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Podcast | Season 1 | Episode 15: School Budget Mastery

Stephen Morales (ISBL) leads this week's episode with a talk on how to plan a 5-year school budget. At the core is Integrated Curriculum Financial Planning, as an effort of joined-up leadership - with pedagogy, governance and business working seamlessly together.

๐Ÿ“˜ The presentation can be found at this link 

๐Ÿ”ง For more information on the ISBL's tool mentioned in the episode, you can visit this page 

๐Ÿ“Ž School Budget Mastery: Curriculum Led Integrated Financial Planning

  • A focus on integrated curriculum-led financial planning and resource management in the context of an evolving national funding formula
  • How to conduct a school budget review
  • What methods to employ to ensure long-term good financial planning
  • Why this will reduce practitioner workload long-term

๐Ÿ’ก Stephen Morales, Chief Executive, ISBL

๐Ÿซ This session was recorded live on 13th November 2019 in the Business & Finance Theatre of the Schools & Academies Show at the NEC in Birmingham.

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Stephen Morales

I'll say from the outset, there's no silver bullet. These are practical tips. And as we go through the slides, if you want me to pause if you want to ask questions as we go, very comfortable with that, and we'll see where we get to. Okay, so, we're gonna start off with financial planning value for money, what you need to have in place, what to look out for, how you develop your strategic plan? And is that what everybody's expectation of this session was okay with that. So I'm going to start with 10 things that you should be, you should be fully conversant with, that should encourage your leadership teams to engage with. So that's SLT, certainly the head teacher, the chief executive, governors and trustees. And I think collectively, you need to own these numbers. So it's not just the job of the finance professional. Everybody should understand, first of all, what the numbers are, and why you're at the levels that you are. So starting from the top staff pay as a percentage of total expenditure. Pretty straightforward, really important. Average teacher cost, pupil to teacher ratio, often known as PTR. size of your classes. If I took a bit further than that, the size of the classes, and also the environment in which teaching and learning is taking place of that space allocation, teacher contact ratios, the proportion of budget spent on the leadership team, the three to five year budget projections. And I know many of you will say, we can't do five year projections because we don't have budget certainty. And that's in its own way, it is a legitimate, legitimate response. But actually, you have far more certainty than many organisations, certainly outside of the public sector. And yes, of course, you're gonna have to make assumptions, and you're gonna have to make informed assumptions. You have to make assumptions, assumptions around around pensions, and we know that there's a local government pension valuation coming up shortly. You're gonna have to make assumptions about that. And hopefully once we get past this political uncertainty, you'll have a bit more certainty so that you can plan more effectively.

Stephen Morales

But you've got to, you've got to start to think about, you know, what's not just what's going on this year, even next year, certainly three years and ideally five years and and start to build that and it's not set in stone yet a five year projection will adjust, just like as you review your own budgets, hopefully on a monthly basis, certainly on a quarterly basis. You'll make adjustments and you may go back to your to your trustees to your leadership teams and say actually, given what we now know about the about the budget want to recast it when you can do that, for the three year budget you do for the five year budget. So, you know, it is the art of the possible rather than the impossible. spend per pupil for non pay expenditure lines compared to similar schools. And I think the similar schools thing is is important, you won't necessarily find that by plugging your data into the national benchmarking tools. I mean, do that by all means. And in its own way you find some of the information quite useful. But you probably know more about your own local environment and actually, if you've got a good relationship with your local schools, if you can do those kind of comparisons, again, it's really quite helpful. Your school improvement plan priorities and the relative cost options. So school improvement shouldn't be sitting out as a siloed activity, it should be fully integrated into your strategic thinking and the way you deploy resources to that absolutely central. And then finally, a list of contracts with customer new dates. And again, apologies if I'm teaching you to suck eggs here, but I often see schools that have multiple contracts, and they're just rolling on the contract year after year, and they don't go back and first of all, don't test the market, they don't even look at the contract and say, actually, does this represent value for money? Could I do better? And, you know, what's it costing? So they're really important to have a have a system that will first of all alert you to those contract renewal dates, and then to do the, the kind of forensic thinking around, how can we do better? If indeed, the conclusion to that, is that where you are is okay, well, that's fine, but at least you've you've reflected.

