We covered this kaupapa in more detail in a previous pānui, but with the number of enquiries we’ve received recently, we’re happy to share it again—just let us know if you’d like a copy.
In the meantime, here are a few quick pointers:
Separate the Operating Budget from Capital Expenditure.
Identify fixed costs for the coming year. Use a highlighter to mark expenses unlikely to change, such as power, audit fees, insurance, and board fees.
Set a default outcome for the Operating Budget. Aiming for an end-of-year surplus of 3% of the Operating Grant is a good starting point. This keeps the budget proportional to the size of the school while ensuring income received that year is used for its intended purpose, with a small buffer to manage risks.
You can ask your Edtech Accountant to provide a template, pre-populated with predicted income, to make the process easier.
Minimum Working Capital
We are often asked about how much money the Board needs to set aside (reserve) for safety. Over the last thirty years, we have heard widely different answers. Edtech does NOT recommend a figure of $1,000 per ākonga/student. Instead, we suggest these steps:
Conduct a simple SWOT/Risk assessment. The Ministry now uses a matrix to identify kura that might need extra help, and this is a good tool for any Board. Their indicators for increased risk are: change of leadership, significant recent capital expenditure, overcommitment to board-funded staffing, and roll drop. We are singing from the same songbook!
Check how much working capital is actually available. This is clearly stated on every monthly Financial Performance report.
Agree on a minimum reserve which reflects the identified level of risk and is proportionate to the size of your school, and minute the decision.
We recommend using this formula:
For a low level of identified risk: 25% of Operating Grant—in theory, enough to run the school for one term.
For a greater level of identified risk: 50% Ops Grant—in theory, enough to run the school for two terms.
