Rising costs, flat income and increased scrutiny mean that budgeting has never been more important for academy trusts.
In this guide, we explore what effective budgeting looks like in practice, the key risks boards should be challenging, and how trusts can use budgets as a strategic tool rather than a compliance exercise.
Responsibility for budgeting
The Academy Trust Handbook (ATH) is clear: budgeting is not simply a finance team formality, but a central part of the board’s stewardship role. Trustees must ensure that financial plans are prepared, monitored and aligned to long term sustainability. This includes:
Approving and minuting a balanced annual budget
- Taking a longer-term view, consistent with three-year budget forecasts
- Setting and explaining a clear reserves policy
- Satisfying themselves that the trust remains a going concern
Importance of budgeting
Academy trusts are operating in a challenging financial environment. Staff and non-staff costs continue to rise, while funding increases are not keeping pace. Trusts can’t borrow and don’t have a local authority acting as a banker of last resort.
For many trusts, running out of cash is not a theoretical risk. Strong financial planning, regular monitoring and timely challenge are essential to avoid unpleasant surprises.
Key budget considerations for all academy trusts
Staffing costs typically account for 70-80% of total expenditure. Trusts should be asking:
- Are all staff correctly included in the budget?
- Is the leadership and staffing structure affordable long term?
- Is there an appropriate mix of experience and cost?
- Are teachers deployed efficiently (e.g. contact ratios)?
For mainstream schools, pupil numbers directly drive income. Forecasts should look at least three years ahead, not just at the next census point.
Planned maintenance and capital requirements should not be an afterthought. Failure to plan can turn into an affordability issue later on.
Moving beyond ‘last year plus inflation’
The DfE discourages simply rolling forward last year’s budget with an inflationary uplift. Instead, effective budgeting should:
- Start with the trust’s strategic and educational priorities
- Involve both educational leaders and finance teams
- Be built bottom-up, based on what the trust plans to do
- Clearly show how resources are aligned to the School Improvement Plan (SIP), with actions prioritised and properly costed
Benchmarking
DfE benchmarking tools allow academy trusts to compare their spending patterns with similar schools and trusts. Used well, benchmarking can highlight unusual trends, prompt the right questions and support value-for-money discussions.
However, benchmarking is only as good as the data going in. Differences should always be explainable in the context of local circumstances.
Deficits, forecasting and avoiding surprises
An in-year deficit is not automatically a problem if it is planned, supported by reserves and clearly understood by the board. However, if forecasts show reserves becoming negative, the DfE must be informed –ideally, well before this becomes a crisis.
Regular profiling and reforecasting will help you understand whether reality is matching expectations and allow corrective action to be taken early. The aim should always be that nothing comes as a surprise.
Key questions your board should be asking
Good governance is about asking the right questions, including:
- What are the main assumptions and risks in the budget?
- How is the trust planning to increase or protect income?
- Are there non-essential costs that could be reduced?
- How does this budget support pupil outcomes and strategic priorities?
- Are resources being used as efficiently as possible?
These questions sit at the heart of effective financial oversight.
How BKL can help
Our specialist education sector team have more than 25 years’ experience of providing advice to over 100 schools and academies, including single academy trusts (SATs) and multi academy trusts (MATs) across the UK.
We can help your trust to review and challenge budgets and forecasts; understand financial risks; align curriculum, staffing and financial planning; and strengthen your governance and reporting.
If you wish to discuss this further please speak to your usual BKL contact or Carly using the form below.
