1.1 The School Standards and Framework Act 1998 requires local education authorities (LEAs) to prepare schemes dealing with the financing of schools maintained by the authority. The scheme below sets out the rules governing the financial relationship between the County Council (the LEA) and its maintained schools. The scheme supersedes the financial elements of the Local Management scheme. Schools have been consulted and the scheme approved by the Secretary of State.

1.2 The scheme contains requirements relating to financial management and associated issues that are binding both on the County Council and on schools. From 1 April 1999 to 31 August 1999 the scheme applied to all county, voluntary, maintained special, grant maintained and grant maintained special schools maintained by the County Council. From 1 September 1999 the scheme continued to apply to such schools when they become community, voluntary, foundation, community special or foundation special schools.

1.3 The County Council is responsible for maintaining the schools covered by the scheme, and this includes the duty of defraying all the expenses of maintaining them (except in the case of a voluntary aided school where some of the expenses are, by statute, payable by the governing body). Although governing bodies are empowered to enter into contracts, in most cases they do so on behalf of the County Council as maintainer of the school and owner of the funds in the budget share. Contracts may be made solely on behalf of the governing body, when the governing body has clear statutory obligations; for example, contracts made by aided or foundation schools for the employment of staff.

1.4 Part of the way the County Council maintains schools is through the funding system put in place under sections 45 to 53 of the School Standards and Framework Act 1998 (see paragraph 2.1).

1.5 The County Council may retain an unallocated reserve within the ISB but must otherwise distribute amounts from the ISB amongst maintained schools using a formula which accords with regulations made by the Secretary of State. Details of the formula, with current values, are given in parts 4 and 5 of the local management scheme.

1.6 After each financial year, the County Council will publish a statement showing out-turn expenditure at both central level and for each school, and the balances held in respect of each school. Out-turn statements are subject to audit certification by the Audit Commission, and information in either type may be collated and published by the Secretary of State.

1.7 One copy of the scheme will be supplied to the Headteacher and one copy to the governing body of each school covered by the scheme, and any approved revisions will be notified to each school. All revisions will be approved by the Secretary of State for Education.

Principles

1.8 The County Council has adopted the following principles in respect of finance:

governors and Headteachers should have maximum freedom to determine spending priorities, including related decisions on the appointment of staff and the use of premises
governing bodies should have the incentive to plan future spending to meet longer-term needs and objectives by retaining unspent balances. However, balances should only be held for specific purposes and should not be excessive
schools should seek value for money in purchasing and setting charges
schools must account properly for all funds, both official and unofficial
schools must keep sufficient financial records to satisfy statutory and County Council requirements
governors and Headteachers should take a realistic approach to financial planning, in particular its future effects.

2 Legal Framework

Legislation

2.1 Legislation of particular relevance includes:

the Local Government Act 1972 which, in section 151 and via the Accounts and Audit Regulations 1996, states that the Chief Financial Officer (CFO) of each local authority is responsible for ensuring the probity and regularity of the authority's financial activities. For schools, this responsibility is discharged by establishing the Scheme of Financial Management under section 48 of the School Standards and Framework Act 1998
the School Standards and Framework Act 1998, which is the Government's main way of raising standards in education. The Act includes legislation on education development plans, class sizes, new categories of schools, new organisational arrangements of schools and the increased delegation of funds to schools
the Late Payment of Commercial Debts (Interest) Act 1998 phases in the requirement, from 1 November 1998, for debts to suppliers to be paid within 30 days of receiving the goods/service or invoice (whichever is the later). The supplier must receive a cheque, or the funds must clear in their account, by the 30th day. Suppliers are permitted to charge interest at the base rate +8% on late payments. Further guidance is available from Creditors Payments, County Treasurer's Department.

Financial Regulations, Standing Orders and Code of Practice

2.2 In managing their delegated budgets, schools must abide by the County Council’s requirements on financial controls and monitoring, not only those in the scheme but outside and compatible with it. The scheme refers to more detailed publications that contain further requirements.

2.3 The scheme is consistent with the County Council’s Financial Regulations, Standing Orders and the Code of Practice relating to contracts, and therefore they apply to all schools. Each school should have a hard copy of the Financial Regulations, Standing Orders and Code of Practice. In addition, they are available on Hantsnet.

2.4 The responsibilities for schools have been recognised in the Standing Orders and Code of Practice on contracts by the following:

references to ‘chief officer’ include a Headteacher
references to ‘committee’ include the governing body
the Headteacher/governing body of a school can receive and accept tenders.

Other guidance

2.5 The scheme refers to the Local Management in Schools Manual of Financial Practice and Procedure, which is produced and maintained by Education Financial Services.

Rules for revision of the scheme

2.6 The scheme will be regularly reviewed by the County Treasurer and County Education Officer and may need revisions from time to time. All revisions will be discussed with school representatives in advance, and then all schools will be consulted before any changes are made. Any revisions will require approval by the Secretary of State for Education.

3 Roles and Responsibilities

Role of LEA

3.1 The LEA will:

determine total resources available to schools collectively
allocate resources to individual schools on the basis agreed after consultation and in accordance with any relevant regulations
set out conditions and requirements within which governing bodies must operate
monitor the performance of schools, give advice and take corrective action where necessary. In extreme cases, this may include withdrawing delegation and charging items against the school’s delegated budget.

Role of governing body

3.2 The governing body will:

have formal responsibility for the running of the school
together with the Headteacher, draw up and carry out a development/ management plan for the school
be able to delegate authority but not responsibility to the Headteacher
deploy resources and ensure they are used appropriately
determine the number of teaching and support staff
appoint and dismiss staff
formulate school policies, eg health and safety, lettings, pay
provide such information as the County Council requires
approve and monitor the school’s budget
report to parents annually on its stewardship of the school’s finances.

3.3 The governing body should consider the extent to which it wishes to delegate its financial powers to the Headteacher, and to record its decision (and any revisions) in its minutes. The first formal budget plan of each year must be approved by the governing body under the Education (School Government) (Terms of Reference) (England) Regulations 2000.

Role of Headteacher

3.4 The Headteacher will:

manage the school’s financial position at a strategic and operational level
have responsibility for the day-to-day running of the school, including effective systems of internal control and other financial issues
have a key role in helping the governing body draw up a development plan for the school, and carry it out
ensure financial statements are properly presented and adequately supported
have responsibility for all tasks delegated by the governing body.

3.5 The Headteacher has overall executive responsibility for the school’s activities, of which financial activities are clearly a part.

Role of County Treasurer

3.6 The County Treasurer is the CFO of the County Council and, as such, must ensure the probity and regularity of the County Council’s financial activities. The County Treasurer will make statutory financial returns, oversee financial processes, provide advice where requested and ensure financial controls are adequate. To fulfil this responsibility, the County Treasurer may prescribe which financial systems and which financial service providers may be used. The County Treasurer, or representative, also has the right to attend meetings of the governing body to advise or report on major financial matters.

Role of audit

3.7 All schools come within the internal audit regime determined by the County Treasurer and the external audit regime of the County Council, as determined by the Audit Commission, and must co-operate with it. Internal audit will test, review, report and make recommendations on the financial controls operating within the County Council and individual schools. This will include examining the economic, efficient and effective use of resources. External auditors will test, review and report their opinion on the accuracy of the accounts produced by the County Treasurer.

Status of schools/County Council in contracts

3.8 If a governing body of a community school enters into a contract, it does so on behalf of the County Council. If the governing body of a Foundation or Voluntary Aided (VA) school enters into a contract relating to staff or property, it does so on its own behalf. No governor of any school will incur personal financial liability for any contract which they enter into in good faith while exercising their delegated powers, provided they are acting in accordance with this scheme and the County Council’s Standing Orders.

