As we reach the midpoint of the academic year, academy trusts are encouraged to undertake a comprehensive mid-year budget review. Conducting a mid-year budget review is essential to ensure financial stability, compliance with reporting requirements and effective communication with those charged with governance. Here are some best practices for finance leads in academy trusts for consideration.
1. Align financial monitoring with reporting requirements
Academy trusts are required to submit various financial returns to the Department for Education (DfE). The Budget Forecast Return (BFR) submission requires financial information as at March, as well as the August forecast outturn.
With the current budget being reported against having assumptions made at the previous July and August, a mid-year review provides the opportunity for assumption reviews, and to take into account unforeseen actual expenditure changes, which will flow into a better year end forecast in the summer.
Having conducted a mid-year review, this should facilitate accurate and timely submission of the return, and clear variances that have been reported in the previous 6 months of monthly management accounts.
2. Engage those charged with governance
Effective communication with trustees and governors is essential. Regular updates on financial performance, including during mid-year reviews, enables informed decision-making and strategic planning.
Presenting clear, concise reports that highlight and explain key financial metrics, variances and proposed updates to the budget, fosters transparency and accountability.
3. Implement robust financial controls and forecasting
Maintaining strong financial controls and forecasting with reasonable accuracy is essential.
- Monitor cash flow: This is a requirement of monthly management accounts, and is to be used to anticipate and mitigate potential shortfalls in cash. This is of particular importance when there are large scale capital works taking place, and funding is going to be received in arrears of payments to contractors.
- Review reserves and investment policies: Ensure that reserve levels align with the trust’s financial strategy and provide a buffer against unforeseen expenses. This can be supported by having a mixed investment portfolio strategy with short and longer term investments.
- Evaluate income streams: Assess the reliability and sustainability of various income sources. Are self-generating sources breaking even, charged at a viable rate to be able to continue offering to the local community? Is there enough interest in the educational and residential trips for them to continue? Could the trust look to enter into new and sustainable income streams to support existing traditional funding sources?
Overview
A mid-year budget review is a vital exercise for academy trusts, providing an opportunity to assess financial health, ensure compliance and plan strategically for the future. By implementing these best practices, trusts can navigate current challenges and position themselves for sustained success.
The next step
If you require any advice with your academy's mid-year budget review, please get in touch with Luke Grubb or your usual UHY academy adviser.
