The education sector isn’t alone in seeing budgets come under serious pressure in recent years. Yet in Ireland, the challenges faced by schools, colleges and universities have led to some alarming headlines.
Earlier this year, it was reported that nearly half (48%) of primary schools in Ireland were running at average deficits of €10,600-€35,600, with some insolvent schools struggling to access emergency funding.
Irish universities, meanwhile, are thought to be running deficits in the region of €15m, with two institutions, Technological University Dublin (TU Dublin) and the University of Limerick, facing censure from the Higher Education Authority (HEA)over financial management.
There are mitigating factors, and not just rocketing post-COVID inflation. Education establishments have to navigate a complex mix of public and commercial funding, with heavy regulatory oversight over both.
There are significant differences across education levels, with Higher Education, for example, being much more overtly commercial than the school sector. But even schools have to manage income streams as diverse as school meal payments, charging for school trips, charitable fundraising (e.g. through PTA organisations) and letting out school premises outside of hours. University grants managed via the HEA, meanwhile, are subject to strict controls around governance and performance.
Clearly, managing these levels of complexity when economic conditions are more challenging than normal only magnifies the pressures. So what can schools, colleges and universities do to get their financial management back on an even keel?
Ensure budgeting aligns with strategy
When organisations depend on financial settlements from elsewhere to operate, there can be a tendency to keep strategic planning and budgeting at arm’s length from one another. Strategy sets out your organisational priorities and goals over a period of time. Budgeting is how you carve out the money granted to you operationally.
But it shouldn’t be this way. Strategic planning should be done in the context of knowing what your budgetary parameters are so you can be realistic about the goals and priorities you set. But the reverse is also true in education. Institutions do have the flexibility to create revenues from various sources. How you do this and what you focus on should be shaped by your strategic objectives.
Double down on best practices
Schools in particular don’t always view themselves as commercial entities. And that means they don’t always follow the sort of accounting and financial management best practices that have long been established in the business world. Education institutions, however, have to manage flows of revenue and expenditure as complex as any business. Maintaining effective oversight of these, which then feeds directly into operational and strategic decision-making, starts with meticulous accounting. But it extends further into the roles of finance teams, such as having the roles and responsibilities of accounts receivable and accounts payable properly defined. And at the top level, that boils down to the quality of the financial control systems you have in place.
Consolidating financial data
One example of best practice that is worth highlighting in its own right is the importance of breaking down silos in how financial information is managed and used within an education institution. In many cases, different functions within a school or college or university, be it procurement or estate management or maintenance etc, operate as very distinct entities. Yet they all draw from and feed into the financial management of the organisation. With teams operating their own budgets in relative isolation from one another, it’s difficult to maintain effective oversight and control.
Thanks to the advent of digital accounting, it’s now relatively easy to consolidate financial data from across an organisation. But the important thing is how this shared repository of information is used. Done effectively, it can lead to better transparency, governance, decision-making and operational efficiency.
Get support from education finance experts
Finally, one tip that can really make all the difference to your financial management is remembering that you don’t have to go it alone. As we’ve mentioned more than once, education is a uniquely challenging sector when it comes to getting a grip on financial affairs. As a leading accountancy firm specialising in educational financial management, we understand the unique financial needs and challenges faced by schools, academies, and Multi-Academy Trusts (MATs) and we are dedicated to providing tailored solutions that empower educational institutions to thrive.
