Training Budget: Which Pending Requests Fit Under the Cap
A district training office holds an approved annual budget of £248,000. At the end of month 9, £186,400 has been committed. Standing policy caps year-end spend at 102.5% of the approved budget; anything above that requires escalation to the board. Unavoidable running costs for months 10–12 are forecast at 18% of the annual budget. Three requests are waiting: a £22,500 statutory compliance course that cannot be deferred, a £14,800 leadership programme, and a £9,600 software licence renewal. The last two can be pushed into next year at no penalty beyond a 4% price increase. The finance officer must decide, today, which requests can be approved in-year without triggering escalation.
1. What is the maximum in-year spend permitted, and which requests can be approved?
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Cap: £248,000 × 1.025 = £254,200.
Headroom: £254,200 − £186,400 = £67,800.
Months 10–12 running costs: 0.18 × £248,000 = £44,640.
Discretionary room: £67,800 − £44,640 = £23,160.
- Compliance £22,500 → fits, leaving £660.
- Leadership £14,800 → would fit on its own inside £23,160, but not with compliance (£22,500 + £14,800 = £37,300).
- Licence £9,600 → same problem; both deferrables together (£24,400) already exceed £23,160.
Decision: approve the statutory compliance course only; defer the leadership programme and the licence. Note the entire discretionary pot is £23,160, so any further in-year request automatically triggers escalation.
2. The leadership sponsor argues that deferring is cheap. Test that claim against funding the deferrable items this year.
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Deferral cost: 4% × (£14,800 + £9,600) = 4% × £24,400 = £976.
Funding them in-year: compliance + both deferrables = £22,500 + £24,400 = £46,900, against £23,160 available - a shortfall of £23,740.
Because months 10–12 running costs are described as unavoidable, that gap could only come from cutting them from £44,640 to £20,900, a 53% reduction.
Even the smaller step fails: adding the leadership programme alone to compliance leaves a £14,140 gap (a 32% running-cost cut); adding the licence alone leaves a £8,940 gap (20%).
Conclusion: paying £976 next year is far cheaper than any credible in-year saving. Defer both.
3. A colleague rounds every figure to the nearest £1,000 and reaches the same answer. Is the decision actually safe?
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Rounded check: budget 248, committed 186, cap 254, headroom 68, running 45, discretionary 23 versus a 22.5 request. Margin £0.5k - same sign as the exact £660, so £1,000 rounding does not flip the answer.
The exposure is forecast error, not arithmetic. Each 1 percentage point on the running-cost line is 0.01 × £248,000 = £2,480, so an overrun of just 0.3 points (18% → 18.3%) consumes the £660 margin and breaches the 102.5% cap.
Judgement: approve compliance, record that it absorbs 100% of discretionary room, freeze all non-statutory spend, and re-forecast running costs at month 10 before confirming. Do not describe the position to the board as comfortable.