3.9 Schools have a right to opt out of contracts arranged by the County Council, unless they have lost that right for particular contracts (whenever started), in accordance with a specified written procedure.

3.10 Standing Orders require all schools to seek at least three tenders for any contract with a value of £5,000 or more. European Union Procurement Regulations must also be complied with for contracts over the prescribed threshold (£160,000 as at 30 September 1998). A school must get an LEA officer to countersign any contracts for goods or services worth more than £60,000 in any one year. The school does not have to seek suppliers from an approved list. These rules apply to all contracts for goods or services where the school does not buy back the County Council service. Schools must assess in advance, where relevant, the health and safety competence of contractors, taking into account the County Council's policies and procedures.

4 Budgets and Planning

Strategic Financial Plans

4.1 Each school should have a strategic financial plan with financial costings for agreed courses of action. It is not necessary to have a separate strategic financial plan document, as long as this information is in another document, eg the School Development Plan. The strategic financial plan should cover a minimum of three years, so it may act as a means of long-term budgeting, eg saving money in years one and two, to spend on a major item in year three. The plan should be updated each year.

Budget plan submission

4.2 Each school must prepare a complete annual school budget within its total resources and must not plan an overspend. Total resources are defined as the current allocation (budget share) plus any balance brought forward. The County Council allows schools to take full account of estimated deficits and surpluses at the previous 31 March in their budget plan. When a realistic forecast suggests a school may be in danger of a deficit budget, the local Education Financial Services office should be informed. If it is not possible to balance the budget, then a plan should be agreed as for schools that have already incurred deficits. Any deficit incurred for whatever reason is a first call on the following financial year's budget share. The County Council may bar schools from adding to the size of a deficit but may not bar spending on particular items of expenditure within the same overall total.

4.3 The school's budgeting timetable will be linked to that of the County Council. The key events for the school will be:

Year One

Jun/Aug - Identification of new plans and priorities for the ensuing financial year (these should be reflected in the school development plan)
Sep/Dec - Final cash-limited allocations will not be received until March each year. However, any changes to allocations will be based largely on inflation and changes in pupil numbers. A school should be able to ascertain in the Autumn term whether its allocation is likely to alter much in real terms (ie ignoring inflation). Therefore, it should be able to start making budget decisions for the following year, eg on staffing levels
Dec/Feb - Staffing levels to be approved by the governing body with regard to pupil numbers and School Development Plan
Feb - County Council agrees the forward budget. This will include the total amount available to be delegated to schools
Mar/Apr - School receives firm cash-limited allocation. The allocation is based on pupil numbers on the January Form 7 (5/12ths), and the estimate for the next academic year (7/12ths) as agreed. The final budget must be formally approved by the governing body, minuted and a signed copy of the budget appended to the minutes.

Year Two

May/Jun - Previous year's accounts closed down and balance carried forward
Sep/Nov - School reassesses original budget and produces revised budget. The revised budget must be formally approved by the governing body and a signed copy attached to the minutes.

4.4 Each school must provide the County Council with details of expected and actual expenditure and income, in a form determined by the County Council. Accordingly, schools must submit a budget plan for the current financial year to the County Council by 1 May. Further details are given in section 21 - Reporting Requirements.

Budget preparation

4.5 Budgets should be prepared realistically and should allow balances for unforeseen circumstances; however, balances should not be excessive. Advice on balances is available from Education Financial Services. The County Council would not expect balances for unforeseen circumstances to exceed 3% of the annual budget share or £10,000 (whichever is the higher). The school may save additional funds for specific projects for the benefit of the current pupils. Balances accumulated for specific projects should not be at the expense of current provision and must be clearly documented as part of the school strategic financial plan.

4.6 Most of the budget will be for staff, so it is essential that a school can accurately estimate the cost of the staff it employs. Budget planning aids are available for staffing (eg HCC BP, SIMS BP).

4.7 A school must take into account any advice from the Chief Executive, or his/her representative, as to the merits of the proposed capital expenditure from the budget share if it is more than £15,000. If the premises are owned by the County Council, or the school has voluntary controlled status, then the governing body should seek the County Council’s consent to the proposed works, but such consent can be withheld only on health and safety grounds.

4.8 The County Council will supply schools with all the school income and expenditure data which it holds and which could help efficient planning by schools, and supply schools with an annual statement showing when this information will be available at times through the year.

4.9 Where a school exercises an option to receive delegated or devolved funding for an item, that option may only be exercised once a year by 1 January preceding the financial year.

4.10 The County Council can charge the budget share of a school without the governing body's consent only in circumstances expressly permitted by the scheme. If such a situation arises, the County Council will consult the school as to its intention and notify the school when the charge has been made. Further details are given in section 14 - Charges Against School Budgets.

Schools in deficit

4.11 The plan for the recovery of any deficit should indicate the rate of improvement in the school’s financial position that the plan will deliver. If immediate recovery is not possible, the plan should have provided for elimination of the deficit by the end of its third year.

4.12 The recovery plan should be submitted to the CEO by 31 July after the financial year in which the deficit was incurred, and an update report produced annually until the deficit is cleared.

4.13 In no circumstances can the actual elimination of a deficit extend beyond five years. Schools which are not effective in reducing actual deficits will be actively considered for the suspension of delegated management.

4.14 Any school that was in deficit at 1 April 2000 must have agreed with the County Council a plan to eliminate the deficit as soon as possible, and in even the most challenging circumstances, within four years (by 31 March 2004).

4.15 Any school whose actual deficit exceeds 8% of its budget share or £40,000 (whichever is the greater), will be examined with a view to suspending delegated management.

4.16 Where a school is in deficit, has considered the best ways of reducing it, and then proposes to use part of its School Standards Grant (often referred to as “the Chancellor’s money” or “direct funding of schools”) for new expenditure, then the County Council will agree to that unless it is demonstrable that the proposed expenditure is unreasonable in the school’s financial circumstances.

School Standards Grant

4.17 Amounts included in school budget shares pursuant to regulation 29(1) of the Financing of Maintained Schools (England) Regulations 2002, shall be placed at the disposal of the governing body of each school by 22 May 2002, irrespective of any instalment arrangement applicable to the remaining amount of the budget share. The making available of this sum shall also be irrespective of the existence of any deficit relating to expenditure of the school’s budget share. No interest clawback will be applied to the amount before it is made available.

5 Financial Controls and Tax

Financial systems

5.1 The County Treasurer is responsible for maintaining the County Council's accounts under S151 of the Local Government Act 1972. Schools' budget allocations comprise part of those accounts. The County Treasurer has prescribed one financial system (which is currently FMS) for use across the County Council's activities.

5.2 Some schools that are not using FMS in 1998/99 may not be able to transfer to FMS until 1 April 2000. These schools will continue with their existing financial system until 1 April 2000, provided it meets the minimum requirements set out in the County Council's “Information Supporting the Scheme for Financial Management” document in Appendix A. The system will be subject to internal audit review.

5.3 Schools must provide information to the County Council on the accounting basis specified in “Information Supporting the Scheme for Financial Management”. It is for a school’s governing body to decide on what basis internal accounts or systems are operated.

Financial records

5.4 All financial records, except payroll-related records, bank statements and inventories, should be kept at the school for three complete financial years (1 April to 31 March) plus the current financial year. This period is based on the date of entry to the financial records; or, if a document covers a range of dates, on the date of the last entry. Bank statements must be kept for six years, and inventories kept indefinitely.

