Budgeting and finance in children’s homes

By John Burton

Date Posted: 14th June, 2012

John Burton is an independent social care consultant and a widely published author on matters to do with social care. His website can be found at www.standardsfor practice.co.uk

Working notes on Budgeting and finance in children’s homes

by John Burton

The money side of care cannot and should not be cut off from the therapeutic body of care. A children’s home that is set up with the primary task of making a profit will fail the children. Equally, a children’s home that is set up with no regard for sensible finance and where money is no object will also fail the children, although it may be more difficult to understand why.

The children and young people living in children’s homes will have been deprived of many of the essential ingredients of childhood and infancy: consistent love, relationships and value, food and comfort, healthcare, education, and material provision that is sufficient and reliable. The job of the children’s home is to provide some or all of these missing elements to support the child in healing and growing, and becoming stronger and more whole as a person growing up.

The income of the home must match the outgoings. To begin with much more money has to be invested and spent than will come in. A building and team have to be there ready to accept the first residents. The home will not be full from day one. This investment must be recouped and interest paid on borrowings.

There will be constant fluctuations in income and expenditure as people (staff and children) come and go. As a home becomes established the fluctuations should begin to level out. The staff stay longer and an effective team is built; a consistent way of working based on tried and trusted theory and method is established. Getting to this point entails huge investment and commitment not only of money, but of time, energy, ideas, belief and emotion. Proprietors, managers and staff who keep faith with the vision of a therapeutic children’s home and build a team, a home and a way of working will all have invested very heavily. The process will have had a profound affect on all their lives.

In a small children’s home (3 – 5 children), the effect of just one child coming or going can increase or decrease income by as much as a third. This makes such small homes too vulnerable to the whims and financial instabilities of placing authorities. A change in placement/commissioning manager can quickly undermine the financial viability of a small children’s home and threaten the good care of the remaining children. While some expenditure can be adjusted to occupancy, staff costs (accounting for well over 50% of outgoings) should not be subject to short-term fluctuations.

Consistency and reliability are essential for the children, and to work in this way, staff too need the same from their employer. If the employer demands short-term fluctuations in expenditure, the staff will inevitably respond with short-term fluctuations in their commitment. Very quickly mistrust and relationship breakdown spread through the organisation, depriving the children of the essential care and concern that the home is there to provide. In no time, the placing authorities (who arguably may have caused the crisis in the first place by underfunding) are withdrawing children and/or the children themselves make their placement untenable. Back to square one!

This whole scenario arises from the failure to make money and resources an integral part of the therapeutic social ecology of the children’s home, and thereby an essential part of the manager’s responsibilities. The manager – and, to some considered extent, the staff and children – must have responsibility, accountability and control over expenditure, and it must be within the manager’s remit to plan spending over whole year periods.

In order to plan and to make this work (and make the home work), the manager must be given the financial information. This information itself is not complicated: whole income, whole expenditure, investment and expected profit margin or surplus. The manager must know exactly what is spent on staff including additional costs such as NI, and be able to review monthly figures. Similarly for food, cleaning materials, maintenance, recreation etc. The figures for staffing are readily available because staff are paid every month. Some of the other expenditure may not be accounted for under separate headings, but this can be achieved very easily. The system must be designed for and adapted to the primary task. If the manager is not given the full picture – everything – s/he will always suspect (and especially at times when spending is being cut back) that the proprietor is manipulating or exaggerating the figures to force urgent action. A feeling of panic and instability spreads.

Balancing income and expenditure over a period of time (not weekly or monthly but annually) is essential to the therapeutic task. Care must be costed and paid for. If a conscientious and honest provider cannot provide good care (and make a modest profit) for the money paid by placing authorities, then I would argue that they should not continue the attempt because the care will not be good enough.

The provider (unless directly managing the home) is not in a position to make the daily/weekly/monthly judgements and decisions about spending because s/he cannot be sufficiently in touch with the immediate needs of the children and the home as a whole. But if the manager doesn’t have the information about income and expenditure which would enable him/her to make these essential decisions and to plan ahead within the proper limitations of the income, the home and its task will be perpetually undermined by a “feast and famine” culture which is no way to do the work.

John Burton

June 2012