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Matters arising

The search for the missing millions goes on with yet another rerun of the old arguments between central and local government. What is not in doubt is that the old labyrinth of education funding dictated by the Standard Spending Assessment and supplemented by other central government pots with strings attached (primarily the Standards Fund) has now been replaced by another labyrinth, supposedly simpler and fairer than the last.

What are the key issues for governors in this financial maze?

* Money for schools comes from central government, which allocates it to local education authorities against a formula broadly dependent on numbers and need. The Government also makes available other specific funds which schools usually bid for either directly or through their LEA. The authority passes on the money to schools in line with its local formula, which has been approved by the Secretary of State. It has some discretion over how much money should be retained to fund the work of the LEA in line with the education development plan for the authority. Many authorities have usually put extra money into education - and directly to schools - on top of the Government's allocation.

* Each LEA must get approval from schools for the formula it intends to use locally to distribute funds to schools on a per-pupil basis. There is now a statutory requirement for each authority to convene a schools' forum, which includes governors, to carry out formal consultation on the annual budget allocation. Ask your LEA or your local governors' association how this operates and how governors are represented.

* At school level it is one of the statutory responsibilities of the full governing body to approve the annual budget. Much of the detailed work on budget setting and monitoring will usually be done in a finance committee but all governors must be involved in the final approval. As a "critical friend" to the school, governors will want to use this opportunity to ensure that funds are being used properly and to best effect, and to ensure that the school is getting a fair deal from local and central government in terms of money allocated.

* When approving the budget, governors should see that resources are being allocated to help the school and its staff achieve their strategic aims, achievement targets and performance objectives. A quick check against the school improvement plan should suffice.

* When purchasing goods and services, governors should always bear in mind "best value" principles - the best quality for the best (not always the cheapest) price.

* On school reserves, good financial management would suggest contingency reserves only, although saving for a particular future project may be appropriate.

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