5.5 Requirements for other financial records are as follows:

income tax and national insurance records and documents must be kept for six years plus the current financial year
all other payroll-related records should be kept for two years plus current
superannuation (pension) records should be kept for three years plus current with the exception (Foundation schools only) of Certificates of Protection of Pension Benefits. These require the pay records to be held for 13 years. Foundation schools were given advice on this point when they first became grant maintained.

Further information on payroll or superannuation is available from Payroll Services or Pension Services respectively, County Treasurer's Department.

5.6 Individual financial records must be suitably retained and cross-referenced so they can be easily retrieved and examined. The following people are permitted to examine such information:

Education Financial Services’ staff
County Treasurer's staff, including Internal Audit, Payments Group, Accountancy and Corporate Finance
Staff from the appointed external auditors, eg District Audit
Representatives of the Inland Revenue
National Insurance compliance officers
Officers from HM Customs and Excise.

5.7 After the retention period is over, records should be disposed of as confidential documents.

5.8 A copy of all invoices where the VAT amount is greater than £20,000 must be sent to the VAT Accounting Officer, Corporate Finance, County Treasurer's Department at The Castle. Copies should be marked “Not for payment - VAT purposes only”.

5.9 Queries about keeping invoices or who is entitled to examine them, should be directed to the Creditors Payments Group, County Treasurer's Department.

Payroll requirements

5.10 To fulfil statutory S151 responsibilities, the County Treasurer must approve the providers of all payroll services to all schools. If the County Council is the payroll service provider, the County Treasurer will arrange for the completion and return of all payroll-related financial statements which are required by law.

5.11 If a school has elected to use an external provider, then all associated responsibilities - such as effective administration, payments and submission of returns - will rest with the school. This will include submitting information to the County Council as specified in Information Supporting the Scheme for Financial Management (Appendix B) by the due dates. If the school fails to provide this, or similar information specified by the County Treasurer, it may result in the suspension of delegated funding to the school and/or a charge against the school's budget (see sections 13 and 14).

5.12 All payments to employees, except cash reimbursements, must be made via the payroll service.

5.13 The Headteacher is responsible for verifying that all who are paid via the payroll are properly appointed employees. A signed declaration must be held for each term and must be available for audit review.

5.14 The Chairman of the governing body must authorise in writing any change in the Headteacher's salary except standard incremental and inflationary increases. A copy of the Chairman's signature must be sent to the payroll service provider, to be held on file, in order to validate any request for amendment.

VAT

5.15 All schools will be included on the County Council's VAT registration. The County Treasurer has produced a VAT manual available to all schools, which explains how to identify and account for VAT. Amounts reclaimed on behalf of schools will be passed back to those schools. Copies and further advice are available from Corporate Finance, County Treasurer's Department.

Construction Industry Scheme (CIS)

5.16 In order to assure smooth running of the scheme, the Inland Revenue has agreed that:

maintained schools, whatever their status, which do not yet operate the County Treasurer’s approved financial system will administer the scheme on behalf of the County Council, in respect of construction work undertaken at those schools
for other maintained schools, the County Council will administer the scheme. In order to do so it is important that the County Council can get proper information from schools as to the details of expenditure on construction work.

6 Audit Arrangements

Internal Audit

6.1 By law, both internal and external audit must be funded from the strategic management heading, therefore not delegated to schools. To fulfil S151 responsibilities, the County Treasurer will appoint internal auditors for all schools. The County Treasurer will determine the frequency and length of audit visits and nature of audit cover. This will be done in consultation with schools through Management Partnership.

External Audit

6.2 External auditors, eg District Audit, will be appointed by the County Council on the recommendation of the Audit Commission.

Additional financial advice

6.3 All schools will receive a basic level of advice and support from Education Financial Services. They may purchase additional advice and support from the same source. They may also purchase additional internal audit services (eg annual reviews) from the County Council if they wish (contact Audit Services, County Treasurer's Department). Furthermore, schools may if they wish purchase financial advice or external audit to provide the governing body with assurance on the financial management of the school, in addition to the assurance gained from internal and external audit paid for centrally. Additional financial advice and independent external audit must be purchased from the school's budget share.

6.4 Schools must provide audit certificates for voluntary and private funds held, and for any trading organisations controlled by the school.

7 Cheque Books and Bank Accounts (not Imprest)

Cheque books

7.1 All schools can choose to manage payments locally. Schools keep all interest earned but bear the cost of all bank charges. Schools are not permitted to overdraw their accounts.

7.2 The school will receive all delegated funds. However, deductions will be made to account for the interest which the County Council loses by forwarding funds earlier than payments would otherwise have been made. The exact deduction will be reviewed annually. Schools should also be aware of the additional administrative costs of taking the cheque book option.

7.3 Where a school receives full budget share payments into a bank account (i.e. including pay costs), then devolved grant payments will also be paid into that account. No interest clawbacks will be made on sums advanced for devolved grants.

7.4 After consulting Headteachers’ representatives, the Education Committee has decided to pay only nominal interest of 0.1% on balances carried forward by primary and special schools. This enables more funding to be used to support those schools' delegated budgets. Secondary schools will receive interest equivalent to the base rate less 0.5% on any part of their balance carried forward and invested with the County Council.

7.5 The decision to opt in or out of the cheque book scheme lies with the governing body. The decision should be formally minuted. Any school opting in to the cheque book scheme, or making any change on this matter, must notify the LMS Team, Education Department by 1 December for arrangements to take effect in the following April.

7.6 Any school operating an imprest account must reconcile and arrange closure of that account before starting to use a cheque book account.

Bank accounts

7.7 All maintained schools may have an external bank account, in the name of the school rather than the County Council, into which their budget share instalments may be paid. If a school has an external account, the account mandate must state that the County Council is the owner of the funds in the account, entitled to receive statements and can take control of the account if the school’s delegated management is suspended. Bank account signatories must be employees of the school or Hampshire County Council. All banking arrangements must be approved by the County Treasurer so that the suitability of the banking institution can be assessed and monitored. The list of approved financial institutions is maintained by Corporate Finance, County Treasurer's Department. Should any institution be removed from the list, all accounts held must be closed immediately following notification from the County Treasurer, and any funds returned to the County Council pending the opening of a replacement account. Any funds paid by the County Council should be returned to them pending the opening of a replacement account.

7.8 Approved banking institutions as at 1 March 1999 are:

Lloyds Bank Plc Royal Bank of Scotland Plc
National Westminster Bank Plc Bank of Scotland
HSBC Co-operative Bank Plc
Barclays Bank Plc Abbey National Plc
Halifax Bank Plc Nationwide Building Society
Alliance & Leicester Bank Plc Bradford & Bingley Building Society
Britannia Building Society Yorkshire Building Society

7.9 Schools having bank accounts with other banks, before 1 April 2001, will be allowed to retain those accounts. Any changes of banking arrangements must be approved by the County Treasurer.

7.10 All new banking arrangements may only be made with effect from the beginning of each financial or academic year, except in the case of paragraph 7.7. Schools without a bank account either at the start of the scheme or later cannot have one until any deficit balance is cleared. When a school opens an external bank account, it may immediately have transferred to it the estimated total of its surplus balance, with corrections effected later if necessary.

7.11 The County Council would estimate the expenditure based on that school’s historical profile, and then seek comments on the estimate from the school. The balance to be transferred would be the difference between the pro rata share of the budget share allocation and the estimated expenditure, plus any balance from a previous financial year. This provisional balance would transfer on the last banking day before the new arrangements take effect. There would subsequently be a full reconciliation.

