Contact: Sheila Little, Contact Ext.7545, e-mail: [email protected]

1 Summary

1.1 This report summarises the Education service's spending in 2004/05 and sets out the policy framework underpinning the budget provision in those areas where the variation is greatest .

1.2 It recommends that the final accounts for 2004/05 be approved and that the underspendings be carried forward to 2005/06 based on current policy and aided by the use of other resources to meet new pressures in 2005/06.

1.3 Decisions on Education service revenue, expenditure and capital programmes impact on the financial resources available to this service to contribute to the following corporate strategy aims:

· Maximising life opportunities

· Achieving economic prosperity

· Improving services

1.4 In addition the Education service contributes to the five keys aims of the Children Act:

· Being healthy

· Staying safe

· Enjoying and achieving

· Making a positive contribution

· Achieving economic well-being

1.5 Race and equality impact assessment has been considered in the development of this report and no adverse impact has been identified.

1.6 Overall, there is a net underspending of £803,000 (0.1%) against the 2004/05 adjusted revised revenue cash limit of £668.890m. This represents a variation on the balanced budget reported in the latest budget monitoring report.

1.7 The revised cash limit is made up of the Schools Budget, £564.1m and the LEA Budget, £104.8m. The Schools Budget represents the amount that the County Council has consistently fully passported to schools and which is likely to be subject to changes as the DfES introduce new school funding arrangements in the form of a `dedicated schools grant' with effect from 2006/07. Further details on the new arrangements will be reported to Members when they have been announced by the DfES later in the summer. Of the Schools Budget, £516.834m is delegated to schools through budget share allocations (the Individual Schools Budget - ISB and other grants). The County Council can determine how this money is allocated to each school with the Schools Forum providing advice. The balance, £47.269m is held centrally but spent on school related areas, such as Special Education Needs (SEN), Education Otherwise Than At School (EOTAS) and Early Years. Strict DfES controls limit the annual level of increase in these budgets.

1.8 The LEA Budget, £104.857m comprises mainly home to school transport, £19.723m and a range of services supporting pupils in schools, such as the Education Psychology Service and Education Welfare Service.

1.9 The major variations against the revised budget are:

1.10 The County Council's policy is to carry forward into the following year 100% of net overspendings and 50% of net unplanned underspendings. Cabinet decides what use should be made of the other 50% underspending. On this basis £402,000 will be added, as a one-off to the Education service cash limit for 2005/06.

1.11 It is proposed to use the carry forward total of £402,000 as follows:

· An additional Education service contribution to the Youth Offending Team (YOT) to maintain existing service provision, £157,000

· In 2004/05 funding, to the value of £45,000 had to be subsequently held back when some providers of locally managed programmes of adult learning failed to meet the targets. Allowing this carry forward, as a one off, will enable individual providers to secure the delivery of programmes during 2005/06. However, part of the efficiency programme for 2005/06 requires a saving of £8,000 in the advance adult learning programme to ensure a balanced budget in 2005/06.

· Additional contribution to pay for the one off cost incurred on installing the Hampshire Web Interface (HWI) in all schools, £200,000. HWI allows schools access electronically to the financial, procurement and personnel system and provides the school management team and governing body with data essential to strategic resource management. Paying a larger contribution in 2005/06 reduces the amount due in future years by £40,000 each year. Freeing up this money will allow the County Council and schools to fund new initiatives based upon priorities.

1.12 On capital, schemes to the value of £46.979m were committed in the year and schemes to the value of £13.190m have been approved (or approval is being sought elsewhere on this agenda), to be carried forward to start in 2005/06. In total this amounts to £0.822m less than the approved cash limit for the capital programme.