Stephen Morales

So, in terms of applying the 10 checks, I think it's really important to use these 10 checks early in the budget planning cycle. And certainly, when we talk about the three to five year position, kind of doing that anyway, because, you know, if you're if you're building assumptions in, something's gonna happen in five years time, that's, that's quite a nice, a nice leading. Make sure there is there is there is a proper period of time to reflect on, on how you build your assumptions up. And what we don't want is budget planning right up to the wire, where, you know, people are having to make decisions on the hoof, we want to plan, we want to plan a process, which is, which gives you that time to properly reflect, and to do any cross referencing to do any triangulation of your thinking, for that matter. And I keep banging on about this. I've already done one presentation that I've talked about it. I've got about another five to do over the next two days. It's going to keep coming up in all my presentations, because I believe joined up leadership is absolutely central to successful schools and trusts. And what I mean by that is pedagogy, governance and business working seamlessly together, not in silos. So if you're a finance professional, you're not just creating your budget, the budget in isolation. If you're designing the curriculum, you're not doing that without reference to the resources that are available to you. And if you're a governor or a trustee, there is improper challenge in terms of the assumptions that are being used. So that joined up piece really important. And compare your school spending with other schools in similar circumstances. And as I've said, you can do that by the DfE benchmarking, or you can do it by building a relationship with local schools, in your area. And remember, if you ever have to be a slave to numbers, you know, what comes out of benchmarking what comes out of the resource management toolkit. When you're looking at efficiency metrics, when you're looking at the ratios that I talked about earlier in this presentation, no where you are and defend your position. And if you if you're a bit of an outlier, but you can defend the reasons for it, that's absolutely fine. And not knowing your numbers and not being able to defend the decisions you make, I think is inexcusable. So when schools come to me say I have done everything I possibly can in terms of efficiency in the most efficient school in the country. There's nowhere else for me to make to go. My first question would be well talk to me about your numbers. And if the answer is I don't know my numbers, then I will say, I'm sorry, I don't believe you. And, and so know your numbers, defend your position.

Stephen Morales

Okay, so let's walk through each of those 10 checks that I suggested. So staff pay is a percentage of total expenditure. It won't come as any surprise to you that staff pay is the single most expensive item in a school budget. Typically, it represents over 70% of expenditure. So we should, we should we should understand why we're spending that money, how we're deploying talent across the organisation. And, and does it reflect the ambition that we have and the resources available to us. From a governance perspective and the kind of challenge you would expect to receive from your governors should be, what percentage of the budget is spent on staffing compared with similar schools? How does the percentage for teaching staff curriculum support staff and other support staff compared with other similar schools? I'm looking at I'm taking this this from a from a governor perspective, if I was a governor or a trustee, that's the question I would be asking my school business professional in this area. What you need to do if you're a school business leader, is have the ready made response to that question. Staying on this same item, staff pays attention to total expenditure? How do your schools pupil outcome, that's progress, compared with other similar schools? So in terms of in terms of return, the return on investment, the amount of money that you're spending on staff, what are pupil outcomes that like, understand that relationship? What's the overall cost of staff as a percentage of total income, and if your staffing costs are over 80%, I would argue that's very high out, there could be good reason for it. But for me that would start to set off some alarm bells. If I was a trustee or a governor, I'd be wanting to get some robust responses, if that's where the levels were. And if teaching costs are relatively high, is this due to the number of teachers? Or is it about salary levels, so not about numbers, but about the pay the remuneration of individuals within the organisation? And again, if that is the case, it's about high pay. Is there good reason for it? Are you in an area of the country which is really quick, which makes it really difficult for you to recruit, retain good teachers, high quality leaders, and you have to pay a premium for that and if that's the case, and that's the price you have to pay for improving children's outcomes, then it could be good reason for again, know your numbers. Average teacher costs. And this is measured. This is measured by dividing the total teaching cost by the full time equivalent teachers straightforward calculation. And you might be wanting to be ready for the following question. If the average teacher cost is high in comparison with other similar schools, why is this? And is it due to any of the following things, the staffing grade profile, such as a high number of staff on the upper pay scale, and that's, that's very common. So where we see where we see high levels of retention, teachers that are having are enjoying their experience in a particular setting, and have been there for 10 or 15 years and the school has held on to those teachers, but you're going to see is that over that period, they're all they've all moved up through the pay spines all on the upper ay scale, almost all of them will be on some kind of teaching and learning responsibility point. Some may be enjoying honorarium as well. And, and again, it's a very tough question to be faced with as a head teacher, when you're looking at balancing your budget, if that quality that caliber of workforce is making a huge difference to your institution, are you really prepared to make the difficult decision of looking for looking as a way of removing that cost burden. Some of it will come through natural wastage. Some of it might be some difficult conversations in recruiting in more junior members of staff. It's very difficult but the difference between a school with that kind of profile and a school that's got a high level of NQTs, some in the middle of their professional journey and someon the upper pay scale versus a school which is almost exclusively got teachers on the pay scale, the budget impact is is massive. But again, understand your particular context and make decisions informed decisions about how you're going to tackle that and then the responsibility structure in the school.

