Deficit procedures

Deficit recovery plans

When a school ends the financial year in deficit, the procedures are:

  • That the school must submit a robust recovery plan to clear the deficit within no more than three years in deficit.
  • That the school will be required to complete deficit monitoring returns.

The deficit recovery plan consists of the initial deficit monitoring return and a matching three year financial plan at either GL Code or CFR report level. The plan must include all cost centres used by the school.

The deficit recovery plan must be submitted to EFS by 31st May and must incorporate the key actions and assumptions that have been included in the plan.

The County Council will review the deficit recovery plan and the financial plan, undertaking validation checks to ensure the plans are reasonable. These checks may include:

  • Compare the current year’s budget v forecast report with the previous year’s trend analysis report to identify any significant differences.
  • Review the deficit recovery plan to check its reasonableness and the required level of savings can be achieved within the timescale specified.
  • Check the correct brought forward balance has been included in the current year’s plan and that all delegated funding has been accounted for.
  • Check the future pupil numbers are realistic. The school may be required to provide evidence to support the forecast and changes in pupil numbers. Should there be a shortfall in pupil numbers, the school will be required to fund this from existing resources.
  • Areas detailed in the deficit recovery plan that are unclear or not considered achievable will be queried with the school and further clarification sought.

Once the plan and been submitted, reviewed, and agreed as a robust recovery plan it will be approved by the County Council and will be the school’s approved deficit recovery plan.

Where a school’s financial position deteriorates further and deviates from the approved deficit recovery plan, this will be escalated to the Director of Children Services to decide whether to approve a revised deficit recovery plan or whether County Council intervention may be required.

Deficit monitoring returns

The school will be required to submit deficit monitoring returns to EFS by the 31 May (Budget setting), 31 October (Mid-year review) and 28 February (Outturn forecast).

The monitoring return requires the school to:

  • Complete the deficit monitoring return template
  • Submit a three year financial plan at CFR or GL Code report level
  • Upload the latest current year forecast into SAP via the IBC Portal using the following plan versions:
    31 May: 300 & 301
    31 October: 301
    28 February: 302

The school will not be required to undertake November budget revision during this period.

A plan must be completed and uploaded for all the cost centres that are used by the school.

The deficit monitoring return must show the total amount added together of all cost centres that are used by the school.

The returns must show an accurate reflection of the school’s current financial position and must include a commentary detailing the reasons for any movements from the previous plan, as well as stating any further action that will be taken.

The deficit monitoring returns must be approved by governors and signed by both the headteacher and chair of governors.

EFS will monitor the receipt of these returns to check for accuracy and reasonableness, compare them with previous returns and the school’s approved deficit recovery plan. Any returns completed incorrectly will be returned to the school and will need to be resubmitted.

Schools should use the budgeting tool to draft financial plans. If the school does not have access to the budgeting tool or a similar alternative, then the school should provide the plan in a suitable format to be agreed with the County Council.

Schools who require assistance with completing the deficit monitoring process should contact their attached EFS finance adviser. If you do not subscribe to the EFS SLA, please email [email protected] for further advice.

County Council intervention

County Council intervention will apply where either:

  • the school has not engaged in the deficit recovery process
  • the school has failed to submit a deficit recovery plan
  • the deficit recovery plan fails to provide sufficient assurance
  • the deficit worsens and no action is being taken by the school
  • the school has failed to submit deficit monitoring returns.

Intervention is proposed to escalate as follows:

Warning letter

A warning letter will be sent to a school where it is considered that County Council intervention is required. The letter will express concerns regarding the financial health of the school and actions that school may be required to undertake.

Where a school has received a warning letter and a level of intervention has already been given but there is insufficient assurance from the actions taken that the deficit balance will recover, the school will be referred to members of the Children Services Department Management Team (CSDMT).

CSDMT will decide the appropriate action to be taken, which may include requesting a formal meeting with the schools governing body, or to issue a formal notice of concern to the school.

Notice of concern

Should the school be issued with a formal notice of concern this will set out in writing the detailed concerns and actions the school will need to take within the stated period. The notice will also state the actions that the County Council will take where the governing body does not comply with the notice.

The governing body will receive an intervention visit and a robust deficit recovery plan will need to be provided by the deadline provided. If this is not provided or the deficit recovery plan is judged to be deficient then further intervention will be implemented through the notice of concern including the creation of an IEB. The IEB will commission a review into the financial management of the school and set/review the headteacher’s finance performance target.

Suspension of delegated financial powers

Where a school refuses to take action identified by the County Council the ultimate sanction will be the suspension of delegated financial management.