Plan prepared by Hampshire County Council for the use of Targeted Transitional Support Grant for Schools in Financial Difficulty 2004/05

Contact: Thomas Whiffen , 01962 846287 e-mail thomas.whiffen@hants.gov.uk

Introduction

1.1 This plan for the use of Transitional Support Grant by Hampshire County Council takes full account of DfES guidance of 19 November and 10 December 2003. The approach taken in the plan has been discussed extensively in the Schools Forum and with other representatives of schools. The County Council would wish to use the entire allocation of £6.909 M for 2004/05 which the DfES showed in its November guidance letter.

2 Current financial position of Hampshire schools

2.1 At the end of financial year 2002/03, 53 schools were in deficit as shown on the Section 52 statement with a cumulative total deficit of £2.012m. There is a longstanding locally agreed view that the more worthwhile concept is the effective net balance i.e. the Section 52 figure adjusted for the retrospective adjustment shown on 2003/04 budget shares but in respect of over or under estimates of January 2003 Numbers on Roll (NOR) as used in the 2002/03 budget shares. Thus a school which had higher NOR than predicted might have legitimately anticipated the funding for those pupils and so had an apparent deficit at 31 March which is immediately covered by the NOR adjustment on its 2003/04 budget share. There are also schools which show a cumulative surplus at the end of a year but this is needed to offset the negative NOR adjustment for their lower than predicted numbers. On the net effective balance basis 62 schools are in deficit with a cumulative total of £2.290m.

2.2  Hampshire County Council was a 2003/04 SFSS floor authority with a small amount of budget support grant. The allocation of transitional support grant for 2004/05 shows a recognition of the low funding increase from 2002/03 to 2004/05 for the authority and its schools. This means that there is a general funding problem for all Hampshire schools which will continue beyond 2006/07, while the grant changes from the new national funding formula unwinds.

2.3  As such Hampshire's schools will be receiving relatively low levels of funding for 2005/06 and onwards, and the permanently low level of Standards Fund grant which the County Council and its schools attract inevitably shape the view of the future budget outlook. These low levels of both general and grant funding mean that it would be inappropriate to seek advance of such grant to improve the 2004/05 outlook as the impact would be to further reduce funding levels for schools below the floor in 2005/06. It has therefore been decided that no advance of future years grant will be sought.

2.4  A recent exercise has estimated that Hampshire schools have absorbed general unfunded pay cost pressures of £4.138m in 2002/03 and 2003/04 in respect of teachers' pay ( Main scale restructuring and assimilation, increments, leadership and performance pay (net of government grant), recruitment and retention measures ). Additionally the grading and pay scales of Learning Support Assistants in schools were reviewed recently and the estimated cost effect has not been explicitly included in budget shares. Schools could decide whether to adjust job content to reflect existing salaries or to meet the higher costs of the re-graded jobs. Our analysis of the impact of incremental profile on school level teacher costs shows that any school's relative position can change quite rapidly. This is to be expected in an area where recruitment and retention are noticeable challenges. In any case the smaller primary schools are funded on the basis of school average salary. There are thus no reliable grounds for predicting particular individual school cost pressures due to incremental profile and accordingly it is not one of the criteria for selection.

2.5  The expenditure trends to date and the evidence from schools' revised budget plans is that school balances will fall during 2003/04 financial year. They are expected to be about £6m lower by 31 March 2004 at a total of £21m. No specific one off items are known of within this total.

3  Prospects for 2004/05 and beyond

3.1  The budget situation for 2004/05 is dominated by the floor status of the authority and high SEN related inescapable cost pressures. The County Council intends to passport the increase in SFSS. The passported increase will cover:

3.2  The move of funds towards the schools serving the most deprived areas is based on careful consideration and debate of the issues after the December 2002 DfES policy guidance on the topic. These schools are recognised as having specific financial pressures. More than £2m per year was identified as the eventual requirement, with about £1m per year available in 2004/05 and future years.

