Value for money
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Last updated 31 August 2004
The Schools' Standards and Framework Act 1998 has made changes to the ways in which schools are funded. A greater proportion of funding is now devolved to schools for them to spend. At the same time, there has been a strong focus on the need for schools to ensure greater value for money in securing their resources.
What is value for money?
There are three main elements of value for money, commonly referred to as the 3 Es: economy, efficiency and effectiveness. However, the distinction between the three is often not clear cut.
Economy
Minimising the costs of resources used within the public sector, but having regard to quality.
Example: Were school supplies, of the quality specified, purchased at the best price?
Efficiency
The relationship between output, in terms of goods, services or other results, and the resources used to produce them.
Example: Were the costs of the school meals service minimised, whilst enhancing the nutritional quality of lunch provided to pupils?
Effectiveness
The extent to which objectives have been achieved. The relationship between the intended impacts and actual impacts of an activity.
Example: Did the education programme improve examination success rates?
Value for money and schools
All staff in schools should be looking at what money is being spent on, in order to question whether they are achieving value for money.
The concept of value for money is now embedded in all public sector organisations. Organisations must demonstrate how value for money has been achieved in the use of their resources.
The move towards financial delegation in schools has incorporated schools' management of their own resources. Head teachers can respond to this in a number of ways. For example, choosing between spending options, rationing the availability of a service or new resource (e.g. computer equipment), or considering how they can improve cost-effectiveness. By assessing value for money, schools may be able to free up resources for other uses in support of the school development plan.
The introduction of best value in LEAs, and by schools, is an important framework helping the education service to achieve value for money.
Achieving value for money
When looking at value for money, schools need to answer three questions.
1. Are we sure that our financial procedures are sound?
2. Are we choosing the right things to spend money on, reflecting the school's overall priorities and strategy?
3. Are we making sure that the money we spend is spent well? Do we know whether it achieves the desired results?
In order to deliver value for money in their use of resources, schools should have in place:
· Sound financial management practices for the control of resources and for their accounting
· Organisation of school operations to ensure that the resources available are used in a way that maximises their effectiveness
·
Strategic management skills that allow the school to respond to a changing
environment: to innovate and introduce new initiatives.
Resources used inefficiently in one part of school management will, inevitably, deprive other areas of resources which could be put to better effect. Value for money goes over and beyond the price a school pays for its services, or the quality of goods received. Value for money is delivered by the organisation and management of the whole school. Improving value for money will involve applying the principles of the 3 E's across the school's operations. It also asks questions about how well the school is doing in relation to these principles.
For more information on how the DfES is supporting schools in achieving value for money, visit the Value for Money website. It contains further information on value-added performance data, benchmarking and best value.
Main text
Legislation
Further information
