Formula Capital – Eligible Expenditure
This guidance document is for Community, Foundation and Voluntary Controlled
Schools only. The DfE issues separate guidance to Voluntary Aided (VA) Schools
on the use of Formula Capital.
There is a requirement placed upon the schools and the authority to ensure that
Devolved Formula Capital (DFC) is allocated directly in line with individual schools
Asset Management Plan (AMP) priorities and the authority’s AMP priorities, which in
turn reflect the requirements of the DfE.
With effect from 2006/07 schools ICT grant has been issued to schools via Formula
Capital. It is for the schools to determine how much Devolved Formula Capital
should be spent on ICT and how much should be spent on building works.
Capital expenditure must either:
1.
2.
3.
lengthen substantially the useful life of the asset.
increase substantially the open market value of the asset
increase substantially the extent to which the asset can be used
Formula Capital spending priorities are identified through Asset Management
Planning, Condition and Suitability Surveys. The priority needs identified should be
considered before allocating Formula Capital to non-essential/nice to have works.
Examples of projects where Formula Capital can be used are:

Structural improvements to buildings, fixtures and fittings (ie. furniture);

The purchase of capital equipment, including ICT hardware;

Total refurbishment, or improvement of classrooms, toilets and staff
facilities (not just decorating, or replacing like for like individual items like
carpets/curtains/cubicles);

Installation of new boilers to improve heating;

Refurbishment and improvement to library facilities;

Benching/cabling/security grills/air conditioning/lighting for ICT provision
and ICT equipment (hardware);

Total replacement of roofs/windows/doors (not external decoration, or
patch repair);

Implementation of energy efficiency programmes which save money and
the environment;

Alterations to improve reception areas for parents/daytime security;
1

Minor extensions to the building;

Security fencing;

Other long-term improvement to the school estate.
The Scheme for Financing Schools, sets out the schedule of works deemed capital
which are the Local Authority’s responsibility. Items included in the list, but which
cost less than £10,000 are deemed revenue and are the responsibility of the school.
However, where these items are a total replacement and where applicable to the
whole school, they may be deemed capital eg. window replacement for £7,000 is
under the £10,000 limit for capital, so would only be deemed capital if the
replacement applied to the whole school and not partial replacement. The Local
Authority would expect Formula Capital to be spent on projects over £2,000.
There are some grey areas:

Refurbishment of toilets is revenue, but may be deemed capital if it is a total
refurbishment including the floor screed, rather than a partial replacement with
like for like items;

Resurfacing the playground is revenue, but may be deemed capital if it
involves reconstruction of the foundations, rather than just a resurface layer.
Extending the area would be capital;

Replacement of a few windows is revenue, but would be deemed capital if it
involves replacing windows across the whole school (or whole elevation
costing more than £10,000);

Boiler replacement for a lower school, if under £10,000 would be deemed
capital.
Consequently repairs that maintain assets to their existing state are classified as
revenue and examples of works which would be deemed revenue are listed below:
Formula Capital funding cannot be used for:

General maintenance, redecoration, like for like replacement;

Day to day and routine repairs and maintenance;

Purchase of books, ICT software, or training materials/services;

Operating leases in respect of equipment, or facilities. Finance leases are
classed as borrowing, for which approval from the Secretary of State must be
sought;
2

Hire of temporary accommodation, unless it is part of a larger project which
has a short-term requirement to re-house classes;
Further guidance can be found on www.teachernet.gov.uk
In addition, where the Council are taking forward a major capital project at the
school, it is expected that the school will contribute to the project utilising Devolved
Formula Capital to address condition and/or suitability issues in respect of the school
premises, considered as part of the project.
Where schools opt not to use their formula capital for outstanding high priority works,
the School Organisation and Capital Planning Team will challenge schools to provide
evidence for the need of the project prior to releasing the grant.
The Council does NOT automatically fund projects costing over £10,000.
Schools are therefore reminded that a regular maintenance/repair programme
should be implemented to assist in avoiding costly projects/schemes.
3