Stephen Morales

And that's more than just T&Rs. It's about, you know, management. How many managers do you have within the organisation? Do you have what I refer to as a bloated leadership team? And do you have lots of lots of leaders on high salaries that are not in front of children very often, if at all. And again, you need to reflect on your own particular context, moving on pupil to teacher ratios, often referred to as PTR. And this is calculated by dividing the number of full time equivalent pupils on roll or the total number of FTE teachers are relatively low PTR could suggest small class sizes, as well as benchmarking the PTR. You may want to review the average PTR and pupils who had ratios and look at that across other schools and academies. The ratio of pupils to all educational staff is also relevant particularly or primary, and I mean, this is a bit contentious. We did some work on teaching assistants and if you look at some research that the dam fund have have conducted, there is the correlation between high levels of teaching assistants and pupil performance and what the evidence isn't there. So I think it's important to reflect on the value that I'm not suggesting for a moment. Teaching Assistants aren't important because they are absolutely important. But the level of teaching assistants the number of teaching assistants and the correlation with outcomes are that you need to look very carefully at that and make your own your own determination. And so the kind of questions that might be thrown at you if you're constructing a budget, and what's the PTR for different key stages within within your organisation within your school. How do schools PTR compared with similar schools, again, there's national benchmarking you can do or you can collaborate with local schools and and get what I believe would be a more meaningful response. And how does the ratio of pupils to staff compared with similar schools? Class size, again, really important, and, you know, we can all square the budget by chucking 80 children into the main hall and, teaching them teaching the group. That wouldn't be ideal at all, surely, and but there's a balance. And, again, I think there is the evidence that is out there that suggests a class of 24 will achieve better outcomes than a class of 28. I'm not sure that the evidence is there. And I know we've you know, we've been very careful to make sure that we don't, we don't we don't end up with class sizes which are which are manageable. You know, what is the sweet spot in terms of a class size? I can't give you that number, but I think it it probably is reasonable between number of 24 and 30. And I don't think there's any evidence to suggest that either is better than the other. So again, think carefully about that.

Stephen Morales

Look at the average class, size by Key Stage and the options that are available for children at key stages four and five. Again, we want a breadth of credit curriculum with a broad, rich curriculum, and we don't want to undermine that. But at the same time, we do need to think about about viability and what's the opportunity cost. If we end up with some subjects where they are such class sizes, that it becomes difficult to make the case. What class size does your school aim to achieve, and what's the reason for that? So, have you notionally decided that you're never gonna have a class above 28 About 30 or, or less than a certain number what what's the reason behind that? Is it? Is it evidence based? Or is it just? Is it just kind of intuitive? Again, I think it's important to to know the answers that. Are there any small classes where the pupil funding does not cover the cost of delivery? Now, this is a difficult one, because going back to that question of broad and rich curriculum, and there may be circumstances where it's not just about the cost of that particular lesson. But it's about the learning experience. It's about the opportunities for the whole learning community. And it may be that other activities, other lessons, other funding needs to cross subsidize that activity. But just just make sure you understand what the reasons are for keeping a particular class or a particular lesson or a particular subject going. And then do you know the maximum average class size the school can operate at, given the context and the pupil admissions policy.