7.12 Schools opting for cheque books must set up a direct debit instruction if they intend to make payments via FMS or have the County Council process payments centrally (eg for utility bills), so that the County Treasurer can debit schools for items paid on the school's behalf. An instruction form is available from Corporate Finance and should be returned there on completion. This direct debit cannot be stopped by the school once a payment has been made on its behalf. However, the request to make a payment via FMS must be authorised in advance by one of the school's nominated authorising officers. Any school with a service level agreement including County Treasurer's Payments services (eg full subscription) will need to set up a direct debit instruction for the agreement to take effect.

7.13 The County Council can offer two options to schools for the advance of budget shares:

option 1 - monthly payments in arrears (in line with FAS arrangements)
option 2 - termly advances of non-pay only (in line with the County Council local management of schools system). Non-pay means everything except payroll.

7.14 The monthly payment option gives advances as shown below:

1/36th of the school's annual budget share on the first banking day of April each year
1/12th of the school's annual budget share on the penultimate banking day of each month from April to February inclusive
2/36ths of the school's annual budget share on the penultimate banking day of March each year.

Schools who want an advance before these dates can request an earlier date and will incur an additional cashflow deduction.

7.15 The termly non-pay advance option will allow those County schools that already had cheque books at 31 March 1999 to continue as before. Therefore, payroll-related payments will not be made to schools but will be centrally retained. Non-payroll related payments will be made termly in advance on the following basis as this reflects previous spending patterns:

First banking day of April - 40% of school's non-payroll budget share
First banking day of September - 30% of school's non-payroll budget share
Last banking day of December - 30% of school's non-payroll budget share.

7.16 Schools will incur cashflow deductions appropriate to the option they choose. Schools opting for the monthly payments will be able to choose which day of the month to receive budget share advances, eg on the 15th of each month. Schools choosing a date before the last banking day of the month will incur an additional cashflow deduction.

7.17 The County Council will pay interest to schools on late advances of budget share instalments, where such late advance is the result of a County Council error. The interest rate for cash flow deductions will be used.

7.18 Examples of interest deductions are shown in the tables that follow for a school with a budget share totalling £1,500,000, of which £1,200,000 is payroll-related and £300,000 is not. The examples reflect the actual spending patterns of schools.

Table 7.1 - Interest deduction calculation for local bank account - schools option 1

		Average day of payment for non-cheque book schools				Average day of advance
Date	Day of year	Non-pay amount	Pay amount	Total amount	Weighted day of spending	Advance amount	Weighted day of spending
a	b	c	d	e(c + d)	f(b x e)	g	h(b x g)
01/04/99	1			0		41,667	41,667
15/04/99	15	60,800		60,800	912,000
29/04/99	29					125,000	3,625,000
30/04/99	30		100,000	100,000	3,000,000
15/05/99	45	31,400		31,400	1,413,000
27/05/99	57					125,000	7,125,000
28/05/99	58		100,000	100,000	5,800,000
15/06/99	76	15,300		15,300	1,162,800
29/06/99	90					125,000	11,250,000
30/06/99	91		100,000	100,000	9,100,000
15/07/99	106	36,700		36,700	3,890,200
29/07/99	120					125,000	15,000,000
30/07/99	121		100,000	100,000	12,100,000
15/08/99	137	13,300		13,300	1,822,100
27/08/99	149					125,000	18,625,000
31/08/99	153		100,000	100,000	15,300,000
15/09/99	168	13,500		13,500	2,268,000
29/09/99	182					125,000	22,750,000
30/09/99	183		100,000	100,000	18,300,000
15/10/99	198	34,600		34,600	6,850,800
28/10/99	211					125,000	26,375,000
29/10/99	212		100,000	100,000	21,200,000
15/11/99	229	13,800		13,800	3,160,200
29/11/99	243					125,000	30,375,000
30/11/99	244		100,000	100,000	24,400,000
15/12/99	259	22,900		22,900	5,931,100
29/12/99	273					125,000	34,125,000
30/12/99	274		100,000	100,000	27,400,000
15/01/00	290	23,400		23,400	6,786,000
28/01/99	303					125,000	37,875,000
31/01/00	306		100,000	100,000	30,600,000
15/02/00	321	14,800		14,800	4,750,800
28/02/00	334					125,000	41,750,000
29/02/00	335		100,000	100,000	33,500,000
15/03/00	350	19,500		19,500	6,825,000
30/03/00	365					83,333	30,416,545
31/03/00	366		100,000	100,000	36,600,000
Total		300,000	1,200,000	1,500,000	283,072,000	1,500,000	279,333,212
				(i)	(j)	(k)	(l)

Average day of payment (j divided by i) = 283,072,000/1,500,000 = 188.7

Average day of advance (l divided by k) = 279,333,212/1,500,000 = 186.2

Difference = number of days interest = 2.5

Interest deduction = 2.5/365 x 6.00% x 1,500,000 = £616 (where 6.00% is the base rate)

Table 7.2 - Calculation of interest deduction for local bank account schools - option 2

		Average day of payment		Average day of advance
Date	Day of year	Non-pay spend amount	Weighted day of spending	Advance amount	Weighted day of spending
a	b	c	d(b x c)	e	f(b x e)
01/04/99	1			120,000	120,000
15/04/99	15	60,800	912,000
15/05/99	45	31,400	1,413,000
15/06/99	76	15,300	1,162,800
15/07/99	106	36,700	3,890,200
15/08/99	137	13,300	1,822,100
01/09/99	154			90,000	13,860,000
15/09/99	168	13,500	2,268,000
15/10/99	198	34,600	6,850,800
15/11/99	229	13,800	3,160,200
15/12/99	259	22,900	5,931,100
30/12/99	274			90,000	24,660,000
15/01/00	290	23,400	6,786,000
15/02/00	321	14,800	4,750,800
15/03/00	350	19,500	6,825,000
Total		300,000	45,772,000	300,000	38,640,000
		(g)	(h)	(i)	(j)

Average day of payment (h divided by g) = 152.6 days

Average day of advance (j divided by i) = 128.8 days

Difference = 23.8 days

Interest deduction = 23.8/365 x 6.00% x £300,000 = £1,174 (where the base rate is 6.00%)

7.19 If a school chooses to have its monthly advance before the last working day of the month, the additional lost interest deduction will simply be the number of days early divided by 365 x base rate x the advance amount, ie if a school wants to receive a £125,000 advance four days early, the deduction will be:

4/365 x 6.00% x £125,000 = £82 (where the base rate is 6.00%)

7.20 All schools must notify the LMS Team, Education Department, by the 1 January for changes from 1 April and by 1 June for changes from 1 September when they wish to change their option or date for advances. Schools will incur cashflow deductions appropriate to the option they choose to cover the estimated loss of interest income that would have been earned by the County Council, if the funds were not forwarded to an external bank account.

7.21 For further details of the requirements for and operation of cheque book accounts, please see section 14 of the County Council's Local Management of Schools - Financial Practice and Procedure.

8 Provision of Services and Facilities by the County Council

Centrally retained budgets

8.1 The County Council will determine on what basis to provide services funded from centrally retained budgets. The County Council will not discriminate on the basis of category of schools except where:

funding has been delegated to some schools only
such discrimination is justified by differences in statutory duties.

Service level agreements

8.2 All agreements between the County Council and schools from 1 April 1999 will last for a maximum of three years from inception and up to five years for any subsequent agreement relating to the same services, except catering services where the periods in question will be five and seven years respectively. The terms of any agreement should be reviewed at least every three years.

8.3 The County Council will endeavour, where possible, to offer services singly as well as in combination packages. Buyback services will not unreasonably restrict a school's freedom of choice among the services available. Services will be available on a basis which is not related to an extended agreement, as well as on the basis of such agreements.

