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      • The principles of school finance
      • Financial planning and budgeting
      • Strategic financial management and budgeting
      • Financial monitoring, reporting and evaluation
      • Cash management
      • Evaluating financial resource management
      • Creating capacity for strategic and operational leadership
      • Procurement
      • Personnel and benefits management
      • Leading learning and teaching
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      • Effective use of resources: case studies

The principles of school finance

The principles and standards that support effective financial control and reporting in schools and the roles of the governing body, headteacher and school business manager.

Financial management objectives

All schools must operate sound financial management practices that support the financial objectives of:

• establishing proper financial management arrangements and accounting procedures
• maintaining a reliable system of internal controls, including safeguards against fraud
• ensuring that funds are used for the purpose intended
• fulfilling the requirements of public finance accountability.

Roles, responsibilities and accountabilities

Responsibility for different aspects of a school’s financial management are shared across the governing body, headteacher, school business manager and other members of staff.

• Governing body: the governing body has a strategic role in the financial management of the school. Key responsibilities include setting financial priorities, approving and monitoring the annual budget and ensuring that the school fulfils its statutory obligations. It is not compulsory to have a finance committee, but it is good practice. Academies are required to appoint a governor as responsible officer whose responsibility it is to sample transactions to ensure that correct procedures are being followed. It is also good practice for maintained schools to appoint a responsible officer.
• Headteacher: with overall executive responsibility for the school’s activities, the headteacher is the person directly accountable to the governing body for the financial management of the school. The headteacher should ensure that the governing body is provided with financial advice, that proper financial systems and controls are in place, and that accounts are prepared and maintained.
• School business manager (SBM): although the headteacher retains ultimate responsibility for financial management, they will often delegate much of the financial responsibility to an SBM.
• Budget holders: in a delegated budget system, budget holders are responsible for authorising expenditure and for monitoring their budgets. The financial procedures manual may specify a level above which transactions need to be approved by the school business manager or another member of staff.
• Financial personnel: the appointment of staff with responsibility for financial administration and management should take account of the qualifications and capabilities necessary for the duties. The SBM should establish procedures to ensure that those involved with financial arrangements are competent, suitably qualified and trained and that the school has effective arrangements to deal with the absence of key financial personnel.
• Other staff: all other staff are responsible for the security of school property, for avoiding loss or damage, for using resources effectively and for complying with the school’s financial procedures.

The school may also have a role to play in its local schools forum, a statutory body made up of headteacher and governor representatives from across a local authority. Local authorities must consult with their schools forum on all key funding decisions and in some cases, the forum has responsibility for the financial decision.

Financial procedures manual

All schools should have a financial procedures manual which clearly sets out the systems, processes, roles and responsibilities for the administration and management of school finances. The financial management practices of a maintained school must comply with local authority financial regulations, while academies must comply with the Academies Financial Handbook.  

The financial procedures manual should be updated and approved by governors each year. The manual should cover roles, responsibilities and accountabilities for financial management, as well as topics including:

• Documentation: properly documenting all aspects of financial management reduces the chance of error and assists in timely accounting and reporting. It also ensures continuity in the absence of key members of staff or during personnel changes. Documentation should cover areas such as accounting systems, operating procedures, computer systems, procurement procedures and authorisation limits.
• Data management: the school should make daily back-ups of financial data, with the back-ups stored securely. The back-up process is usually done remotely.
• Segregation of duties: financial duties should be segregated so that no individual can record and process a complete transaction, for example from ordering to receipt of goods and payment of invoice.
• Fraud prevention: governors should take reasonable steps to prevent and detect fraud. If fraud or other financial irregularities occur or are suspected, the governing body must report the matter to the local authority immediately.

Further information

• Teaching Expertise - financial management
• Academies Financial Handbook

Reporting and auditing

Governing bodies can complete and sign a statement of internal control (SIC) as part of their year end financial return, which also includes an annual report and financial statements. The annual report and financial statements describe the operational and financial outcomes for the financial year. The SIC acknowledges the governing body’s responsibilities for the system of internal control that supports those operational and financial outcomes. Consistent financial reporting (CFR) enables the benchmarking of schools’ financial data on a national level.

In maintained schools, funds remain the property of the local authority treasurer until spent. Local authority audit teams conduct financial audits of schools at intervals of around two years. The aim of the audit is to produce a true and fair view of whether the school is accounting for funds correctly and whether the school’s accounts give an accurate and up-to-date picture of its finances. The audit team may offer advice to the school on how to correct minor procedural errors or make improvements in methodology. Independent schools and academies must arrange for an external audit to take place once a year. Many maintained schools also appoint external auditors for the additional reassurance it brings.

Ethics and probity

It is vital that governors and members of staff not only act in a legal and ethical manner, but are also seen to do so. The 1996 Nolan Committee report on standards in public life identifies seven principles that should apply in public life, including schools:

• selflessness
• integrity
• objectivity
• accountability
• openness
• honesty
• leadership

Schools should establish systems through which members of staff can raise concerns without prejudice to their personal position. Such systems should operate outside line management structures and uphold staff confidentiality. Staff should also understand how to raise concerns outside of the organisation.

Further information

• The Committee on Standards in Public Life - Seven Principles of Public Life
• Public Concern at Work

Further information

• Certificate of School Business Management