Guidance

Helping schools manage resources and money: guidance for governors

Published 9 May 2018

Applies to England

This guidance is a starting point to help governors of schools and academies manage their resources and money efficiently.

Use these checks early in the annual budget planning cycle, and when looking ahead at your 3 to 5-year position.

You should also:

• consult your school business professional (SBP), headteacher or chief executive officer (CEO)
• request that comparative information and analysis from the financial benchmarking and insights tool is incorporated within relevant reports that the full governing body, and any finance committee, receives

Staff pay as percentage of total expenditure

Staff pay is the single most expensive item in the school budget. It typically represents over 70% of expenditure. The financial benchmarking and insights tool will help with analysis.

Governors might want to consider:

• the percentage of budget spent on staffing compared with similar schools
• how the percentage for teaching staff, curriculum support staff and other support staff compares with other similar schools
• how your school’s pupil outcomes, such as your school’s progress score, compares with other similar schools relative to spend on staffing
• what the overall staff cost is, as a percentage of total income - staffing costs over 80% of total income are considered high
• whether high teaching costs are due to the number of teachers or high proportion of highly-paid staff

Average teacher cost

This measure is calculated by dividing the total teaching cost by the full-time equivalent (FTE) number of teachers.

Governors might want to consider:

• whether the average teacher cost is high in comparison with other similar schools and if so whether the costs are due to:
  • the high number of staff on the upper pay scale
  • the teaching and learning responsibility (TLR) scale
  • another reason
• whether the school is using its pay flexibilities - for example, to differentiate pay by teachers’ performance

The financial benchmarking and insights tool includes staffing costs per teacher in the ‘expenditure’ section.

Pupil-to-teacher ratio

The pupil-to-teacher ratio (PTR) is calculated by dividing the number of FTE pupils on roll by the total number of FTE teachers. A relatively low PTR could suggest small class sizes.

As well as benchmarking the PTR, you may want to review the average PTR and pupil to adult (teachers and support staff) ratios in other schools and academies. You can do this using the ‘workforce’ section of the financial benchmarking and insights tool and choosing ‘pupils per measure’.

Governors might want to consider:

• what the PTR is for different key stages within their schools
• how the school’s PTR compares with similar schools and if it is significantly different, then why
• how the ratio of pupils to staff compares with similar schools

Class sizes

The smaller the class size the greater the cost of delivery per pupil. Governors should ensure that class size plans are affordable while supporting the best outcomes for pupils.

Governors might also want to consider:

• the average class size by key stage, and by options at key stages 4 and 5
• the class size the school aims to achieve and the educational reason for this
• if there are any small classes where the per pupil funding does not cover the cost of delivery - this can be especially important at key stage 4 and 5 where class sizes for some subjects can fall
• the maximum average class size that the school can operate at within the context of the pupil admissions, taking into account the:
  • structure of the building
  • numbers in different year groups
  • need for intervention strategies

Integrated curriculum and financial planning (ICFP) can help you to plan the best curriculum for pupils with the funding you have available.

You may find it helpful to look at the Education Endowment Foundation’s evidence on the impact and costs of reducing class size.

Teacher contact ratio

This measure is calculated by taking the total number of teaching periods timetabled for all teachers in the school and dividing that by the total possible number of teaching periods.

All teachers should have a guaranteed minimum of 10% timetabled planning, preparation and assessment (PPA) time. This means that the teacher contact ratio will always be lower than 1.0.

Governors might want to consider:

• how changes to the teacher contact ratio would impact the overall budget
• whether teaching staff are doing roles that could be done by support staff

Proportion of budget spent on the leadership team

Schools have many different leadership and management structures and comparisons are not straightforward.

Some schools calculate the cost of non-class-based leadership time as a percentage of total expenditure. They then compare their school to similar schools by collaborative exchanges of summary information. Multi-academy trusts can also compare across their member schools where they are similar.

The total number of staff in the leadership group (FTE) is included in the financial benchmarking and insights tool.

Governors might want to consider:

• how this compares with similar schools, taking into account any contact time the leadership staff have
• whether leadership structures are proportionally the same if there is more than one school in the trust or federation
• how the school makes decisions on the budget it spends on the leadership team - if this is relatively high or low compared with similar schools, whether it is because of the size of the leadership team, or their pay

Budget projections

Governors should ask to see 3 to 5-year financial projections, and the assumptions made to cost them.

Assumptions governors may want to review include:

• projected pupil numbers
• free school meal numbers
• likely pupil premium income
• projections of the staffing that will be necessary in these years

Schools should plan their staffing based on multi-year projections of curriculum needs.

Governors may also want to consider:

• whether pupil number projections are realistic - if there is uncertainty, boards should be given 3 scenarios: cautious, likely, optimistic
• if the optimistic scenario indicates financial difficulties, whether the school should be developing a recovery plan
• if the cautious budget indicates potential financial difficulties, whether the school has contingency plans to overcome them
• any issues in the medium term that should be addressed now
• how current decisions might impact medium-term budgets
• what to put in place now to have the necessary funding in the future

Spend per pupil for non-pay expenditure lines

The financial benchmarking and insights tool will allow you to compare your school’s pattern of expenditure with similar schools.

Governors might want to consider the spend per pupil for:

• catering
• ICT
• estates management
• business administration
• energy
• curriculum supplies

If the spend is relatively high compared to similar schools, then governors should consider whether the school can be more efficient. They should look at:

• switching the energy deal or provider if the cost of energy seems high compared with similar schools
• opportunities for collaborating with other local schools to bring costs down
• encouraging SBPs to attend local networks
• whether the school can get a better deal on the things it buys regularly

Multi-academy trust (MAT) trustees may also want to compare their level of ‘top slice’ to other MATs, what it is used for, and how it provides value for money for member academies.

School improvement plan priorities

The budgetary process sits firmly within the strategic leadership framework and should link into the overall management and planning cycle. It should not be seen as an additional activity that is the responsibility of the finance manager.

Governors might want to:

• consider whether school improvement initiatives are prioritised, costed, and linked to the budget
• check that all new initiatives are fully costed before your school is committed to the proposal

Reviewing contract costs and renewal dates

Each year your school must review its contracts for all its services to check which ones are due for renewal. Check that contracts are good value for money and meet the school’s needs.

Governors might want to consider whether:

• all contracts due for renewal are re-tendered or reviewed
• there are any regular payments for services that are an invoice-only contract (including all goods and services on a contracts list, single-items and routine purchases, such as stationery) and that all suppliers are on a contracts list
• all contracts for the supply of goods and services captured are reviewed regularly for value for money

DfE’s advice about buying for schools has more information.

Useful tools

• financial benchmarking and insights tool - to compare your school’s spending with other schools in similar circumstances and see if spending could be more efficient
• schools financial value standard (SVFS) - for assurance that you’re meeting the standards necessary for a good level of financial health and resource management
• self-assessment tool (SAT) - to check you’re managing resources effectively
• integrated curriculum financial planning (ICFP) - to create the best curriculum for pupils with your available funding

Find out about schools and other organisations offering training and support with financial management and efficiency from school business professionals: training and development.