Budgeting for schools

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Budgeting for schools

  1. 1. BUDGETING FOR SCHOOLS
  2. 2. Business Finance Training <ul><li>Paul Lower FCMA </li></ul><ul><li>Twenty years experience as Finance Director </li></ul><ul><li>Global media, publishing and retail companies </li></ul><ul><li>Adviser and part-time FD to small & medium sized businesses </li></ul><ul><li>Financial trainer & coach </li></ul><ul><li>Managing Director of Business Finance Training </li></ul>
  3. 3. Budgeting for Schools IS THIS YOU? BAFFLED BY BUDGETING? CAN’T SEE THE POINT? CRYSTAL BALL GAZING? WASTE OF TIME? NECESSARY EVIL? IT ‘DOES MY HEAD IN’
  4. 4. Budgeting for Schools WHAT’S BEEN YOUR EXPERIENCE?
  5. 5. Budgeting for Schools LET’S SEE IF WE CAN MAKE IT CLEARER WHAT IS BUDGETING ABOUT?
  6. 6. What is Budgeting About? PEOPLE PLANNING MEASURING CONTROLLING
  7. 7. What is Budgeting About? PEOPLE PLANNING MEASURING CONTROLLING
  8. 8. Planning “ With careful and detailed planning one can win; with careless less detailed planning one cannot win. How much more certain is defeat if one does not plan at all” Sun Tzu: “ The Art of War” written in 400BC In other words: Failing to plan is planning to fail
  9. 9. Planning <ul><li>What is planning about? </li></ul><ul><ul><li>Looking at where we are now </li></ul></ul><ul><ul><li>Deciding what we want to achieve </li></ul></ul><ul><ul><li>Working out how we will achieve it </li></ul></ul><ul><ul><li>Taking stock of resources available or needed </li></ul></ul><ul><ul><li>Anticipating problems </li></ul></ul><ul><ul><li>Deciding what will need to be done </li></ul></ul>
  10. 10. Planning <ul><li>Types of planning </li></ul><ul><ul><li>Operational = detailed day to day planning </li></ul></ul><ul><ul><li>Tactical = annual planning and budgeting </li></ul></ul><ul><ul><li>Strategic planning </li></ul></ul>
  11. 11. <ul><li>What is strategic planning about? </li></ul><ul><ul><li>Deciding long term objectives and goals </li></ul></ul><ul><ul><li>Based on a vision for the organisation </li></ul></ul><ul><ul><li>Identifying various strategies for achieving your objectives </li></ul></ul><ul><ul><li>Selecting the strategy that is most likely to succeed </li></ul></ul><ul><ul><li>Giving the organisation direction </li></ul></ul><ul><ul><li>And a plan by which it can measure its progress </li></ul></ul>Planning
  12. 12. Planning <ul><li>Strategic planning in education </li></ul><ul><ul><li>V alues </li></ul></ul><ul><ul><ul><li>Ethos and sense of purpose </li></ul></ul></ul><ul><ul><ul><li>Culture and beliefs </li></ul></ul></ul><ul><ul><ul><li>A shared vision for the future </li></ul></ul></ul>
  13. 13. Planning <ul><li>Strategic planning in education </li></ul><ul><ul><li>V alues </li></ul></ul><ul><ul><li>O bjectives </li></ul></ul><ul><ul><ul><li>Goals based on the values which shape decisions </li></ul></ul></ul><ul><ul><ul><li>Time assigned targets based on goals </li></ul></ul></ul><ul><ul><ul><li>Targets which can be measured and monitored </li></ul></ul></ul><ul><ul><ul><li>And provide direction for the organisation </li></ul></ul></ul>
  14. 14. Planning <ul><li>Strategic planning in education </li></ul><ul><ul><li>How would you describe your own school’s V alues? </li></ul></ul><ul><ul><li>What are its long term O bjectives and goals? </li></ul></ul>
