IMPROVING SCHOOL
GOVERNANCE

3.1 Budgeting

Why is this topic important?

The budget is the school council’s main financial management tool. It is the ‘money plan’ that shows how the school will use its financial resources to support the goals and priorities in the School Strategic Plan. Proper and adequate oversight of the school's finances, in line with Department guidelines, is one of council’s most important responsibilities.

On completing this unit, school councillors should understand the budget process and timeline and be able to:

  • review program budget submissions against the School Strategic Plan

  • recommend, approve and revise the school's program budget

  • monitor the performance of programs against the budget.

Programs include:

  • the various curriculum programs (such as art, science and mathematics)

  • administrative programs (such as staff development and school maintenance)

  • trading activities (such as the school canteen)

  • specific purpose programs (such as the library).

The principal develops the workforce plan and salary budget using the Department’s salary structures for teaching and administrative staff. Council is not involved in preparing this budget.

The following table shows the typical budgeting responsibilities of the principal and school council.

The principal:

The school council:

  • develops the budget timeline
  • approves the budget timeline
  • develops program budgets with staff, and salary and revenue budgets
  • reviews budget submissions and program priority list (undertaken by the finance sub-committee if council has one)
  • evaluates program outcomes, prepares and prioritises budget submissions
  • reviews and approves the budget
  • communicates the budget to staff

 

 

It is recommended all school councils elect a treasurer, each year. Most schools have finance sub-committees and this unit is written as if your school has one. If it doesn't, council will undertake the tasks described.

Budget process and timeline

At the outset of the budget process, the principal and finance sub-committee develop the budget timeline. The diagram below shows an indicative timeline (actual timings depend on the school).

Budget Process and Timeline

The principal, business manager and program leaders develop program budgets using estimates of revenue derived from:

  • student funding received through the Student Resource Package (SRP)

  • other government funding or special purpose grants

  • locally raised funds

  • funds left over from the current and previous years.

SRP funding is the major source of funding for schools and is provided by the Department. It is calculated using complex formulas, which take into account the number of students at each year of study and includes equity funding and other funding for special initiatives.

The funding is provided in two parts: credit and cash. Broadly speaking, the credit part of the funding (which accounts for approximately 90% of the SRP) is money allocated to the school but held by the Department and used to pay school salaries and professional development costs.

The remainder, which council oversees, is given as cash and held in the school’s bank accounts. It funds school running costs (such as electricity and phones) and the non-salary expenditure in program budgets approved by council.

If in any year the school overspends its SRP credit funding, it must repay the overspent amount in the next year. The budget must allow for this.

If the school decides to put money aside for large purchases (such as equipment) in a future year, it will have less to budget for programs in the coming year.

Council discusses priorities for the coming year with the principal and gives advice about these to the finance sub-committee. The principal and school staff consider and determine priority programs for the following year and prepare budget submissions for each program. They also rank programs by priority; that is, in order of their importance for funding.

The treasurer and finance sub-committee informs the review of the budget submissions with the priorities advised by council.

Reviewing budget submissions

Council is encouraged to have a finance sub-committee, convened by the school council treasurer, to review budget submissions in detail on behalf of council. The finance sub-committee checks that each submission provides enough information for it to make a decision to recommend it for funding or not. Each submission should include:

  • an evaluation of the program’s current and previous outcomes

  • the rationale for the program (how it meets the school’s strategic priorities)

  • the program’s estimated revenue and expenditure, with expenditure split between the essential, unavoidable costs of the program and the non-essential costs (for extras which will enhance the program, in line with the school’s strategic priorities).

Guided by the strategic priorities decided by council, the finance sub-committee should ask:

  • what did the last evaluation of the program reveal?

  • how well will the program address the school’s strategic priorities?

  • does the allocation of funding in the submissions reflect key strategic priorities?

  • if the program is not explicitly part of the strategic plan, does it have merit?

The treasurer and finance sub-committee discusses expenditure estimates in the budget submissions with the business manager or principal to determine whether these estimates are reasonable. The business manager and principal will have reviewed all submissions but councillors bring their own knowledge and perspectives to the task and, for good governance, must satisfy themselves that the proposals are sound and the estimates are reasonable.

Economy and efficiency

When considering expenditure it is important to consider value for money (VFM).

In basic terms VFM means “getting a good deal from school expenditure”. It is based not only on the minimum purchase price (economy) but also on the maximum, efficiency and effectiveness of a purchase.

This means finding solutions that achieve the best mix of quality and effectiveness for the least outlay.

This may not always mean choosing the immediately cheapest option since, for instance, it may be more cost effective to buy a more reliable service or a better quality asset with lower maintenance costs and a longer operating life.

The Three E's

VFM Concept

Definition

Example

        Economy

Careful use of resources to minimise expense, time or effort

Was photocopy paper of the quality specified obtained at the lowest possible price?