Stephen Morales

Again, all things that you need to build into your, into your considerations. Teacher contact ratio. This measure is calculated by taking the total number of teaching periods, timetables for teachers in the school and then dividing that by the total possible number of teaching periods. All teachers have a guaranteed minimum of 10% time for planning and preparation. Therefore, the teacher contract ratio would always be lower than one. So if you're wondering why you've seen that before, and you've thought two ways number one, that's that's why because that needs to be it needs to be factored in. You can questions that might be thrown at you, and how would changes to the teacher contract ratio impact on the overall budget? Are teaching staff undertaking roles that could be done by support staff, really important? We don't want people particularly talented individuals within an organisation distracted by tasks that other people could do. And the worst culprits for that are the most senior leaders in our system. It is bizarre, but it's true. How many times have you sat in an SLT meeting where the conversation is centered around how we're going to set out the school play the assembly, the sports day, or whatever it might be? Actually, you know, time isn't being spent on spent on the proper strategic elements. How many times have you seen a Deputy Head, Head of curriculum, Head of School Improvement re-keying data from one spreadsheet to another, it's not the best use of individuals time. So let's make sure we deploy people to the right tasks, and we absolutely get the best return on investment for the talent we've got available to us. And then linked to that is, you know, how does your school compare against ICSP National Benchmarks and we'll come on to ICSP a little bit later on.

Stephen Morales

I don't need to tell you that, that schools have many different approaches to, to the way they structure themselves, and the amount of money that they spend on central teams, or the way they construct their leadership teams. So in some cases, you might have quite a lean leadership team with a head teacher that's very hands on. And that's probably appropriate for a smaller primary setting where the school really can't enjoy the luxury of key members of staff are not participating in pedagogy. And then conversely, when you start to scale up structures, where you have Multi Academy Trusts, that are looking after 30, 40, 50 schools, and clearly the Chief Executive role in terms of frontline delivery is not negligible. It just doesn't exist, they have a very, very executive function which is completely detached from frontline teaching and learning. But it needs to be proportionate. I did come across a primary school with a pupil role of less than 500. And the structure went like this, it had Chief Executive. So that was a SAP, by the way, wasn't a Multi Academy Trust, it was a Standalone Academy Primary, less than 500 and roll, Chief Executive, Executive principal, five Deputy Heads, seven Assistant Heads, an Accountant and a School Business Leader. It's published, it's out there, I mean, so, you know, I'm not gonna reveal the school, but it was out there. Clearly, that is totally disproportionate. So, you know, we've just got to make sure that we have a leadership structure, a structure which is appropriate for the particular context that we're that we're dealing with. And then this is this whole conversation is interesting, because I don't think we've really bottomed out. I've certainly had lots of conversation. With officials at the department about how we calculate non class based leadership, and what do we mean by that? So, when we're looking at, you know, when we're looking at the percentage of teachers as an overall cost percentage of teaching leadership as an overall cost, the percentage of overall leadership sense of overall cost, and do we chop the head teacher in half? Do we do we do some apportionment and to what extent is the Chief Executive, the leader of pedagogy in a trust environment, so that depending on how you treat those individuals and the, the making in any particular area of the of your organisation, that data will be skewed and there is inconsistency in the system.

Stephen Morales

So when we're doing benchmarking, it's very difficult to arrive at the right number, I would, I would recommend that you know, the amount of resource that is being deployed exclusively to pedagogy, and that, you know, the resource that's been exclusively deployed to overall leadership and management. I mean, if you want to use any of the other metrics, you can, but at least you've got a handle on on the spend that's taking place in those important areas of your activity. Questions that they might be asked of you if you're developing your budgets. Again, how does this compare with similar schools? Taking into account any contact time that issue staff has? If there's more than one school in your trust configuration, are the structures proportionally the same? How has your school made decisions on the proportion of its budget to be spent on the leadership team conversation we've just had? And is this relatively high or low compared to other similar schools, again, without being a slave to national data, but understanding whether you are part of that best fit line or whether you're an outlier? I'm not gonna dwell on this. We talked about this a little bit earlier, three to five year budgets. And of course, the pushback will always be we don't have certainty, or you perhaps have more certainty than you think. And I think you do need to be courageous with your assumptions. When I say courageous, I don't mean I don't be overly optimistic. I just think you need to you set your head above the parapet and say, actually, given the evidence I've got this is where I think we might be in three years time and you build in a sensible contingency.