  15. 15. Planning <ul><li>Strategic planning in education </li></ul><ul><ul><li>V alues </li></ul></ul><ul><ul><li>O bjectives </li></ul></ul><ul><ul><li>R esources </li></ul></ul><ul><ul><ul><li>Teaching and administrative staff </li></ul></ul></ul><ul><ul><ul><li>Buildings and facilities </li></ul></ul></ul><ul><ul><ul><li>Funding </li></ul></ul></ul>
  16. 16. Planning <ul><li>Strategic planning in education </li></ul><ul><ul><li>V alues </li></ul></ul><ul><ul><li>O bjectives </li></ul></ul><ul><ul><li>R esources </li></ul></ul><ul><ul><li>R isks </li></ul></ul><ul><ul><ul><li>“ The effect of uncertainty on objectives” </li></ul></ul></ul>
  17. 17. Planning Uncertainty Government policy Funding problems Opportunities? Threats? RISKS Resource shortages? ANTICIPATING AND MANAGING RISK
  18. 18. Planning <ul><li>Strategic planning in education </li></ul><ul><ul><li>V alues </li></ul></ul><ul><ul><li>O bjectives </li></ul></ul><ul><ul><li>R esources </li></ul></ul><ul><ul><li>R isks </li></ul></ul><ul><ul><li>S trategy </li></ul></ul>
  19. 19. Planning <ul><li>S trategy </li></ul>Is a plan that matches the resources available and the strengths and weaknesses of the organisation with the threats and opportunities it faces in order to meet the organisation’s objectives over 3 – 5 years
  20. 20. Planning <ul><li>Strategic planning in education </li></ul><ul><ul><li>V alues </li></ul></ul><ul><ul><li>O bjectives </li></ul></ul><ul><ul><li>R esources </li></ul></ul><ul><ul><li>R isks </li></ul></ul><ul><ul><li>S trategy </li></ul></ul>
  21. 21. Planning <ul><li>Strategic planning in education </li></ul><ul><ul><li>V alues </li></ul></ul><ul><ul><li>O bjectives </li></ul></ul><ul><ul><li>R esources = </li></ul></ul><ul><ul><li>R isks </li></ul></ul><ul><ul><li>S trategy </li></ul></ul>THE SCHOOL DEVELOPMENT PLAN
  22. 22. Planning <ul><li>Budgeting </li></ul><ul><ul><li>Uses the strategic plan : the School Development Plan </li></ul></ul><ul><ul><li>To identify short term goals and objectives </li></ul></ul><ul><ul><li>To match the cost of achieving these goals with funding </li></ul></ul><ul><ul><li>To produce an annual operating plan </li></ul></ul><ul><ul><li>That will allow the school to remain financially viable </li></ul></ul>
  23. 23. What is Budgeting About? PEOPLE PLANNING MEASURING CONTROLLING
  24. 24. People <ul><li>Budgeting and People </li></ul><ul><ul><li>R esponsibility </li></ul></ul><ul><ul><ul><li>Objectives should be set at departmental level </li></ul></ul></ul><ul><ul><ul><li>Department manager is responsible for delivery </li></ul></ul></ul>
  25. 25. People <ul><li>Budgeting and People </li></ul><ul><ul><li>R esponsibility </li></ul></ul><ul><ul><li>I ntegration </li></ul></ul><ul><ul><ul><li>Individual efforts focussed on common goals </li></ul></ul></ul><ul><ul><ul><li>Managers and staff “pull in the same direction” </li></ul></ul></ul><ul><ul><ul><li>Avoids managers following their ‘own agenda’ </li></ul></ul></ul>
  26. 26. People <ul><li>Budgeting and People </li></ul><ul><ul><li>R esponsibility </li></ul></ul><ul><ul><li>I ntegration </li></ul></ul><ul><ul><li>M otivation </li></ul></ul><ul><ul><ul><li>Results measured and reported against budget </li></ul></ul></ul><ul><ul><ul><li>Interest and commitment of staff maintained </li></ul></ul></ul>
  27. 27. People <ul><li>Budgeting and People </li></ul><ul><ul><li>R esponsibility </li></ul></ul><ul><ul><li>I ntegration </li></ul></ul><ul><ul><li>M otivation </li></ul></ul><ul><ul><li>E valuation </li></ul></ul><ul><ul><ul><li>Performance of budget holders can be measured </li></ul></ul></ul>
