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Section 4 : Budget Monitoring & Financial Records
1. Introduction
2. 4-Weekly Monitoring
3. Reports to Governing Bodies
4. Virements
5. Masterpiece General Ledger
6. MPGL Financial Reports
7. Retention of Financial Documents and Records
8. Capital Spending from Budget Shares
1. Introduction
It is essential that schools monitor their budget on a regular basis. This
includes not just the ISB but also SEN, Standards Fund, Excellence in Cities
and any other funds making up the school’s overall budget allocation.
Although school governors may only require a termly budget monitoring report,
schools must check their overall financial position every 4 weeks after receiving
the 4-weekly MPGL printouts.
Masterpiece General Ledger (MPGL) is a computerised system on which all
income and expenditure is recorded and represents the official accounts of the
Authority. Information on budgeted and actual income and expenditure is
maintained to enable schools to monitor their budget throughout the financial
year.
The 'internal' systems used in schools for budget monitoring (SIMS, Money
Manager, Key Solutions) MUST agree to MPGL (the official accounts of the
school).
The school budget should be input onto the school system and agreed to the
Financial Statement and MPGL print Form T5. All changes to the budget are
notified to schools during the year via the financial statement and included on
MPGL Form T5, these changes should be deducted/added to the school
system.
All actual expenditure and income showing on the 4-weekly MPGL printouts
should be matched against the 'actuals' showing on the school system.
2. 4-Weekly Monitoring
School Budget
When the (S)B3 form has been signed and submitted to the Lifelong Learning
Resources Finance Section, it will be checked by your LMS School Contact
Officer.
Once approved, the delegated budget will be input into MPGL against the
appropriate budget headings.
Budget Profiles
It is necessary throughout the financial year to estimate the pattern of
expenditure and compare it to actual expenditure.
Expenditure/Income profiles are created for these patterns and are applied to
the individual budget headings.
Every 4 weeks the profiles are applied to the budget (giving the profiled budget)
and compared to the actual expenditure/income to date.
It is recognised that a budget profile can never be completely accurate, but the profiles
provide a framework for budget monitoring.
MPGL has a package of standard profiles that are applied to certain budget
headings.
Budgets with no particular spending pattern default to the straight line profile of
13 equal periods.
It is not sufficient for schools to prepare a 'budget monitoring report' that
compares actual expenditure to date against the budget for the year with the
final column showing the budget remaining. This type of report does NOT
reflect the current financial position of the school and gives no indication of
whether or not the school is currently spending within budget.
Whilst the Form T5 may be presented as a monitoring report to Governors, it should
be adapted to reflect any known commitments. Such a report would include the
following:
1. School budget (Form T5)
2. Profiled budget (Form T5 or the school’s own assessment if felt to be
more accurate)
3. Actuals to date (Form T5)
4. Known commitments to date (School records)
5. Variance (columns 2 - 3 - 4)
Variances
The 'variance' between the profiled budget and actual expenditure will need to
be examined and accounted for.
Whilst the cause of some variations will be easily recognisable, others may
need further, more detailed, investigation.
Where investigations show that there will be an overspend on certain budget
heads, the Headteacher must study the overall position of the budget and
transfer (vire) funds from one budget head currently underspending to one that
is overspending.
If a transfer (virement) of funds is not possible, the budget will need to be
further scrutinised to determine where planning can be altered or funds made
available from the SCHOOL’S own contingency fund.
3. Reports to Governing Bodies
Monitoring of the school's actual expenditure against the budget should be
carried out on a 4-weekly basis by the School Finance Officer/Bursar/
Headteacher.
The first 4-weekly monitoring should be carried out no later than Week 12.
This is normally the first period for which MPGL reports are sent to schools.
This will allow Governors to take any corrective action before the Summer
break if it is deemed necessary.
Governing Bodies should decide on their own practical arrangements for
monitoring the school budget, but a formal monitoring report should be
presented at least termly to a meeting of the Governing Body.
