Hopefully by now you (and all other Trusts) have at least had your Finance Committee and Local Governing Board review and agreed your budget for 2019/20 and the 3-year forecast through to 2021/22.
Key points on the BFR
With many Trust Board’s meeting to approve this prior to submission to the ESFA on 30 July it is important to remember these key points: –
- What assumptions have been made?
- Are those assumptions the right ones?
- Does this include the plans of the Trust to improve or maintain high standards?
- If we have set a deficit budget in year, do we have the GAG reserves to cover this?
- If we do not have sufficient reserves what affirmative action had the Board taken?
Assumptions in the BFR
The person or people in the Trust who are compiling the budget will need to make assumptions about future events, funding and expenditure in order reflect what the finances of the Trust will look like for the next 3 years. The things to look out for are where funding or expenditure doesn’t change from year to year or are significantly different from one year to the next without explanation. Brexit, the upcoming spending review and teachers pay and conditions will all need assumptions made about them that could drastically change the look of the budget. Challenging these may have been done by the Finance Committee or Local Governing Board and reviewing their discussions is key but if not, it is up to the Trust Board to challenge those assumptions as the Board is ultimately responsible for the Financial Management of the Trust.
The bottom line on the BFR
Once the Board are happy with the assumptions and that the figures reflect the plans of the Trust the bottom line should be their where they focus next. A Trust can bring forward surplus GAG reserves from previous years to plug a gap in funding for the next year. If not, then the budget cannot be approved and changes must be made to show a balanced budget before it is approved. If the 3-year position shows a significant deficit after taking into account those reserves brought forward then what action will the Board make to ensure that they can continue to function must be discussed and explanations provided to the ESFA in the submission.
Following Teachers pay and conditions and the forthcoming Pension on cost increases many Trusts will be struggling more than ever to balance their budgets. With no general increase in funding to meet the increase in costs on the horizon it is important for Trusts and their Trustees to ask the difficult questions and to ensure that they can continue to provide the education their pupils deserve.