        Efficiency

Delivering the same level of service for minimum input of cost, time or effort; or obtaining maximum benefit from a given level of input

Were canteen costs reduced while improving the nutritional content of food provided?

       Effectiveness

Delivering a successful outcome and meeting objectives as fully as possible

Has the literacy program improved NAPLAN results?

A strategic approach to economy and efficiency

Develop a value for money culture

This means encouraging everyone to accept that value for money (VFM) is not the responsibility of the school business manager, but rather it is a shared responsibility across the school. If strong leadership is provided by the principal, senior leaders and the school council, this will significantly enhance the importance of VFM in the wider school community.

Factors impacting on value for money

VFM is considered to be the achievement of a desired procurement outcome at the best possible price – not necessarily the lowest price. It should take both financial and non-financial factors over the total contract period into account. Key factors to consider include (but are not limited to):

Financial factors

  • up-front costs of the goods and services

  • costs associated with transition in and transition out (if applicable)

  • maintenance costs after the goods and services have been purchased

  • costs associated with consumables (if applicable)

  • costs for disposal.

Non-financial factors

  • ensuring goods and services are fit for purpose and meet the school’s needs

  • determining whether small medium enterprises (SMEs) or local businesses and communities achieve benefits

  • level of knowledge transfer from the supplier to the school

  • level of risk associated with the purchase of the goods and services and engagement of the supplier

  • availability of maintenance and support services.

Procurement Processes

Part 2.3 of the Education and Training Reform Act (2006) (the Act), states that the school council is responsible for arranging for the supply of goods, services, facilities, materials, equipment and other things or matters that are required for the conduct of a school. For the purpose of meeting this objective, council is the legal entity through which the school enters into contracts, agreements or other arrangements. 

The incurring of expenditure by schools is strictly controlled and subject to approval by the school council or any officer that has been authorised by the school council to carry out this function (for example, a delegated officer). The names of people authorised for this function are to be recorded in the school council minutes.

School council should be aware of the Schools Procurement Policy and Schools Procurement Procedures. Thresholds are in place, which must be followed as outlined below:

    Procurement Threshold (inc GST)      

     Minimum market approach     
≤ $2,500 One quote (either verbal or written)
> $2,500 and ≤ $25,000 One written quote
> $25,000 and ≤ $150,000 Three written quotes to be sought
> $150,000 Tender process

 

The following table shows the typical responsibilities of the principal and the school council with regard to procurement.

The principal...

The school council...

  • leads and manages procurement activity, or delegates management of the procurement activity to a business manager or other staff member
  • approves justification for procurement expenditure, or authorises a delegated officer to carry out this function 
  • ensures that all procurement activity complies with the Schools Procurement Policy
  • must ensure the school complies with the Department’s Finance Manual for Victorian Government Schools
  • attests that those at the school undertaking procurement activities are capable of doing so (in conjunction with the annual financial accounts attestation)
  • must ensure that the school complies with the Schools Procurement Policy

 

Further information is available at the Schools Procurement Policy and Procedure portal.

Recommending, approving and revising the budget

The treasurer and finance sub-committee, after discussion with the principal, determines:

  • the final prioritised list of programs to be funded, in light of available funding and if appropriate by changing the priority order of submissions

  • how the funded programs will be evaluated when the budget for the following year is developed.

The treasurer, on behalf of the finance sub-committee, then recommends the final prioritised list of submissions to council as the school's program budget. Council reviews and approves the budget and the principal communicates the budget to school staff.

There may be more than one version of the budget during the year. The finance sub-committee recommends changes to the budget, in line with the priority list, if:

  • SRP funding increases or decreases (for example, the school may need to rely on its cash budget to fund salaries if the credit budget is not sufficient)

  • funds left over from the last financial year are less (or more) than expected

  • for another reason revenue increases or decreases

  • estimates of expenditure change.

Resources and links

Title

Link

Finance Manual for Victorian Government Schools

A Guide to Budget Management in Schools

Documents can be accessed under the heading School Financial Guidelines:

www.education.vic.gov.au/school/teachers/management/finance/Pages/guidelines.aspx

Conflict of Interest

www.education.vic.gov.au/hrweb/workm/Pages/Conflict-of-Interest.aspx

Ethical Decision Making

www.education.vic.gov.au/school/principals/spag/governance/Pages/ethicaldecisionmaking.aspx

School Policy and Advisory Guide - Purchasing

www.education.vic.gov.au/school/principals/spag/finance/Pages/purchasing.aspx
School Procurement Policy and Procedure Portal edugate.eduweb.vic.gov.au/sites/i/pages/production.aspx#/app/content/2089/support_and_service_(schools)%252Fprocurement,_funding_and_travel%252Fprocurement%252Fprocurement_procedure

 

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