FINANCE INDUCTION

Jan Powley
Kim George

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"Although the primary responsibility of a school
is to provide the best education possible for
its pupils, control over a delegated budget
brings with it a responsibility for financial
stewardship"

Audit Commission

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COURSE OUTLINE

Governors Responsibilities inc Budget Planning

The Financial Framework
Schools Financial Value Standard
Value for Money
Monitoring Budgets
Financial Reports
Funding Formula

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GOVERNORS RESPONSIBILITIES

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GOVERNORS RESPONSIBILITIES

Each governing body has a statutory responsibility for the

financial management of the delegated budget in their
school.

As a whole, they are accountable for the standards of

education provided and for balancing cost and effectiveness.

Governors also need to ensure that they achieve the best

possible outcomes for their pupils in the most efficient way

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 KEY STANDARDS FOR GOVERNORS

The roles and responsibilities of governing body should be

set out in writing
A finance committee should be set up to consider strategic
financial issues
The governing body should establish the financial limits of
delegated authority
The governing body should agree with the headteacher the
detail and format of financial information to be provided
Minutes should be taken of all meetings of the governing
body and its committees and include all decisions and by
whom action is to be taken
The governing body should establish a register of business
interests

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 KEY ACTIONS FOR GOVERNORS

Set financial limits of delegated authority

Review last internal audit report
Voluntary funds
Local authority financial regulations and
instructions
Setting 3 year budget plan links to school
improvement plan
Setting timetable budget monitoring and review of
financial plan

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 POSSIBLE DELEGATIONS OF
FUNCTIONS TO HEADTEACHER
Responsibility for notifying LBC of 3 year budget plan
Monitoring and reporting of actual/projected expenditure
and income against budget plan
The maximum value of virement or a single transaction
without recourse to the full governing body
Responsibility for awarding of contracts
Responsibility for entering into lease or hire agreements
Responsibility for setting letting scale charges and
extent to which these can be varied/waived

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 SUBMISSION OF BUDGET PLANS

Plan should show total estimated expenditure and income

produced in conjunction with school improvement plan
Must be agreed by governing body
Submitted to LBC each financial year
Deadline notified to schools each year 31 May and 31 July
No deficit without consent
If deficit budget likely then contact LMS team in first
instance.

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SCHOOL EXPENDITURE

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 BUDGET PLANNING CYCLE
APRIL
- 1 Apr - Start of the financial year
- Close down old financial year APRILTO MAY
- 31 May
provisional
budget plan
MARCH - Surplus/deficit
- Begin to finalise budget plan from previous year
- Prepare for year end b/f

JUNE TO JULY
- 31 July submit final budget
plan
- Initial monitoring (Quarter 1)

SEPTEMBER TO OCTOBER
JANUARY TO FEBRUARY - Revise budget plan
- Quarter 3 monitoring - Quarter 2 monitoring
- Begin work on provisional budget plan
- 28 Feb final budget allocations issued

NOVEMBER TO DECEMBER
- Review Budget Plan revise if necessary

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SUMMARY OF RESPONSIBILITIES

Governors are responsible for school

delegated budgets

Governors should ensure school meets

required standards and has effective
controls

Governors may delegate some

responsibilities to headteachers

Governors must agree and review

school budget plan

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THE FINANCIAL
FRAMEWORK

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 WHAT IS THE FINANCIAL
FRAMEWORK?

Schools spend large sums of public money

LBC has duty to account for this
Hierarchy of financial controls exist within which LBC and
schools must operate

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HIERARCHY OF CONTROLS
Scheme for Financing
Schools
Approved by Schools
SFF Forum

Contract Approved by LBC

Financial Procurement
Regulations Procedures

Approved by Head
Financial Schemes
of Finance
Approved by
Guidance Notes
Service Chief
Officers

Audit & Inspection

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 THE SCHEME FOR FINANCING

Scheme sets out financial relationship between LBC and

maintained schools
Sets out requirements relating to financial management
and associated issues
All schools and governors should have access to a copy
www.learning.luton.gov.uk
Guiding legislation - School Standards and Framework Act.
Changes to scheme need Schools Forum approval and
consultation with schools. (Some changes are directed by
DFE)