3.3  The position for 2005/06 is not much healthier. The SFSS passporting value will again be based on a floor settlement. There will be the next phase of the development of three year old education which could require a further £700,000 to £1,000,000 or more. Every effort is being made to contain SEN costs and those for excluded pupil provision. It is hoped that a budget share increase above the minimum might be achievable but of course the full implementation of the move of funds to schools serving deprived areas will take much of any funding above the guarantee. The additional cushioning of the education funding changes with a higher floor for 2004/05 and 2005/06 means Hampshire and its schools will continue to feel the effect of the increasing grant losses into 2006/07 and beyond. This will represent a significant budgeting challenge at a time of increasing expectations across the sector, particularly with the implementation of workforce reforms.

4 Criteria for choosing schools for financial support

4.1 The criteria for eligibility have been extensively discussed including sessions at both the November and December meetings of the Schools Forum. Relevant material from the minutes is attached at Appendix 1.Paragraphs 4.2 to 4.7 below set out these agreed criteria.. There was considerable interest in treating deficits and capital reinstatement over two years so that the funding would only be completed if there was real progress in the budget .However the uncertainty over the level of grant in 2005/06 prevented this idea being developed further.

4.2 Pay sums equivalent to the value (write off) of historic deficits, defined on the net effective balance basis, as at 31 March 2003, into schools' budgets W here schools have already stated that the deficit will be cleared by a transfer from other funds then that transfer should be actioned before figures are calculated. This measure will use £2.29m and affect 62 schools.

4.3 Reimburse schools who opted to transfer money from devolved capital to revenue as a one off during 2003/04. This will use £1.14m and affect 48 schools. The money will be restored to schools' revenue accounts. However, the recovery and financial stability plan guidance will ask schools to carefully weigh up their school level balance between capital and revenue items. They should consider the need to restore devolved capital for their school.

4.4 Allocate money to schools with low year on year funding gains for 2003/04 to bring all schools up to an agreed threshold (in respect of budget share and Standards Fund). This is using the same method as agreed by Schools Forum to allocate the additional £278,000 budget support grant (i.e. where both budget share and budget share per pupil are below a threshold then extra cash is given to take each school up to the threshold). Schools in receipt of existing budget protection measures could be expected to lose these as circumstances changed. Thus there would not be compensation for the effect of a reduction in such protection. At a total of £1.67m i t would affect about 130 schools.

4.5 Allocate funds for falling roll issues affecting schools with key stage 1 pupils. The impact of falling rolls is most severe in the infant age range (Years R,1,2) and there is the added complication of the legal requirement on class sizes of 30. Few such schools are expected to qualify under the previous criterion, partly due to the move of class size money into budget shares. It is suggested that data from the 2002/03 and 2003/04 academic years, as at PLASC dates, be used to identify those schools where the number of infant age range pupils is falling and the class size of 30 requirements are likely to require a class more than the per pupil basis of funding will easily permit e.g. 128 pupils need five classes whereas the per pupil funding would only permit that at about 140 in the age range. £0.49m would be involved.

4.6 In the move to overall sustainable budgets for all schools the low year on year funding and the key stage 1 class size represent clear criteria based on objective evidence of where there is currently stronger financial pressures. The objective of sustainability will be achieved by giving these schools breathing space afforded by the supplementary finance in 2004/05 to secure better balanced budgets. The time created to make the adjustments to the profile of costs at the school and income sources mean that such funding aids sustainability rather than delays necessary decisions.

4.7 Allocate £250,000 across all schools for the purposes of financial training and advice. All schools in Hampshire will have to plan for significant financial challenges resulting from the impact of falling rolls, workforce reform, limited budget increases for 2003 - 2007 as a result of being in a floor authority and the resulting requirement to plan ahead more rigorously and over longer time periods make this essential. The Secretary of State wishes to see deficits eliminated and balances reducing by 2006/07 and this will help achieve that aim. This money will fund around one day's training or consultancy for each school in Hampshire.

