The need for clear leasing guidance

The changes in schools’ financial management over recent years have been two-fold. Increasing autonomy means that schools now have to be astute investors and secondly, the annual increase in investment over previous years has led schools, parents and students to have a high level of expectation for new resources, both hardware and software.
Schools have therefore been looking at using various routes to manage their budgets, with leasing as an option. Using leasing to manage their own procurement and cash flow and spreading the cost of resources over a number of years certainly helps schools by giving them the ability to acquire the technology they need now, rather than waiting until funding arrives. In terms of having the latest technologies in each classroom, the majority of available leases for school equipment allows for technology upgrades, enabling schools to manage the longevity of their products.

Depending on the term of the lease, as new equipment becomes available schools can upgrade to the latest models, often at the same monthly fee. Of course, the upgrade usually comes with a new fixed term contract, but many ICT equipment leasing programmes schools have the flexibility to add-on extra computer equipment, or upgrade current equipment.
Another popular advantage of leasing in schools is the ability to forecast expenditure. In the event that an item needs replacing quickly, such as a server, schools can do so with a relatively minor monthly adjustment to the budget, instead of a lump sum that could seriously affect cash flow.
Leasing is also inflation friendly. Although inflation will be built into the lease, it is based on the current cost of the products rather than how much they will cost at the end of the contract. Of course, with the price of many ICT products falling, this could equally be a disadvantage.

The justification for leasing in schools appears to be irrefutable, if government guidance is clear and only reputable financial service providers are used. For these reasons, we are currently calling on the government to clarify its guidance to schools on leasing.

As previously mentioned, schools are currently only able to use operating leases. An operating lease involves the school paying a rental fee for the hire of an asset for a period of time, similar to a rental agreement. Schools are therefore not allowed to take out a finance lease which can be likened to a loan. The products are owned by the school and should be reflected as such in its accounts.
We believe that the government can achieve substantial savings in school budgets by making a small change to the current leasing and finance guidance it provides to schools. By amending current leasing guidance to reflect industry best practice, schools will be able to secure better value leasing contracts that are more relevant to their educational needs. These changes would also help to achieve multi-million pounds savings across the sector, supporting the government in the delivering of its publicised efficiency targets.
New guidance supported and promoted by this industry, would also ensure that schools benefit from clearer, simpler guidance, and cut down on the mismanagement of leasing arrangements by schools that have recently been publicly highlighted.
BESA is working with the government to ensure that leasing contracts are straight forward, transparent, and cannot be altered by a finance company at any time during the term of the lease. We will keep you updated on any changes.
In the meantime, if in doubt, always ensure the supplier and leasing company are BESA members. This will mean they are signed up to a code of best practice business operation, fully understand the sector’s needs and will have access to invaluable support.