I welcome the Audit Commission report Valuable Lessons: Improving Economy and Efficiency in Schools.
The department has already provided a range of tools to help schools make the most effective use of their resources including financial benchmarking, the strategic planning guide, the financial management standard in schools and the offer of a free one-day consultancy visit on improving value for money. The Education Procurement Centre is working with schools to carry out procurement health checks which help to identify where savings can be made. The e-procurement tool OPEN has been developed to help schools buy products online and compare prices of a range of suppliers.
The report supports our position on surplus school balances. It is sound financial management for schools to retain a small surplus from year to year, and revenue funding is intended to support the education of children in school now. It should not be necessary for it to be channelled into capital improvement projects given that separate and substantial capital funding has been made available.
Schools and authorities must work to reduce high balances over the next two years. If total revenue balances and the excessive balances held by individual schools do not reduce substantially by 2010-11, the Government will consult on further action from 2011-12 to bring the total down.
The department provides a reference document called A Guide to the Law for Schools Governors (the guide) to all schools and local authorities to inform them of the legal duties applicable to governing bodies of maintained schools. The guide includes information about the allocation of schools budgets and informs governors that there is a provision in the scheme for financing schools (the scheme) for the local authority to claw back excess surplus budgets. The scheme is issued by their local authority and sets out the financial relationship between the local authority and the maintained schools in their area. The scheme must include a mechanism on how the local authority will control excessive school balances, defined as greater than 5 per cent of the annual budget in secondary schools and 8 per cent in primary and special schools.
In accordance with paragraph 2(3) of Schedule 14 to the School Standards and Framework Act 1998 (the Act), the local authority must consult all the governing bodies and schools in its area if it proposes to make any revisions to the provision of its scheme.
Additionally we have commenced a survey of local authorities practice and experiences in clawing back and managing surplus balances, in partnership with the Local Government Association and the results of this survey will be used to inform possible further action or guidance.