PART1
ITEM NO.
JOINT REPORT OF THE STRATEGIC DIRECTOR FOR
CHILDREN’S SERVICES AND THE DIRECTOR OF FINANCE and CORPORATE
BUSINESS
TO: Schools Forum on Wednesday 8 July 2015
TITLE: School Balances 2014-15
RECOMMENDATIONS: Members of School Forum are asked to consider the current
position on school balances and the actions being taken to assist and challenge
schools.
EXECUTIVE SUMMARY: This report updates Schools Forum on the position with
school balances as at 31 March 2015. The report shows that:  The number of schools in deficit is 3. Two of these schools have decreased
their deficit in line with their agreed deficit recovery plans. There is 1 new
school in deficit at the year end. This is a temporary situation only. A licensed
deficit agreement is not required for this school as a surplus is forecast in
2015/16. The continued robust deficit management application and monitoring
process has significantly reduced the number of schools entering into a deficit
budget situation and encouraged those already in deficit to reduce their
deficits quicker than the approved plans.
 Increases in pupil numbers have resulted in the sustained increase in the
primary sector budgets and should, in time, flow through into the secondary
sector.
 The level of surplus balances is increasing. Schools Forum may wish to take a
view on the processes that monitor and manage the level of surplus balances.
 Academy conversions will impact on the overall level of schools balances.
BACKGROUND DOCUMENTS:
Schools Year End Balances 2014-15
Salford Schools Scheme of Delegation
KEY DECISION: No
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Report Detail
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Introduction
1.1 At the beginning of 2014-15, the council maintained 85 schools made up of 72
primary schools, 10 secondary schools and 3 special schools. During the
financial year no schools converted to academy status and St Georges R.C
High School closed on 31.8.15. All schools have delegated budgets and
responsibility for the management of their own financial affairs. A summary of
the school balances as at 31 March 2015 is detailed in Appendix A.
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Year end balances 31 March 2015
2.1 The overall position for Salford schools shows an increase in balances from
£7,739,799 in March 2014 to £8,016,285 in March 2015, an increase of
£276,486 in overall balances. This is made up of £343,781 reduction in deficit
budgets and a decrease in surplus balances of £67,295.
2.2 Schools in deficit work with council officers to manage and reduce the levels of
deficit budgets. Three schools are in deficit. Two of these have decreased their
deficit in line with their agreed deficit recovery plans. There is 1 new school in
deficit at the year end. This is a temporary situation only. A licensed deficit
agreement is not required for this school as a surplus is forecast for 2015/16.
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Support mechanisms for schools with financial difficulties
3.1 Schools are notified of their indicative budgets in January of each year with final
budget allocations being notified in February. Schools are required to submit
their annual budget plans to the council by 31 May. Five year budget
projections are produced by the Finance Team in September for the following
financial year onwards using projected pupil numbers provided by the schools.
For schools projecting a deficit in future years, various options are modelled to
assist in the process of planning to address the deficit, including staff reductions
and revised pupil numbers.
3.2 The financial performance of all Finance SLA schools is monitored monthly
(quarterly for non Finance SLA schools) and, for a school with a deficit budget,
particular attention is paid to these finance reports to ensure spending is within
the licensed deficit plan.
3.3 The majority of a school’s budget is employee-related, so schools with large
deficits can only balance their budgets by a reduction in staff numbers whether
through not filling vacancies, VER or redundancy.
3.4 Officers from Human Resources and Finance work with schools that have
deficit budgets or are projecting deficits in future years. There is constant
support and challenge from the officers with a view to returning schools to a
balanced position as early as is practically possible.
3.5 There is an increase in pupil numbers within the primary sector which, while
placing additional demands on the schools, has attracted additional funding for
them. The pupil increase will move into the secondary sector in time.
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Surplus balances
4.1 In previous years, efforts have been concentrated on the issue of deficit
budgets in schools and the overall low levels of balances. This has improved
and schools have accumulated increasing surplus balances, some of which
could be classed as significant.
4.2 In recognition of a national accumulation of large levels of school balances, the
government gave local authorities the power to redistribute excessive
uncommitted revenue balances. They recommend that the level of the
uncommitted balances should be no more than 5% of secondary schools
individual budgets and 8% of primary and special school individual school
budgets. Salford adopted this guidance and has included the levels within our
scheme of delegation to schools.
