strategic financial planning

CPC – May [email protected]

Strategic Financial Planning

Val AndrewASCL Business Management Specialist

May 2014


AIMS• A straightforward approach to strategic financial planning

which links to staff deployment and curriculum planning

• To make suggestions to facilitate discussions of strategic financial planning within the senior leadership team and with the governing body


A common language ……


It is about team work

Team work ~The actions of a group working together towards a common goal

The skill that allows common people to achieve uncommon results


Greater financial freedom, but also greater financial accountability

Why is financial awareness important? Declining funding pre-16

(MFG -1.5%) Declining funding post-16

(around 12.5% reduction between 2011-2014, and further cuts in the pipeline)

Rising costs (inflationary pressures on non-pay expenditure, and pay inflation)


Managing expectations!

Benefits of financial awareness? Common understanding

that quality improvement cannot be driven just by increasing resources

Common understanding that making any commitment has a financial implication

A 3-5 year financial strategy to ensure drastic changes are identified and planned for/avoided


Factors in our control:-You cannot continue to perpetuate the past

• Which means a step change in management thinking is required

• Sometimes called:-

A paradigm shift


The paradigm shift – is the link between the curriculum and the money…..

•No!

•Yes Budget reality process Curriculum

compromise

Curriculum Vision process Budget (compromise?)


What constitutes a “good enough view”?Establish some key elements:-

• Critical variables• Distinction between essential and desirable expenditure• Rules of thumb• Benchmarking• Best, worst and most likely scenarios


What are the critical variables?In general useful categories include:-

Average costs for staff– Teaching staff– Education support staff– Premises Staff– Administrative staff

Broad expenditure categories such as– Premises– Learning resources– Supplies and services– Other


How do they compare?

Benchmark your expenditure against other institutions


What is the trick?Have as few variables as possible

• Use those that really make a difference

• Recognise when it is useful to think in terms of

– Per pupil - e.g. learning resources– Per school/college - e.g. premises– Per other things (school, teacher, class etc.)


Ask questions• Is this a Health and Safety issue?• Is this a safeguarding issue? • Could this put us in an Ofsted category?• Are we planning this expenditure because

– we have to do it?– we would like to do it?– we have always done it?– It is part of a strategic plan?

Essential and desirable expenditure


School/college funding depends on student numbers

• What are our current roll numbers?

• What are our expected intake numbers for the next three years?

• Can we influence our intake numbers?

• Can we influence our retention of students?

Keep an eye on the student roll


i. What’s the cost per period?

ii. What are economic class sizes?

iii. What are teacher costs (the largest variable?)

iv. What are the other costs?

Rules of thumb – what does it

cost to run the school/college?


Cost per period?

Depends on teachers average contact time, average cost, and the ‘overheads’ of running school – calculations next slides

Economic class sizes?

Depends on the costs above, and the taught hours that students receive - calculations next slides

Teacher costs (the largest variable?)

Take average cost across all teaching staff, and include the employers contribution to national insurance and teachers pensions (usually min of 56% of total budget with on-costs)

What are the other costs?

All other staff, premises, equipment /resources – usually 44% of total budget


11-16 Students 16-19 Students Teachers

900 250 70 FTE

@ £5,500 @ £4200

£5,000,000 £1,100,000


2013/2014 – A period on the weekly timetable

Pre-16 Approximate figures

School income (13/14) £5,000,000

Total number of periods on timetable 950 per week

Cost of a period on the timetable £5,300


Post-16 Approximate figures

School income (14/15) less a very small contingency/surplus £1,000,000

Total number of periods on timetable 250 per week

Cost of a period on the timetable £4,000

2013/2014 – A period on the weekly timetable


A different way of working out what was tenable in 2013/2014?

Approximate figures

Average teacher cost(this includes all teaching staff, and

employers on-costs)

£46,000

How many teachers do we need to teach the lessons a post-16 student

attends (say 18)

Teachers teach on average 18 periods, so we need 1 teachers, at a

cost of £46,000

How many post-16 pupils (@ £4200) each?

11

How many post-16 pupils are needed to cover all the costs (add 44%)

16

…..and funding for post-16 provision is in significant decline, so future class sizes must increase to be economic


The big picture means …….

0 2 4 6 8 10 12 14 160

50

100

150

200

250

Arbitrary time units

Arb

itra

ry d

eman

d u

nit

s

PRODUCTION DEMAND …. must notexceed

the PRODUCTION CAPACITY……….OR “Houston, we have a problem!”


The equation of life (Sam Ellis)

TpI

ATCPTR

PTR = Pupil to teacher ratio you can affordATC = Average teacher cost (salary plus on costs per FTE staff)I= Revenue funding in pounds per pupilpT = proportion of revenue funding available for spending on teachers.


So what can you do?THESE ARE QUESTIONS NOT SUGGESTIONS!

• Staffing structure/curriculum review - teachers teach (more?) and support staff support?

• Students have more - supported self study?• Different delivery options – lecture style post 16?• Collaboration - sharing staff with other schools? (watch out

for system cost and local politics!)• Fewer chiefs and more indians?• Buying resources at Aldi prices and not Waitrose


What else can you do?MORE QUESTIONS NOT ANSWERS

• Only buy resources that are needed / group purchasing initiatives?

• Energy savings maximised ? • Water saving ?• Study DfE review of efficiency ……(June 2013)• Is your BM/FD an integral member of leadership ? • Common language/understanding of financial targets within

leadership ?• Benchmarking? - I’ll show you mine if you show me yours?


And …..• Is sponsoring academies, setting up studio schools etc

good business? What about college viability – is this a serious distraction from the core business?

• Is government funding now so unreliable that colleges need to focus on employer funded activities?

• Are we seeing a shift in priorities away from the teaching and learning agenda towards managing the business?


To summarise then:-Effective strategic financial planning considers:-

• Vision and context• Funding prospects• Development plans• Curriculum plans• Demographic data and forecasts• Contingency plans• Benchmarking expenditure• Procurement principles


Key areas of business risk in schools• Governance Risks - governing body lacks skills or

commitment• Operational Risks - safety, staffing issues• Financial Risks - dependency on grant, cash flow• External Risks - demographic trends• Fraud risks - misuse of public funds/ property• Compliance with law & regulation - poor knowledge of

requirements• Horizon scanning – what could impact in 3 – 5 years time?


Whilst the information provided at this event was correct to the

best of the knowledge of the presenters and organisers, neither

ASCL nor Professional Development can accept liability if at a

later date this should prove not to be the case. Nor can they be

held responsible for any errors or any consequences resulting

from its use

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