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 FINANCIAL REGULATIONS
Key Areas of financial management and control :

Responsibilities Capital Expenditure

Delegation Internal Audit

Financial Plan Legal Procedures

Revision of the Financial Access to Information

Plan
Voluntary Funds
Accounting Procedures
Trust Funds
Year-End Balance

CONTRACT PROCUREMENT PROCEDURES

Minimum requirements for purchasing, quotations and tendering

Promotes good purchasing practice, public accountability, best
value
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 FINANCIAL INSTRUCTIONS
These instructions are issued by the Head of Finance to fill in the detail of
the Financial Regulations: Detailed technical advice is contained in
guidance notes.
Expenditure Income

Order for Work, Goods and Banking Arrangements

Services
Value Added Tax
Invoices and Accounts for
Payment Inventories

Contracts for Building and Insurances

Civil Engineering Works
Travelling and Subsistence
Salaries, Wages and Pensions Allowances

Imprest and Petty Cash Security

Accounts
Information Systems

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 GOVERNORS RESPONSIBILITIES

Governing body should ensure school has written descriptions of all its
financial systems and procedures
The school should maintain proper accounting records and retention of
documents as prescribed by the LA (see schools finance handbook)
Internal controls required:

Internal checks; Separation of duties; System manuals

A system of authorisation; An audit trail
LMS Handbook
Section 13 School Finance Manual

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 SCHOOL FINANCIAL VALUE
STANDARD

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Schools Financial Value
Standard
Introduced by DfE July 2011
Requires annual assessment
Primarily aimed at Governors
Self assessment 23 questions
Can be delegated to finance
committee but must be signed by
chair of governors
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SFVS continued
4 key areas
The Governing Body and School Staff
Setting the Budget
Value for Money
Protecting the Public Purse

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VALUE FOR MONEY

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Value for Money
The 3Es
Audit Commission report Valuable
Lessons
Growth in school funding has slowed
Plan now for austere times ahead

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Value for Money
7 areas for governors actions to improve VFM
Support and challenge school management

Ensure the school has considered the financial

implications of its plans

Review school balances

Ensure that goods and services achieve VFM

Ensure the school workforce is used to best effect

Encourage greater collaboration with other schools

Use financial information when making spending

decisions

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BUDGET MONITORING

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 MONITORING CYCLE

Budget Versus Actual

The financial plan should be monitored (checked) to see if expenditure and
income are going according to plan
If not corrective action will be required

Plan

Corrective Actual
Action

Compare

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 IMPORTANCE OF BUDGET MONITORING

Central to effective financial management

Early identification of need for remedial action or revised
spending decisions in light of budget position
Assess cost effectiveness of individual initiatives against
the criteria set out in the school improvement plan
Understanding of budget position important for setting
following years budget(s)
Important to demonstrate that financial management is
effective
BOTTOM-LINE:
Bad financial management can undermine good education
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 MONITORING PROCESS
Monthly reports run from local system and agreed with LA system. (Bursar to raise
queries with LMS Finance Team if it doesn't)
Bursar prepares monthly summary analysis of income and expenditure identifying
variances from plan and providing written narrative/explanations
Head (or delegated officers) initially reviews analysis and seeks further clarifications
from Bursar
Governors provided analysis in advance (ideally at least 1 week) of Finance
Committee meeting
Head and bursar invited to finance committee meetings to provide further or
detailed explanations.
Governors able to concentrate on identifying corrective action if needed and future
years budget plan (Governor time not spent on transaction details)

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 CORRECTIVE ACTION

MOVE BUDGETS
Virement - A virement or budget adjustment within the limits of delegated
responsibilities
Profiles - Can be standard or customised
Review - The Financial Plan can be reviewed and new targets set
MOVE ACTUALS
Journal Transfers
used to correct mis-codings
transfer expenditure/income to another code
to share income/costs between schools
charge another school/cost centre
REDUCE SPENDING
INCREASE INCOME
Is income due, or available from other sources? e.g. school fund.
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 AMENDING FINANCIAL PLANS

Circumstances change during the year. This may make it necessary to submit
a new financial plan

Revising the financial plan will assist monitoring as information on reports will
reflect the new circumstances

