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Why do Budget Deficits Happen, and How do you Tackle Them?

March 9, 2018, 9:06 GMT+1
Read in about 4 minutes
  • ‘Budget deficit’ – two words guaranteed to frighten even the most seasoned heads and managers. Why do they happen, and how can you tackle them?
Why do Budget Deficits Happen, and How do you Tackle Them?

Budget deficits can stem from a number of factors, including drops in pupil numbers. With the age-weighted pupil unit (AWPU) being schools’ primary source of revenue, a loss of students will result in not just a lower basic income, but also reductions in areas such as your Pupil Premium and Primary PE and Sport Premium.

Poor financial management can also play a factor, maybe due to a lack of forecasting or decisions made without consideration of the financial impact. The school might have experienced a significant change in circumstances, such as a reduction in funding from an LA, MAT or central government. Staffing changes, particularly at senior levels, can have a significant impact on budgets. An incoming SBM inheriting a budget from their predecessor, for example, can result in a period of uncertainty, due to their lack of knowledge.

So what can prevent schools from falling into deficit? The most effective budgets are created through shared ownership. The school’s staff and governors all have a responsibility to consider value for money and best value when using the school budget, so it’s good practice to gather information about the school’s spending from every available source. This might involve asking the staff in question to look at last years’ spend, evaluate its impact and assess how their spend can then change moving into next year and beyond.

But what if, despite your best efforts, a deficit has either happened or been forecast for the coming years? The first thing to do is share this information. It might be tempting to try and manage the situation ‘in-house’ without admitting that you have a problem, but that’s a risky strategy. The old adage ‘A problem shared…’ applies here – it’s not a personal failure, and the sooner all stakeholders are made aware, the easier it will be to get a recovery strategy in place.

Assemble a working party to look at the school budget. Ensure that this includes both senior and teaching staff, any governors with financial responsibility and representatives from your LA or MAT. That way, the resulting deficit recovery plan will have broader buy-in and a greater chance of success.

With a working party in place, your key tasks will then include comparing staffing spend against curriculum need and reviewing your existing contracts – evaluating how they’re used and the value for money they deliver. Cancel any you don’t need and start a contracts register.

Use benchmarking data to analyse and measure your spend over time. If you can’t obtain this from your LA or MAT, you can find it using the government’s Schools Financial Benchmarking tool. Use SWOT (strengths, weaknesses, opportunities, and threats) and gap analysis to scrutinise your financial decisions to date, and provide justifications for any changes in strategy that might be needed.

As someone who has been in this situation before – more than once – my advice would be to communicate, share and plan ahead. And above all else, don’t panic!

Sue Birchall is a consultant, speaker, writer and business manager at The Malling School, Kent