Governor Finance Induction Training School Funding Team Name of Presenter

Session Objectives By the end of this session you will be familiar with: Governing Body responsibilities The reporting requirements for schools throughout the year Local Authority Protocols Deadline dates for submission of returns How to access further written documentation on the topics covered during the session via the Bradford Schools Online website Governors wishing to learn and understand more about school finances can book onto the Effective Financial Governance Course. Contact Governor Services for information.

School Funding Team What is the role of the School Funding Team (SFT)? We aim to continuously improve the financial management and controls in Bradford Schools via effective monitoring, support and challenge Reduce the number of schools reporting deficits and excess surplus balances Support & challenge delivered according to the risk posed by the financial position of the school (e.g. at risk of deficit) SFT provides a ‘helpdesk’ for schools on all aspects of school financial management and reporting SFT carries out school visits in line with ‘Protocol’ requirements Manage Bradford’s School Forum and the calculation of school delegated budgets

Role of the Governing Body Provide “strategic direction” Meet statutory responsibilities Set the school financial (and educational) priorities Approve and monitor the school’s budget (revenue and capital) Establish limits of delegated authority. In practice many responsibilities delegated to Head Teacher – governors need to understand their role Ensure accurate financial accounts are kept Determine the staff complement and the pay policy for the school Determine other school policies e.g. lettings Act as a ‘critical friend’ to the Head Teacher by providing advice, challenge and support Comply & participate in completing the Schools Financial Value Standard (SFVS) Respond to the LA consultations on formula funding changes. (Many changes within education finance since the introduction of the Coalition Government)

Role of the Finance Committee Set financial priorities through the: School Development Plan 3 Year Financial Plan (also known as Governor Approved Budget) Annual Budget Propose or decide how the school’s delegated funding should be spent Approve and monitor the annual budget Revising the annual budget where significant changes have occurred since approval Ensuring the budget is managed effectively (control of balances) Ensure the school complies with the LA financial regulations Determine virement and expenditure thresholds Evaluate the effectiveness of spending decisions & value for money Ensure accounts are properly closedown at year end Administer voluntary / private / company funds

What is the Schools Financial Value Standard (SFVS)? The SFVS has been designed in conjunction with schools to assist them in managing their finances and to give assurance that they have secure financial management in place. Governing bodies have formal responsibility for the financial management of their schools, and so the standard is primarily aimed at governors. Maintained schools are required to complete the SFVS once a year For all maintained schools, the first run through was required by March 2013. An annual review is required thereafter. The DFE website includes two versions of the SFVS assessment form, both of which can be downloaded. One version includes embedded support notes, the other is simply the assessment form. Schools are free to use either version. The support notes can also be downloaded from the SFVS section of the DFE website. (http://www.education.gov.uk/schools/adminandfinance/financialmanagement/Schools%20Fi nancial%20Value%20Standard) Once completed the SFVS document should be submitted to Bradford Council Audit Division no later than 31st March each year. The LA should use schools’ SFVS returns to inform their programme of financial assessment and audit. SFVS is mandatory and all maintained schools are expected to comply. Failure to do so could lead to the issue of a Notice of Concern and to withdrawal of budget delegation.

SFVS March 2013 Very mixed quality of returns; small number of ‘poor’ returns Of 171 returns: 105 schools gave a ‘NO’ or an ‘IN PART’ response to at least 1 question 5 questions where fewer than 90% of schools gave a ‘YES’ response (Qs 1, 8 12, 22, 23) Q23 (business continuity or disaster recovery plan and an up to date asset register and adequate insurance) - only 53% of schools responded ‘YES’ SFVS Outcomes are being built into the Council’s audit plan Further guidance / training will be available through School Funding Team

