2 Financial planning and management
4. Governors and school principals can be responsible
for very significant sums of money. While Education and Library
Boards provide general training on financial management, the Department
accepted that the support provided to them requires strengthening.
It told us that, from September 2005, it intends to introduce
regulations to make the link between LMS and school development
planning more effective and that this will also involve training
to enhance the skills of governors and principals in linking budgets
to school development plans and monitoring school expenditure.[13]
5. Against a background of weak budget monitoring,
we were disturbed to find that schools' unspent revenue balances
and deficits are both substantial and growing.[14]
The C&AG's Report records that, in 2001-02, 10% of schools
were in deficit by 5% or more[15]
and that other schools had combined revenue surpluses amounting
to nearly £27 million.[16]
Figures supplied to the Committee by the Department show that
the position has deteriorated: in 2002-03 schools in deficit by
5% or more had increased to 18% (210 schools amounting to £11
million) and 37% of schools (422) were holding surpluses in excess
of 5%, amounting to £31 million. We also note that almost
£1 million of school deficits in the Belfast area contributed
to the Belfast Education and Library Board's own overspend of
£5.4 million in 2003-04.[17]
6. We find it particularly alarming that 38 schools
had deficits greater that 20%.[18]
Moreover, we find it hard to believe that schools with large surpluses
could not be making better use of money simply held in bank accounts.
In addition, we were disturbed to learn that teachers in some
schools have been made redundant to make ends meet.[19]
The Department agreed with us that it is neither morally nor educationally
justifiable that teaching resources should be denied to pupils
in some schools to save money while other schools had large reserves.[20]
7. By allowing surpluses and deficits to escalate,
the message has been given to schools that working within a budget
is not a priority. The Department accepted that the situation
reflected in these figures represents a failure of proper financial
management.[21] It told
us that the situation was unacceptable and that it now has recovery
plans from all schools with deficits and surpluses greater than
5%. These plans will be monitored to ensure that those schools
involved reduce their deficit or surplus below the 5% threshold
by 2007-08.[22] We cautioned
the Department on the need to ensure that where surpluses are
to be reduced it must guard against the danger of these funds
being spent frivolously. The Department told us that the scrutiny
of school plans by the Boards was aimed at ensuring that plans
for school spending are sensible.[23]
The implementation of recovery plans is an important step in the
right direction and we look forward to seeing how they work out
in practice. Education and Library Boards have powers to intervene
or to direct funding where surpluses and deficits are excessive,
but the Department told us, while such action has been threatened,
these powers have not been exercised.[24]
8. The problem of poor monitoring of school budgets
has been compounded by the fact that the necessary electronic
interface between school and Education and Library Board financial
systems has failed to materialise.[25]
A previous report on Local Management of Schools by the C&AG
in 1995[26] drew attention
to this deficiency and eight years later the problem still has
not been rectified. It is unacceptable that after such a lengthy
period of time the technological improvements needed to support
the monitoring of school budgets have not been implemented. In
our view, the failure to enhance the systems for controlling budgets
has meant that children currently in schools with deficits and
surpluses have been let down and disadvantaged as a result of
resources not being used effectively to influence teaching and
learning.[27]
9. It is the Committee's view that ensuring all schools
continue to be in a position to manage their budgets effectively
remains a key issue for the Department and the Education and Library
Boards. For instance, the C&AG's Report draws attention to
the need to improve the management information that is available
to schools to assist in budget management.[28]
In our view, school expenditure is monitored and evaluated with
too narrow a focus. The Education and Library Boards have distanced
themselves from monitoring and challenging school budgets other
than to deal with critical incidents. As the C&AG's Report
points out,[29] they
concentrate their efforts on those schools with excessive surpluses
and deficits. While such involvement provides a safeguard against
the worst sorts of financial mismanagement, it does little to
promote good management. The Boards' responsibilities are not
confined to the minority of schools giving a clear cause for concern.
Given the very large sums of public money involved, early intervention
securing even modest improvements across the majority of schools
can be well worth the investment involved. As reported at paragraph
5 above, in 2003-04, almost one in five of all schools had deficits
in excess of five percent of their budgets. It is likely that
this figure would have been significantly lower if schools had
been subject to more stringent monitoring and challenge. Moreover,
such action could have helped to ease some of the budgetary control
problems which have recently emerged in the Education and Library
Board sector (paragraph 5).
13 Qq 13-14 Back
14
Qq 6-10 Back
15
C&AG's Report, para 3.26, Figure 3 Back
16
ibid, para 4.18, Figure 6 Back
17
Q 5 Back
18
Qq 37-39 Back
19
Qq 24-29 Back
20
Qq 91-92 Back
21
Q 41 Back
22
Qq 36, 53 Back
23
Q 97 Back
24
Qq 55-56 Back
25
Qq 30-35, 42 Back
26
C&AG's Report, Implementation of the Local Management of
Schools initiative (HC 329, March 1995) Back
27
Q 33 Back
28
C&AG's Report, para 3.52 Back
29
ibid, para 3.26 Back
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