Dealing with a deficit

Setting a deficit budget and deficit recovery plans

Hampshire’s Scheme for Financial Management of Schools states schools must not plan for a deficit budget. A deficit budget is where the net balance of all the cost centres is in an overall negative position. It is important to note there is no additional funding available to support schools that go into deficit as schools must work within their allocated budget. Should the school be in an unfortunate position and require to set a deficit budget then this must be recovered as quickly as possible to minimise the impact. EFS can support the school providing advice and guidance.


If the school sets a deficit budget the procedures detailed below must be followed:

  1. The school should discuss the matter with EFS at the earliest opportunity and in advance of governors approving a deficit budget. Before agreeing to the school setting a deficit budget, EFS will need to be convinced that the deficit is indeed unavoidable, and that the school will produce a recovery plan to clear the deficit within three years.
  2. Once a deficit budget has been agreed in principal this would be subject to producing a satisfactory recovery plan by 31 May showing the school coming out of deficit by the end of the third year ie. a maximum of two years in deficit. The recovery plan will need to incorporate a summary of key actions and assumptions being taken. EFS will closely monitor the effectiveness of the recovery plan.
  3. Once EFS has provided approval for the school to set a deficit budget, the deficit budget plan must be approved by the full governing body and uploaded into the IBC portal by 31 May.

For further details regarding setting a deficit budget please refer to the guidance notes (to follow shortly).


After the budget approval the school will be required to send EFS quarterly monitoring reports for the periods ending 30 June, 30 September and 31 December. The quarterly monitoring reports will need to be signed by both the headteacher and chair of governors and submitted to EFS within one calendar month of the quarter end date. Further
deficit quarterly monitoring return guidance notes are available.


When drafting a deficit recovery plan the school should use HCSS Budgeting. If the school does not have access to HCSS Budgeting then this template should be used. HCSS Budgeting or the prescribed template will both need to be accompanied by the agreed recovery plan outlining and quantifying the actions taken to make savings or increase income. Depending on circumstances EFS may ask schools for a more detailed submission and/or additional data, if needed.