Jan Powley Kim George

1. Jan PowleyKim George FINANCE INDUCTION

2. "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

3. COURSE OUTLINE • Governors’ Responsibilities inc Budget Planning • The Financial Framework • Schools Financial Value Standard • Value for Money • Monitoring Budgets • Financial Reports • Funding Formula

4. GOVERNORS’ RESPONSIBILITIES

5. 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

6. 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

7. 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

8. 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

9. 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.

10. SCHOOL EXPENDITURE

11. APRIL - 1 Apr - Start of the financial year - Close down old financial year • APRILTO MAY • 31 May provisional budget plan • - Surplus/deficit from previous year b/f MARCH - Begin to finalise budget plan - Prepare for year end JUNE TO JULY - 31 July submit final budget plan - Initial monitoring (Quarter 1) • SEPTEMBER TO OCTOBER • Revise budget plan • Quarter 2 monitoring • JANUARY TO FEBRUARY • Quarter 3 monitoring • Begin work on provisional budget plan • 28 Feb – final budget allocations issued • NOVEMBER TO DECEMBER • Review Budget Plan – revise if necessary BUDGET PLANNING CYCLE

12. 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

13. THE FINANCIAL FRAMEWORK

14. 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

15. HIERARCHY OF CONTROLS Scheme for Financing Schools Approved by Schools Forum SFF Contract Procurement Procedures Approved by LBC Financial Regulations Approved by Head of Finance Financial Schemes Approved by Service Chief Officers Guidance Notes Audit & Inspection

16. 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)

17. FINANCIAL REGULATIONS Key Areas of financial management and control : • Capital Expenditure • Internal Audit • Legal Procedures • Access to Information • Voluntary Funds • Trust Funds • Responsibilities • Delegation • Financial Plan • Revision of the Financial Plan • Accounting Procedures • Year-End Balance CONTRACT PROCUREMENT PROCEDURES • Minimum requirements for purchasing, quotations and tendering • Promotes good purchasing practice, public accountability, best value

18. 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 • 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 • Income • Banking Arrangements • Value Added Tax • Inventories • Insurances • Travelling and Subsistence Allowances • Security • Information Systems

19. 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

20. SCHOOL FINANCIAL VALUE STANDARD

21. 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

22. SFVS continued • 4 key areas • The Governing Body and School Staff • Setting the Budget • Value for Money • Protecting the Public Purse

23. VALUE FOR MONEY

24. Value for Money • The 3E’s • Audit Commission report – Valuable Lessons • Growth in school funding has slowed • Plan now for austere times ahead

25. 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

26. BUDGET MONITORING

27. Plan Corrective Action Actual Compare 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

28. 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 effective • BOTTOM-LINE: • Bad financial management can undermine good education

29. 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)

30. 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.

31. 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

32. 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

33. 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.

34. FINANCIAL REPORTS

35. 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

36. 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)

37. FUNDING FORMULA

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

39. ISB 2011-12 • Early Years • Primary • Secondary • Special • Total • £8.9m • £85.2m • £47.1m • £6.3m • £147.7m

40. 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

41. 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

42. 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

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

44. OTHER FUNDING • Pupil Premium • Service Children £200 • LAC £488 • Free School Meals £488 • Maternity recompense

45. FUNDING FORMULA SUMMARY • Complex • Every school is unique. Formula tries to reflect this • Subject to annual review

46. Further Training Setting and Monitoring the School Budget 12 January 2012 7-9pm at LLRC School Financial Value Standard Spring term 2012

47. LMS Finance Team