Local Management of Schools

1.13 Any balance of budget allocation held by schools at the year-end, whether surplus or deficit, must be carried forward into the next financial year. During 2004/05 the overall level of school reserves under LMS increased by a total of £6,656,000 (Primary balances by +£3,434,000, Secondary by +£2,742,000, Special by +£429,000 and Nursery by +£51,000). The cumulative reserves now stand at £34.999m (including balances for community education) which represents 6.3% of schools' allocations as shown in the table below:

1.14 The above figures are higher than anticipated from the indications received from schools, earlier in the year, suggesting that they had plans to reduce balances. However, one of the key criteria for distribution of Transitional Support Grant (a Central Government grant paid to some Councils to assist schools in financial difficulty), in 2004/05 totalling £6.9m was deficits. The difference between the 2004/05 total allocation to schools, £551.4m and the amount spent by each school, £544.8m is £6.6m which is £0.3m less than the additional amount paid through the Transitional Support Grant. The number of schools in deficit at the end of 2004/05 is considerably lower than in 2003/04 at 37 compared with 55. After taking account of retrospective number on roll adjustments, there are 24 primary (down from 33), 11 secondary (down from 18) and two special (down from four) schools in deficit situations at March 2005.

1.15 The second and final allocation of the Transitional Support Grant during 2005/06, totalling £3.455m has been made to schools. The same conditions have been applied as for 2004/05. These are that all those schools in deficit (and those in receipt of more than £15,000 transitional support grant) have to produce an agreed, costed three year stability / recovery plan in order to be eligible to receive the grant. As at the end of May 2005, 20 schools had not yet done this but officers continue to assist these schools in finalising the required three-year plan.

1.16 Further details on the main differences between the actual revenue expenditure and the revised budget for cash limited expenditure are given in Part A below while details of revenue expenditure which is not included in the cash limit are contained in the appendices at the end of the report. The results of the trading units are reported in Part B. Part C deals with capital schemes. Part D explains the basis of the control assurance statement included as Appendix 8

2 Part A - Revenue expenditure under the service's control

2.1 Revenue expenditure under the service's direct control is subject to a cash limit. For 2004/05 the adjusted amount is £668.9m as set out in Appendix 1.

2.2 The final outturn was £803,000 less than the cash limit, despite previous monitoring reports projecting a balanced budget. The overall position is analysed in Appendices 2 and 3. Appendix 4 includes a more detailed statement of variations from the revised budget. Budget overspends are shown as + figures, and underspends as - figures.

2.3 The table below compares the revised and original budgets to outturn across a number of years and indicates that there have been budget variations at either revised budget stage or end of year over a number of earlier years.

The most significant elements within the total net under spending are explained in the following paragraphs.

Centrally Managed budgets for schools +£243,000

This was caused by temporary classroom rentals costing more than had been anticipated, £151,000; exceptional circumstances beyond the control of individual schools for which they were given additional funding, £65,000; and small overspends on copyright and other licences and supply cover for teachers on public, union and representative duties.

Inclusion and Behaviour (Special Education Needs) -£488,000

In line with Hampshire County Council's SEN Policy (most recently confirmed by the Education Policy Review Committee in March 2005) considerable effort continues to be made to educate children and young people close to their homes and to maintain them within their families and communities wherever possible (SEN Policy, April 2005 - Principle 4).

Financial investment continues into developing the County Council's very good special educational provision, both in terms of its special schools and resourced provision attached to mainstream schools. In recent years a new secondary special school for children with complex learning difficulties has been built in Winchester and a primary special school, addressing similar areas of need, has been developed and extended in Compton (Nr. Winchester). Another new all-age (2 - 19) special school is being built in Bordon and is due to open in September 2006.

Due to the successful implementation of Hampshire County Council's SEN and Inclusion policies, there are now fewer young people removed from their families and placed in out-county, non-maintained schools than at any time in recent history. This and reflects the increasingly high quality of Hampshire's local specialist provision. In recent Ofsted inspections, out of a total of 28 Hampshire special schools, all have been found to be at least satisfactory, with a considerable percentage being identified as good, or very good. No Hampshire special school is at present identified as having serious weaknesses or to require special measures..

Even in the light of this successful policy implementation, planning and controlling expenditure on demand-led budgets for pupils with special needs continues to be a challenging management task. Support for this area has been identified as a major element in the work of the new SEN Scrutiny Committee.

