The Financial Template
This page provides initial guidance on the first principles to be aware of when completing your financial template and our detailed application guidance books for each type of Free School.
What is the financial template?
Your financial template is a model budget for your school from opening. As funding levels are subject to review, it is indicative rather than a full budget. You should therefore consider it as part of a test of capability.
It does not include expenditure in the pre-opening phase, which is budgeted separately.
As well as the template itself, you must produce a written section in the body of your application explaining your approach.
Aim:
The aim of the financial template is to allow you to show that can produce viable educational plans. It is the counterpart to Section D, in which you demonstrate that your plans are desirable and appropriate.
By setting out a balanced budget, you will make it clear to the DfE that your school has:
- A clear grasp of the relationship between your curriculum and your staffing structure;
- Relevant understanding of what the running of your school will involve; and
- Strong financial management.
Requirements:
Produce a balanced budget that reflects your educational plan.
Provide detailed explanatory assumptions.
Approach:
The very first step is to read the guidance provided by the Education Funding Agency (EFA) in the first tab of the template. It outlines how to understand the template. It is essential to read this first.
- Begin with your vision, the size of your school, and the size and structure of your teaching staff and leadership
- Start at steady-state – your pupil numbers when your school is full. Now you will need to determine how much your school will increase in size each year from its opening to full capacity. This will give you your DfE income.
- From full-capacity, working back, go through the process in the diagram below. It will be iterative, and you may have to revisit your educational plan and staffing structure as you work through the details.
This diagram below will help you form a strategic plan for constructing your budget, and assist you in making the decisions you need to about your proposed school.
Sensitivity Analysis
What is the sensitivity analysis?
The sensitivity analysis is a financial plan in which your income is reduced. You must demonstrate your plan for running the school where this is the case. This is intended to test resilience due to a permanent shortfall in funding; it should not show how you will make ‘one-off’ savings.
As in the full-capacity template, you will have to provide a written section explaining your approach. This will demonstrate how well thought-through your plans for your school are.
Aim:
The aim of the sensitivity analysis is to allow you to show your understanding of your school’s finances, staffing structure, and educational plan.
By setting out a balanced budget with fewer pupils, you will make it clear to the DfE that your school has:
- A clear grasp of the relationship between your curriculum and your staffing structure;
- A plan that is resilient to reductions in income; and
- Strong financial management.
This establishes both the credibility of your full-capacity plan and your capacity and capability as a group.
Requirements:
As a mainstream school you will reduce your income by reducing your pupil numbers by 20%.
This means that your pupil numbers will be 20% lower in every year up to and including capacity.
If you have estimated a Free School Meal rate higher than your Local Authority average, you should also include a template in which this is reduced to that average level.
Approach:
The very first step is to read the guidance provided by the Education Funding Agency (EFA) in the first tab of the template. It outlines how to understand the template. It is essential to read this first.
You should take the same approach to your sensitivity analysis as you did for your full-capacity template.
You will need to produce a strategy for the DfE, explaining what you would cut from your original plans and why if your pupil numbers were 20% lower than expected.
The key question to consider is which costs are fixed and which are variable. Some of your expenditure, on heat and light for instance, will remain largely the same with 80% of your intake. Others will scale in proportion to the reduction in numbers. Educational resources are one example.
- Begin with your vision, and plan what staff you will need to implement it for only 80% of your planned pupil numbers.
- Start at steady-state. In this case it will be 80% of your full capacity. This will give you 80% of your DfE grant income. In every year, your school will admit 80% of the pupils that it did in your full capacity template, rounded sensibly.
- Examine variable costs: consider which costs will be automatically reduced with fewer pupils.
- Staffing: as your largest expenditure, it is here that you should expect to make most of your savings. Focus on changes that can be justified by the reduced pupil numbers, not on structural alterations that you could beneficially apply to your full-capacity template.
- Examine fixed costs: components of some of these will fall, depending on the size of your school. For instance, fewer pupils may mean fewer rooms being utilised and so lower utilities costs.
- Leave out your ‘Other income’ for now, but remember to add it in at a reduced rate later in the process. You should not rely on more non-grant income to make up the shortfall in DfE funding.
Resources:
- The Academy Network website has a lot of information on Academy funding, including a good overview, which can be found here: http://www.academynetwork.co.uk/blog/2011/1/26/academyfunding.html.
- There is also a financial benchmarking website for schools: This can be accessed using a Guest Login: https://sfb.teachernet.gov.uk/login.aspx
- The DfE school budgeting page produces charts that allow you to compare your budget to other similar schools (click on the ‘facility’ link): http://www.education.gov.uk/schools/adminandfinance/financialmanagement/consistentreporting/benchmarking.
- School Teachers Pay and Conditions Document (Reference: DFE-00072-2011) this gives details of current national teachers’ pay scales and conditions https://www.education.gov.uk/publications/standard/publicationDetail/Page1/DFE-00072-2011
- The latest Academies Financial Handbook has been published here https://www.education.gov.uk/publications/eOrderingDownload/Academies%20Financial%20Handbook%20Sept%202012.pdf