Local Authority (LA) maintained schools operate within a unique financial framework. If you’re new to school finance, terms such as fund codes, cost centres and ledger codes can seem confusing. Understanding these terms is essential for managing budgets, monitoring expenditure and ensuring compliance with Local Authority and Department for Education (DfE) requirements.
This guide explains the most common finance terminology used in LA maintained schools.
Understanding School Finance Terminology
Assets
Assets are items that the school owns and which have a value.
Assets can be:
Current Assets
Items that can be used or converted into cash within one year:
- Cash held in school bank accounts
- Petty cash
- Money owed to the school (debtors)
- Prepaid expenses
Fixed Assets
Items that provide value over several years:
- School buildings
- Land
- ICT equipment
- Minibuses
- Furniture and fixtures
Example
If a school purchases 30 laptops costing £18,000, those laptops become school assets because they provide value beyond the current financial year.
Liabilities
Liabilities are amounts the school owes to another organisation or individual.
Examples include:
- Unpaid supplier invoices
- Outstanding payroll costs
- Pension contributions due
- VAT payments due
- Income received in advance
Example
A catering company has supplied lunches worth £5,000 but has not yet been paid. The £5,000 is recorded as a liability until payment is made.
Revenue Funding
Revenue funding is money used for the day-to-day running of the school.
Revenue expenditure covers:
- Staff salaries
- Supply teachers
- Learning resources
- Utilities
- Cleaning contracts
- Educational services
- Routine maintenance
Common Revenue Income Sources
- Dedicated Schools Grant (DSG)
- Pupil Premium
- Universal Infant Free School Meals Funding
- Nursery Funding
- SEN Top-Up Funding
- Income from lettings
Easy Way to Remember
Revenue = Running Costs
If it’s needed to operate the school on a daily basis, it’s usually revenue spending.
Capital Funding
Capital funding is used for significant purchases or projects that create long-term value.
Capital expenditure includes:
- New buildings
- Major refurbishments
- Roof replacements
- Boiler replacement projects
- Large ICT infrastructure projects
Common Capital Funding Sources
- Devolved Formula Capital (DFC)
- Condition Improvement Funding (where applicable)
- Local Authority Capital Programmes
- School Condition Allocations
Easy Way to Remember
Capital = Investment
If it improves or creates a long-term asset, it is generally capital spending.
School Balances
A school’s balance is the difference between income received and expenditure incurred.
Surplus Balance
When income exceeds expenditure:
Income £2,000,000
Expenditure £1,950,000
School Balance = £50,000 Surplus
Deficit Balance
When expenditure exceeds income:
Income £2,000,000
Expenditure £2,050,000
School Balance = £50,000 Deficit
Why Balances Matter
Maintained schools are expected to:
- Manage budgets responsibly
- Hold reasonable reserves
- Avoid excessive surpluses
- Avoid deficit positions where possible
Local Authorities monitor both surplus and deficit balances regularly.
Financial Coding Structure in LA Maintained Schools
Most schools use a coding structure within their financial management system (FMS) to track income and expenditure accurately.
Fund Code
A Fund Code identifies the source of funding being used.
It answers the question:
“Which pot of money is paying for this?”
Examples
| Fund Code | Description |
| 01 | School Budget Share |
| 02 | School Meals |
| 03 | Devolved Formula Capital |
| 04 | Pupil Premium |
| 05 | Nursery Funding |
Example
A teaching assistant salary might be charged to:
- Fund 01 (Budget Share)
Whereas intervention resources for disadvantaged pupils may be charged to:
- Fund 04 (Pupil Premium)
Cost Centre
A Cost Centre identifies the area of the school responsible for the expenditure.
It answers:
“Which department or area is spending the money?”
Examples
| Cost Centre | Description |
| 100 | Leadership Team |
| 200 | Early Years |
| 300 | Key Stage 1 |
| 400 | Key Stage 2 |
| 500 | SEN Provision |
| 600 | Premises |
Example
New books purchased for Year 6 may be coded to:
Cost Centre 400 (Key Stage 2)
This helps budget holders monitor spending within their area.
Ledger Code
A Ledger Code identifies the type of income or expenditure.
It answers:
“What was the money spent on?”
Examples
| Ledger Code | Description |
| E01 | Teaching Staff |
| E03 | Education Support Staff |
| E19 | Learning Resources |
| E25 | Catering Supplies |
| E27 | Grounds Maintenance |
| I01 | School Budget Share Income |
| I05 | Other Income |
Example
Purchase of exercise books:
- Fund: 01
- Cost Centre: 300
- Ledger: E19
This tells the finance system:
Budget Share funding paid for learning resources used by Key Stage 1.
Putting It All Together
A coding string may look like:
| Element | Code |
| Fund | 01 |
| Cost Centre | 400 |
| Ledger | E19 |
Interpretation
- Fund 01 = Delegated School Budget
- Cost Centre 400 = Key Stage 2
- Ledger E19 = Learning Resources
The transaction therefore records:
Key Stage 2 learning resources funded from the school’s delegated budget.
Why These Codes Matter
Proper coding helps schools:
✅ Monitor budgets accurately
✅ Track spending against grants
✅ Produce statutory returns
✅ Support internal audits
✅ Demonstrate value for money
✅ Provide meaningful reports to governors and senior leaders
✅ Meet Local Authority and DfE financial requirements
Key Takeaways
| Term | Simple Definition |
| Asset | Something the school owns |
| Liability | Something the school owes |
| Revenue | Day-to-day running costs |
| Capital | Long-term investment spending |
| Balance | Difference between income and expenditure |
| Fund Code | Where the money came from |
| Cost Centre | Who is responsible for spending it |
| Ledger Code | What the money was spent on |
For maintained schools, good financial management is about more than balancing the budget. Understanding how assets, liabilities, revenue, capital, balances, fund codes, cost centres and ledger codes work together provides transparency, accountability and better decision-making for school leaders, governors and finance teams.
When these fundamentals are applied consistently, schools can demonstrate strong stewardship of public funds while ensuring resources are directed where they have the greatest impact on pupils.
If you have any further questions, please get in touch with our School Finance team for expert advice and guidance.
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