  28. 28. What is Budgeting About? PLANNING MEASURING CONTROLLING PEOPLE
  29. 29. Measurement <ul><li>Actual performance must be measured </li></ul><ul><ul><li>Income and spending must be recorded and monitored </li></ul></ul><ul><ul><li>Accounted for in sufficient detail with FMS6 or similar </li></ul></ul><ul><ul><li>Monthly and year to date report at department level </li></ul></ul><ul><ul><li>Other non-financial KPI ’s also calculated monthly </li></ul></ul>Jargon Buster : KPI’s = Key Performance Indicators
  30. 30. What is Budgeting About? PLANNING PEOPLE MEASURING CONTROLLING
  31. 31. Controlling <ul><li>Control – one of the main purposes of budgeting </li></ul><ul><ul><li>Actual monthly performance must be measured </li></ul></ul><ul><ul><li>And compared to monthly phased budget </li></ul></ul><ul><ul><li>Feedback reporting to budget holder is key </li></ul></ul><ul><ul><li>Actual results should be compared to budget </li></ul></ul><ul><ul><li>Variances shown for investigation </li></ul></ul>Variance is the difference between budget and actual
  32. 32. Controlling <ul><li>Best practice for feedback reporting </li></ul><ul><ul><li>Reports should be clear and comprehensive </li></ul></ul><ul><ul><li>Reports should be timely to allow prompt action to be taken </li></ul></ul><ul><ul><li>Information must be accurate but without superfluous detail </li></ul></ul><ul><ul><li>Reports go to the responsible manager with authority to act </li></ul></ul>
  33. 33. Controlling
  34. 34. Controlling
  35. 35. Controlling <ul><li>Control – one of the main purpose of budgeting </li></ul><ul><ul><li>Actual monthly performance must be measured </li></ul></ul><ul><ul><li>And compared to monthly phased budget </li></ul></ul><ul><ul><li>Feedback reporting to budget holder is key </li></ul></ul><ul><ul><li>Actual results compared to budget </li></ul></ul><ul><ul><li>Variances investigated and appropriate action taken </li></ul></ul>
  36. 36. What is Budgeting About? PEOPLE PLANNING MEASURING CONTROLLING
  37. 37. Budgeting for Schools LET’S SEE IF WE CAN MAKE IT CLEARER SO HOW DOES BUDGETING WORK IN SCHOOLS?
  38. 38. Budgeting for Schools For further information visit: www.fmsis.info
  39. 39. Budgeting for Schools <ul><li>Aim of school budgeting </li></ul><ul><ul><li>Ensure resource allocation matches school priorities </li></ul></ul><ul><ul><li>Priorities should reflect School Development Plan </li></ul></ul><ul><ul><li>Budget ensures there are sufficient funds to do this </li></ul></ul><ul><ul><li>And so confirms the budget can be ‘balanced’ </li></ul></ul>
  40. 40. Budgeting for Schools <ul><li>Why accurate budgeting is important </li></ul><ul><ul><li>The budget must be as realistic as possible </li></ul></ul><ul><ul><li>And school must have satisfactory systems </li></ul></ul><ul><ul><ul><li>To help set the budget </li></ul></ul></ul><ul><ul><ul><li>And to measure, report and control the budget </li></ul></ul></ul>
  41. 41. Budgeting for Schools <ul><li>Why accurate budgeting is important </li></ul><ul><ul><li>The budget must be as realistic as possible </li></ul></ul><ul><ul><li>And school must have satisfactory systems </li></ul></ul><ul><ul><li>Because small errors can cause big problems </li></ul></ul>In a typical secondary school the teaching staff budget could be well in excess of £3m per year. A budget error of just 3% could leave the school with an end of year shortfall of over £100,000 and could result in drastic spending cuts in other non-staff priority areas of school spending.