4.3 Guidance from the government suggests:
“The scheme may contain a mechanism to claw back excess surplus balances. Any
mechanism should have regard to the principle that schools should be moving towards
greater autonomy, should not be constrained from making early efficiencies to support
their medium-term budgeting in a tighter financial climate, and should not be burdened
by bureaucracy. The mechanism should, therefore, be focused on only those schools
which have built up significant excessive uncommitted balances and/or where some
level of redistribution would support improved provision across a local area.”
4.4 Our current scheme includes the recommended levels of 5% and 8% as
maximum uncommitted balances allowed. This is monitored on an annual basis
by the calculation of the year end balances for schools. Schools are allowed to
split their balances between committed and uncommitted balances. For those
designated as committed, schools are required to provide evidence of the
commitment which may be in the form of governing body minutes, finance
committee minutes, copies of quotations, invoices or detailed commitments
held on the schools financial system.
4.5
Taking into account the government guidance at para 4.3 which emphasises
flexibility for schools, and that uncommitted balances have not breached the
tolerances outlined in paragraph 4.4, finance has not sought to impose
additional controls. Schools Forum may wish to take a view on whether this
approach is appropriate. It should be noted that the introduction of a national
formula is now expected in 2017 and this could have a significant impact on
schools budgets.
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Impact of academies on overall balances
.
5.1 As more schools convert to academy status there is an impact on the overall
level of balances held by schools and recorded in the council’s accounts.
Schools which choose to convert are able to take any accumulated capital and
revenue balances with them.
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Conclusions
6.1 The number of schools in deficit is 3. There is 1 new school in a temporary
deficit position. Agreed deficit recovery plans are in place where necessary.
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6.2 The introduction of a robust deficit management application and monitoring
process has significantly reduced the number of schools entering into a deficit
budget situation and encouraged those already in deficit to reduce their deficits
quicker than the approved plans.
6.3 Increases in pupil numbers should provide sustained increases in the primary
sector budgets and should, in time, flow through into the secondary sector.
6.4 Academy conversions will impact on the overall level of schools balances
6.5 School budgets are closely monitored and the licensed deficit monitoring
arrangements enforced in schools as appropriate.
6.6 The level of surplus balances is increasing. Schools Forum may wish to take a
view on the processes that monitor and manage the level of surplus balances.
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Recommendations
7.1 Members of School Forum are asked to consider the current position on school
balances and the actions being taken to assist and challenge schools.
KEY COUNCIL POLICIES: Revenue Budget 2014-15
EQUALITY IMPACT ASSESSMENT AND IMPLICATIONS: None
ASSESSMENT OF RISK: Medium.
Out of a total of eighty five maintained school balances reported, there are eighty two
in surplus and three in deficit. Attention is focussed on the schools in deficit and
deficit recovery plans are in place for these schools.
LEGAL ADVICE OBTAINED: The Council has adopted the Government guidance
regarding the levels of school balances and is acting in accordance with this.
Provided that school budgets continue to be closely monitored and the licensed
deficit monitoring arrangements continue to be enforced in all schools with licensed
deficits there should be no adverse legal implications.
FINANCIAL ADVICE OBTAINED: Provided by the Finance Team.
PROCUREMENT IMPLICATIONS: Supplied by: No implications from procurement
HR IMPLICATIONS: Laura Coluccio – HR Consultant
Human Resources supports schools in budget deficit to achieve their aims as
outlined in their licensed budget recovery plans. Where staffing has been highlighted
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as an area for savings, options for Voluntary Early Retirement or Voluntary
Severance may be considered along with other options to avoid compulsory
reductions of staff in line with the Workforce Change Policy. The Schools HR Team
will provide continuing support to Headteachers and Governors throughout the
process ensuring the school complies with its statutory obligations.
OTHER DIRECTORATES CONSULTED: None
CONTACT OFFICERS:
Chris Hesketh - Strategic Finance Manager Tel: 0161 793 2668
Debbie Fulton – Finance Officer Tel: 0161 778 0486
WARD(S) TO WHICH REPORT RELATE(S): All
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