The importance of knowing the long-term health of your school has never been more crucial. Many schools are facing a bleak financial future. It is clear that, even in schools which stand to gain from the much-trumpeted National Funding Formula, any rises in funding will probably be too little and too late. For those that are potential losers from the new formula, this will only exacerbate the increasing financial strain currently being experienced.
Pinpointing the timeline of potential financial problems is key to beginning to solve the issues that will present themselves. Here are a few keys steps that every school who hasn’t undertaken this exercise should be taking now:
- Use the latest October 2017 pupil census as your starting point. This will dictate your funding next financial year. How does it compare to the previous year? Take account of pupil number fluctuations year on year. Are levels of deprivation similar? Are pupil premium figures similar? Are there any other factors that you know will affect your funding levels?
- What other forms of income apart from formula funding can you expect and are these reliable? If in doubt, leave it out. You don’t want to be relying on income that may not materialise.
- Staffing costs are the biggest single area of expenditure for any school. Make sure your forecasts of staffing costs include an allowance for pay awards, incremental points if due, changes to pension or National Insurance contribution rates.
- Are there any potential staffing changes that you are aware of now or can anticipate in the future? For example, if a member of staff has signposted their retirement, can you live without a replacement or maybe replace with a part time post? What would this saving look like? Projected over three years this can amount to many tens of thousands of pounds.
- Look at other areas of expenditure that are somewhat more discretionary. Examples of these may includes amounts spent on pupil resources, training costs, one-off projects and some cover costs. Can you cut some of these areas of expenditure without harming the core functions of the school?
- School budgets are not rising for inflation so it is reasonable to not build inflationary rises into some budgets and make expenditure fit what is available
- Once you are happy with your income and expenditure forecasts what does the bottom line look like? Can you balance in-year? If you can’t immediately balance in-year and are relying on any carry forward balance to help you set your budget then this is an immediate red flag. Continue as you are and this carry forward will eventually run out.
- The use of any carry forward to set the budget may help to buy you some time to undertake staff restructuring. Staff may move on or retire and the school may be able to transition to a more affordable staffing model in a relatively pain-free way.
- If you have little or no carry forward balance and are staring down the barrel of an impending deficit budget, then forced redundancies may be the inevitable outcome.
- One key point to emphasise when you’ve finished the forecasting exercise is to document the set of assumptions you’ve made to produce the forecast. These assumptions should be kept with the forecast as, in six or twelve months time when you come to revisit the document, these assumptions form the basis of an amended or updated forecast.
The key point to note and the main purpose of producing these forecasts is that you identify when potential financial problems will affect the school and give you a timeline to formulate some solutions. drb Schools and Academies Services Ltd have a wealth of experience in supporting schools with their long-term forecasting. If you ever feel that we could help you with this please contact Doug Skinner for a further discussion (firstname.lastname@example.org)