TO: SCHOOLS FORUM
DATE: 18 NOVEMBER 2021
THE SCHOOLS BUDGET: 2021-22 BUDGET MONITORING
Executive Director of People
1 PURPOSE OF REPORT
1.1 The purpose of this annual report is for the Schools Forum to receive an update on the 2021-22 forecast budget monitoring position for the Schools Budget, to be aware of key issues and management actions being taken and progress to date on the Education Capital Programme.
2 EXECUTIVE SUMMARY
2.1 Monitoring information on the revenue budget available at the end of September forecasts a significant year end over spending on the Schools Budget of £7.598m which mainly arises from the previously highlighted increase in the number of children and young people needing support through the High Needs Block (HNB) budget. Taking account of the pre-existing £2.626m deficit held in the Dedicated Schools Grant Adjustment Account, a £10.224m cumulative deficit is currently being forecast for 31 March 2022.
2.2 The on-going significant increase in costs and the difficulty in presenting balanced budget proposals for 2022-23, despite the significant increase in funding and developing savings programme illustrates the changing financial situation.
2.3 Furthermore, the council has begun discussions with the Department for Education (DfE) relating to the significant size of the HNB deficit through the DSG Deficit Recovery programme. These discussions are on-going and remain at the exploratory stage.
2.4 These discussions are in the context of the expectation that the current 3-year period of change to DSG conditions that currently confirm that no liability for a deficit will fall onto an LAs General Fund will end at 31 March 2023 with LAs then needing to manage the cumulative debt from their own resources. The current forecast debt for the HNB at that point of transfer is £20.4m. This reduces to £18.2m when other earmarked DSG surplus balances are also included.
3 RECOMMENDATIONS
That the Schools Forum NOTES:
3.1 the budget variances being forecast on the Schools Budget that total to an aggregate net forecast over spending of £7.598m (paragraph 6.12);
3.2 that the year-end balance held in the Dedicated Schools Grant Adjustment Account is forecast at a £10.224m deficit (paragraph 6.12);
3.3 the possibility that liability to fund balance held in the Dedicated Schools Grant Adjustment Account will transfer to LAs from April 2023 (paragraph 6.18)
3.4 the council is in discussions with the Department for Education relating to the management for the High Needs Block deficit (paragraph 6.21)
3.5 progress to date on the Education Capital Programme, as summarised at Annex 2.
4 REASONS FOR RECOMMENDATIONS
4.1 It is appropriate for the Schools Forum to be aware of, and where relevant, comment on these financial matters.
5 ALTERNATIVE OPTIONS CONSIDERED
5.1 Where relevant, these are set out in the supporting information.
6 SUPPORTING INFORMATION
2020-21 Monitoring of the Schools Budget (Revenue)
Setting the budget
6.1 The Council holds the statutory duty to set the annual Schools Budget and each February sets an initial total budget as part of the overall budget setting process. For 2021-22 this included a net budget of £5.170m which comprised £4.943m as the forecast over spending on the HNB element of the Dedicated Schools Grant (DSG)[1], and £0.227m from Council funds to finance the additional costs arising from new schools to ensure that the BF Funding Formula for Schools was set at the same values as the Department for Education’s (DfE) National Funding Formula (NFF)[2].
6.2 Having set the initial budget, the Council then delegates to the Executive Member for Children, Young People and Learning the power to agree the allocation of budgets to individual lines of the Schools Budget, up to the level agreed.
6.3 Budget proposals for the 2021-22 Schools Budget were approved by the Schools Forum at its meetings in January and March, and these were subsequently agreed by the Executive Member.
6.4 The most significant income source to the Schools Budget is the Dedicated Schools Grant (DSG), which is paid by the Department for Education (DfE). The initial approved budget included £109.240m as the estimated amount of DSG. Other grant income of £5.444m was also expected from the Education and Skills Funding Agency (ESFA) for sixth forms, the Pupil Premium, Primary PE and Sports activities and the Universal Infant Free School Meals initiative. With £0.130m of general income also anticipated, there was originally expected to be £114.814m of income available to fund expenditure within the Schools Budget. Adding the £5.170m approved net budget results in a gross budget of £119.984m.
6.5 In agreeing an initial HNB budget, the Schools Forum was in receipt of more up to date information than the Council when the formal budget decision was taken and agreed the HNB should include an initial forecast over spending of £5.699m, a £0.756m increase on the amount initially approved by the council. The budgets agreed at individual service level therefore reflected an aggregate level of spend that would result in a forecast £5.699m over spending.
Current approved budget
6.6 Subsequent to setting the original budget, the ESFA has confirmed the amount of DSG recoupment that needs to be deducted to directly fund academy schools, where funding continues to be based on the BF Funding Formula for Schools. This amounted to a £28.353m deduction which has been balanced off by an equivalent decrease in budget for maintained mainstream schools.
6.7 Furthermore, the ESFA has also recalculated allocations through the HNB DSG. This reflects updated numbers of pupils in special schools and the adjustment made to LA HNB funding allocations to ensure the resident LA funds the cost of places taken up by their pupils in other LA specialist providers and also for deductions for ESFA directly funded providers. The deduction for BFC has reduced by £0.066m, which has been balanced off by an equivalent increase in budget for non-maintained special schools.
6.8 Overall, these changes result in an anticipated level of income of £86.527m, an unchanged net budget of £5.170m and therefore total funding of £91.697m. To ensure budgets correctly reflect anticipated spending requirements, relevant adjustments have been made to the areas of the accounts that the changes relate to. Annex 1 sets out a summary budget statement.
6.9 Other budget changes may need to be processed later in the year if further updates are provided by the ESFA. If applicable, this will relate to the HNB and the Early Years Block.
