail to meet their request, then at least the person will see that you recognise the importance of what they’ve asked for but there are good reasons behind why you’ve had to say no.

It’s worth keeping a note of any budget request you receive to discuss in your finance meeting with the Head. Any requests that fall into a ‘grey’ area can be reviewed as a whole as the financial picture continues to shift.

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Written for: Education Executive Magazine (@edexec)

Blog, Finance, Governance

Should your MAT consider GAG pooling?

March 26, 2019 No Comments

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.

The Academies Benchmark Report 2019 by Kreston, states that:

“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.

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Article, Finance, Leadership

5 Management Account Tips for Headteachers

March 12, 2019 No Comments

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.

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Written for: Primary School Management Magazine (@primaryleaders)