  42. 42. Budgeting for Schools <ul><li>Planning the annual budget </li></ul><ul><ul><li>Income </li></ul></ul><ul><ul><ul><li>Over 90% of income for typical school comes from </li></ul></ul></ul><ul><ul><ul><ul><li>LEA Resource Budget </li></ul></ul></ul></ul><ul><ul><ul><ul><li>and if there is a sixth form </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Learning Skills Council Post 16 Budget </li></ul></ul></ul></ul><ul><ul><ul><li>So income is fairly easy to predict </li></ul></ul></ul>
  43. 43. Budgeting for Schools <ul><li>Planning the annual budget </li></ul><ul><ul><li>Expenditure </li></ul></ul><ul><ul><ul><li>Staffing costs typically 75%-80% of total expenditure </li></ul></ul></ul><ul><ul><ul><li>Premises costs typically 10%-12% of total expenditure </li></ul></ul></ul><ul><ul><ul><li>Profiling attempts to spread budget costs over year </li></ul></ul></ul>
  44. 44. Budgeting for Schools <ul><li>Practical approach to budgeting expenditure </li></ul><ul><ul><li>Staff costs must be estimated as accurately as possible </li></ul></ul><ul><ul><ul><li>Use curriculum timetable to establish staffing needs </li></ul></ul></ul><ul><ul><ul><li>Identify non-teaching staff requirements </li></ul></ul></ul><ul><ul><ul><li>Factor in appropriate pay scale increase </li></ul></ul></ul><ul><ul><ul><li>Use salary calculator to get a good estimate </li></ul></ul></ul><ul><ul><ul><li>Remember to build in a contingency </li></ul></ul></ul>
  45. 45. Budgeting for Schools <ul><li>Practical approach to budgeting expenditure </li></ul><ul><ul><li>Staff costs must be estimated as accurately as possible </li></ul></ul><ul><ul><li>Estimate other key expenditure items </li></ul></ul><ul><li>Utilities </li></ul><ul><li>Cleaning Contract </li></ul><ul><li>Business Rates </li></ul><ul><li>Repairs and Maintenance </li></ul><ul><li>Insurance </li></ul><ul><li>Postage </li></ul><ul><li>Telephones </li></ul><ul><li>Examinations and Assessments </li></ul>
  46. 46. Budgeting for Schools <ul><li>Practical approach to budgeting expenditure </li></ul><ul><ul><li>Staff costs must be estimated as accurately as possible </li></ul></ul><ul><ul><li>Estimate other key expenditure items </li></ul></ul><ul><ul><li>Staff and other key items = 85% to 90% of expenditure </li></ul></ul><ul><ul><li>So that takes care of most of the costs </li></ul></ul><ul><ul><li>Use the unallocated income to cover the other costs </li></ul></ul>
  47. 47. Budgeting for Schools <ul><li>Practical approach to budgeting expenditure </li></ul><ul><ul><li>Estimate staff costs as accurately as possible </li></ul></ul><ul><ul><li>Estimate other key expenditure items </li></ul></ul><ul><li>Examinations and Assessments </li></ul>Just hold on a minute. Tell me more about how I can estimate the examination costs for the budget!
