The importance of 3-year budgeting in schools

Finance Team

April 24 2024
Most maintained schools have likely finalised their 2024-2025 budgets by now.
Since 2021-2022, the Schemes for financing local authority maintained schools statutory guidance states that all maintained schools should produce and submit their 3-year budget plan to their local authorities between 1 May and 30 June following the year's start. However, some local authorities aren't making a 3-year budget compulsory, despite its impact and benefit to schools. 

As such, we're highlighting the importance of a 3-year budget, especially for those thinking of academisation or joining a trust in the future.

Spot areas of concern before they become a problem!

3-year budgeting gives schools insight into the future and helps them be proactive, whether that's due to noticing falling pupils on rolls, reducing income, or inflation on costs, budgets are only as good as the assumptions made. With 3-year budgeting, the hope is to spot potential problems before they become reality.

Staffing makes up a considerable chunk of schools' expenditure - at around 78-80% - a 3-year budget here will enable any trends to be seen. As part of the budgeting process, other benchmarking metrics should be used to ensure that the staffing levels are kept at a sustainable level for the funding received, as well as delivering a good curriculum to benefit the children on roll. 3-year budgeting enables schools to make decisions knowing the future impact. Not understanding the future impacts could leave schools making tough decisions later down the lineIf the school is thinking of joining a trust in future, future redundancies after converting could cause a risk to the receiving trust's reputation. This needs to be considered when undertaking financial due diligence.

Due diligence

Financial due diligence is usually required from the receiving trust to help them understand the financial health of the converting school. It's a necessary process to reduce any risk for the receiving trust that may arise from the converting school joining. From the receiving trust's aspect, they need to ensure that the reserves and forecasted budget position do not significantly threaten the trust's going concern. If a 3-year budget is not available, this could delay conversion plans.

Academy Trust Handbook guidance

If the school becomes an academy or joins an existing academy trust, a 3-year budget is a 'must' according to the Academy Trust Handbook. The ESFA's good practice guide also suggests budget forecasting throughout the academic year. This helps the academy base decisions on the most up-to-date information and ensures they make well-informed decisions.

Each year, the academy trust must submit its 3-year budgets to the ESFA in a Budget Forecast Return due by 31 August before the financial year starts. The ESFA uses this data to monitor trusts.

Do I need to use the LA to produce my 3-year budget?

No, you can do this yourself. However, if you require any assistance, please get in touch with our Finance Team, who would be happy to help. At EPM, we write our own budget assumptions paper each year, which provides guidance on what we think are reasonable assumptions for the next three years. Of course, this guidance does not need to be adopted, but it acts as a good base from which schools can start.


If you’re looking for support with managing finances, budgets and resource management or would like to learn more about our support and relevant training, please talk to us.

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