This paper examines the effects upon management control in schools following the assumption of responsibility for delegated budgets required by the Education Reform Act (ERA) 1988. The paper examines the process of construction, approval and amendment of school budgets drawing on a neo‐institutionalist framework. Our investigation has drawn upon extensive interviews in 17 schools in three North West local authorities, supplemented by a postal questionnaire and inspection of relevant documents. We develop two main arguments. First, in order to satisfy their statutory duties LEAs supervised the introduction of internal systems of budgetary control and school development planning in schools. Thus, control procedures were largely designed by internal auditors, who sought to provide an audit trail and to ensure financial probity mainly to satisfy external legitimacy, rather than to influence internal decision‐making. Second, the specific nature of the relationship between budgeting and strategy varies between schools as the extent of formalised planning differs, but in general there is a very loose coupling between strategic objectives and budget expenditures.