Any under/overspending variances should be highlighted and discussed at an
early stage and appropriate action taken.
The Governing Body will also require to be notified at any time of an
expenditure variance which has a significant impact on the budget.
4. Virements
This is the transfer of an underspending on one budget heading to finance additional
spending on another budget heading.
Where a school needs to adapt to changing financial circumstances by viring
resources, a procedure will need to be established for approving such a
virement within school.
The Governors may delegate virement up to an agreed limit to the
Headteacher. The Governing Body must be notified of virements above this
limit. The exact levels to be set will depend upon the size of the school budget
and circumstances pertaining to the school. Amounts should be for £100 or
more and to the nearest £100 thereafter.
Schools must inform their LMS school contact officer in the Lifelong Learning
Resources Finance Section of any virement decisions on the V1 proforma for
the purpose of amending the school budget record on MPGL (central
accounting system).
Examples of the Form are shown as Appendix 4A.
4.1 Secondary and Middle Schools Cheque Book System
The Cheque Book System for most Secondary and Middle Schools necessitates the
school delegated budget being split into a bank budget and non-bank budget. This
has implications for any virements, which can fall into 4 categories:
a) Virement within the Bank Budget - from Repairs & Maintenance to Supplies &
Services
b) Virement within the Non-Bank Budget - from F/T teachers to Clerical staff
c) Virement from Bank Budget to Non-Bank Budget - from Supplies & Services to
Staffing
d) Virement to Bank Budget from Non-Bank Budget - from Staffing to Supplies &
Services.
Virements which fall into categories (c) and (d) will necessitate the transfer of funds
between the bank and non-bank budget and, therefore, the bank account itself. The
actual amount of the transfer will be spread evenly over the remaining number of
payments in the financial year, effectively adjusting the school monthly standard
payment. These adjustments will be increases to the standard payment for (d) and
decreases for (c).
Virements falling into categories (a) and (b) do not affect the bank account.
All virements should be completed on the V1 virement form and sent to the office with
the 4-weekly returns.
4.2 Cashflow
The Secondary and Middle School Cheque Book System necessitates the monitoring
of the School's cashflow. The Standard monthly payment to the bank is calculated
from the bank budget on the S(B)3 budget form. If any of the budget headings within
the bank budget are overspending then there will be insufficient funds in the bank
account to cover the costs. If there is a likelihood (at any time) of there being
insufficient funds available, a VIREMENT must be actioned by the School, transferring
funds from the non-bank to the bank budget. Any overspendings must be reflected on
the non-bank budget. The agreed banking terms with the Yorkshire Bank are that the
accounts MUST stay in credit. Any cheques written against a bank account with
insufficient funds will be returned.
5. Masterpiece General Ledger
Most schools maintain their own internal financial records. These are usually
computerised, and assist schools in producing the SEA returns for their school bank
accounts. In addition to maintaining budget records, some systems also perform
other tasks, e.g. producing school orders, raising cheques and in many cases are
integrated into other systems (attendance records, timetabling, pupil records).
While it is accepted that MPGL will not be as up to date as school records as a result
of bank account expenditure, it should be noted that MPGL, being the Authority's
official accounts, will always be used as the basis for calculating school balances at
the financial year end.
It is, therefore, necessary for schools to reconcile their internal records to MPGL on a
4-weekly basis on receipt of the MPGL reports. It is the responsibility of the school to
check these and notify their LMS school contact officer if any discrepancy occurs.
5.1 Structure of MPGL
The format of the information held on MPGL is known as the structure and consists of
several different levels. This is because of the varying level of detail required by
services within the Authority. In terms of the school MPGL structure, the highest level
will be the school and the lowest level will be detail codes ie the codes where the
income and expenditure is posted to.
5.2 Structure of MPGL accounting codes
Accounting codes are used to identify the budget which an item of income and
expenditure is to be charged against. These codes are used on source documents
and when data is passed from feeder systems to MPGL.