8.4 The County Council will offer services at prices which are intended to generate income which is no less than the cost of providing those services. The total cost of the service must be met by the total income, even if schools are charged differentially.

8.5 Service level agreements must be in place by 31 March of the previous financial year to be effective for the following year. Schools must have at least six weeks to consider the terms of agreements.

9 Computer Security

9.1 The school's governing body should ensure that computer systems used:

provide security to fulfil responsibilities under the Data Protection Act
can efficiently provide information required by the County Council
have suitable controls to safeguard the data stored from unauthorised access, manipulation and corruption
are backed up and retained so that any information lost can be recreated.

10 Insurance

10.1 Insurance will be delegated to all schools which will have the opportunity to buy back into the County Council’s arrangements. If a school chooses external insurance providers then the cover relevant to the County council’s insurable interests provided by the policy should be demonstrably at least as good as the relevant minimum cover arranged by the County Council. For further details on the requirements and operation of the County Council’s scheme, please see section 21 of the Local Management of Schools – Manual of Financial Practice and Procedure.

10.2 If a school does not choose the County Council's scheme, it should obtain the cover detailed in Appendix C of Information Supporting the Scheme for Financial Management. Schools must gain approval from the Chief Executive’s Insurance section if they intend to purchase insurance that does not meet the minimum requirements specified. The County Council will have regard to the actual risks which might reasonably be expected to arise at the school in question when considering minimum levels of cover.

10.3 Schools should make appropriate arrangements to ensure replacement or repair of their buildings and contents if damage arises from explosion, storm, flood, riot or malicious damage, and similar risks. Arrangements with their insurer or other provider are expected to match the standard and speed of response currently provided by the Council.

10.4 The school must cover not only its own liabilities but those of the County Council which are engendered by the action or inaction of the school. If schools choose to insure risks themselves, it is expected that they will arrange for the insurer to provide all insurance and risk management advice, claims handling and legal representation in respect of claims.

10.5 The governing body should also undertake risk assessment to determine whether insurance of the school buildings and contents against theft and terrorism would represent value for money.

10.6 For a school that was formerly voluntary aided, the governing body must have regard to any guidance from their trustees about the insurance required for any premises, used by the school, which are owned by the trustees. Voluntary aided schools are discussed more thoroughly in section 20 of this scheme.

10.7 If an external provider is to be used, the governing body must invite tenders every three years, in accordance with tendering procedures.

11 Other Financial Controls

Write-offs

11.1 Headteachers may write-off any amount of income due up to a maximum of £200 if they consider it is irretrievable, and must sign an explanatory record giving reasons for the write-offs. Records must be kept for inspection.

11.2 The County Council cannot write-off the deficit balance of any school.

Community subsidy

11.3 The governing body may choose to let school premises and equipment. Hire charges should be set so that the income at least covers any additional costs resulting from the non-school use. Any surplus may be added to the school's budget. Schools may claim a “community subsidy” from the County Council towards the costs arising from use by eligible community groups. In return, the governing body is expected to apply hire charges suggested by the County Council for use by the community groups. The charges are calculated to cover likely costs when added to the subsidy. Any surplus arising from subsidised use by community groups may only be spent for the benefit of community users. Further details, definitions and guidance are given in section 23 of the County Council's Local Management of Schools - Financial Practice and Procedure manual.

Early-years clubs; pre- and after-school clubs

11.4 An early-years, pre- or after-school club may operate at a school in one of two ways. Either the school lets rooms to a bona fide organisation which has sole responsibility for running the club, or the school operates the club as an extension to the school.

11.5 If the school operates the club, the governors are responsible for agreeing day-to-day matters such as fees, staffing and budgets. Registers should be used to record attendance and as a basis for collecting fees.

Pecuniary interests

11.6 The governing body of each school must establish by 31 December 1999 (if it does not already have one), a register which lists for each member of the governing body, the Headteacher and staff who may influence expenditure any business interests they, their partner or any member of their immediate family have. The governing body must keep the register up to date with notification of changes and through annual review of entries, and make the register available for inspection by governors, staff, parents and the County Council. Further details are given in Information Supporting the Scheme for Financial Management (Appendix D).

Special Educational Needs (SEN)

11.7 Additional funding may be given to mainstream schools to educate pupils with SEN in line with the 1981 Education Act. Governors have a statutory responsibility to provide for pupils’ needs.

Assets

11.8 All schools should maintain an asset register which contains details of significant equipment and capital items and an inventory which contains details of moveable non-capital assets. The register and inventory should be kept up to date and include the following information:

date of acquisition
description of the asset including a unique identification mark such as a serial number
cost
source of funding
location of asset
details of disposal or write-off.

11.9 Schools will be free to determine their own arrangements for keeping a register of assets worth less than £1,000. However, schools must have a register and will be expected to have regard to the County Council’s policies on inventories. Schools must ensure that whatever arrangements are in place meet the school’s insurance policy requirements

11.10 Controls such as security marking should be in place to safeguard assets. Schools should consider the best location for the asset. Any changes to the asset register should be authorised. Further details are given in the County Council's Financial Regulations.

Governors' expenses

11.11 Under schedule 11 of the School Standards and Framework Act 1998, only allowances for purposes specified in regulations may be paid to governors from a school's delegated budget share. Payment of any other allowance is strictly forbidden. Furthermore, schools must not duplicate payment by the Secretary of State to additional governors appointed by him or her to schools under special measures.

11.12 The County Council may delegate funds to meet governors' expenses to the governing body of a school yet to receive a delegated budget.

PFI/PPP

11.13 The County Council will issue regulations regarding PFI/PPP projects if one is developed.

Liability of governors

11.14 As the governing body is a corporate body, governors of maintained schools will not incur any personal liability in the exercise of their power to spend the delegated budget share provided that they act in good faith.

Health and safety

11.15 In expending the school's budget share, governing bodies must have due regard for duties placed on the County Council in relation to health and safety, and the County Council's policy on health and safety matters in the management of the budget share.

Delegation to new schools

11.16 The County Council can delegate selectively and optionally to the governing bodies of schools which have yet to receive delegated budgets.

Whistleblowing

11.17 Schools should take note of the Human Rights Act and the County Council’s rules on “whistleblowing”. Schools should establish arrangements to safeguard the interests of whistleblowers. Further guidance will be included in the Personnel Manual.

Child Protection

11.18 Schools are urged to support the work of child protection case conferences and similar events whether by the release of staff to attend or by making written submissions. However, there is no requirement on schools to release staff to attend and the County Council does not make any payments to schools to help meet costs.

12 Borrowing and Investments

Borrowing

12.1 Schools must not borrow through a bank overdraft or other means without the prior written consent of the Secretary of State. Paragraphs 12.4 to 12.8 will only apply once consent has been received. The County Council does not wish to operate any loan scheme.

12.2 The County Council defines borrowing as:

loans, whereby lenders make available to schools a sum of money which schools use for specific purposes
finance leases and hire purchase contracts.

12.3 Schools should seek an opinion on the nature of the lease from Corporate Finance, County Treasurer's Department before entering into any lease agreement.

12.4 It is good practice for the governing body to draw up a borrowing policy which will set out the basis on which their decisions are made. A decision to borrow may well significantly affect a school's finances and operations. The borrowing policy must include:

which types of borrowing may be used, eg overdraft, loan
who the school may borrow from
under what circumstances the school may borrow
authorisation process, eg who has to authorise and within what financial limit
monitoring arrangements.

12.5 Loans must not be secured against assets which the County Council considers essential to the continuance of the school, namely:

land needed to meet the requirements of the Education (School Premises) Regulations 1996
buildings or other assets essential to the functioning of a school, and the requirements of health and safety and other relevant legislation.

