R116 – A GUIDE TO LINKING YOUR SCHOOL DEVELOPMENT AND ...
R116 – A GUIDE TO LINKING YOUR
SCHOOL DEVELOPMENT AND
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Are your Financial Projections reflecting your School
One of the most difficult challenges for schools in terms of financial management
has been in driving the creation of the school budget from the objectives as set out
in the School Development Plan (SDP) or School Improvement Plan.
For many years since the introduction of School Development/Improvement Plans,
schools have created their school budget and determined what should be allocated
to school development planning priorities from what ever budget was remaining,
after allocating costs against what are perceived to be ‘fixed costs’.
Schools are really starting to recognise the benefits of producing longer term
financial plans in-line with the Departments strategy of issuing multi year budgets to
schools to enable them to plan more effectively. It is also recognised as effective
financial management to ensure that the priorities, as determined in the SDP, are
costed accurately and built into the budgeting process. The Financial Management
Standard requires that ‘The School improvement / development plan has sufficient
scope and depth of the financial implications and it is reflected in the school’s three-
year budget plans.’
One of the difficulties in matching the schools priorities to the budget has been in the
timing of each of the separate requirements, budgeting has always been in financial
years (April to March) and is likely to continue on this timetable into the foreseeable
future, whilst School Development Planning clearly needs to be determined by the
needs and priorities of the school in academic years (September to August),
therefore the planning and funding cycles are not always aligned.
How can I do it?
The skill in creating a budget driven by the SDP is to clearly recognise the financial
implication of each objective and to clearly recognise the point in which the costs will
be incurred to meet each objective. It makes sense to at least recognise the term in
which the costs are likely to be incurred and therefore recognise the financial year
when the budget provision is needed. It is therefore recognising the costs of the SDP
and placing them into the appropriate financial year i.e. summer term and autumn
term costs would be in one financial year whilst spring term costs would be in the
next financial year.
In linking the resources to meet the objectives in the School’s Development Plan the
school should ensure that:
• Resources are targeted on improving standards and the quality of provision
• Resources are used to support the varied educational needs of all pupils
The school also needs to ensure that financial decisions made have been effective,
to do this it needs to continually:
• Monitor the implementation of the School Development Plan;
• Evaluate how effective the school has been in achieving targets set out in its
• Evaluate the cost-effectiveness of decisions by weighing the resource inputs
against the outcomes and benefits
• Ensure that the allocation of resources promotes the aims and values of the
• Examine the ‘Opportunity Cost’ of each activity within the SDP objectives.
A Tried and Tested Strategy
Ensuring best fit is part of the process of driving the school budget from the SDP,
obviously the school has to ensure ‘best value’ and there are many ways in which
that can be done, set out below is just one strategy for budgeting which ensures best
fit and certainly focuses the schools management on ensuring ‘value for money’.
Identify school development plan resources requirements; ensure that budget
provision has been recognised in the correct financial year although the SDP is in
an academic year format. This exercise obviously needs to be performed well in
advance of the start of the financial year. Decisions made in the autumn term i.e.
the start of a new academic year need to be the first consideration when creating
the budget for the following financial year.
Examine all fixed costs, do they represent ‘best value’? apply the 4 ‘C’s (see
toolkit R37 Document) criteria to ensure that absolute best value is achieved on
every purchase as well as on all other costs (staffing included) This becomes
extremely critical if the school cannot afford all the objectives in the SDP. The
greatest error in this exercise would be to have to cut out elements of the SDP
because some of the other budget areas were not as prudent as they could be.
Ensure that your planned expenditure matches your projected income? i.e. after
constructing your budget from both the SDP resource requirements and then
adding in all the additional costs not determined by the SDP. If at this stage you
have achieved a balanced budget then you are certainly amongst the minority of
schools, often the budget is exceeded by the financial resource requirements of
the SDP. It could be argued that if your school budget balances at this stage then
as mentioned above, perhaps the SDP is not ambitious enough!
If like the vast majority of schools you cannot make the budget balance then a
workable strategy is set out below in stages 4-6
Re-examine priorities; what are the short, medium and longer term implications?
Look at the value of each of the objectives to the school. Place in strict priority
order every item in the SDP that needs a resource allocation, number 1 is the
most important and most critical part of the SDP the last item is the least critical
to the school.
