These notes provide a detailed explanation of the accounting treatment of the amounts carried forward at the end of each financial year under the terms of the Highland Council scheme of devolved school management.
Under the terms of the DSM scheme each school is permitted to carry forward a surplus of up to 5% of their devolved budget and a deficit of up to 3% of their devolved budget. The carry forward parameters have been increased in recognition of the fact that schools are now sharing more of the risk in relation to contributing towards Teacher’s absence cover. Therefore the school has the capability, all other things being equal, to carry forward a larger surplus in order to off-set any potential future commitments.
- If any school has a surplus of more than 5% of their devolved budget then the school’s budget will be reduced accordingly at the financial year-end
- If any school has a deficit of more than 3% of their devolved budget then the school’s budget will be increased accordingly at the financial year-end.
The critical factor in the successful operation of the DSM scheme is that Head Teachers receive regular financial reports on which they can understand and rely. It is absolutely essential that Head Teachers are aware of their projected financial position at all times during the financial year in order to manage their devolved budget within the prescribed carry forward limits
The partnership between the Head Teacher, school administrative and clerical support staff and the financial support officer is therefore critical in the successful management of the devolved school budget
The integrity of the devolved budget and the related transactions in the ledger are therefore critical factors
At the end of the financial year when all financial transactions have been processed it is the net expenditure variance figure in the ledger which will be the surplus or deficit figure. This figure will be added to or subtracted from the surplus/deficit brought forward from the previous financial year.
The year-end accounting entries are contained within Annex 7A. (Word document)