Deciding how the money is spent is one of the key strategic levers you have for influencing what goes on in school,” schools minister Robin Squire told governors recently. But if school inspections are any guide, not many governors are getting their hands on those levers. Few question how effectively the school budget is spent or are able to relate spending to planning priorities.

Governors need to be understand the strategic financial levers and how they work. Robin Squire concentrated on the way money is spent. Governors may also be able to influence school income. But arguing for proper funding does not relieve governors of the duty of ensuring effective spending. Many are uneasy about their financial responsibilities and are happier lobbying for more money than challenging their schools’ status quo.

Though governors have no control over the overall levels of funding for education they can influence it by ensuring what they know about the adequacy or otherwise of school funding is shared locally with parents and education authorities and nationally through their MPs and the national governor organisations. Most governors’ annual reports to parents offer little more than a bald account of income and expenditure and little sense of whether the school is adequately funded, what governors’ spending priorities are and what they have had to cut to balance the budget.

Governors also have a right to influence the way money is shared between schools in their area. The local authority must consult all governing bodies on changes to the funding formula which determines how the total schools’ budget is divided. This gives governors the chance to comment on the funding differences between primary and secondary schools; whether special needs and circumstances are allowed for fairly; and which services should be provided by the local authority out of money it retains from schools and which should be “delegated”, that is, left to be bought in by schools at their own discretion.

By gaining an understanding of the formula, governors may be able to discover ways of increasing their share of the total schools’ budget. If free school meals are used to calculate special needs supplements, for instance, do the figures used for the school include every child entitled to a free dinner or just those who claim it? And given that most of schools funding must follow the pupils, preserving or increasing the numbers on roll will often be a major financial consideration.

Governors should also ensure that opportunities are not being missed to generate income other than that provided by their funding authority. Are school rooms, playing fields and other facilities available for hire after school? Might it even pay to employ someone on a self-funding basis to seek out new sources of income?

Heads and their staff are responsible for the operational side of financial management. They and not governors seek quotes and tenders, place orders, sign the cheques and ensure proper accounts are kept. For this to happen within agreed limits the governing body needs to agree a scheme of delegation: what spending decisions the head may make without reference to the governors and the responsibilities for meeting various requirements imposed on schools’ spending by the education authorities. The governors also need to clarify what regular information they want from the staff to ensure the budget plan is being followed.

The main spending lever is the annual school budget. Only the governing body can set this, though it will normally be drawn up by a member of staff. Before they do so, however, governors need to be clear about their spending priorities, how many and what kind of staff are required, what commitments there are already and how they will use any uncommitted funds.

In reaching these conclusions governors and the staff responsible for the budget also need to have examined the cost-effectiveness of previous years’ budgets. One way to do this is to compare the school’s spending pattern with that of other similar schools using “benchmark” figures provided by the local education authority (or the Funding Agency for Schools in the case of grant-maintained schools). Governors also need to look forward as well as back and should ask their headteacher for forecasts of future pupil numbers and their expected impact on budgets and staff three or fours ahead.

Staffing is the biggest element in any school’s budget. On average schools spend about 70 per cent of their budget on teaching staff but this can vary widely for good or not so good reasons. Audit Commission surveys found the amount spent on teachers varied from below 60 per cent to over 80 per cent in similarly sized schools. The variations may be due to differences in funding levels, class sizes, pupil teacher ratios, the amount of time teachers are allowed off timetable, and pay differences, either because staff are more experienced or because governors use their discretion to raise salaries. Good benchmark figures should provide average teacher costs for schools as well as enabling governors to see how much they spend per pupil on books and equipment, energy and support staff compared with similar schools. Governors can then ask the reasons for any differences.

Access to good management information is crucial to effective financial monitoring and if it the education authority is not providing it, as the Department for Education and Employment has said they should, the governing body should be asking it why.