The outturn for the various non-delegated budgets in 2004/05 shows a net underspend of £488,000 made up as follows:

60 % of the underspend on out-county placements relates to developments late in the year, e.g. excluded pupils and an inability to find alternative placements for them (resulting in some of the overspend in EOTAS), non-attendees, late starters, and lack of success in achieving placements for pupils with very difficult circumstances. The average cost of an out-county placement is approximately £38,000, with the highest being over £200,000. Pupils with the more difficult circumstances are usually in relatively high cost placements. When they are excluded or cannot be placed, the variations in expenditure are also high. This has always been, and remains, a volatile budget, presenting significant challenges for budget management. In 2005/06, additional management resources are being deployed with the aim of achieving early identification and reports of variations, albeit changes in circumstances, producing large variations, may still occur late in the year.

The placements in other County Council special schools and units which give rise to inter-authority recoupment, are due to parental preference, foster placements to other local authority areas, and situations where the nearest appropriate placement is over the Hampshire border. These demand-led circumstances, and the practicalities of the recoupment process, present a challenge to budgetary planning and control.  Measures are always under review with the aim of achieving an earlier warning of variations, while at the same time avoiding a disproportionate cost in terms of management resources.

In addition to the budgetary pressure placed on EOTAS by the often sudden exclusion of children from out-county provision (see above), there has also been an increased emphasis on preventative, early intervention work, in line with the "EOTAS - Towards a Strategic Framework" document agreed by the Education Policy Review Committee in March 2004. There has been growth in the amount of work carried out with young people at risk of exclusion. This has resulted in an overall drop of 38% in permanent exclusions, when compared with the same period last year. However, the young people are still there and their needs still have to be met - before permanent exclusion, rather than after. Basingstoke School Plus continues to develop and there are now very real signs of improvement in educational provision for the vulnerable young people who attend, but the cost of meeting their needs has also contributed to the overall EOTAS overspend. All of these budgets will continue to be monitored carefully and managers are seeking ways further to improve budgetary forecasting and control.

The Behaviour Support underspend arises from recruitment difficulties relating to social workers for schools for pupils with Behavioural, Emotional and Social Difficulties.

Early Years -£659,000

During 2004/05 the County Council created almost 3,000 new childcare places under its Sure Start programme and was able to claim grant according to the unit costs set by the DfES. This generated grant of £415,000 more than the actual costs of creating these places. This `excess grant' is reflected in the 2004/05 accounts. However, with effect from 2005/06 the DfES rules move to funding on an actual spend basis so there will be no excess grant in 2005/06 or onwards. The Education service had also budgeted to add £154,000 to the DfES contribution, which has not been required. The revised budget reflected the anticipated spending in the final term on 3 and 4 year olds. At the end of the year this budget had only a small variation of £5,000, indicating that the pupil number projections used in January 2005 to predict the final term were accurate.

School Centrally-held Budgets +£547,000

Investment in the implementation of the Hampshire Web Interface in schools of £424,000 in 2004/05 has reduced the budget pressures from this development in future years by £84,000 per year. Increased spending on premature retirement compensation, £123,000 accounts for the balance of the over spend.

Access (e.g. pupil support) -£96,000

The main saving related to lower than expected levels of claims for school clothing allowances in the pupil support budget, £68,000 on a revised budget of £403,000 and, an increased income of £19,000 on the residential housing budget as a result of more active management of the housing stock to make it available to teachers and other key workers.

Adult Education -£252,000

Within the net underspend there is £90,000 which was originally allocated through funding agreements with individual providers to secure the delivery of locally managed programmes of adult learning. The allocation was made against agreed numbers of adult learners and was subsequently held back when some providers failed to meet the targets. The timing effect of the LSC financial year (academic based, ending at the end of July), meant that it was not possible to re-allocate this money within year. The balance is accounted for by further complications arising from the different financial year-ends.

Continuing Education -£62,000

The main variations related to an underspend on the home to college transport budget, £36,000 against a revised budget of £787,000, reflecting the continuing success of spend to save initiatives in reducing contract costs and a reduction of £18,000 due to a change to the process for charging from Connexions for the provision of careers guidance for Special Education Needs pupils.

Youth Offending Team (YOT) +£159,000

An additional contribution to the Wessex Youth Offending Team partnership of £153,000 was the main element of this overspend.