Types of circumstances that might warrant the raising of new plan:

significant reduction/increase or change in staff
unexpected major expenditure
the cancellation of a regular letting

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 AMENDING FINANCIAL PLANS

Points to remember:
Terms of Reference for Finance Committee
Levels of virement delegated to Headteachers or finance committee
New plan must also be reported to the Governing Body

Local system updated

Copy of plan forwarded to LMS Team

Financials updated and Summary Report now matches school system

Retain a copy of the original budget for future financial planning

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BUDGET MONITORING SUMMARY

Central to effective financial

management
Finance Committee Members
role should be more strategic,
less transactional
Bursar/Finance Officer and Head
critical in providing relevant
information to Finance Committee
Identifies problems whilst you can
still take action.

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FINANCIAL REPORTS

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 FINANCIAL REPORTS AVAILABLE
Different reports are available:
Local Finance System Reports:
SIMS FMS6
Financials (LBC) Reports:
Chart of Accounts Review - Ledger Codes/Cost
Centres
Income and Expenditure CFR Report
Cumulative Expense Analysis Report
Monthly Summary I&E
Transaction and payroll transaction
Electronic Reconciliation File
Capital I&E and transactions
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OTHER REPORTS AVAILABLE

Section 251 Statement (Budgets and outturn)

Required of all LAs
Format prescribed by DFE

School Profile (Parent/Governor report)

Schools financial position summarised in a format suitable for presentation to
parents

Comparative data - benchmarking

Local benchmarking data(LA)
CFR return
Schools Financial Benchmarking (DFE/Audit Commission/OFSTED)

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 FUNDING FORMULA

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Where does the funding come
from?
Formula Funding
Pupil Premium
Other allocations
School generated income facilities,
bank interest etc

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 ISB 2011-12

Early Years 8.9m

Primary 85.2m
Secondary 47.1m
Special 6.3m
Total 147.7m

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INDIVIDUAL SCHOOLS BUDGETS

Complex formulae, broadly summarised as follows

Individual schools budgets =
Age weighted pupil unit allocation+
Lump sum allocation+
Premises allocations+
Other pupil-led allocations+
Other special factor allocations

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 AWPU

By far the largest component of school budget shares

Irrespective of the type of school, pupils of the same age will receive exactly
the same AWPU funding.
Similar system in special/nursery schools - use planned places rather than
pupil numbers
Current AWPU rates per key stage primary and secondary schools

Key Stage Age Group 2011-12 AWPU

Pre KS1 4+ full time 2,906

KS1 5+ / 6+ 2,466
KS2 7+ / 8+ / 9+ / 10+ 2,482
KS3 11+ / 12+ / 13+ 3,033
KS4 14+ / 15+ 3,530

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 OTHER ALLOCATIONS

Lump Sum allocation

Each school in a specific sector receives an equal allocation, irrespective of size
or type
Premises allocations
Based on physical areas for caretaking, cleaning, grounds maintenance, building
maintenance, energy and swimming pools, rent and rates
Other pupil-led allocations
Includes sen factors and free school meals allocations
Other special factors
Includes small school allowances, KS1 ghost pupils

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 OTHER FUNDING

YPLA (post 16)

Determined by YPLA on their own
formula basis. Only applies to 1
secondary school

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 OTHER FUNDING

Pupil Premium
Service Children 200

LAC 488

Free School Meals 488

Maternity recompense

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FUNDING FORMULA SUMMARY

Complex
Every school is unique.
Formula tries to reflect
this
Subject to annual review

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 Further Training

Setting and Monitoring the School Budget

12 January 2012
7-9pm at LLRC

School Financial Value Standard

Spring term 2012

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LMS Finance Team
Jan Powley
Group Accountant
Schools
548070

Liz Burden Lorraine Byrne

Kim George Lynne Knapton Keena Kunvarji Ruth Stryczko
Senior School Financial School Funding
School Financial Adviser School Financial Adviser School Financial Adviser School Financial Adviser
Adviser Co-ordinator
548076 548074 548075 548073
548071 548072

Amina Begum Barbara Wightman

Finance Assistant Finance Assistant
548194 548077

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