Stephen Morales

Kind of questions are going to be asked of you if you're preparing your three to five year budget. How confident are you that people number projections aren't realistic? It is the pothole that so many schools fall down on and overly optimistic people projections, and not not having a plan B if those pupils don't arrive at the school, and how much certainty can you offer the board in terms of cautious lightly and optimistic Again, stating the obvious if the cautious budget indicates potential financial difficulties, what contingencies do you have in place to overcome is there a plan B. Maybe you even need a plan C, you do need to build these scenarios up. And I think the further out you get, the more you need to think about potential scenarios and adjust as you get closer to more certainty around what's coming. And then, you know, think about how decisions today will impact medium and longer term ambitions that you have for your trust or school.

Stephen Morales

Okay, on to eight we're getting there. spend per pupil for non pay expenditure lines compared to similar schools. And you might want to ask, what is the spend per pupil for catering, ICT, estates management, business administration, energy, curriculum and supplies These are obvious questions. I think when you're planning your you're planning your your budget, three things you've got to have in mind, curriculum ambition, and your red lines in terms of what you're prepared to concede your operating costs, which includes all of these things, and the grant income that you expect to receive to fund those two activities, if there's a shortfall. So if funding doesn't meet your curricular ambition and your operating costs, it's about prioritization. It's about making those difficult decisions. And then ask the question, are the reasons for particular challenges unavoidable? Or are there further efficiency savings that are possible? And I actually don't like the word efficiency, the department have moved a row back from it. We talked about resource optimisation. I think that's that's better language. I think what we should be doing is making sure that resources that are available to us we're using in the most in the most appropriate way so In fact, rather than looking for efficiencies, he's just asking the question, am I deploying the wrong, I'm deploying the resources that are available to me in the best possible way. So other things to think about cost of energy. I mean, we could we could we could go on in terms of in terms of human energy is, is obviously a big ticket item. If you haven't looked at energy for a number of years, you should do so. You should do so at the point of renewal. But you should also look at what schemes are out there available to you to make to make significant savings, and there are many. The investment on learning resources. In some cases, what I've seen is a a fixed capitation for all faculty areas, year on year. And really, we should be thinking about what are the needs in a particular given year of a particular faculty. If a faculty can make a really strong case for additional funding, and it needs it to ensure people outcomes, and that means that other areas have to concede in that year, then you should be at liberty, you should have the flexibility to do that. In following in forthcoming years, other departments will enjoy extra funding if they need it. I think a blanket approach to just throwing cash at departments year on year without doing a needs based analysis, I think is is a bit of a mistake. And then this is contentious. Just talking very quickly about top slice and GAG pooling, particularly in Multi Academy Trusts. A lot of trusts, particularly those that middle to large starting size, are taking a management fee, a levy, whatever you want to call it from local schools to run central services, or in some cases, their GAG poolin so taking all of the funding into the center, and then distributing, allocating it out to, to the various schools. Now some who are opposed to GAG pooling would argue that what's we're striving to a national funding foliot formula, suddenly we allow schools or trusts to GAG pool, doesn't that defeat the object?

Stephen Morales

Those that are in favor, it would argue that actually, pupils attract a level of funding, and it's up to the trust to make sure they are delivering the best outcomes for a community of learners and not for one individual school. That debate rumbles on, GAG pooling, top slicing the level of the top slice what's appropriate, what's not, I think at the center of that is ethical leadership. You've got you know, if the executive team are absolutely committed to, to making moral judgments, and their moral compass is where it should be if they get the local schools on board and if it is genuinely about improving the outcomes for a community of learners, then those things can work. If there are other motivations for GAG pooling, or squirreling funds away, then, of course, that's going to be subject to quite heavy scrutiny. Okay, school school improvement plans and the relative cost options. And I know, again, I'm going over old ground, but the budgeting process needs to sit firmly with the strategic leadership team and the framework and should link to the overall objectives of the school or trust and the conversation needs to be properly joined up pedagogy, business, governance, all involved in the conversations, all in all, challenging each other to make sure that decisions are made robustly, and in an inclusive way.