MPGL accounting codes are structured in their format and have 11 characters (two
alphas and nine numeric) and consist of two distinct parts. These are known as the
objective and subjective codes.
Objective code - consists of 6 characters and identifies the school to which it relates.
School objective codes are based on DfES numbers and are either 2 alphas followed
by the 4 digit DfES number, or 3 alphas followed by the last 3 digits of the DfES
number. Separate objective codes are used for each different element of devolved
funding, e.g. there are separate objective codes for each school’s delegated budget,
SEN, Standards Fund etc. The alphas used are :
Funding Source Primary/ Primary - Secondary Special
nursery - DfES no. & Middle & DfES no.
DfES no. Starting 3 Starting 7
Starting 2
Delegated Budget EP EP ES EL
SEN EQ EQ EW -
Standards Fund EZ EZ EZ EZ
Excellence in Cities EZA EZB EZH -
EMAG ERA EGA EHA EEA
Resourced Provision EB EB EB EB
An example of how this applies in practice is given below, using fictional schools
consisting of two primary schools, DfES numbers 2999 and 3999, a secondary school
with DfES number 4999 and a special school with DfES number 7999.
Example of School Objective Codes
Funding Source Primary Primary Secondary Special
DfES no. DfES no. DfES no. DfES no.
2999 3999 4999 7999
Delegated Budget EP2999 EP3999 ES4999 EL7999
SEN EQ2999 EQ3999 EW4999 -
Standards Fund EZ2999 EZ3999 EZ4999 EZ7999
Excellence in Cities EZA999 EZB999 EZH999 -
EMAG ERA999 EGA999 EHA999 EEA999
Resourced Provision EB2999 EB3999 EB4999 EB7999
Subjective code - consists of 5 characters (all numeric) and identifies the type of
expenditure or income, e.g. 05001 is full time teachers' basic pay. Subjective codes
are the same for every single school, it is the objective code that identifies which
school the expenditure relates to. Therefore, the code for full time teachers' basic pay
charged to Honley High School delegated budget would be ES4038-05001 and for,
Howden Clough High School would be ES4048-05001. The equivalent codes for SEN
would be EQ4038-05001 and EQ4048-05001 and for EMAG would be EHA038-05001
and EHA048-05001.
Because of the hierarchical nature of the MPGL code structure, all codes which are
"owned", i.e. lie directly below a higher code in the structure, are added together to
give the higher code its value. The diagram on the next page illustrates how this
would appear for teacher costs being charged to a school’s delegated budget.
The diagram below shows the structure of MPGL:
ES3000-NETXX
ABC School
£2,578,849.76
ES3000-INCOM ES3000-GROSS
Income Expenditure
(£16,122.04) £2,594,971.80
ES3000-AEMXX
Employees
£2,238,175.81
ES3000-AEM00
Operational
Employees
£2,028,831.42
ES3000-051XX ES3000-050XX ES3000-052XX
P/T Teachers F/T Teachers Claiming
£241,484.52 £1,732,160.62 Teachers
£55,186.28
ES3000-05001 ES3000-05003 ES3000-05004 ES3000-05006
Basic Pay National Superannuation Other
£1,510,243.16 Insurance £106,596.16 Allowances
£115,239.45 £81.85
Posting level codes (detail code) - the lowest level of the MPGL coding structure.
Whenever an item of income or expenditure is incurred it will be posed to an
accounting code at this level. All posting codes have a numeric subjective code.
Summary level code (aggregate code) - appearing above posting level codes, these
codes add up all codes which are below them in the code structure, i.e. full time
teachers is a summary level code and within it includes the totals of basic pay,
employer's NI and employer's superannuation. All summary level codes are part
alpha and numeric in the subjective element of the code.
5.3 Feeder Systems
All data on actual income and expenditure is entered into MPGL by way of a "feeder
system", so called because the data "feeds" into MPGL.
