Management Information Sheet
Changes to the RAG rating
The EducationFinance team is always looking to improve our service and not rest on our accomplishments. As part of this we have undertaken a complete review of the RAG process, and we are delighted to introduce to yourselves what has been agreed but also explain why the need for the review and update.
What is the RAG
The RAG is a tool the EducationFinance team use to measure the financial risk for each Local Authority School. There are a number of categories that we review covering all areas of the financial management against a 4-phase rating system, which is reviewed all together to come up with an overall rating for the school.
The review is completed after the completion of each term and is calculated by looking over the past 12 months, this is to ensure ratings aren't too volatile, and previous both good and bad practise are recognised.
Why have a RAG
Norfolk County Council have an obligation to the DfE to ensure our schools are managing their finances, made up from public funds, appropriately and within both their guidelines, for example budget submissions, but also our own NCC requirements. The RAG measures the risk that these public funds are under, as well as offers an overview of the financial state of a school, not just based on the budget out turn.What are the ratings
There are 4 ratings that can be given both overall and for each section.
- Red - being the highest risk
- Amber 1
- Amber 2
- Green - being the lowest risk
Each of the ratings given for each section shouldn't come as a surprise for the school, as a combination of the matrix being in place and a visible tool for the school, and also the ratings being completed after each term.
Why the need for change?
The RAGs have been in place for several years, however as the landscape of the education sector has changed, the RAG required updating in certain areas, which was impacting on the whole process and purpose.
A team was put together of EducationFinance staff along with representative from the three major stakeholders of schools, finance staff, headteachers and governors. The scope was to review everything from whether the RAG was still needed, to reviewing every question and areas not included under the old matrix.
We also wanted to ensure there were no grey areas in the RAG. If your schools are being rated, we wanted to be clear how those judgements have been made, and also informing you know about them in advance.
The new matrix
The first decision was made that the RAG was still an important tool, and therefore was still required. Following this decision, a robust review of each section was undertaken. The new matrix can be found attached to this MI sheet, but we have detailed some of the changes to explain the though process and reasons for the changes.3.0 Sustainable budgets
Previously called deficit budgets. This section we wanted to change the focus from the overall balance to the in-year balance, as well as not having an A2 rating. The change to sustainable over deficit is more of a shift to looking at the in-year position each year rather than the balance at the end of year 3. A budget that has a year 1 surplus of £300,000 but ends year 3 with a surplus of £1,000 although balances, isn't sustainable with large overspends.
If a budget balances in-year each year or is subject to only small changes, this will by default keep a budget in surplus. We have offered clarity around what a significant overspend looks like, and with 4% these scale per school regardless of size.
3.1 Staffing
Historically section 4.1, no other changes made.
4.0 Submission Statutory returns
The emphasis has been expanded to all statutory returns rather than just budgets. This section now covers SFVS returns, Analysis of balances and budgets. Analysis of balance is more important under the new mechanism coming into place this year, with all schools needing to explain all surplus amounts.
5.0 Leadership, Governance & Finance Staff issues
This section highlights where there is a change of staff with significant finance responsibilities, as new staff come with no/limited knowledge of that school, or even that role. We felt that it was important to distinguish between Headteacher/finance staff who have moved within Norfolk (A2) and those that are either new into Norfolk or new to that role with no previous experience (A1). This is why we have added A2 rating.
7.0 Norfolk Audit Service audits & Health checks
There will be more information coming out in the new term regarding this section. However, the group were very passionate that this section be reinstated into the RAG. This was because ultimately engaging in the audit process, ensured that basic financial controls and adequate finance practises are in place in the school, which are the foundations to allow school leaders to make informed decisions.
8.0 Themed audits
This section is important for schools to engage with, because it's a quick way for NCC to ensure that a particular topic, or issue can be reviewed in every school. The themed audit process and findings should be discussed at length and then applied to your school(s) to ensure there is a reduced financial risk within your school. It was agreed that we would include the themed audits that had a financial impact/focus.
11.0 LA Returns
We have expanded the explanation within this section to show what is being reviewed.
12.0 Governor Engagement
This section has been expanded to look at the engagement at finance visits all year round. This was increased on the basis that new information comes out all year round that has significant impact, whether it be grants, pay awards or other outside factors.
Training
There hasn't been a major change with this section, we have expanded the section that was Headteachers, to include all leadership, to encourage future planning and CPD opportunities to staff. There is also the inclusion of other finance courses delivered by other providers, however, to be included in the RAG evidence of attendance needs to be sent to the team, who will review the details and confirm whether or not it is appropriate enough to include.
This new RAG will take effect from 1 April 2023, with the first RAG issued on the new matrix from being the Summer 2023 RAG which is issued in September. The upcoming RAG you will receive shortly after Easter will be based on the old matrix.
If you require any additional information, please contact the EducationFinance Team on finance.support@norfolk.gov.uk or telephone 01603 307758.