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Patches of financial flabbiness

What is your budget strategy? Rolling forward all this year's commitments and hoping for a bit left over? Or do you have clear priorities in mind with an estimate of how the 1997 and 1998 budgets should contribute to those? Anat Arkin looks at how far schools are combining financial and development planning and offers a checklist of financial efficiency

Around two schools in five should be making better use of their resources than they are, if Office for Standards in Education inspections are anything to go by. Most primary and secondary schools give satisfactory overall value for money, but in about four schools in 10 "value for money is reduced because significant aspects of their work are not cost-effective". Inspectors find few schools where value for money is rated as "good".

What exactly value for money means is not entirely clear. The OFSTED Handbook tells inspectors to consider whether a school provides "value for money in terms of educational standards achieved and quality of education provided in relation to its context and income". In other words, inspectors are asked to relate educational outputs to inputs.

But as a recent study of OFSTED's assessment methods points out, many of the outputs of schooling cannot be quantified. Those that are, including exam results, need good quality comparative data and value-added measures, which are not yet available nationally. ("Value for Money: How Schools are Assessed by OFSTED", by Rosalind Levacic and Derek Glover, appears in OFSTED Inspections, edited by Janet Ouston, Peter Earley and Brian Fidler and published by David Fulton.) In practice, inspectors seem to focus on the processes schools use to manage their resources, often concluding that if these processes are sound, a school must be giving value for money.

As a typical comment in an OFSTED report puts it: "There are efficient and effective systems in place for the prudent management of the school's financial resources. The quality of planning in all areas is good and, as a result, the school provides good value for money."

While value for money is a difficult concept to apply to schools, efficiency - in the sense of providing services at the least possible cost and avoiding waste - is more straightforward.

The chief inspector's report estimates that at least one secondary school in six could improve its efficiency by delegating more routine tasks to non-teaching staff and making better use of IT facilities, library resources, in-service training and teachers' non-contact time.

While schools that make good use of financial resources have clear development priorities and target spending on areas of need, those which are judged less efficient tend to lack clear priorities. They often fail to quantify needs and to cost alternatives. They take uninformed financial decisions, which result in waste, including under-used textbooks and over-used photocopiers.

To improve their financial efficiency, they need to link financial and development planning. "A lot of schools now have good three to five-year development plans and know where they want to go - and yet they budget on an annual basis," says Roger Opie, head of educational services at the Industrial Society, which offers training and consultancy services to schools.

"They wait until the year ends and see what they are going to do in the next year, which makes nonsense of a three to five-year vision."

He argues that even though schools have to work within the current year's budget, they should still draw up outline budgets for the next two or three years. If the roof then collapses or teachers get a huge pay rise, they will obviously have to revise their plans.

Schools also need to audit their own financial performance to identify ways of improving efficiency; comparisons with other schools can help in this process. One source of comparative information is the Audit Commission, which has just published Adding Up the Sums 4, the fourth in a series of surveys of schools' spending.

This shows that the proportion of delegated budgets spent on teachers' salaries ranges from just under 60 per cent to more than 90 in secondary schools, and from 60 per cent to more than 80 in primaries.

By themselves these variations say little about how well the 72 schools in the sample manage their finances. But many local authorities publish comparative figures for similar schools and encourage heads and governors to discuss the reasons for any differences between schools.

Some may spend more of their budgets on teachers' pay than others of similar size because they employ more staff who are older or more experienced; or because they have chosen to have smaller classes or to give teachers more non-contact time. But heads and governors of schools in this position might do well to consider why their staffing costs are so much higher.

Any consideration of spending on salaries needs to take account of administrative and ancillary help, as well as teaching costs, and the Audit Commission's figures show wide variations in the number of hours worked by administrative staff in schools of similar size.

Adding up the Sums 4 . HMSO, Pounds 10

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