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Jan PowleyKim George

FINANCE INDUCTION

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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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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

GOVERNORS’ RESPONSIBILITIES

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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

KEY STANDARDS FOR GOVERNORS

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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

KEY ACTIONS FOR GOVERNORS

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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

POSSIBLE DELEGATIONS OF FUNCTIONS TO HEADTEACHER

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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.

SUBMISSION OF BUDGET PLANS

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SCHOOL EXPENDITURE

Teaching Staff 55%

Education Support Staff14%Admin & Clerical Staff5%Other EmployeeExpenses 6%Running Expenses 20%

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APRIL- 1 Apr - Start of the financial year- Close down old financial year

MARCH- Begin to finalise budget plan- Prepare for year end

APRILTO MAY- 31 May provisional budget plan- Surplus/deficit from previous year b/f

JANUARY TO FEBRUARY- Quarter 3 monitoring- Begin work on provisional budget plan- 28 Feb – final budget allocations issued

SEPTEMBER TO OCTOBER- Revise budget plan - Quarter 2 monitoring

NOVEMBER TO DECEMBER- Review Budget Plan – revise if necessary

JUNE TO JULY

- 31 July submit final budget plan

- Initial monitoring (Quarter 1)

BUDGET PLANNING CYCLE

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•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

SUMMARY OF RESPONSIBILITIES

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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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SFF

Contract Procurement Procedures

Financial Regulations

Financial Schemes

Guidance Notes

Scheme for Financing SchoolsApproved by Schools Forum

Approved by LBC

Approved by Head of Finance

Approved by Service Chief Officers

Audit & Inspection

HIERARCHY OF CONTROLS

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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

• Responsibilities

• Delegation

• Financial Plan

• Revision of the Financial Plan

• Accounting Procedures

• Year-End Balance

Key Areas of financial management and control :

• Capital Expenditure

• Internal Audit

• Legal Procedures

• Access to Information

• Voluntary Funds

• Trust Funds

• Minimum requirements for purchasing, quotations and tendering

• Promotes good purchasing practice, public accountability, best value

CONTRACT PROCUREMENT PROCEDURES

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FINANCIAL INSTRUCTIONS

• Expenditure

• Order for Work, Goods and Services

• Invoices and Accounts for Payment

• Contracts for Building and Civil Engineering Works

• Salaries, Wages and Pensions

• Imprest and Petty Cash Accounts

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.

• Income

• Banking Arrangements

• Value Added Tax

• Inventories

• Insurances

• Travelling and Subsistence Allowances

• Security

• 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 HandbookSection 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 3E’s Audit Commission report – Valuable

Lessons Growth in school funding has slowed Plan now for austere times ahead

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Value for Money7 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

Corrective

ActionActual

Compare

Plan

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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 year’s budget(s) • Important to demonstrate that financial management is

effectiveBOTTOM-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 year’s 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 setMOVE 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 SPENDINGINCREASE 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 Chart of Accounts Review - Ledger Codes/Cost Centres

Income and Expenditure CFR Report

Cumulative Expense Analysis Report

Financials (LBC) Reports: 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 Primary Secondary Special Total

£8.9m £85.2m £47.1m £6.3m £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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•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 £2,906KS1 5+ / 6+ £2,466KS2 7+ / 8+ / 9+ / 10+ £2,482KS3 11+ / 12+ / 13+ £3,033KS4 14+ / 15+ £3,530

AWPU

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Lump Sum allocationEach school in a specific sector receives an equal allocation, irrespective of size or type Premises allocationsBased on physical areas for caretaking, cleaning, grounds maintenance, building maintenance, energy and swimming pools, rent and ratesOther pupil-led allocationsIncludes sen factors and free school meals allocationsOther special factorsIncludes small school allowances, KS1 ghost pupils

OTHER ALLOCATIONS

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YPLA (post 16)Determined by YPLA on their own formula basis. Only applies to 1 secondary school

OTHER FUNDING

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Pupil PremiumService Children £200LAC £488Free School Meals £488Maternity recompense

OTHER FUNDING

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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 Budget12 January 20127-9pm at LLRC

School Financial Value StandardSpring term 2012

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LMS Finance TeamJan Powley

Group Accountant Schools548070

Liz Burden Senior School Financial

Adviser548071

Kim GeorgeSchool Financial Adviser

548076

Lynne KnaptonSchool Financial Adviser

548074

Amina BegumFinance Assistant

548194

Keena KunvarjiSchool Financial Adviser

548075

Ruth StryczkoSchool Financial Adviser

548073

Lorraine ByrneSchool Funding Co-ordinator

548072

Barbara WightmanFinance Assistant

548077