12.6 Each application to the County Council to enter into a borrowing agreement will be evaluated on its own merits. As a guide, an application should normally include:

a statement of how the borrowing fits in with a school's strategic plan
an estate management plan setting out how the assets to be financed by the borrowing complement other estate developments
an evaluation of the different options available to a school to meet its objectives, including a value-for-money assessment
financial forecasts covering a period of at least five years (or the loan period if less), including full details of the assumptions underlying the projections. The forecasts should be based on the activities and developments identified in the school development plan
an evaluation of future changes in pupil numbers covering at least the period of the financial forecasts
risk/sensitivity analysis.

12.7 Schools are responsible for understanding, assessing and managing the risks to which they may be exposed as a result of borrowing.

12.8 Schools must not borrow from overseas or in foreign currency.

12.9 Voluntary aided schools may borrow from the Diocesan Authority in certain circumstances, but only with the prior consent of the County Treasurer (see section 20 - Voluntary Aided Schools).

Investments

12.10 If a community school has chosen to operate a local bank account (cheque book option) and intends to invest money other than in a deposit account, then the governing body of the school must write an investment policy and get it approved by Corporate Finance, County Treasurer's Department, before making any investment. The investment policy must include:

which types of investment may be used, eg deposit account
who the school may invest with, ie financial institutions approved by the County Treasurer
under what circumstances the school may invest
authorisation process, eg who has to authorise and within what financial limit
monitoring arrangements.

12.11 Investments must be made in accordance with the investment policy and written procedures approved by the governing body. Governors should obtain written advice on their investment policy from their professional advisers. The governing body must implement procedures to ensure that this policy is adhered to at all times. Governors should note that the security of any funds under their control is more important than the level of return gained from them.

Leasing

12.12 The temporary acquisition of premises or equipment by a school may constitute a lease. Schools are not permitted to enter into leases of land or buildings. In some cases, the County Council may enter into a property lease for school use subject to approval by the relevant committees. Any school wishing to propose a new lease should contact their Building Planning Officer in the Education Department and the Head of Estates Practice.

12.13 Accounting standards require leases to be reported in specific ways, depending on the terms of the lease. For the County Treasurer to determine how the payments should be accounted for, all schools must contact the Corporate Finance section, County Treasurer's Department before entering into any contract where the school acquires the temporary use of buildings or equipment.

13 Suspension of Delegated Management

Circumstances in which suspension of delegated management would be considered

13.1 The School Standards and Framework Act 1998 states that a governing body's right to a delegated budget may be suspended by the County Council if it fails to comply with requirements or mismanages the funds. The County Council may suspend a school's right to a delegated budget if the provisions of the school financing scheme (or rules applied by the scheme) have been substantially or persistently breached, or if the budget share has not been managed satisfactorily. There is a right of appeal to the Secretary of State. A school's right to a delegated budget share may also be suspended for other reasons as stated in section 17 of the Schools Standards and Framework Act 1998, but in that case there is no right of appeal. Alternatively, or in addition, schools may receive a charge against their school budget for any liabilities incurred (see section 14).

14 Charges Against School Budgets

Basis for making a charge

14.1 The County Council may make a charge against a school's budget share, to protect its own financial position, if it incurs liabilities through action or inaction by the governing body. The circumstances for making a charge are given in Information Supporting the Scheme for Financial Management (Appendix E), and shown below:

where premature retirement costs have been incurred without the prior written agreement of the County Council to bear such costs (the amount chargeable being the excess over any amount agreed by the County Council)
other expenditure incurred to secure resignations where the school had not followed County Council advice
awards by courts and industrial tribunals against the County Council, or out of court settlements, arising from action or inaction by the governing body, contrary to the County Council's advice
expenditure by the County Council in carrying out health and safety work, or capital expenditure for which the County Council is liable, where funds have been delegated to the governing body for such work, but the governing body has failed to do it
expenditure by the County Council incurred in making good defects in building work funded by capital spending from budget shares, where the premises are owned by the County Council
expenditure incurred by the County Council in insuring its own interest in a school where funding has been delegated but the school has failed to demonstrate that it has arranged cover at least as good as that which would be arranged by the County Council
recovery of money due from a school for services provided to the school, where a dispute over the money due has been referred to a disputes procedure set out in a service level agreement, and the result is that money is owed by the school to the County Council
recovery of penalties imposed on the County Council by the Board of Inland Revenue, the Contributions Agency or HM Customs and Excise, Teachers Pensions or regulatory authorities as a result of school negligence
correction of County Council errors in calculating charges to a budget share (eg pension deductions)
additional transport costs incurred by the County Council arising from decisions by the governing body on the length of the school day, and failure to notify the County Council of non-pupil days resulting in unnecessary transport costs
legal costs incurred by the County Council because the governing body did not accept the advice of the County Council
recovery of amounts of annual maintenance grant for a former grant- maintained school which have been redetermined by the Secretary of State or the Funding Agency for Schools (FAS). The excess amount will be recovered on a timescale agreed by the Secretary of State or FAS, or one which has regard to the stability of education for the school's pupils if no such agreement exists
costs of necessary health and safety training for County Council staff, where funding for training had been delegated but the necessary training was not carried out
compensation paid to a lender where a school enters into a contract for borrowing beyond its legal powers, and the contract is of no effect
cost of work done on teacher pension remittance and records for schools using non-County Council payroll contracts; the charge to be the minimum needed to meet the cost of the County Council’s compliance with its statutory obligations.
Costs incurred by the County Council in securing provision specified in a statement of SEN where the governing body of a school fails to secure such provision despite the delegation of funds in respect of that statement.
Costs incurred by the County Council due to submission by the school of incorrect data.
Recovery of amounts spent from specific grants on ineligible purposes.
Costs incurred by the County Council as a result of the governing body being in breach of the terms of a contract.

14.2 If any former grant-maintained special school maintained by the County Council fails to repay any amount of a loan due to the Secretary of State, as agreed under section 122 of the Education Act 1996, the County Council may charge the school's budget share.

14.3 If the County Council believes that a charge should be made against a school's budget, the matter will be discussed with the school first and then presented in writing. The school will have 15 school days from the date of the letter to respond. The reasons for the charge and the response will be considered by the appropriate chief officer before deciding a charge. Charges will be reported to Education Resources Sub-Committee at least annually.

14.4 An invoice may be sent or a charge deducted from the budget share, either in full for immediate settlement or over a period of time as specified by the chief officer. A charge against a school's budget can still be made if the school has a deficit balance or the charge would leave the school with a deficit.

14.5 The County Council must charge salaries of school-based staff to school budget shares at actual cost. The County Council may also suspend delegated funding to the school (see section 13).

Fees to be deducted from teachers’ salaries and remitted to the General Teaching Council for England

14.6 The General Teaching Council for England (Deduction of Fees) Regulations 2001 (“the Regulations”, S.I. 2001 No. 3993) came into force on 10 January 2002. The Regulations apply to teachers at maintained schools registered with the General Teaching Council for England (“the GTC”) or required to be so registered by the Teachers (Compulsory Registration) (England) Regulations 2001 (S.I. 2001 No.1266). The Regulations place a duty on the employer of such teachers to deduct and remit the GTC fee in respect of a teacher who has not already paid the fee to the GTC where the GTC has notified the employer to deduct and remit the fee of that teacher. This includes teachers who have indicated to the GTC that they wish to pay the fee by a salary deduction as well as teachers who have not indicated how they wish to pay the fee.