These systems perform a specific function, e.g. pay employees, reimburse school
bank accounts, and then pass over selected information to MPGL so that related
income and expenditure is posted to the relevant accounting codes.
All feeder systems are allocated a specific source reference when they appear on
MPGL. The list below summarises these, along with details regarding the frequency
of charges.
Reference Source Frequency
AP Creditors - Invoice details Weekly
AR Design Practice As and when required
MN Mentor (Estates - Rents) As and when required
SA Salaries (Administration) 4-weekly
SS Salaries (Claiming Teachers) Monthly
ST Salaries (Teachers) Monthly
SE School Cheques (Enabling accs) 4-weekly
SK Skyline Property Management As and when required
SD Sundry Debtors Weekly
WW Wages Weekly
YP YPO Weekly
5.4 Accounting Periods
The financial year runs from 1 April to 31 March. When referring to the financial year it
is often abbreviated to just the start and finish year, i.e. the financial year from 1 April
2003 to 31 March 2004 is referred to as 2003/04.
Each financial year is divided into 13 periods of 4 weeks.
Each period is allocated a number thus "period 1" is the first 4 weeks of the financial
year, "period 8" is weeks 29 to 32 and Period 1 to 8 would be up to and including the
32nd week of the financial year.
There is also a period 14 which is used for all transactions occurring after the financial
year end, but which relate to the old financial year rather than the new one. Usually
these entries will be in the form of special creditors/special debtors. This is not a
period of 4 weeks duration but continues until the accounts are finally closed.
6. MPGL Financial Reports
MPGL has a facility to produce certain financial reports which assist schools in
monitoring their budgets throughout the financial year. Three different MPGL reports
are sent to schools at 4-weekly intervals. Listed below are details of each report and
the purpose they serve.
6.1 MPGL Report "Form 01" (Summary Financial Ledger)
Details expenditure at level of the school code structure
Provides cumulative expenditure from the start of the financial year, and also
shows the 4-weekly expenditure for a selected period
No detailed transactions are included within this report
Non-bank expenditure from the current period column on this report should be
input to the school financial system
An example is shown as Appendix 4B.
6.2 MPGL Report "Form 31" (Ledger Transactions)
This report provides the detailed information summarised on "Form 01"
Details all transactions showing source details, enabling easy identification of
all transactions
This report should be checked to ensure all SEA entries have appeared as
expected and KDF210 totals have transferred; follow up any discrepancies
Shows detail codes only, no summary level (aggregate codes) codes
The report sent to schools shows transactions for a 4-weekly period only
An example is shown as Appendix 4C
6.3 MPGL Report "Form T5" (Budget Monitoring)
This report shows all income and expenditure during the financial year to date and
compares this with the profiled budget and shows the total budget for the year.
Once a school has submitted its (S)B3 budget form, the information is then
entered onto MPGL
Each budget heading also has a budget profile which reflects its expenditure
pattern and to enable a comparison to be made with the expenditure to date
At times during the course of the financial year, some budget figures may
change due to virements or additional budget allocations (i.e. increased pupil
numbers)
The total actual expenditure to date shown on this report will correspond to the
total shown on Form 01
An example is shown as Appendix 4D.
6.4 Correction of errors on MPGL reports
Sometimes discrepancies will be identified as a result of the checking of MPGL
reports to the school system. These are usually the result of incorrect coding.
To assist in the checking and correcting of errors, queries should be detailed on the
proformas provided (see Appendix 4E). Completed forms should be sent to Lifelong
Learning Resources Finance Section, addressed to your LMS School Contact Officer.
The forms reflect the MPGL report (Form 31) so that the necessary information can be
extracted from the report in the same format. It is advisable to keep a copy in school
so that adjustments can be checked on a 4-weekly basis.
Common errors appearing on MPGL reports
There are errors on MPGL reports that appear to be more common than others.
The majority of transactions appearing can be checked against information available
in school, e.g. all payroll costs can be checked against KDF210 reports, bank account
expenditure is recorded on the SEA1/SEA8/SEA10 forms and SIMS, Key Solutions or
Money Manager.
