Finance committees

Finance committees

"Although the primary responsibility of a school is to provide the best education possible for its pupils, control over a delegated budget brings with it a responsibility for financial stewardship" Audit Commission

Each governing board has a statutory responsibility for the financial management of the delegated budget in their school. As a whole, they are accountable for the standards of education provided and for balancing cost and effectiveness. Above all, governors need to ensure that they achieve the best possible outcomes for their pupils in the most efficient way.

Best Value

Ofsted Inspectors are required to establish the governing board's application of Best Value principles as part of their inspection. The Schools Financial Value Standard (SFVS) began in September 2011. It was been designed in conjunction with schools to assist them in managing their finances and to give assurance that they have secure financial management in place. Governing boards have formal responsibility for the financial management of their schools, and so the standard is primarily aimed at governors. Maintained schools are required to complete the SFVS once a year. SFVS is not externally assessed but Local Authorities may use schools' SFVS returns to inform their programme of financial assessment and audit.

The Role of the Finance Committee

The whole governing board decides how to spend the budget and must approve the school budget plan submitted to the LA at the beginning of the financial year. The governing board should also approve any changes to the budget plan during the year, unless it delegates this function to the Finance Committee.

Most governing boards would find it difficult to manage their financial responsibilities without a Finance Committee. The Finance Committee acts on behalf of the governing board, and reports back to them on decisions taken. Good Governing boards will have sound structures for managing these responsibilities through the Finance Committee, with all governors understanding clear terms of reference and delegated powers.

The Finance Committee links the priorities in the School Improvement Plan to the budget, and evaluates the effect in the school of investing in these priorities. It monitors expenditure and income and takes action to revise the budget plan if the budget position is not in line with the set budget plan.

The Committee also plans ahead (preferably for three years) by reviewing the priorities in the School Improvement Plan and factors such as pupil projections, condition of the school and realistic lifespan of equipment/resources to determine potential pressures on the budget.

The Finance Governor

Governors on the Finance Committee need to build up their expertise in this particular area, and to share that expertise with new members of the Committee. A Finance Governor does not need a financial background, but does need an interest in the best use of resources. Governors have no authority as an individual, only as a corporate body. The authority must be properly agreed and delegated to the Finance Committee by the whole governing board. This means that governors on the Committee need to know the limitations of their powers and act accordingly, including reporting back to the governing board on the decisions they have undertaken on their behalf.

All governors should have a clear understanding of the following:

  • The Terms of Reference of the Finance Committee
  • The Delegation of Functions including the limits on the expenditure the Committee and the headteacher can authorise.
  • The rationale for the Budget plan for the year
  • When governors will receive budget information
  • What budget information will be presented

The statutory responsibility for oversight of financial management within the school lies with the whole governing board. Therefore, all governors should ensure that they have access to sufficient information to judge whether the budget is being used effectively, and should raise questions at the governing board meeting to clarify any areas of uncertainty or concern.

Information the Committee needs

It is for each governing board to determine their own requirements but we would recommend the information described below as a minimum.

  • School Budget Share; calculated according to the LEA's formula in line with current Government regulations. The majority of funding is allocated on the basis of pupil numbers, with the balance allocated using a mixture of factors, such as a fixed allocation for all schools and specific funding for SEN departments, where appropriate.
  • Standards Fund allocations, often targeted by government on specific initiatives or developments. Schools receive allocations towards a range of activities and have considerable flexibility as to how the funding is spent.
  • Devolved Formula Capital Grant; specifically for improvement or extension of premises.
  • Local funding; lettings of school premises, donations from PTA, parents etc.
  • Charging Policy for activities such as visits and swimming (as agreed by whole governing board).
  • Historic information on income and expenditure to allow comparisons.
  • Information on salary costs.
  • Monthly monitoring information - Educ 15 monitoring report sent by Schools Finance Support Team at County Hall.
  • Monthly cumulative expense analysis from the school's own financial system.
  • School Improvement Plan Priorities.
  • Pupil numbers and future projections.
  • LA-published financial school profiles. This information allows schools to identify other schools with similar characteristics and to engage in benchmarking exercises.
  • Auditors reports (when produced every 3-4 years)

Information to Receive

We would recommend the information described below as a minimum:

  • Fully-costed budget plan for the year ahead (by 31st May)
  • End-of-year position (in the summer term)
  • A termly report or minutes of meeting showing:
    - an analysis of income and expenditure compared to the budget plan
    - an indication of whether the overall budget is on target compared to the budget plan, highlighting any
    significant variances with explanatory notes
    - If the budget is not on target, an explanation of the reasons why and details of remedial action required
    - revisions to the budget plan, if necessary

Setting and Monitoring the Budget

Finance_and_budget_setting - The process of drawing up a budget and what needs to be considered. (Revised in February 2014)

Other Matters to Consider

Strategic Planning

The Committee should plan ahead, preferably for three years, by determining potential pressures on the budget, for example:

  • Are our pupil numbers likely to increase or decrease? What impact would this have on school organisation, class sizes, and resources?
  • What work will be required on the interior and exterior of the school (e.g. decorating, building works, heating systems)?
  • What is the realistic lifespan of equipment or resources?
  • Are there any key dates in relation to contracts or lease expiry? (This may result in significant price change or offer opportunities to review how things are done)
  • What are the costs in the School Improvement Plan for our priorities for future years?

Voluntary Funds and Private Funds

The Committee should know the requirements for audit or independent examination, and whether the fund needs to be registered under the Charities Act 1993. At the time of printing, it was likely to be beneficial to register if this type of income exceeded £1000 per year. For the latest information contact the Charities Commission or call 0870 3330123. The governing board should also receive audited/examined accounts annually.

Links with other Committees

  • The Finance Committee may produce or comment on policies prior to adoption by the governing board.
  • Governors should be clear who is undertaking the pay reviews. Is this included within the remit of the Finance Committee or another Committee? Are there procedures to liaise on the effect on the budget of pay reviews?
  • Are there procedures to liaise with the premises Committee in the selection of suppliers and awarding of contracts?
  • Are there effective links with the Personnel Committee in respect of staffing and associated costs?

Governors' Annual Report

It is a statutory requirement that a financial statement is included in the annual report. The governing board should:

  • reproduce or summarise any statement provided by the LEA since the last annual report;
  • indicate how any money provided by the LEA was spent;
  • give details of any school gifts;
  • give details of governors' travelling and subsistence expenses, if any.


For more information on indicative budgets for future years, financial modelling, information on the LMS Handbook Financial Regulations and Instructions, School Cost Comparisons or school financial audits, and support to staff and governors on all aspects of financial management training, contact the Finance Service Centre on 01296 382222 or

For more information on pupil number projections, comparative performance data and financial school profiles, contact the School Management Support Team on 01296 382599 or

DfE Schools Financial Management - includes benchmarking and Spending Data

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