Start at the end (lowest priorities) and work backwards, decide what the options
are? Downscale the objective, defer the objective or abolish that particular
strategy completely! You continue with this process until you have worked your
way up the list far enough to be able to balance the resource requirements with
the funds available. This strategy ensures that the objectives remaining are the
most critical to the school and to prove that you go through the analysis in stage
6. What you have achieved here is a balanced budget with as many of the
elements of the SDP built in and in strict priority order ensuring that the most
important objectives within the SDP receive the limited resources available as a
Option appraisal, looking at opportunity costs and performing cost/benefit
analysis, i.e. what value have we lost with cutting an item from the SDP because
we cannot afford it, compared with the benefits that the remaining items left in the
SDP will bring to the school. The school needs to ask itself do the benefits
retained outweigh the benefits lost. If not go back to stage 4 and ensure that the
school’s priorities are in the correct order.
Below are some financial reflections that need to be considered during the process
of matching the SDP to the financial year budget:
• Always start the annual budgeting from the development plan agreed priorities
• More is not always better; examine the redeployment of existing resources;
• Zero base budgeting versus incrementalism; examine existing spending patterns,
do not accept that because ‘its always been done like that’ it is the most effective
way forward for the school (challenge previous practices)
• Plan for problems now; think at least two or three years ahead, further if possible
albeit less likely to be as detailed in the latter years
• Review the SDP for whole school issues; external constraints and opportunities;
• Share budgeting with key people in your team
Linking budget planning to School Development Plans is not always easy and of
course there are many, many reasons why schools do not plan in this way very
effectively; set out below are some of the reasons why schools have poor linkage
between their SDP and their longer term financial plan:
• Doing what they can afford rather than prioritising outcomes
• Finalising the development plan after setting the annual budget
• Not costing developments in time or sufficient detail
• Not challenging assumptions
• Not using benchmarking tools to assess their cost effectiveness
• Not identifying expenditure against actions, with smart success criteria
• Not using available software to model the financial requirements of the SDP or
not being able to change assumptions and immediately recognise the financial
Obviously the ultimate management tool to enable this function to be performed
successfully would be in some form of automated process, where the building of the
SDP recognises the costs of each of the objectives (and the associated activities) in
the appropriate term and creates a longer term financial plan based on this data in
financial years. This resource requirement would then match the period in which the
school receives its budget allocation, without having to perform a separate manual
process of creating an SDP and then manually inputting the data into your longer
term financial/budget plan.
Opportunity costing (everything in the SDP has a cost?)
Opportunity costing measures the value of a benefit sacrificed in favour of an
alternative course of action. This could be in the use of actual tangible resources or
in deciding on a particular course of action using staff time which is the most
valuable resource that any school has.
The school has to make opportunity cost decisions regularly and in particular during
its School Development Planning process. Many schools believe that if a member of
staff is performing a particular task or fulfilling an activity linked to an SDP objective,
then there are no costs associated with that activity, because the employee is being
paid a salary anyway regardless of whether or not they are involved in that activity.
What schools need to consider is the lost opportunity of that member of staff doing
something else, the school has to ensure that the benefits of the objective
undertaken outweigh the benefits of the lost opportunity if the school made a
decision to pursue a different strategy.
This is particularly valuable when assessing whether or not the priorities in the SDP
are in fact in the best interest of the school or would other strategies be more
beneficial. There is also the likelihood that every activity with the SDP cannot be
funded from the limited resources available and therefore prioritising the objectives
and activities of the SDP is critical to ensure that all the highest priority objectives
are funded first. Inevitably the school cannot afford all its ‘wish list’ and therefore
sacrifices have to be made.
There could be an argument to suggest that if a school can afford everything in its
first attempt to construct its SDP then the SDP is not ambitious enough! It is more
likely that it cannot and therefore priorities have to be set and opportunity costs are a
factor that needs to be considered.
One of the main benefits of employing this kind of strategy in your school is the
greater emphasis placed on the School Development Plan determining the priorities
within the budget, not just looking at what is left after all the perceived fixed costs
have been considered. Schools that already use this methodology have commented
on how it certainly focuses the mind on all costs incurred within the school and
ensuring that they represent the absolute ‘best value’ possible, especially when
going through the exercise of having to cut out objectives from the SDP because
clearly they cannot be afforded from the limited budget available to the school.
Another benefit to this methodology is to ‘question and challenge’ all that has gone
before, no longer is it acceptable to do things because “its always been done like
that”, perhaps it still is the best methodology but going through the exercise above
will ensure that you get to the right answer for the right reasons!