Funding for state schools has fallen in real terms over the past decade, causing significant challenges for schools as they try valiantly to provide ever-improving provision against the reality of less cash. At The Primary First Trust, we have innovated our approach to finances to find a way to make budgets workable.
Schools are accountable for the efficient use of public funds. To really take control of finances, achieve value for money and maximise every public pound, we looked at issues from an economics basis, with the hope of changing the very culture of how ‘the money’ works.
To understand the structural problem of financial management in the public sector, we looked to Nobel Prize-winning economist Milton Friedman. His insights lay out the four ways of spending money and their corresponding effects on quality and value. Friedman broke down the types of expenditure into two categories – spending our own money, and spending someone else’s. Each had two sub-categories, based on who the money was being spent on – ourselves or some else.
In the public sector, we find ourselves spending someone else’s money on someone else. It is the most removed we can be from properly valuing our expenditures and their impact, meaning the quality and value for money aspects have less weight. The key for us in maximising our funding has been to change that culture – to alter our financial mindset so that everyone is invested in getting value for money.
Create a feasible surplus
We aim for budgets to deliver a three per cent in-year surplus as it is both achievable and provides sufficient ‘wiggle room’ to weather unforeseen circumstances. We return the majority back to schools the following year to reinvest in education, and the Trust retains the remainder to bolster reserves and emergency funding.
Our schools benefit from this approach and have so far purchased iPads and Apple TVs to accelerate digital learning; new outside play equipment to support cognitive and physical development; and a new reception area to enhance our parental facilities, all of which would be difficult to achieve otherwise.
Now, there is a tangible incentive for schools to save money and look for best value. The traditional year-end drive to spend unused funds to avoid clawback no longer applies and schools have become accustomed to conserving funds to use strategically, resulting in a virtuous circle of year-on-year improvements.
Shift the culture
We emphasise the importance of value for money over cost, prioritising what we get for the money, rather than the amount itself. We aim to deliver better provision for the same money, or at least the same provision for less. We will never reduce the standard of provision by paying less and seek to always improve our value proposition so schools can see how their investment in us continues to generate ever-greater returns.
Make the most of being in a trust
We cannot ignore costs entirely, so we contracted procurement specialists to sweat big-ticket items, including catering and cleaning. However, the game-changer was supplier management and outsourcing. By reducing approved suppliers across our schools, we saw material cost benefits, using our size as a trust to negotiate improved rates for high-quality services.
Outsourcing basic finance and HR functions to India also ensured higher standards of expertise to provide high-quality support for schools, while dramatically reducing costs, enabling them to invest elsewhere.
Work with the sector
We work with and advise other trusts, sharing our experiences, the lessons we’ve learned and the best practices we’ve encountered and developed. Our transformative cost savings in finance and HR have generated lots of interest and opened up the possibility of trusts working together in new ways to generate efficiencies.
As state schools, we cannot control our funding. What we can do is change our relationship with money, negotiate hard, innovate our service provision and create new revenue streams.
And the winners of our spending others’ money on others in this way are not just our students and communities. They are our teachers too.
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