The role of the governing board in monitoring financial performance
Gillian Allcroft, Deputy Chief Executive, National Governors’ Association, writes…
Governing boards in all state funded schools (maintained and academies) are covered by three core functions set out in the Department for Education (DfE)’s governance handbook:
- ensuring clarity of vision, ethos and strategic direction
- holding the headteacher to account for the educational performance of the school and its pupils, and the performance management of staff
- overseeing the financial performance of the school and making sure its money is well spent.
While in this context the final bullet is the most important, it does not operate in isolation from the other two. Making sure the money is well spent doesn’t just mean ensuring that the school stays in the black. It encompasses those first two bullets – making sure the money is well spent in order to ensure that the board’s vision for the school is realised and the students leave with good outcomes.
Indeed the starting point is the vision, by which I mean where the governing board wants the school to be in three to five years’ time. This needs to be accompanied by a strategy for getting there – and that must come with resources attached, otherwise it’s just a piece of paper. It’s all very well saying we want to take an expedition to the South Pole, but it has no chance of succeeding if you haven’t identified a leader, trained the other participants and provided the necessary equipment. So it is in schools: you can’t improve provision and outcomes if you don’t have the right personnel and/or an identified strategy to recruit them and the curriculum materials for them to use.
You can’t improve provision and outcomes if you don’t have the right personnel and/or an identified strategy to recruit them and the curriculum materials for them to use
This is a key role of the governing board, ensuring that it has a vision and that the senior leadership team have devised an appropriately resourced strategy to get there. One of the most important roles of the governing board is to ensure it has the right leadership in place, both the senior executive leader and the lead finance person. These are vital appointments and those in post must have sufficient expertise to both manage the day-to-day running of the school and report in a coherent and meaningful manner to the board.
Governing boards need to ensure that financial competence forms part of the application when recruiting the senior executive leader to their school. Likewise the governing board should where possible insist that the lead finance professional is both part of the senior leadership team and has the appropriate professional qualification. The National Association of School Business Managers (NASBM) has developed a set of professional standards for the business function which governing boards can use when recruiting a new lead financial officer.
In an annual cycle, the first task of the governing board is to approve the budget. This will have been developed by the lead financial officer and senior executive lead and should come with a commentary to explain why the various levels of spending are being proposed. It has to support the agreed vision and strategy. For example, if the key priority is to improve the teaching of languages in the school, but the budget proposes to put additional resources into another curriculum area, then the board needs to question the rationale.
In any school the biggest cost will be the staff team. The biggest impact on improving outcomes is for young people to have a high quality teacher in front of them. But what do you, as the governing board, know about your staff complement? There is a very basic question, how many there are, but this doesn’t tell you very much. What proportion of the budget is spent on staff – if this is tipping over 80% then the board need to be asking why, because over 80%, the room for manoeuvre gets tighter. There may be a very sensible reason, such as your school is a good place to work, you have a happy and well qualified staff and consequently they are towards the top of their pay ranges rather than the bottom.
If the key priority is to improve the teaching of languages in the school, but the budget proposes to put additional resources into another curriculum area, then the governing board needs to question the rationale
What’s the pupil teacher ratio (PTR)? You may as a board have opted for smaller class sizes, but it is something you need to have done consciously rather than just allowed to happen. If your senior leadership team has proposed this as a strategy then you should ask for the rationale and evidence that it will make a noticeable difference to justify the extra cost.
At least as important is the teacher contact ratio – i.e. what proportion of a teacher’s time is spent in front of the young people. Going back to the point that having a good teacher makes the most difference to pupil outcomes, if the contact ratio is low in your school, then is that the most effective use of staff? The Association of School and College Leaders (ASCL), from the work it has done on budget and curriculum planning, suggests that in secondary schools the optimum contact ratio is around 0.78.
Likewise, is your leadership team good value for money? What proportion of the budget is spent on senior leaders compared to the rest of the school staff?
Last but by no means least, what are your support staff doing? The Education Endowment Foundation has with its recent research shown that teaching assistants can make a positive difference in the classroom, but only if they have a clear role and have received appropriate support and development. Is that true for those working in your school?
Having the right staff expertise should also improve the school’s procurement of goods and services. Governors should ask how staff ensure value for money, what networks they are using to share and obtain good practice ideas, and whether they know about the deals negotiated by the government procurement service.
Once the budget is in place you need to monitor against expenditure. In most cases this will be done by a committee of the governing board, but all those on the board need to have a clear picture of the financial health of the organisation. It is up to the board to decide how often the committee should meet, but this should be at least once a term; many meet once a half-term. The board doesn’t have to scrutinise the accounts line by line at every meeting: reporting by exception is more efficient and effective. For example if you allowed £7,000 for energy costs and seven months in the costs are on target, you don’t need to spend any time discussing it. But if instead you have already spent the allocated yearly budget for energy then further interrogation is needed.
Governors should ask how staff ensure value for money, what networks they are using to share and obtain good practice ideas, and whether they know about the deals negotiated by the government procurement service
As with any other reporting to the governing board, it is the board that decides and informs the executive what information it wants to receive, not the executive deciding what it wants to show. This needs to be a balance of ensuring you have sufficient information to carry out your role well, and not demanding so much information that the executives are spending more time servicing the board than improving outcomes for pupils. The Department for Education has improved its resources relating to financial effectiveness, including updated benchmarking tools and a designated page for those governing. You can access it here.
You also need to ensure that good internal financial procedures and processes are in place, to both mitigate against the risk of fraud and protect your staff from misplaced allegations. That doesn’t mean that the governing board needs to become hands-on internal auditors. But you may need to think about contracting someone to do a sample check every so often – e.g. following a transaction from start to finish, checking everyone on the payroll actually exists.
Any spending proposals which fall outside the agreed budget headings should be accompanied by a paper setting out the reasons for the request. There are two questions governing boards should ask: can we afford it? And, what impact will this have on outcomes for children? Do not be bumped into agreeing significant additional expenditure, the proposal for which is tabled at a meeting. You cannot be said to be using public money well if you make snap decisions without proper consideration of the consequences.
Finally, make sure you also review your own performance as a board.
This piece is taken from Triumph in adversity – an SSAT and Arcadis publication that explores the many different ways in which schools are overcoming financial constraints. You can download the full publication here [PDF].
