Education and skills

Oversight of financial management in local authority maintained schools

Financial pressures are growing on local authority maintained schools and the capacity of local authorities to support financial management in schools is itself under pressure. The Department for Education needs a system for alerting it to problems requiring intervention.

School children in playground

"Financial pressures are growing on local authority maintained schools and the need to reduce costs is becoming greater. At the same time, the capacity of local authorities to monitor and support financial management in schools is itself under pressure. There must be early warning systems in place to alert the Department for Education to emerging issues requiring action and intervention."

Amyas Morse, head of the National Audit Office, 19 October 2011


The National Audit Office has today underlined the importance of effective financial management in schools. It is essential that the financial management framework for schools is capable of alerting the Department for Education to any systemic issues that may require action or intervention.

Today’s report to Parliament notes that weak financial management and weak academic performance often go hand in hand. The Department has a limited role in relation to the financial management of schools. It sets standards but responsibility for financial management and cost reductions lies with schools themselves, with local authorities responsible for exercising effective oversight.

The NAO acknowledges that schools’ financial management capability has improved – for example, as more schools have employed or have access to a school business manager. In the current financial environment, however, more schools are having to manage with reduced funding, and strong financial management is more important than ever. Many headteachers have no personal experience of leading a school during a period of financial constraint. Many schools consider that they need to reduce staff costs and that they need guidance on how to do so while maintaining high-quality education.

The Department now requires less detailed assessment of financial management, to reduce the administrative burden on schools and local authorities. Local authorities do not publish systematic data to demonstrate how they are monitoring schools’ financial management and that they are intervening where necessary. At a time when some schools may need support most, many local authorities are set to devote fewer resources to monitoring and supporting schools’ financial management. Forty per cent of authorities responding to an NAO survey do not believe they have sufficient resources to provide effective support to schools and almost half of those authorities are planning to reduce the amount of staff time spent on support.

The report recommends that the Department should make clear how it is going to review the working of the financial management arrangements.


Publication details:

ISBN: 9780102976717 [Buy from TSO]

HC: 1517, 2010-2012

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