  48. 48. Budgeting for Schools <ul><li>Budgeting for examination costs </li></ul><ul><ul><li>Several components to examination costs </li></ul></ul>For some helpful examination planning tools visit: www.qcda.gov.uk/qualifications/exams/579.aspx
  49. 49. Budgeting for Schools
  50. 50. Budgeting for Schools <ul><li>Budgeting for examination costs </li></ul><ul><ul><li>Several components to examination costs </li></ul></ul><ul><ul><ul><li>Examination entry fees </li></ul></ul></ul><ul><ul><ul><li>Invigilation costs </li></ul></ul></ul><ul><ul><ul><li>Other costs </li></ul></ul></ul>
  51. 51. Budgeting for Schools Using Microsoft Office Excel ™ software for budgeting
  52. 52. Budgeting for Schools
  53. 53. Budgeting for Schools
  54. 54. Budgeting for Schools
  55. 55. Budgeting for Schools The blue numbers are typed in to cells B5 and C5 The formula multiplies the contents of the two cells
  56. 56. Budgeting for Schools
  57. 57. Budgeting for Schools
  58. 58. Budgeting for Schools
  59. 59. Budgeting for Schools
  60. 60. Budgeting for Schools
  61. 61. Budgeting for Schools That completes the exam fee calculation
  62. 62. Budgeting for Schools ‘ Insert Worksheet’ to add new sheet to the workbook Type in the rows for the summary sheet
  63. 63. Budgeting for Schools Enter the sheet and cell reference from the exam estimate worksheet to enter the total
  64. 64. Budgeting for Schools
  65. 65. Budgeting for Schools
  66. 66. Budgeting for Schools Fees can be difficult to estimate One approach might be to ‘sensitivity test’ your assumptions
  67. 67. Budgeting for Schools
  68. 68. Budgeting for Schools <ul><li>To summarise </li></ul><ul><ul><li>Budgeting is part of the planning process </li></ul></ul><ul><ul><li>Budgeting is about </li></ul></ul><ul><ul><ul><li>Planning </li></ul></ul></ul><ul><ul><ul><li>People </li></ul></ul></ul><ul><ul><ul><li>Measuring </li></ul></ul></ul><ul><ul><ul><li>Control </li></ul></ul></ul>
  69. 69. Budgeting for Schools <ul><li>To summarise </li></ul><ul><ul><li>The School Development Plan is the 3 year strategic plan </li></ul></ul><ul><ul><li>The budget identifies short term goals and objectives </li></ul></ul><ul><ul><li>Matches the cost of achieving these goals with funding </li></ul></ul><ul><ul><li>To produce an annual operating plan </li></ul></ul><ul><ul><li>That will allow the school to remain financially viable </li></ul></ul>
  70. 70. Budgeting for Schools <ul><li>To summarise </li></ul><ul><ul><li>The budget assigns responsibility to the relevant manager </li></ul></ul><ul><ul><li>Actual spending is measured during the year </li></ul></ul><ul><ul><li>Feedback reporting is used to inform managers </li></ul></ul><ul><ul><li>Managers take appropriate action to correct variances </li></ul></ul><ul><ul><li>This maintains the financial viability of the school </li></ul></ul>
  71. 71. Budgeting for Schools <ul><li>To summarise </li></ul><ul><ul><li>Preparing the budgets requires managers to estimate costs </li></ul></ul><ul><ul><li>Examination costs can be problematical </li></ul></ul><ul><ul><li>But there are a number of tools to help with the job </li></ul></ul><ul><ul><ul><li>QCDA website </li></ul></ul></ul><ul><ul><ul><li>Simple Excel worksheets </li></ul></ul></ul>
  72. 72. Budgeting for Schools <ul><li>To summarise </li></ul><ul><ul><li>Preparing the budgets requires managers to estimate costs </li></ul></ul><ul><ul><li>Examination costs can be problematical </li></ul></ul><ul><ul><li>But there are a number of tools to help with the job </li></ul></ul><ul><ul><li>‘ Sensitivity testing’ will give a range of estimates </li></ul></ul><ul><ul><li>Good luck with your own budget! </li></ul></ul>
  73. 73. BUDGETING FOR SCHOOLS

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