- Financial reporting and monitoring can be difficult for governors, whose own understanding of financial procedures may range from very little to considerable.
- An invaluable starting point is to ensure that all governors understand the strategic context of the school budget.
- The Schools financial value standard (SFVS): Support notes provide invaluable support for governors in understanding what is required of them.
- As governors are a key part of schools' leadership and management, proactively building positive working relationships with them can be immeasurably beneficial in preventing misunderstandings.
Financial reporting and monitoring can be difficult for governors – busy people whose own understanding of financial procedures may range from very little to considerable, and all points in between. At one end of the spectrum are those governors who demand to see every last detail of the accounts. Cost centres are minutely examined and there are prolonged discussions about the cost of paper towels and pencils, leaving no time for strategic discussions. At the other end of the spectrum, and with equal potential for disaster, are governors who trust their SBM implicitly and are happy to sign off reports without examination, challenge or sufficient understanding.
An invaluable starting point is to ensure that all governors understand the strategic context of the school budget.
With new governors I explain how, each year, following self-evaluation and review, the school articulates clear plans and priorities for raising standards and attainment. This is usually known as the school improvement or development plan. To ensure stra-
tegic spending and value for money, the plan is costed and the budget aligned to this plan. Not so different from any normal business planning arrangement, perhaps, except that we are dealing with the additional responsibilities of spending public money.
Effective financial management within this complex context necessitates robust processes, policies and procedures. The headteacher and SBM make sure this framework is in place and governors hold the school to account for working within it.
Schools financial values standard
For maintained schools, the Schools financial value standard (SFVS): Support notes offer invaluable support for governors in understanding what is required of them, as well as what best practice looks like and what to do when things are not right. Although only required for maintained schools, the SFVS framework can be used to inform all school settings.
'Section A: The governing body and school staff' (questions 1 to 7) describes the explicitly strategic role of governors.
'Question 2: Does the governing body have a finance committee (or equivalent) with clear terms of reference and a knowledgeable and experienced chair?'
These terms of reference should describe the functions, delegated authority and parameters of the committee's operations and powers. Although these necessarily vary from school to school, they should specifically reference reporting and monitoring func-tions, defining the scope and limitations of practice. SFVS suggests that the terms of reference for reporting include the following:
Regular monitoring of actual income and expenditure against each budget and revised forecast for the year.
Reviewing reports by internal audit and the finance governor/responsible officer (if applicable) as to the effectiveness of the financial procedures and controls.
These terms of reference do not allow for time-consuming micromanagement. The SBM can micromanage as and when required, but that is explicitly not the role of the governors.
" As part of their role, finance committee governors are bound to receive, understand and challenge financial reports."
'Question 4: Does the governing body receive clear and concise monitoring reports of the school's budget position at least three times a year?'
This also provides more specific detail of reporting requirements, enabling governors to 'review income and expenditure against the agreed budget. It will identify variances, provide meaningful explanations for these and explain what will be done to re-balance the budget.' To reflect this, you may recommend that the committee use terms of reference that describe these responsibilities more precisely. So, you might include the following:
- Ensuring that accurate accounts are kept within the framework of the school's financial policies and guidelines.
- Ensuring that the school operates within the financial regulations of the local authority.
- Considering a budget position statement at least termly and reporting significant anomalies from the anticipated position to the governing body. Agree, through financial delegation, what constitutes a 'significant anomaly' in percentage terms and just report on these (with a proviso that for higher-level budget headings, such as salary costs, that percentage might be lower).
- Approving transfers between budget headings (virements) at least termly and within agreed limits.
- Monitoring expenditure of all voluntary funds kept on behalf of the governing body.
Format of monitoring reports
SFVS also states that monitoring reports should be 'in an easy to understand format that can be automatically generated from base financial records'. This means that governors should not receive overly detailed financial reports exported into spread sheets. The system-generated reports that governors should scrutinise instead provide for consistent financial reporting and, as reconciled to bank statements, help eliminate the risk of 'manipulated data' which might otherwise hide inconsistencies and/or fraudulent activity.
These arrangements are not just pertinent for governors who like to micromanage. They should also help resolve the problem of governors who prefer to trust their SBM, happily authorising reports with limited, if any, scrutiny or challenge. Governors must recognise that such practice is negligence and leaves the SBM, the headteacher and themselves dangerously exposed.
Communicating with governors
As part of their role, finance committee governors are bound to receive, understand and challenge financial reports. When faced with this particular dilemma myself, I thanked my governors for having faith in me but pointed out that while it was flattering, it left us all extremely vulnerable. I added that, in any case, I welcomed their scrutiny and support as it helped me improve my own practice and understanding. We returned to the committee terms of reference and agreed to tighten up some ambiguous wording in order that we all knew exactly what was expected of us.
Interpersonal and communication skills are essential for the effective and successful business manager. Our governors are a key part of our school's leadership and management and integral to ensuring that the budget facilitates prioritised and sustained school improvement and value for money. Proactively building positive working relationships can be immeasurably beneficial in preventing misunderstandings happening in the first place. If misunderstandings do happen, agree what went wrong, how to resolve it together, and what can be done to prevent it happening again, for the good of the school. Prevention will almost certainly focus on robust and rigorous management frameworks as well as clearly defined, and understood, roles and responsibilities.
SFVS recommends that committee terms of reference should be reviewed annually. It has been my experience, both as an SBM and as chair of a finance committee, that investing time in this review process helps everyone fully understand the terminology, scope and implication of this critical committee remit.
Schools financial values standard (SFVS) and Schools financial values standard (SFVS): Support notes can both be downloaded at: http://bit.ly/SFVSdocs
About the author
Nickii Messer has many years' experience as an SBM and now works as a freelance school business management and leadership consultant. She is also Anglia Ruskin University's operational lead for the Level 4 and Level 5 Diplomas in School Business Management. Nickii is passionate about developing support staff and offers several training programmes including INSET days and a support staff middle leadership course.