Third of schools falling into the red by not planning effectively

One in seven schools are still not budgeting effectively, despite more than a third of schools and academies suffering from a budget deficit in the past three years, new research has found.
A study of 265 school leaders* by HCSS Education, a leading education finance specialist, found that 42% of academies and 32% of maintained schools went into the red in the last three years.
Yet, despite struggling to manage their finances, 13% of maintained schools and academies are still not planning ahead and do not have 3 to 5-year budget plans in place.
With a third of schools and academies admitting they lack the appropriate support they need with budget planning and forecasting, this might explain why some are failing to budget effectively.
The research found that many schools and academies are making cut backs or generating savings to ensure they don’t go into the red. 82% said they are reducing spending on equipment and educational materials, while 64% said they are hiring out facilities and buildings to generate additional funds. 48% admitted to dipping into reserves and 39% are putting strategies in place to increase pupil intake to help balance the books.
The survey was conducted as part of HCSS Education’s Balancing the Books report, which takes an insightful look into the budgeting issues facing schools and academies and the effect this has on the education sector. It explores whether school leaders have financial strategies and support in place, why deficits occur and what tends to lie behind this when it happens. It also looks at how these issues can be addressed.
Howard Jackson, head of education and founder of HCSS Education, said: “It’s worrying to discover that so many schools have fallen into the red over the past couple of years, and it just goes to show what impact rising costs and available funding is having on the sector.
“It’s clear that managing school and academy finances is becoming more complex so effective planning and forecasting is vital. Head teachers and finance teams need to be reviewing budgets and plans on a regular basis, constantly looking ahead so that they can see what could be heading their way and doing all they can to prevent possible deficits. That’s why five-year projections are key.
“With so many variables affecting budgets, such as changes in pupil numbers and staffing costs, schools and academies should look to invest in a robust financial management system designed for the education sector, to help simplify operations and keep a careful track of budgets, income, funding and expenditure.”
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