In order to ensure the performance of the duties to deduct and remit the fee imposed on employers by the Regulations the following conditions are imposed on the Authority and governing bodies of all maintained schools covered by this Scheme in relation to their budget shares and come into effect on 28 February 2002:

(1) By virtue of section 46 of the School Standards and Framework Act 1998 and the regulations made under that section (at present the Financing of Maintained Schools (England) Regulations 2001 (S.I. 2001 No.475, Part II and Schedule 1) the costs of payroll administration for teachers in the Authority’s maintained schools fall to be met from the budget shares which are allocated to governing bodies pursuant to section 47 of the Act, and which are delegated to them pursuant to sections 49-50. Accordingly, by virtue of Chapter IV of Part II of that Act and this Scheme, governing bodies of maintained schools are responsible for making suitable arrangements (or ensuring that such arrangements are made) for the administration of payroll services in respect of their teachers.

(2) A governing body of a community school, community special school or a voluntary controlled school, though not the employer of the teachers at such a school, shall:-

(a) where the governing body has entered into any arrangement or agreement with the Authority to provide payroll services, ensure that any such arrangement or agreement is amended to allow for the deduction and remittance of fees by the Authority to the GTC. The governing body shall meet any consequential costs from the school’s budget share;

(b) where the governing body has entered into any arrangement or agreement with a person other than the Authority to provide payroll services, ensure that any such arrangement or agreement is amended to allow for the deduction and remittance of fees by that person to the Authority or directly to the GTC where this has been agreed between the GTC and the Authority. The governing body shall meet any consequential costs from the school’s budget share; and

(c) where the governing body directly administers the payroll, deduct and remit the fees to the Authority or directly to the GTC where this has been agreed between the GTC and the Authority. The governing body shall meet any consequential costs from the school’s budget share.

(3) A governing body of a foundation school, a foundation special school or a voluntary aided school, as the employer of its teachers, is by virtue of the Regulations under a duty to deduct (or arrange for the deduction of) the fee and to remit the fee to the GTC. Accordingly, a governing body shall:-

(a) where the governing body has entered into any arrangement or agreement with the Authority to provide payroll services, ensure that any such arrangement or agreement is amended to allow for the deduction and remittance of the fees by the Authority to the GTC on the governing body’s behalf. The Authority shall agree to any such amendment. The governing body shall meet any consequential costs from the school’s budget share;

(b) where the governing body has entered into any arrangement or agreement with a person other than the Authority to provide payroll services, ensure that any such arrangement or agreement is amended to allow for the deduction and remittance of the fees by that person to the GTC or to the governing body for onward transmission to GTC. The governing body shall meet any consequential costs from the school’s budget share; and

(c) where the governing body directly administers the payroll, deduct and remit the fees to the GTC. The governing body shall meet any consequential costs from the school’s budget share.

(4) All this shall be done whether the funding for the salary payments is paid to the Authority by the school from budget share instalments which have been held by the school in an independent bank account, or the salary costs are directly charged by the Authority to the school’s budget share account.

15 School Income

Retention of income by schools

15.1 Schools are permitted to keep all income from:

letting school premises (subject to any joint use or PFI agreements)
levying fees and charges, except where a service is provided by the County Council from centrally retained funds
fund-raising
selling of assets purchased with delegated funds.

Schools must have regard to any policy statements on charging produced by the County Council.

15.2 Schools may cross-subsidise lettings for community and voluntary use with income from other lettings, provided there is no net cost to the budget share. However, schools should have regard to directions issued by the County Council on the use of school premises, as permitted under the School Standards and Framework Act 1998 for various categories of schools.

15.3 Schools must ensure that VAT is accounted for properly on all income (see paragraph 5.15 on VAT).

Fees and charges

15.4 All schools must have a charging and remission policy. Charges may not be made for education provided during school hours. The exception is that they may charge for musical tuition of an individual or a group of up to four pupils, if the teaching is not an essential part of either the National Curriculum or a public examination syllabus.

15.5 Schools may also charge for:

board and lodging
public examinations where the pupil has not been prepared by the school, or where the pupil fails without good reason to complete the examination requirements
wilful damage to school property, or the misuse or loss of books and equipment.

15.6 Although charges must not be made, parents may be invited to make a contribution towards the cost of school activities. If a particular activity cannot take place without financial help, that can be explained to parents at the planning stage. The essential point is that no pupil may be left out of an activity because his or her parents cannot, or will not, make a financial contribution. The school must first decide which class or group of pupils is to benefit from the activity, and then look for voluntary contributions either for the activity or by general fund-raising.

Sale of assets

15.7 For assets purchased from non-delegated funds, any income received will belong to the County Council. The school must take the advice of the Head of Procurement and Supplies on the disposal of surplus or obsolete assets. Normally, disposal should be by competitive tender or public auction except where:

the expected value is less than £200, in which case the Headteacher should dispose of the asset in an effective and fair manner and must keep a record
the asset was purchased from delegated funds, in which case the governing body is free to exercise its discretion.

15.8 The sale of land is subject to different procedures: the advice of the Head of Estates Practice must be sought and followed.

16 Carry Forwards

16.1 Schools will carry forward from year to year both underspendings and overspendings. When a school decides to invest with the County Treasurer some or all of the unspent money brought forward, it will receive interest on the sum concerned at a rate determined by the County Treasurer, after consultation with school representatives (currently 0.5% below base rate for secondary schools and 0.1% for primary and special schools - see paragraph 7.4).

16.2 A school's surplus or deficit balance at 1 April 1999 is equal to that at 31 March 1999. In addition, any schedule for eliminating a deficit balance agreed either between the County Council and a school, or between FAS and a grant maintained or grant maintained special school, must continue to be followed.

16.3 A school facing an overspend is expected to discuss this with the County Council before it incurs a deficit. In the case of an actual overspend, if the amount in any one year exceeds 3% of the school's budget share, the County Council would expect to agree with the school a plan of action to reduce the deficit over a reasonable period. This is regarded as an important management discipline, aiming to help the school to manage its own affairs. Similarly, if a school overspent in consecutive years it would again be necessary to discuss why and agree corrective action. In practice schools must discuss all budget deficits with Education Financial services.

16.4 Schools must not plan for an overspend, though there may be instances where it is necessary to anticipate a future budget in order to meet a large one-off item of expenditure. Agreement must be sought in advance from Education Financial Services.

16.5 The County Council may charge interest on deficit balances up to 0.5% above the base rate at 1 April each year. The interest will be on the balance at the start of the year. Former grant-maintained special schools will not be charged interest for pre 1 April 1999 deficits. Interest will only be charged on deficit balances after a specific decision of the Education Committee to do so.

16.6 All former grant-maintained schools will have the right to spend any surplus balances which they bring with them from the period during which they were funded by the FAS. Where a deficit balance exists at the end of FAS funding, that is carried forward. Any schedule for eliminating the deficit agreed with the FAS (or the County Council in the case of deficits incurred when the school was previously maintained by the County Council, and carried over into the change of status under the GM Finance Regulations) must continue to be adhered to.

Balances

16.7 If a school’s end of financial year balance exceeds 5% of the budget share or £25,000 (whichever is greater), then the governing body must submit a report by 31 July of that year to the local Education Financial Services office, explaining how they intend to use the balance.

17 Maintenance of Buildings

17.1 For community schools, where the County Council owns the school land and buildings, the County Council will be responsible for “landlord” functions such as major structural repairs and replacing major components. The responsibility for most general items of repair and maintenance of the buildings, including related health and safety requirements, rests with schools. The County Council does not have a de minimus level for capital. The split of responsibility has been based on guidance from the DfEE and is in line with the CIPFA Statement of Recommended Practice. Further details and examples are given in Appendix A of the scheme and Appendix F of Information Supporting the Scheme for Financial Management.