Schools Forum What is Schools Forum? Bradford’s Schools Forum is a representative group of Head Teachers, Governors & non school members established by statutory instruments issued by the Department for Education. Further Information is available online (Bradford Council minutes website) What do they do? Acts a body for Local Authorities to consult on School Budget related issues, such as formula funding and provision for the education of pupils with Special Educational Needs (SEN) Agree the “funding formula” and oversee the review of this (via the Formula Funding Working Group; FFWG and the Early Years Working Group; EYWG) and consultation with schools Make the recommendations on the allocation of the Dedicated Schools Grant (DSG) on an annual basis. This includes agreeing ‘topslices’ to school budgets for centrally managed funds and services that maintained schools can access Manage and monitor school deficit and surplus budget processes, through the Schools Financial Performance Group; the SFPG Consider changes in financial procedures and protocols e.g. the Scheme for Financing Schools, the Financial Classification of Schools, Light Touch Financial Monitoring and Intended Use of Balances

The Financial Year – What happens when? Indicative S251 Budget Statement issued to schools by LA in February Final S251 Budget Statement issued to schools by LA in March Return Date to be submitted to LA each year 3 Year Governor Approved Budget 15 May Q1 Budget Monitor & Bank Reconciliation 31 July Q2 Budget Monitor & Bank Reconciliation 31 October Q3 Budget Monitor & Bank Reconciliation 31 January Q4/Year End Bank Reconciliation April (exact date confirmed Spring Term) Intended Use of Balances Documents (excess surplus balance information) Schools Financial Value Standard 31 March Consistent Financial Report (Annual Return to DFE) June (exact date confirmed Spring Term)

What is the S251 Budget Statement? The S251 Budget Statement is the documentation issued to schools which details their funding for the financial year. Significant changes to the way schools are funded have been implemented for 2013-14 > a move to a more simple, national funding formula The majority of funding a school receives is based on pupils numbers – the more pupils on roll, the higher the funding (volatility also?) Other factors contribute to a school’s funding allocation towards the budget (these are shown separately on each S251 Budget Statement), including: Deprivation levels (FSM and IDACI); FSM influences levels of Pupil Premium funding Special Educational Needs Levels of mobility Pupil Prior attainment Rates (actual cost) Funding is grouped together in types (CFR codes): I01 – Funds delegated by the Local Authority I02 – Funding for 6th Form Students I03 – High Needs Top Up Funding I04 – Funding for Minority Ethnic Pupils I05 - Pupil Premium

School Funding Reform - significant changes from 2013/14 The DfE has announced the intention to move to a ‘national funding formula’ for schools in the next spending review period All local authorities have been required to implement significant changes to local formula funding arrangements from 1 April 2013, to ‘prepare the way’ Bradford’s Schools Forum made final recommendations on our Primary, Secondary Early Years, and High Needs funding formulae for 2013/14 in January 2013. A number or aspects, especially concerning High Needs provision, are to be further reviewed during 2013/14, in time for implementation at April 2014

School Funding Reform – key changes for 2013/14 School budgets are based on the October 2012 pupil count, rather than the January 2013 count Our funding formulae for Primary & Secondary schools has been simplified; reducing the number of factors from 37 to 10. Funding allocations for high needs providers for pupils and students (aged 5-25) has been moved to the ‘Place-Plus’ model and will be calculated monthly The Minimum Funding Guarantee (MFG) has been set at -1.5% per pupil in 2013/14 and 2014/15, limiting any reduction in funding from the previous year for individual schools to 1.5% per pupil The funding of centrally managed services has been restricted, leading to a greater level of delegation to schools to make their own arrangements. Certain central funds continue e.g. maternity

What is a Budget Monitor? The Budget Monitor records the following information: Original Governor Approved Budget Governor Approved Revised Budget (if applicable) Spend to date (end of each quarterly period) Forecasted Spend Projected Outturn – balance remaining at the end of the financial year Outturn (balance) in relation to the excess surplus balance threshold The Governing Body should expect to see the Quarterly Budget Monitor each term before it is submitted to the LA

