Finance

The Deficit Dilemma – a tool kit for surviving negative numbers!

Stuart Fern outlines the steps that SBM's should take when faced with negative numbers on their balance sheet. Even if your school’s finances are in the red, there’s no reason for them to be unmanageable.

By Stuart Fern on 27 Sep 2019

School finances may be in the red, but there’s no reason for them to be unmanageable. Here's how to assess the situation as it currently stands, devise a workable plan that will let you fulfil your medium and long-term financial obligations and continue delivering the high quality pupil outcomes and daily operations your school prides itself.

Deficits can hit any school at any time – they can be the result of a demographic change and the related funding shortfalls and changes, unforeseen staffing issues or the school roof blowing off!

As a diligent SBM you will always take the deficit position personally but please remember one thing it’s not your fault!

Your role now is to help the schools decision makers – the Senior Leadership Team and the Governors – have to hand all the facts, figures and information they will need to understand what has happened to put the books into deficit, make informed decisions, scenario plan and come out of the deficit dilemma.

First and biggest tool out of the box:

Budget Review – this will tell you how your school got here!

You will have as a minimum your three year budget plan (potentially a five year one) this should have been regularly reviewed and scenario tested. You need to do this again and quickly!

Whilst there are many guidelines and advice resources (especially from the DfE) out there for schools in relation to all financial matters – health checks, efficiency measures, checklists etc. - these guides are always useful but it is you and your SBM knowledge that matters now as every school is different with its own unique expenditure profile and staffing structure.

You need to go into the detail behind every line of the budget and be especially mindful of making sure current spending is factored in as some cost centres will already be on track to overspend and so changes to spending may only achieve part year savings this year.

Expenditure on staffing: Review and Restate!

It’s your biggest spend and where the most difference can be made. Remember to review and challenge ALL areas – your job is to be objective and advisory to those making the decisions.

  • Make sure you focus on roles NOT people – what roles are needed – not always who performs the best
  • Identify temporary contracts and consider savings now and in the future if contracts are not extended
  • Review any resignations or ending contracts, think creatively about covering the post with existing staff without the need for ‘backfill’

Any staffing restructure is expensive and a medium term project – it will be vital to ensure , once the schools budget is back in surplus, that the structure is ‘futureproof’ and won’t push the school back into deficit in the coming years always tie back to the three and five year forecast and the School Improvement Plan.

Judge the staffing decisions on their value, impact and potential savings.

Prioritise spending: Does it make the boat go faster?

Identify all the services you buy in light of their ‘educational benefit’ this makes the case for keeping them a solid one. BUT be mindful that some services may not appear directly related to education but will be having a positive effect on pupil outcomes and school performance metrics. It’s your SBM knowledge that is needed here to make those connections.

  • Be careful of penalty clauses for stopping services early, list all the schools contract and agreements forensically and pass to the SLT for review and recommissioning!
  • Beware of reducing your ‘fixed cost’ centres to much in the new budget plan, utilities are likely to be higher in every subsequent years so don’t set them at a level in your new budget that cannot be realistically achieved – what looks like a saving will become and overspend in a tight budget !
  • Unplanned expenditure will always happen and you need to make allowances for this, a Health & Safety requirement for example. Tackle unplanned expenditure case by case and review each expenditure request form a whole school viewpoint, what one colleague sees as essential may in reality not be needed elsewhere.
  • Capital review – anything not yet started will need to be reviewed in the light of you deficit with serious consideration of whether to proceed with these – it may be a ‘now or never decision for the SLT!

Funding and Income: it was all their fault!

The deficit may have been born of a decline in school funding – if this is the case then you have to take the following actions:

  • The available funding needs to be aligned solely to curriculum activities that underpin school performance – extra and wider curricular activities may be at risk but need to go on the list the SLT will have to make a decision about.
  • Look at a micro level at all income generated, does it really cover the costs of the clubs and visits the school runs, do the fees for those need to increase
  • Ensure your debtors are chased and paid – at both parent and Local Authority level

In summary

As I said at the start the deficit is not of your making – it is however everyone’s problem to solve and a school taking a long hard look at how it uses its resources may not always be a negative experience – remember in school business management nothing stays the same - your budget review and reforecasting, supported by well informed, knowledge based scenarios will be the key to solving the deficit. Only your role ever sees the whole picture and the finances behind the school and its pupil outcomes.

Always align your budget with the school improvement plan, challenge all areas of expenditure and always plan for the unplanned!

You can never relax however, once a current year surplus is achieved again further cuts and reductions may be needed to prevent future year deficits. The earlier decisions are taken the earlier they can take effect!


This article, written by Stuart Fern, Finance Director at One Education, was published in Primary School Management magazine and can also be viewed on their website. "Drop the Defeatism and Deal with Your Deficit" ~ Primary School Management, 6th September 2019


About the author

Stuart joined One Education in 2016 from the Higher Education sector and brings with him 30 years of finance management experience across financial services, manufacturing and engineering to most recently a university background. His areas of expertise are business processes, data as information and leading growing organisations through periods of change and development.

Please get in touch or visit this page for more information.

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