Analysis of Balances - 31st March 2007

Schools were consulted in the autumn term about whether Norfolk's Scheme for Financing Schools should include a balance redistribution mechanism whereby excess balances are redistributed amongst all schools. Schools were also consulted about simplifying the current balance control mechanism, if it was decided to continue to have one.

Following publication of the consultation document, the DfES announced that it is to be mandatory for all Schemes for Financing Schools to include a balance control mechanism.

The proposals have been considered by; schools, the Schools Forum and by Children's Services Review Panel and the views of each of these will be taken into account when Cabinet members are asked to agree the proposals when they meet on 29 January 2007.

The proposals to simplify the current balance control mechanism have been agreed so far and are expected to be agreed by Cabinet. Schools, therefore, need to plan on this basis for any surplus balances likely to be held at 31 March 2007.

The proposals are set out below:

Proposal

Contingency

It is proposed that any balance control mechanism in the future would allow all schools to carry forward surpluses up to 5% of the school's final budget share or £20,000, whichever is the greater. The minimum of £20,000 is set at a level that would allow smaller schools to continue to employ a teacher for the summer term when falling rolls mean that staffing would need to be reduced in the new academic year. In the case of a temporary fall in pupil numbers, where a school wished to maintain staffing throughout the academic year, any further funding shortfall could be met through a licensed deficit budget, subject to the usual criteria.

• To provide schools with contingency funding, schools can carry forward surpluses up to 5% of their final budget share or £20,000 whichever is the greater.

Building Fund

A feature of Norfolk's current Scheme for Financing Schools is that schools that do not belong to the Building Maintenance Partnership Pool have been permitted to retain a maximum of £250,000 or £450 per pupil, whichever is the lower. Schools display prudence in setting aside sums for potential crises (problems with boilers and roofs are usually cited) although, in practice, the actual amounts can vary considerably.

When school surpluses are featured in the local press the reasons why large sums are retained for this purpose are not usually mentioned. The Local Authority is prepared to set up a fund where schools can deposit money they wish to put aside for any aspects of building maintenance. Schools that do not belong to the Building Maintenance Partnership Pool would be permitted to deposit a maximum of £250,000 or £450 per pupil, whichever is the lower, as in the present scheme.

By introducing a new Building Maintenance Fund, the Local Authority can both reduce the headline figure of school surplus balances whilst ensuring that schools have the reassurance that any unforeseen building-related matter can be dealt with from the monies they have deposited in this fund. In effect, it would operate as a banking account from which withdrawals for necessary building works could be made at any time. Joining the Fund would remain voluntary but interest would be payable on these funds at the same rate as for schools' year-end surpluses. Funds deposited must be used for building works.

Funds in the Building Fund would not be counted as part of the 5% or £20,000 of the school's final budget share mentioned in the main proposal above.

Each school's contribution to the Fund would be held as an earmarked sum and schools would access their monies in the Fund by sending invoices to Children's Services' Finance for payment. It was not envisaged that this will cause any additional administrative burden to schools, as schools have to comply with CIS procedures for this type of work anyway.

• Schools not in the Building Maintenance Partnership Pool are able to lodge monies with the Local Authority up to a maximum of £250,000 or £450 per pupil whichever is the lower. This money will be released at any time on production of an appropriate invoice for maintenance or building works that would have been covered by the BMPP scheme. Interest will be payable on monies lodged in this way.

Sources from Outside the Budget Share

Schools would be allowed to carry forward any monies derived from outside the budget share, eg LSC sixth form funding or contributions from parents for school trips, where expenditure will not be incurred until the following year or surpluses arising from providing community facilities.

• Schools are allowed to carry forward any monies derived from outside the budget share.

Local Seed Challenge Bids

Schools would be allowed to hold monies to support a Local Seed Challenge bid in accordance with the Authority's rules for the scheme.

• Schools are allowed to hold monies to support a Local Seed Challenge bid in accordance with the Authority's rules for the scheme.

Exceptional Circumstances

Where a significant individual allocation is made after 1st February amounting to more than 1% of the school's final budget share, authorisation could be given by the Head of Children's Services' Finance to carry forward this amount with a right of appeal to the Schools Forum.

• Schools are able to carry monies forward in exceptional circumstances with authorisation from the Head of Children's Services' Finance, where any individual allocation amounted to more than 1% of the final budget share and was allocated after 1st February.

The following categories will continue to be allowed, as DfES rules state that Standards Fund and School Standards Grant (Personalisation) monies can be spent up to 31 August in the following financial year and because of the particular liabilities VA school governors have in relation to capital works.

Standards Funds/School Standards Grant (Personalisation)

• Schools are allowed to carry forward any unspent Standards Fund or Schools Standards Grant (Personalisation) monies in accordance with DfES regulations. This does not include funds for personalized learning allocated within the budget share and itemised in the SEN Memorandum.

Voluntary Aided Schools' Capital Liabilities

• Voluntary Aided schools are allowed to carry forward monies to fund the governors' liabilities towards DfES grant aided capital works. Evidence of the cost and timing of the project will be required to support this.

N.B. In line with the current scheme non-VA schools will not be able to carry forward revenue balances for capital projects. Schools can however use revenue for capital in year, schools must have incurred capital expenditure equal to or greater than the amounts transferred and, once transferred, monies cannot be transferred back to revenue, in a following year.

Redistribution

Any surplus balances not retained by schools for these purposes will be distributed to all schools through AWPA funding.