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Implications for MAT in-year forecasting and budgeting

The unprecedented situation facing Multi-Academy Trusts (MATs) in responding to Covid-19 took another unexpected turn when the Department for Education (DfE) announced it had cancelled “all but the most essential data collections” to “help reduce the burden” on Trusts and schools amidst the coronavirus pandemic.

Normally academies have to submit a Budget Forecast Return Outturn (BFRO), which is used by the DfE to review the in-year position and expected outturn of the sector, to ensure this financial data can be accurately reported to the Treasury in May. The form was due to be made available to schools to fill in from late April, but is one of several data collections and services to be cancelled this year. Others have been paused until 30th June or beyond.

I was as surprised as many by the decision to cancel this year’s BFRO requirement. I think we were expecting a deferral or an amendment to the requirements, where maybe the actuals to March would have remained (for Whole of Government Accounts purposes) but a full cancellation was not an outcome we anticipated.school cost, forecasting and budgeting

Obviously any reduction in workload during this period is welcome for MAT Chief Financial Officers (CFOs) and School Business Managers, and given that the BFRO is probably one of the least familiar of the various returns that academies need to produce, the removal of the completion and submission of the return is positive. 

However, there has not been a time in my career where strong financial management and solid in-year forecasting and budgeting have been more important than now. This is needed to underpin the heroic attempts of MAT leaders to serve their children, staff and community during this crisis. Making such unprecedented decisions, often daily, without the guidance or confidence that it is the ‘right’ decision has become the norm. Education leaders (and teachers, of course) are embracing this ‘new normal’, taking it in their stride. 

One element that can improve the ability of leaders to make these tough decisions is having up-to-date, prudent financial forecasts at their fingertips. It can be easy to get caught up in the current crisis and decide that with so many unknowns, financial forecasts will be lacking accuracy and therefore any sense of reliability. 

Of course, over the past few weeks, the number of unknowns have been higher than any point in history that I can remember. But looking at the positives, information is emerging all of the time so there are much more ‘knowns’ this week than last week, and last week there were more than the week before. Financial forecasting will always be a mixture of art and science and right now the art element is currently more pronounced that normal. Extra caution, attention and scenario planning will be required – which is what CFOs are extremely good at.

That said, whilst there are many unknowns, we still know more that we don’t know. Forecasting is achievable in the current climate, and when done right can make a huge contribution to both enable and give confidence for decision-making.

In my experience, the quality, embeddedness and frequency of in-year forecasting is an area that can vary greatly between MATs, with some having well-established processes that are deeply ingrained and followed as a matter of course each month. At the other end of the spectrum, however, Trusts may only prepare a forecast in April/May to satisfy the BFRO requirements, which now might not even happen. 

Having worked in this area for nearly 10 years, I would say that most MATs are somewhere in the middle, with a combination of culture, lack of resource and limitations of technology (in that order) being barriers to achieving the vision of a monthly re-forecasting cycle. Where Trusts have implemented a monthly cycle, it was not perfect on day one, but the beauty of a good process is that each month it will improve. 

As you progress through the year you can compare each month’s actual to the previous month’s forecast and identify areas that were not quite right. Next month it will be better and take less time than the previous month until you get to the stage where the process in embedded and becomes a natural part of the monthly cycle. 

By keeping on top of a monthly cycle you are not only reducing the effort for each forecast, you will only ever be a month away from your next set of financial data and can therefore ensure that decision-making is always based upon the most up-to-date financial information. Will jordan, forecasting and budgeting

Whilst it is a welcome relief that already stretched MAT finance teams no longer have to complete BFRO form, the current situation remains fluid and fraught with uncertainty, and has the potential to be a perfect storm for MAT finances. Some will have received positive effect, through lower operating costs; but for many, where there is a reliance on self-generated income from extended services and the use of facilities, budget are likely to be hit hard, in addition to the costs that will arise as part of Covid-19. 

However, MAT CFOs are familiar with operating within a moving landscape and having to make tough choices. They will know the importance of robust financial planning – continuing with their in-year forecasting and formulating strategic budget plans when information, assumptions and reporting deadlines are uncertain.

Will Jordan is Co-Founder of IMP Software, specialists in MAT budgeting systems


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