What is an ‘excess’ surplus balance? Bradford LA operates a scheme to manage excess surplus balances. This is called The Surplus Balance Protocol. Please note that the Protocol is currently under review and is likely to change for balances held at March 2014. The next few slides explain the current Protocol. At March 2010 the total surplus balance within Bradford it was £21.3m. At March 2011 the figure for Bradford was £24.6m. At March 2012 the figure for Bradford had risen to £25.2m At March 2013 the figure for Bradford has fallen to £22m Currently, Primary, Nursery and Special schools can hold up to 8% of Section 251 Funding (subject to change for March 2014) Secondary schools can hold up to 5% of Section 251 Funding (subject to change for March 2014) The 8% 5% are ‘limits’ not ‘targets’ DFE Guidance is ‘most Primary schools should be able to manage with balances of 4-5% and Secondary schools with 2-3%’

How do we know if our projected surplus is over or under the limit? The Governor Approved Budget template includes an alert to show if your projected surplus balance is over the limit The Budget Monitor template includes a calculation table (see below) to identify if the surplus balance is over or under the limit. Governors should check this on every budget monitor presented to them Change in Forecasted Carry Forward March 2014 Q1 Monitor vs. Original Budget £71,750 Change in Forecasted Carry Forward March 2014 (as a % of I01-I05) Q1 vs Original Budget 6.70% Forecasted Carry Forward Balance March 2014 as % of I01 – I05 Funding 9.53% Cash Value of Forecasted Surplus Balance at March 2014 over/under 5% (Secondary) / 8% (Nursery, Primary, Special) £16,400

What happens if a school exceeds the limit? Where a school identifies that their surplus balance will exceed the threshold at Year End they should refer to their School Development Plan (SDP) priorities and endeavour to utilise the excess within the financial year If a school is unable to spend the excess surplus within the financial year and the Governing body wishes to carry the balance forward to the next financial year they should adhere to the Surplus Balance Protocol in that they must: Meet, before the 31st March, to discuss and agree the SDP priorities upon which the excess surplus balance will be spent in the next financial year Ensure these plans are clearly minuted and where possible include costs and timescales for completion Complete the Intended Use of Balances (IUB) Schedule Template issued by the LA; this details the plans and costs within set categories Submit the Schedule, Minutes and any other evidence to support the plans to School Funding Team no later than 31st March

What happens if we do not take action? Where a school fails to comply with the Protocol at any point within the process, they may be at risk of ‘clawback’ School Funding Team recommends that Governors download the Surplus Balance Protocol from the Bradford Schools Online website to ensure they are familiar with this

What happens if a school projects a deficit balance? Bradford LA operates a process for managing deficit budgets. This is called the Deficits Protocol Bradford LA has a ‘zero tolerance’ style stance towards deficits If at any point during the year a school reports a deficit balance they must contact School Funding Team An SFT Officer will undertake a visit to the school and meet with the Head Teacher and a member of the Governing Body to discuss whether the school can take immediate action to bring the budget back into balance before year end Where it is not possible to do this the school must make a ‘formal application for deficit’ This application will identify cost savings and when the budget will be back in a balanced position If the school cannot produce a plan which achieves a balanced budget position the LA will work with the school to produce a repayment plan which achieves a balanced budget whilst ensuring the progress of pupils is not compromised The Deficits Protocol can be downloaded from the Bradford Schools Online website (BSO)

Efficiency & Value for Money With the current economic climate, the DFE expects schools to make savings through increased effectiveness and value for money Schools should consider how they can collaborate with each other to help towards achieving these savings. By collaborating on both a formal and informal basis, schools can raise standards and maintain local provision Schools working together can generate efficiencies by providing an opportunity to pool funding, purchase goods and services jointly, share staff, functions, facilities and technology across sites. Benchmarking can help schools identify where their spend is significantly different to other similar schools and where savings and efficiencies could be introduced, thus achieving greater value for money Value for money is not simply buying goods and services for the cheapest rate. It is maximising resources, improving efficiency and utilising budgets effectively to directly improve the teaching and learning of pupils There are websites and guidance documents available. Details of how to access these is provided later in this presentation

Consistent Financial Reporting (CFR) CFR is the acronym for Consistent Financial Reporting This refers to the national Government prescribed standard coding structure in place for all Local Authority Schools There are codes to define types of income and types of expenditure, for example: Income Expenditure I01 Funds delegated by the LA E01 Teachers Salaries I08 Income from Facilities & Services E12 General Maintenance All financial returns to the Local Authority are made in this format. School Funding Team issues templates for all returns based on this standard