Certain types of expenditure which, although correctly charged to schools, are difficult
to identify because of the lack of supporting information:
- Staff advertising
- Wages for relief nursery nurses and support assistants
- Transport expenses claims by minute clerks
- Disputed charges to teachers cover budget in cases where a school
thinks a claim should be covered under the insurance scheme
There are two main areas of payroll expenditure where errors occur: (1) Where an
employee moves from one school to another, usually at the start of a new academic
year; (2) Those employees dealing with SEN who are mainly on temporary contracts
and change along with the requirement of the pupils.
6.5 KDF210 - Analysis of Employee Costs
The KDF210 report is a detailed analysis of school employee costs. It provides a
detailed listing of individual employee costs. The total cost of each type of employee
(i.e. teachers, claiming teachers and non-teaching staff) appears on MPGL report
Form 31 under the appropriate headings; basic pay, NI, superannuation, etc.
An example of a KDF210 report is shown at Appendix 4F and an explanation of what
it shows is given on the next page.
A Report Headings
These provide a number of items of information :
a) Organisation
In the case of schools this will always be 01 for Kirklees Council
b) Payroll Number
004 for full-time teachers, 005 for claiming teachers, 003 for APT&C staff, 002
for weekly wages
c) Pay Date, Pay Period, Accounting Week and Period
d) MPGL Objective Code
e) School name
B Employee Information
a) Establishment
The school reference as held on Delphi; this is based upon the DfES number
b) Contract Number
1st digit : 1 = employee transferred from Arcast, (the previous payroll system),
digits 2 to 7 are former employee number.
2 = employee started after Delphi introduced, digits 2 to 7 allocated by
Delphi.
End alpha - some employees have more than one employment on the same
payroll; this is used to identify them, using A for the first
employment, B for the second and so on.
c) Employee name
d) Hours
For teachers, 32.50 hours is classed as full-time
e) Employee type
The first 3 digits of the basic pay code for that employee, e.g. 050 for full time
teachers, 051 part time teachers etc.
f) Pay section
The school pay section
g) Annual salary
The annual salary for that employee
h) Percentage Costing
This applies when an employee’s salary for a particular employment is being
charged to more than one MPGL code. The apportionment is made on every
element of pay not just basic pay so overtime or other allowances are also
apportioned.
C - I Pay for the Period
These columns analyse pay into its component parts and largely correspond to
the MPGL subjective headings. These totals can be matched up to those on
Form 31.
J Establishment Total
Totals of all pay columns for the establishment.
K Objective Code Total
Totals of all pay columns for the objective code.
It should be noted that the KDF210 report shows employee costs charged to a
particular objective code and not total pay costs for each employee. However, it is not
unusual to find employees with more than one employment charged to different
objective codes and/or with one employment charged to different objective codes by
means of percentage costings.
For example, one individual may work as a cleaner for the Catering and Cleaning
Service and as a lunchtime supervisor in a school. A teacher may have part of their
pay charged to Standards Fund and part to the delegated budget. If information is
required about the total pay of an individual employee this is best obtained by
contacting the Payroll Section.
7. Retention of Financial Documents and Records
7.1 General Rule - Financial Documents and Records
As a general rule, documents or records are subject to special legal requirements, and
the retention period should be a minimum of three years or six years plus the current
financial year where VAT related. Customs, the Audit Commission and Audit have
given permission for the prescribed retention periods for invoices/copy invoices,
credit/debit notes, delivery notes and purchase orders to be altered. However this
provision only applies where services and schools come under the Council’s
VAT registration. This concession is for VAT purposes only.
