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Top five tips for robust MAT budgeting
Creating a budget for a group of schools across different phases and local contexts, with the potential to also be spread across multiple local authorities, is by no means an easy task.
The sheer variety of areas that require in-depth consideration, coupled with the frequency of government funding announcements that can impact on a Multi-Academy Trust (MAT) three-year budget, can represent some significant challenges akin to ‘nailing jelly to the wall’.
I have been working with MATs for nearly 10 years and seen many different approaches that can be used to reduce the risk of material misstatement – untrue information in a financial statement that could affect the financial decisions of those who rely on the statement – in the budgeting process. Of course, a budget will always be a ‘best guess’, but data, technology and consistency in approach can significantly reduce the chance of material manual error.
Drawing on this experience, we have got to grips with the issues that present the biggest challenge for (and therefore risk to) MATs or are areas that can be worked on. Here are my top five tips to ensure robust MAT budgeting:
1. Know your schools inside out
The best Chief Finance Officers (CFOs) that we work with have an excellent feel for their numbers and know all the local stories and context for each of their schools. They instinctively know the results they should be seeing, so when they view budget versions as part of the planning process they will have a good idea as to whether they are showing the right results, or whether there are some anomalies to explore further. All budgets will be reviewed but this review cannot take place at every step of the process, so an ability to be instinctive helps MATs arrive at better budgets, quicker. The specific high-level KPIs that can help shape this are: pupil number totals and three-to-five year pupil movement trends; pupil teacher and pupil adult ratio; surplus/deficit as % of General Annual Grant (GAG) income; average teacher cost; and contact ratios or average class sizes.
2. Ability to lock budget assumptions
A CFO’s budget assumptions are at the very core of a MAT budget, so it is vital to ensure that these assumptions are set consistently and not changed through the budget process, unless it is a deliberate decision. It is especially important that budgeting system controls cannot be amended by anyone with access to the system. Many MATs are still grappling with this challenge through a mixture of systems that cannot enforce such controls combined with MATs that have grown quickly. Often they have ‘inherited’ previous budgets for schools that have recently joined the Trust and have kept their previous budget template, which may or may not be in line with MAT defined assumptions. So there are lots of variables, but having strict controls and good visibility of the key budget assumptions is the main message.
3. Centralise control of ‘big-ticket’ items
The 80/20 rule – i.e. 20% of your activities will account for 80% of your results – absolutely applies to budget planning. In most of the MATs we work with there are often thousands of items (income/expenditures and staff contracts) that can make up a budget. There will, of course, be a requirement to review all these items but there should also be an element of delegation and a reconciliation process to ensure these are not being looked at individually by the central team. There are some areas that are crucial to a three-to-five year budget plan and there are some that are not, but the key is ensuring absolute confidence in the integrity and accuracy of these areas. The 20% of budget items that can represent 80% of the budget value are: pupil numbers; GAG funding; capital projects, staffing pay increase/progression assumptions; temporary/ad hoc grants – such as teachers’ pay/pensions and Trust Capacity Fund; and top slice/central services grants.
4. Standardise flexing of future budget lines
Many MATs have a differing view on the future treatments of budget lines, with some adopting a 0% view, where schools will need to absorb inflationary increases, to others using RPI or set percentage increases. There is no real right answer, as it can be subjective, and the assumptions made on income can dictate the subsequent treatment for expenditure. The key point that does need to be implemented, though, is consistency. The work we do in extracting data from incumbent systems is one of the biggest challenges we see as there is no method to compare these in school-based systems. Inconsistencies in the treatment of future-year budget lines can mean that schools take very different decisions in order to balance the three-to-five year budget. It is vital that MATs have a consistent approach to the treatment of budget lines and can see the treatment being used by each school, in each income/expenditure area, to avoid differences being unearthed later.
5. You’re not alone
MAT budgeting is a complex, yet crucial, beast. However, my advice for anyone who is unsure how to treat budget lines in the future is to ask their peers and sector bodies. It is important to be realistic and creative, but at the same time if in doubt play it safe. At IMP we know all too well how difficult the budget-setting process can be across such a variety of schools, with many stakeholders being involved. That is why we have built IMP Planner as a centralised MAT system – not a school budgeting system with MAT reports stuck on top – to ensure CFOs can be confident in their budgeting process. One unified database, with automated budget building and unrivalled reporting, that can be trusted.
Will Jordan is Co-Founder of IMP Software, specialists in MAT budgeting systems
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