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Budgets – a strategic view and a management tool

Budgets – a strategic view and a management tool

The summer term traditionally means exams, SATs, sports days, productions, even end of year proms! For academies, you need to add to the list the preparation of annual budgets.

All Academy Trusts must submit their budget for 2015/16 to the EFA by 31 July, using the EFA’s online form. Multi-academy trusts submit a single budget for the Trust as a whole, indicating which academies are included.

It’s a busy time of year and the holidays are approaching. It might be tempting to regard the submission of the budgets as just one more thing for school management to get off their desks before the end of term.

However, the preparation of the budgets and, more importantly, the thinking behind them should be viewed as a crucial part of an academy’s strategic planning and financial management.

Following a period of relative ease, academy budgets are now being increasingly squeezed. In broad terms, income is fairly static, though this does vary from school to school. What doesn’t vary is that costs are increasing, especially employment costs:
• pay rises for all staff – modest increases, but there is no extra funding to pay for them;
• significant increases in employers’ pension contributions, both for Teachers’ Pensions and Local Government schemes;
• significant increases in National Insurance contributions from April 2016 (when the contracted-out rebate ceases) – this will reduce net pay as well as increasing employer costs.

In the light of this, all academies need to plan ahead with great care, not just to complete the 2015/16 budgeting exercise in isolation, but to ensure that the academy’s plans take into account the longer term outlook. This is vital in the current environment, in order to avoid nasty surprises and the need to take drastic measures later. Early tweaks make more sense.

Once a budget has been set and approved and submitted, that should not be the last you see of it! All academies are required to prepare timely monthly management accounts – these should be compared with the budget, so that any issues can be identified at an early stage and corrective or preventative action taken, as appropriate.

At Revell Ward, we are well placed to advise and assist you with all stages of the budgeting process, from strategic thinking, to budget preparation and submission, then on to management accounts and monitoring.

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