Where there are longer retention requirements relating to Inland revenue or
Companies acts these must be adhered to. Where records relate to a specific grant,
those records will need to be retained until the audit of the grant is complete. The
Council also needs to retain documents to protect it from civil claims under the 1980
Limitation Act. The limitation period for contracts not under seal is six years from the
expiry of the contract/breach of contract. It is therefore important to ensure that in
cases of dispute or potential dispute, no documents are disposed of until a period of
six years has passed
Type of Record Minimum Retention Period
(plus current year)
Enabling Account - Expenditure
Cheque Books (stubs) 6 years
Invoice/copy invoices 4 years
Credit notes/debit notes 4 years
R1 and YPO Purchase Order Pads 1 year *
Delivery Notes 1 year *
SIMS/Money Manager Prints 6 years
Postage Record 3 years
Budget Monitoring Records 3 years
*For purchase and delivery notes this may mean that some items are over one year
old before being disposed of in order to comply with audit requirements.
Enabling Account - Reconciliation
Bank Statements and Bank Correspondence 6 years
All 'SEA' Reconciliation Forms 6 years
Enabling Account - Income
Private Telephone & Photocopier Income Records 6 years
Income Records/Receipt Books 6 years
Paying-in Books 6 years
MS/1, MS/2 and MS/3 Milk Returns 6 years
Lettings Records including invoices and HSP1 & 2 Forms 6 years
Lettings Diary 3 years
Copy Caretaker's Timesheets 3 years
School Fund
School Fund Records and Invoices 6 years
Cheque Books (stubs) 6 years
Bank Statements 6 years
Paying-in Books 6 years
Income Records (supporting documentation) 3 years
7.2 General Rule - Non-Financial Documents and Records
With regard to non-financial documents and records, other than those where the
period is determined by statute or regulation, a retention period of 6 years is advised.
However, the period is at the discretion of the Head of Service.
Type of Record Minimum Retention Period
School Log Book Indefinitely or until closure of
school when it should be
submitted to Schools
Management Section, Oldgate
House
Admissions Register As above
Attendance Registers 3 years from date of last entry
School Meals Records - School Responsibility
School Meals Registers 3 years from date of last entry
Summary Registers 3 years from date of last entry
Paying-in Slips 6 years plus current year
CRG001s 6 years plus current year
Free Meals Tokens/Tickets 3 years plus current year
Free School Meals Entitlement Letters Current and previous letter only
School Meals Records - DSO Staff Responsibility
Day Book 3 years (DSO to advise)
Stock Sheets 3 years
Employee Signing-in Book 3 years
Order Book 6 years
Delivery Notes 6 years
Kitchen Equipment Inventory Indefinitely
Till Audit Rolls 6 years plus current year
Paying-in Slips 6 years plus current year
CRG001s and Cheque Forms 6 years plus current year
Miscellaneous
Computer Discs (with financial details) 6 years
Unclaimed Lost Property 3 months
Lost Property Record 3 years
Copies of Governors Minutes 6 years
Pupil Records 12 years
General Correspondence 6 years
GEST/INSET Records/Invoices, etc. 6 years
Plans, Services Drawings, Boiler, Maintenance, etc. Indefinitely
Register of Pecuniary Interests 6 years
Health and Safety File Indefinitely
8. Capital Spending from Budget Shares
Paragraph 2.14 of the Scheme for Financing Schools states that "Governing bodies
may use their budget shares to meet the cost of capital expenditure on the school
premises. This includes expenditure by the Governing Body of a Voluntary Aided
school on work which is their responsibility under paragraph 3 of Schedule 3 of the
School Standards and Framework Act 1998. If, however, the Governing Body wishes
to incur capital expenditure, it must notify the Authority. In respect of proposed
expenditure of £15,000 and above, the Governing Body can be required to take into
account any advice from the Director of Lifelong Learning as to the merits of the
proposed expenditure. If the premises are owned by the Authority, the Governing
Body must seek the consent of the Authority to the proposed works".
The main reason underlying this requirement is clearly that the Council has a
responsibility for planning the most efficient use of its capital resources and its officers
need to know when a school has been able, from its own resources, to undertake an
outstanding capital scheme. The Council also needs to keep its Asset Management
Plan up to date.
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