School spending remains a mystery

Last year many head teachers feared they would go into the red

Too little is known of how schools in England spend £24bn a year of taxpayers' money, a report concludes.

The Audit Commission says neither local councils nor the government has "reliable, consistent and up-to-date information" on school finances.

The commission's report was carried out in response to a perceived schools funding crisis last year.

But it found the "crisis" was not widespread and that schools are sitting on reserves of more than £1bn.

The events of 2003 saw head teachers fearing they would run into the red and have to sack teachers to make ends meet.

Local authorities don't need more powers. What they need to do is use the ones they've got David Hart, National Association of Head Teachers Heads demand budget power

Initially the government denied there was a problem, then blamed councils for not passing on money to schools.

Then in October 2003, it promised a minimum increase of 4% in the funding per pupil for the next financial year.

But according to the Audit Commission, this action was based on perception, not accurate information.

The commission says neither the government nor councils has a detailed picture of how schools spend their funds.

And it found no evidence that councils had been holding back money from schools.

The Audit Commission's chairman, James Strachan, said: "It is startling that education, one of the biggest areas of public spending, attracts the least amount of scrutiny.

"There needs to be much clearer accountability for this expenditure."

Funding inequalities

Furthermore, the measures taken by the government might prevent cash reaching those schools most in need of financial help.

Guaranteeing schools a minimum increase of at least 4% in funding per pupil could increase the gaps between the "haves" and the "have-nots", the commission says.

"Schools in most financial difficulty are not necessarily in the one-third of councils that are to benefit from transitional funding support.

"Such 'one-size-fits-all' measures are inconsistent with the government's published principles of fair funding.... This approach also constrains councils from tackling funding inequalities within their areas."

Did Charles Clarke over-react?

By supporting schools in deficit, the government was sending out an unintentional message that working within the school budget was not a priority, the report adds.

Council involvement

Alarmed at the lack of accountability over school budgets, the Audit Commission recommends that councils be more involved in schools' financial affairs and assist in improving financial management skills.

Local authorities should have a formal budget reporting structure in place so they have an accurate picture of overall school spending.

The commission also says schools and councils need greater clarity about how funding will be calculated and allocated.

The commission welcomed the Education Secretary, Charles Clarke's recent guarantee of three-year budgets for all schools from 2006-07.

But it urged the government to "move away from short-term funding arrangements that undermine fair funding and provide a disincentive to schools to operate within their budgets".

Surplus cash

The report raises concerns about the high level of reserves being held by many schools - £1.2bn in total.

AGGREGATE SCHOOL SURPLUS 2002-03 Primary schools: more than £600m Secondary schools: £300m Special schools: just under £100m Source: Audit Commission

Surplus balances being held by a half of all primary schools and more than a quarter of secondary schools in England now exceed maximum levels - 8% of a primary and 5% of a secondary school budget - set out by the Department for Education and Skills (DfES).

"This represents an inefficient use of public money, which needs to be addressed," the report warns.

"And there is a tendency for surpluses to grow as a response to uncertainly about future funding."

The report also notes that the rise in reserves has been matched by increases in deficits, with one in four of all schools having been in deficit at some point over the past four years.

The Audit Commission report reviewed primary, secondary and special schools in 15 of the 150 councils in England with responsibility for education from December 2003.

The local authorities were chosen to form a broadly representative group in terms of geography, size and type.

A spokesman for the DfES said it believed it had the right balance between appropriate scrutiny and employing "an army of bureaucrats" to inspect individual schools budgets.

Local education authorities had the power to "claw back" large surpluses from schools, he said - and should use it.