4.8 Allocate £1.069m across all schools for the purposes of ‘invest to save' in workforce remodelling. All schools will need to secure revised allocations of time and workload with new skills and competencies being required from existing staff. The invest to save approach will be promoted with schools encouraging them to use this one off funding to:

The emphasis of this heading is therefore on invest to save in order to prepare schools for the changes. The use of the money in this way will clearly aid sustainability as the full workforce reform will be implemented more effectively. It is expected that this investment will enable schools to manage their workforce more effectively and so avoid deficit risks. It is a key investment for all schools in the lead up to 2005/06 and the delivery of 10% non contact time for all teachers. It is intended that the basis of allocation for these funds be that used to support the staff training element of the Standards Fund. That was devised taking into account of the support staff situation at different types of schools and seems the most appropriate way of distributing funds for the invest to save approach. Once developed further, the cumulative amount that each school will receive will be reviewed with the level of school balances being considered in respect of the third and fourth criteria.

4.9 It is also intended to review the list of schools identified by all these criteria. This is to check that the relevant educational performance issues have been covered. For those schools in special measures/ serious weakness/ where performance and/or management is of concern (as measured by the criteria agreed with Hampshire schools) grant adjustments, of up to a maximum of £10,000 per primary or special school, and £25,000 per secondary school may be made to ensure urgent improvements for pupils are not prevented by budget issues.

5 Individual school recovery and stability plans

5.1 It is expected that as a result of this grant, schools will move forward with a stabilised budget and balance income and expenditure from at least 2006/07. Agreeing these plans and subsequent monitoring of them will place additional burdens on finance (Educational Financial Services {EFS}) and advisory staff working with schools.

5.2  The County Council has been active in promoting medium term planning at school level. A new guidance document on linking strategic planning and resources at school level has been developed over the last few months. This material will complement that being provided by the DfES/KPMG . The proposals in the rest of this plan will provide a more vigorous framework and regime which will secure better quality budgets for sustainability from schools.

5.3  All schools in deficit or budgeting to be and in receipt of transitional grant money will need to agree a recovery plan/ a financial stability plan with EFS which shows that they will not return to being in financial difficulty. Schools will need to continue to effectively manage their budgets in the future as. tough decisions will not be taken away by payment of a one off grant. Plans are expected to focus on the known and forecastable rather concern about future inflation. Known pay awards and movements up staffing structures should be reflected.

5.4  The authority intends to provide, for all schools that are in receipt of grant, a framework for a recovery/ stability plan indicating the necessary information required and the format needed. Further work is being done and the results will be made available to schools early next term.

Key features of the process are :

6 Budget Monitoring

6.1 Under current arrangements all schools are required to produce an agreed budget by May half term each year and are encouraged by staff from Education Financial Services to produce a revised budget in October each year. Governors at the schools would expect to receive regular financial reports on the progress against the plan and any actions required to ensure delivery of agreed outcomes.

6.2 This basic framework, that applies to all schools, needs to be supplemented with the following provisions for those schools in receipt of transitional support grant who must comply with the following conditions in order to receive the grant :

6.3  Monitoring statements will be required from all schools receiving grant in respect of deficit write offs and other schools receiving more than £15,000 grant together with appropriate summary narrative to confirm that plans are on course. These could include:

Other schools in receipt of more than £15,000 grant should ensure that the budget on the system is up to date and that EFS receive statements on the revised budget by 15 November.

6.4  All schools will be reminded of their existing obligation under Hampshire's Scheme of Financial Management for schools to notify EFS as soon as they expect to go into deficit for any reason.

7 Monitoring of achievement

7.1  If a school's deficit plan is not on target or its stability plan looks under threat after the first year

8 Financial Management Training

8.1 Criteria for selection for training are :-

8.2 The County Council intends to nominate and vigorously encourage attendance of Heads and Bursars/Governors from schools with the most significant financial challenges on these financial management courses being arranged free of charge by KPMG for February 2004. Schools will be notified very early in January that they have been nominated and are required to attend the one day training the following month. 57 schools have been nominated which is greater than the initial DfES allocation for 38 school places.

8.3  These workshops will be backed up by on-line information and consultancy support. In addition where capacity allows Education Financial Services staff will continue to work with schools to support financial management plans.

8.4 The intention is to actively use the workshop material and our own material in training events for other schools. This will ensure that the key lessons do get shared more widely and aid overall sustainability.

9 Grant Conditions

9.1 The County Council intends to meet all the grant conditions laid down.

 

Jon Pittam
County Treasurer

Andrew Seber
County Education Officer