Services to Schools and Support -£250,000

A net underspend of £250,000 resulted on a revised budget of £25.8m. This arises mainly from delays in replacing outdated ICT systems, £44,000; the lower than expected staffing related costs in a number of areas, including: Early Years core budget, £139,000; Inclusion support, £47,000; the Education Psychology service, £23,000.

3 Part B - Trading units

3.1 Since 1990, a range of support services has been provided to schools through Service Level Agreements. This allows school governing bodies to choose the level of service that best meets their need and schools pay the Units for the services purchased. The business units have an annual turnover of £26m and the level of overall surplus has varied from year to year, reflecting the volatility of the environment within which each operates. It is not unreasonable for a balance of 5% overall surplus to be held.

3.2 The trading activities of the Education business units during 2004/05 have resulted in an overall in-year surplus of £143,000, compared with a planned deficit of £695,000, on a turnover of £26m. The outturn position on the service's business and trading units are set out, in summary, below:

3.3 The outturn position on the service's business and trading units indicates an increase in overall reserves to £1.32m. The major reasons are a higher level of purchase from schools for HIAS activity and an improved outturn for EdICT following unusually high end of financial year business and delays in implementation of IT projects for which schools have already paid. The HIAS position will benefit the County Council by providing funding for the School Improvement Partner initiative to `match' fund the DfES grant. In addition, other business units received a higher than expected income in the January to April period. The two study centres hold £287,000 of the surplus as a contribution towards future building work to enhance the learning environment for pupils attending the centres.

3.4 All of the units operate under arrangements agreed by the County Council which permits them to retain planned surpluses for purposes approved in their business plans or to take into account in setting future budget strategies.

3.5 The summarised trading accounts of the individual business units and a comparison with the revised budget are shown in Appendix 5

3.6 Appendix 6 lists those items of expenditure, which affect the Education Service but are not within the direct control of the service.

4 Part C - Capital expenditure 2004/05

4.1 The outturn for 2004/05 is set out below with details of the total resources and of the individual schemes committed in the year appearing in Appendix 7.

			Total
			£'000
Total resources			60,991
Value of schemes committed in 2004/05			46,979
Value of schemes carried forward to 2005/06			13,190
Undercommitment against the cash limit			822

4.2 The total programme limit for 2004/05 amounted to £60.991m and schemes to the value of £46.979m were committed in the year. Part of the capital programme relates to `block votes', which are a group of similar minor schemes, which don't require individual project appraisals and where the pattern on expenditure is appropriate to control on an expenditure basis because it is relatively small and smooth. Other larger projects which require individual project appraisals continue to be controlled on a `starts' basis because expenditure is more likely to be in peaks. Commitments in the year therefore represent a combination of expenditure on block votes and starts relating to other projects.

4.3 Schemes approved to be carried forward to start in 2005/06 included Priestlands Community School, The Bridge Education Centre, Netley Marsh Infant School, St Lawrence CE Primary School, and The Sundridge School. The list of schemes committed and carried forward is included in Appendix 7.

4.4 The combined value of schemes which were committed in 2004/05 and those carried forward to start in 2005/06 is £13.190m which is £0.822m below the cash limit. The balance of the cash limit can also be carried forward to 2005/06.

5 Part D - Departmental assurance statement

5.1 From 2003/04 the Code of Practice on Local Authority Accounting in the UK requires the County Council within its Statement of Accounts to publish a Statement of Internal Control signed by the Leader and the Chief Executive. As part of this process the Chief Internal Auditor is required to provide an independent opinion on the adequacy and effectiveness of the system of internal control operating in each department and in the County Council as a whole. The Governance Committee reviews these opinions. Appendix 8 contains the statement relating to the Education service and concludes that Education service has an effective framework of control, which provides reasonable assurance regarding the effective, efficient and economic achievement of the County Council objectives.

6 Legal Implications

6.1 There are no legal implications of this paper.

7 Personnel Implications

7.1 There are no personnel implications of this paper.

Recommendations

1 That the final acounts for 2004/05 be recommended for approval to the Executive Member for Education.

2 That the Executive Member for Education take to Cabinet the £402,000 of the underspendings in 2004/05 be carried forward andbe added to the 2005/06 budget as set out in paragraph 1.10.

Section 100D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents, which disclose exempt or confidential information as defined in the Act.

TITLE