17 August 2018
Our blog last week highlighted the importance of preparing management accounts on a regular basis and for the Governors and Trustees to review this management information – but what sort of things should the Governors be looking at to see if the academy is managing its resources effectively?
The government has issued some great guidance regarding School Resource Management where they highlight the sort of things that Governors should be looking at. The full guidance can be found on the government website but here are some key things to consider:
Staff pay as a percentage of total expenditure
Staff are the biggest cost to most schools and usually represents over 70% of expenditure. Governors should consider whether staff costs are comparable to other schools of a similar size and nature, and what sort of staff mix you have and whether this is also comparable – and whether you are achieving the same pupil outcomes. If you are spending more, but achieving less you may want to take a closer look at your costs. You could then look at your Staff ratios such as your average teaching costs to see if they are reasonable.
Staff cost ratios
Looking at different staff cost ratios can be quite enlightening for a school. Many schools will look at Pupil to teacher ratios, and look at the average teacher cost but not all of them will consider the teacher contact ratio. After taking into account the planning, preparation and assessment time that all teachers spend you can see how much time they actually spend teaching. The Association of School and College Leaders suggest that 78% is an aspirational target for a secondary school. If your ratio is significantly lower you might want to consider why this is the case and if there is a way to improve the contact ratio. You may also look at the percentage of your staff budget is spent on the leadership team – and whether this is appropriate given the size and nature of your school.
Reviewing budget projections
Having budget projections for three to five years is important, but reviewing them is more so, to make sure that they are as accurate as they can be and perhaps performing some sensitivity analysis on them to see what would happen if your pupil numbers take a fall, or if the level of pay inflation is higher than anticipated. By looking at different scenarios the school can plan ahead more effectively.
Contract renewal
Ensuring value for money is something that the majority of academies are well aware of, but making sure that contracts are reviewed and that, if a contract is up for renewal, the school starts the re-tendering process promptly and re-tenders are done regularly. A review of purchases is a simple thing, but can make a difference if the school can take advantage of bulk buy discounts with some suppliers.
Financial benchmarking
The Department for Education suggest that each school use its ‘schools financial benchmarking service’ which allows you to compare your school’s expenditure on a variety of areas with others in similar circumstances either in your immediate area or across the country. This is a brilliant resource that I would recommend you reviewing but I would also suggest you take a look at our benchmarking report that was published back in March which will also give you a feel for what other schools are doing. Benchmarking can be a really useful tool in looking at where your school is spending its money and can help you think about whether you can reallocate your resources – but it does have its limitations.
If you would like further information on the above, or if you would like to talk about your financial information and how we can help you then please contact your local UHY academy expert or visit our contact us page.
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