17.2 The County Council is ultimately responsible for the fabric of the buildings of all County Council-maintained schools. The County Council has a duty to ensure that schools are maintaining buildings and fixtures in line with best practice, and to ensure that all health and safety requirements are being met. The County Council will inspect school buildings in discharging this duty. Failure to maintain buildings and fixtures to the required standard may lead to the suspension of delegated funding (see section 13), or a charge against the school's budget (see section 14), or both.

17.3 Governing bodies of voluntary aided schools are eligible for grant from the DfEE in respect of their statutory responsibilities and in addition they will have responsibilities for other repairs. The voluntary aided and special agreement school - Determination of financial liabilities list will be used to establish responsibility for payment of liabilities.

17.4 The County Council may retain funds centrally for repairing and maintaining kitchens and kitchen equipment in schools which have not had school meals delegated.

18 Central Funds and Earmarking

18.1 The County Council may allocate funds, such as the Standards Fund, in addition to the schools' budget shares. Funds may be allocated to schools at the request of, or otherwise by agreement with, the governing body for any specified purpose.

18.2 These funds must be used only for the specified purpose for which they are made available, and they should be kept separate from the school's budget share. The funds may be allocated regularly for recurrent expenditure, or on particular occasions for a specific expense. Earmarked funds must be returned to the County Council if not spent in-year, or within the period which schools are allowed to use the funding, if different.

19 Catering

Requirements

19.1 All foundation schools, and those secondary schools not covered by existing contracts at April 1999, will receive delegated funding to purchase catering services. From April 2000, all secondary schools will receive delegated funding, and any primary or special school will be allowed to request delegation of funds on an individual basis.

19.2 When entering into a contract or agreement for catering services, the governing body must have regard to the County Council’s policies on school meals in discharging their duties in relation to school meals.

20 Voluntary Aided Schools

Buildings and insurance

20.1 In the case of aided schools, the buildings are owned by the trustees and not the County Council. As such, some of the insurance arrangements are the responsibility of the governing body in conjunction with the trustees. Separate insurance should be considered for:

damage to the school building from fire, earthquake, storm, etc
legal costs of an action due to a fault with the premises
risks arising from events held on school premises and organised by the church or a private individual.

20.2 For further details, definitions and guidance relating to voluntary aided schools, see section 33 of the County Council's Local Management of Schools - Manual of Financial Practice and Procedure.

21 Reporting Requirements

Financial returns - FMS

21.1 Schools operating FMS must submit their budget for the current financial year to FMS by 20 May each year. No further information will be required, as long as FMS records are kept up to date.

Financial returns - Non-FMS

21.2 There will be a transitional period when not all schools operate FMS. In this period, financial returns will be required. An explanation of returns required is given in Information Supporting the Scheme for Financial Management (Appendix G) with further guidance and proforma in Appendices H to T of the same document. The County Council will not request income and expenditure reports more often than once every three months, except for those connected with tax or banking reconciliation, unless the County Council has notified the school in writing that in its view the school’s financial position warrants more frequent submission or the school is in its first year of operation. The restriction to a minimum three month interval does not apply to schools which are part of the County Council’s on-line financial accounting system.

22 Unofficial Funds

22.1 Most schools have money available from sources other than the County Council which may be used for the general benefit of the school. Where such funds are controlled by an employee because of his or her position at the school, but do not pass through the County Council's accounts, they are regarded as unofficial funds. The Local Government Act 1972 states that a local authority may require any of its staff to account for all money and property committed to their charge and to produce the relevant supporting documents. To fulfil section 151 responsibilities, this requirement is extended to include all staff at all schools.

22.2 Accounts must be maintained and supporting documents (eg receipts) held for all transactions, including a 'management trail'. Reporting arrangements must be formalised. Best practice requires the reporting of annual accounts.

22.3 Audit certificates must be provided to the local Education Financial Services office for private or voluntary funds held by the school, and for any accounts of trading organisations controlled by the school. A copy must also be retained at the school.

22.4 For further details on the requirements for and operation of unofficial accounts, see section 32 of the County Council's Local Management of Schools - Manual of Financial Practice and Procedure.

23 Best Value/Value for Money

Best Value/Value for money

23.1 All schools must consider the relevance of Best Value principles in the expenditure of funds from their delegated budget share. When submitting annual budget plans, schools are required to say how Best Value principles are being followed.

23.2 Best Value will be a statutory duty to deliver services to clear standards, covering both cost and quality, in the most effective, economic and efficient means available. Legislation will place a duty on the County Council to secure Best Value for the way the County Council exercises its functions. The new duty is not intended to apply to those functions which are exercised by the governing bodies of County Council maintained schools. However, schools will be encouraged to adopt the Best Value performance management framework.

23.3 In relation to schools and expenditure from delegated budgets, the main features of Best Value can be summarised as a need for the governing body of a school to ensure:

(a) the existence of a programme of performance review which will aim for continual improvement. Existing mechanisms such as school development plans and post-Ofsted inspection plans can be developed to satisfy the requirements for review. The reviews should include:

challenging how and why a service is provided (including consideration of alternative providers)

comparison of performance against other schools, taking into account the views of parents and pupils

mechanisms to consult stakeholders, especially parents and pupils

embracing competition as a means of securing efficient and effective services

(b) the development of a framework of performance indicators and targets which will provide a clear practical expression of a school's performance, taking national requirements into account

(c) that the following are included in school development plans

summary of objectives and strategy for the future

forward targets on an annual and longer term basis

description of the means by which performance targets will be achieved

a report on current performance

(d) that internal and external audits take place ensuring that performance information is scrutinised. County Council oversight of school finances provides external review.

23.4 The independent inspection and intervention elements of the Best Value framework will be the responsibility of other bodies, and therefore not relevant to demonstration by a governing body of adherence to Best Value principles.

24 Glossary

Chief Financial Officer (CFO)	The County Treasurer is the CFO of the County Council so has a responsibility to ensure probity and regularity in the County Council's financial activities
CIPFA	Chartered Institute of Public Finance and Accountancy
FAS	Funding Agency for Schools issued funds to GM schools and monitored financial activities
Financial Management System (FMS)	FMS is a commitment accounting system which provides facilities for reporting to transaction level, invoicing, making payments, budget setting, budget monitoring, ordering and authorisation controls
ISB	Individual Schools Budget
HCC BP/SIMS BP	A budget planning tool which estimates salaries, wages and on-costs for each individual employee on a month-by-month basis
LEA	Hampshire County Council is the appointed Local Education Authority
Prudential Limit	The financial limit up to which a foundation school may borrow money, currently set as the amount of money a school can borrow without the cost of repaying the debt (principal + interest) exceeding 5% of the total annual revenue budget
Section 151 (S15l)	The section of the Local Government Act 1972 which defines the responsibilities of the CFO (see CFO)
Vire	To move funds from one budget head to another

25 Who to Contact

For Financial Records, Advice and Unofficial Funds queries, contact your local Education Financial Services office:

Winchester Local Office, Clarendon House, Romsey Road, Winchester 01962 869611

Fleet Local Office, Birch House, Barley Way, Fleet 01252 812333

Havant Local Office, River Way, Havant 023 92498200

For Cheque Book queries, contact the Havant Local Office.

For Maintenance of Buildings queries, contact Property Business and Regulatory Services on 01962 847876.

For Insurance queries, contact the Chief Executive's Department at The Castle on 01962 847327.

For General Queries and Notification to opt for Cheque Book Status, contac