Annual CFR Return Once the financial year has closed and the school and the LA has agreed on the closing balance, all LA Schools must submit an annual return in the CFR coding format The return details the total funding, income, expenditure and balances recorded for the school for the financial year The return is submitted to the DFE via the COLLECT website The exact deadline for submission varies each year but usually falls in early June What is the CFR Return used for? Both the LA and the DFE use the data to produce benchmarking information The LA also uses the data to compile the Financial Classification of Schools category for each Bradford School

What is benchmarking? Benchmarking is the comparison of financial data between schools to allow financial performance to be accessed and for best practice and value for money to be identified, shared and encouraged The DFE benchmarking tool allows schools to compare themselves to other schools throughout England The LA benchmarking tool allows schools to compare themselves to other schools within Bradford You can compare your school to others based on pre-determined clusters grouped on percentage of ethnic minority pupils and free school meals, or simply on size or interest in a particular school Benchmarking is updated on both a national and local level each year. The local benchmarking data is available on the BSO website. The Finance Committee should expect to see and review this data at least on an annual basis

What is the Financial Classification of Schools? The Financial Classification process is a method employed to identify risk and support needs It allows the LA to identify those schools facing the highest level of financial challenge. The LA provides these schools with additional support. Schools are then placed within a Category to identify which level they fall into. How is the Financial Classification calculated? The financial classification is based on a number of factors: Closing balances for the last 2 financial years Forecast balances for the next 3 year budget period Accuracy of forecasting balances at Q3 compared to final actual balance There are 4 categories A, B, C, D with A being the highest level of support and D being the lowest level of support

Deadline Dates Each return due from schools has a specific deadline date Schools are informed of the deadline dates in the Timetable of Key Dates document and also within the information provided with each report template What happens if a return is late? The LA operates a Light Touch Financial Monitoring Scorecard (LTFM) Where reports are late or inaccurate points are issued to the school Points Colour Action Less than 20 Green No action Over 20 less than 40 Amber Termly contact with Head Teacher 40 or more Red Half termly contact with Head Teacher An example of points issued are Late VAT Submittal = 5 points; late budget monitor = 5 points The finance Committee should expect to see the Scorecard position of the school each quarter

Questions to ask your school Following this session you may wish to ask your school the following questions: Are the pupil numbers stable? Which of the 4 Financial Classification Categories is the school currently placed in? How many points are on the school Scorecard? Does the school currently have an approved Scheme for Intended Use of Balances (i.e. was the surplus balance at March 2013 over the 5% 8% limit?) Is the forecast balance for March 2014 near to or over the 5% 8% limit?

Any Questions? If you have any questions about the topics we have covered during this session please feel free to ask them now

How to access guidance notes and documents We have covered a number of topics during the session and more detailed information is available to you on these and other topics via the Bradford Schools Online (BSO) website We recommend you look through these in order to cement your understanding of the information provided today and also to expand on the information You may also wish to revisit information once a term to ensure you are up to date with any changes in policy. Since the introduction of the Coalition Government there have been a number of changes and we anticipate further changes will take place. The most up to date information available will be placed on BSO at all times. Website address: https://bso.bradford.gov.uk/schools/home.aspx From the home page go to: Site Content – Finance – SFT Guidance – School Governor Induction Documentation

Documents available to view and download: Role of the Governing Body Governance & Accountability HCSS Strategic Financial Planning Guide Audit Commission-Keeping Your Balance Benchmarking (example) The Effective Financial Governance Course Efficiency & Value for Money Governor Approved Budget (Example) CFR Report (Example) SFVS –Schools Financial Value Standard Introduction to Formula Funding Documents to request for your school Glossary of Key Terms Useful Websites School Funding Team Contacts BSO Document Navigation Schools Balances Deficits & Surpluses Schools Forum Protocols & Statutory Framework Training Session Powerpoint presentation Accounting of VAT Timetable of Key Dates

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