Stephen Morales

And then finally, got through the list of 10 contracts and renewal dates. I recognise in the business of our daily lives, that when we've had a relatively positive experience with a provider, it's easy just to let that contract roll on year on year, but we can get caught out. And one we can get caught out because we missed an opportunity to release resources that we can put somewhere else. And we shouldn't allow providers to become complacent. So we need to keep pressing them for the best deal. And we need to test the services and the price with other providers. So there needs to be a systematic approach to looking at contracts and saying, Okay, that was the service we had that was the price we paid, how can we negotiate with this provider to make sure that what goes forward represents value for money is commensurate with what's going on elsewhere in the market and we haven't missed an opportunity to use those important resources somewhere else. So, I think it's important to pay attention to that item. So there's a list of 10. It's pretty straightforward stuff. I told you at the start the presentation, it's not silver bullet. And if you follow those steps, or there you go, you can't go far wrong. And certainly I'd be encouraging trustees to be challenging against those 10 checks.

Stephen Morales

And we've got a bit of time very quickly. And I'm going to skip over this because we've already talked about about joined up leadership. What I do want to mention ICFP. Can I ask by show of hands, who has integrated curriculum financial planning embedded into their practice? Okay, so that's not very many, I mean, I'm guessing but about 10% of the delegates here today. How many are in interested or contemplating how they embed it into their school? Right. Okay. That's good. And who who thinks it doesn't work at all? Okay, that's, that's interesting. So we've got about 10% have it embedded 50% are interested in embedding into their, into their schools. And we've got about another 30% that are abstaining in terms of having a view. So that's, that's fine. So the integrate curriculum, financial planning, and it's not new, it's not a new concept. It's become very fashionable. The minister Lord Agnew really thinks it's transformational for schools. And the reason he thinks that is because it absolutely made a difference in his particular trust. And there is lots of evidence out there to suggest that if you if you understand the numbers, if you do have an integrated approach to curriculum design and your financial planning, then you know you can you go you can go a long way. There are many providers and organisations that you may have heard, there are many out there many, many iterations. But they all do this, ultimately they will do the same thing. And they asked fundamentally the questions in some way or another they asked the questions that I went through earlier in the in the presentation. And it is a very basic level it uses a reasonably set simple set of metrics to assist with collaborative decision making, and that's essentially what it's what it's about.

Stephen Morales

There's no prescribed way to do it. But there are several several well established approaches. But it does provide some really important analytical information that will really help with your decision making and I know in essence, fundamentally, what it will do is bring those pillars of leadership together business governance, and pedagogy. Really, really important. What's it measuring? So I'm not going to, I'm not going to go through that whole list. And but you see that, what the, what the tool does is look at a series of of balances, and then use a series of metrics, and through a series of pre determined formulas will kick out a number of values. Now the institute have developed what we believe is a very accessible tool. So as I mentioned to you before, there are lots of tools out there in the market, someone established, some not so well established. Some of them are very forensic and very technical. And if you're not a qualified accountant, if you're not supernumerary if you don't like Excel, then quite difficult to engage with. What we've tried to do as an institute is develop a tool, which is accessible to those pillars of leadership, to governance, to trustees, to pedagogical leaders, to heads of faculty, and lead the conversation led by the school business leader, school business professional. And we think we've achieved that we're really boiling it down to these few metrics. But essentially, what you've got a series of outputs, given that data that I showed you in the previous side, and then you've got a range of red, amber green. So if you plug the numbers in, and you end up as an outlier, a significant outlier, and it will flag up as red. If you're within a sensible range, it'll come up come up as amber. And if you'll bang on, if we're where we would expect you to be come up with green, so you end up with a heat map and that heat map if you're trying to make decisions is really helpful. Because very quickly you get a sense of, you know, as an institution against those metrics, where are you?

Stephen Morales

And, and then it's about the leaders, the leadership team being able to defend the red. Presumably, we're not too worried about the green because the green is where we'd expect it to be. If it's amber, we have a conversation. If it's red, we need to know, one, can we justify it? Or secondly, do we need to take important steps to get us back to amber, or green? Now, to navigate your way through this tool, it's very intuitive it's very straightforward. There are a series of tabs and you populate those tabs, one step at a time, there are clear instructions. You don't have to be an accountant. There has to be a finance officer, or a finance professional. If you've got the data which again, we give you access to some guidance on where you can extract that from, it will kick out all of this data, all the information that you need to help you to make informed decisions. So that was an incredibly quick canter through school budget mastery. Hopefully in some way it was helpful it was useful.


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