Forecast budget variances
6.10 As part of the Council’s Financial Regulations, the Schools Budget is subject to monthly budget monitoring. This involves forecasting likely expenditure and income through to the end of the year, identification of reasons for variations against original budgets, and where relevant, setting out options for management action. This process allows for a forecast year end level of balances to be calculated.
6.11 It is appropriate for the Forum to be aware of the current forecast year-end balance as this will need to be taken into account when the 2022-23 budget is agreed. It is also likely that a number of variances identified this year will be on-going and will therefore need to be considered in next year’s budget.
6.12 Provisional budget monitoring information available at the end of September indicates that the Schools Budget will overspend by £7.598m this year which is £1.899m higher than the amount forecast when the budget requirement was agreed by the Forum. There is a £2.626mm deficit opening balance on the DSG Adjustment Account meaning an aggregate year end deficit of £10.224m is currently being forecast.
6.13 The prime cause of the increasing deficit is financial performance in the HNB which in the 2 years April 2020 to March 2022 has over spent by £12.422m
6.14 The following sections set out current spending and budget variance forecasts for 2021-22, and whilst there remains the potential for change over the coming months, a significant year end over spending is considered unavoidable. Explanations of the significant changes anticipated from the current budget plan (+/- £0.020m) are set out below, with Annex 1 showing the overall Schools Budget at a summary level.
Schools Block - £0.007m over spend:
LA Managed items - £0.007m over spend:
1) There are 2 significant variances to report: a forecast £0.034m over spend on premature retirement and dismissal costs of school-based staff. This is a de-delegated budget for maintained schools and reflects current actions already taken to facilitate more effective and efficient school organisation structures. Other significant variance relates to a £0.027m forecast over spending on transport arrangements required to maintain children looked after in the most appropriate school setting. These are partially offset by a number of relatively small forecast under spendings.
High Needs Block - £7.636m overspend against budget:
As previously reported, budget items 2) to 6) below represent the most unpredictable and volatile education budgets that the council is responsible for. Therefore, a considerable amount of time is taken in their management. However, they remain subject to significant change at short notice which can result in large movements in cost forecasts. To help manage this volatility, a contingency for future cost increases of £0.178m is included in the forecasts until such time as greater certainty is available relating to placement details and their costs. The contingency amount is reviewed each month and adjusted accordingly.
Forecasts reported at this time for external pupil placements and top up funding for mainstream schools include confirmed costs for the summer term, with provisional amounts included for autumn and spring which are subject to change until all required placements and their costs are known. The forecasts will continue to change through to the end of the financial year.
The variances being reported now will need to be assessed as to their on-going impact and included as appropriate when budget proposals for 2022-23 are presented.
2) Delegated Special Schools – £0.127m over spend. Top up payments to Kennel Lane Special Schools have been recalculated to reflect in-year starters and leavers and increases in support needs for existing pupils. The current forecast also includes provision to purchase 198 places.
3) Maintained schools and academies – £0.419m over spend. Top up payments to BF maintained schools and academies are forecast to overspend by £0.401m. In respect of BF pupil placements in other LA schools and academies, a £0.022m overspend is forecast. In general, placements have increased with average costs of support remaining fairly stable.
Funding of £0.103m set aside to support the development of new SEN resource units in mainstream schools will not now be spent as the programme has slipped, mainly as a result of the coronavirus pandemic.
4) Non-maintained special schools and colleges – £1.613m over spend. This is the most significant budget area in terms of expenditure and the focus of the change programme. Whilst the increase in placements is broadly in line with the budget assumptions which expected an extra 28 FTE which compares to the current actual forecast for the year of 26, there has been a significant increase in the average cost of support. The budget assumed that this would remain close to the 2020-21 actual average of £36.2k but is in fact now at £43.5k, an increase of 20%. This reflects the nature of placements required and the availability of places.
5) Education out of school - -£0.210m under spend. The main variances relate to a forecast £0.078m allocation of top-up funding to support pupils with an EHCP at College Hall Pupil Referral Unit which is off-set by a significant reduction in spend on pupils in externally commissioned Alternative Provision settings as more pupils are placed in school settings. This amounts to a forecast budgeted saving of £0.275m.
6) Other SEN provisions and support services - -£0.012m under spend. The main variances relate to a £0.030m forecast over spending on support to pupils with medical needs and reflects current known cases, a £0.091m expected saving on speech and language and occupational therapy support and additional spend of £0.034m on the general savings programme relating to service re-design. There are a number of other relatively small variances across a wide number of budgets.
7) Over spending anticipated in original budget - £5.699m. In setting the original budget, it was accepted that spending would significantly exceed income and was initially calculated at a £5.699m over spending.
Early Years Block - -£0.045m under spend
8) Free entitlement to early years education – nil variance. In response to the covid pandemic, DfE have put in place a more flexible approach to funding LAs for the free entitlement and if requested will base funding on actual termly take up rates rather than the normal January only census data. This approach is expected to result in an insignificant budget variance which will become clearer once the October census data has been validated and payments to providers calculated.
Forecast cumulative balance - £10.224m deficit:
10) The budget variances being forecast at the end of September indicate a year end cumulative deficit of £10.224m. This comprises the £2.626m accumulated deficit at the start of the year, the £5.699m overspend anticipated when the budget was set and the additional £1.899m overspend now being reported.
Managing the forecast overspend
6.16 The work currently being undertaken through Schools Forum HNB Sub Group to review the overall budget for impact and efficient use of resources is fundamental to moving towards a sustainable financial position over the medium to long term. An update on this and other work is provided on a separate agenda item.
6.17 As previously reported to the Forum, in response to the continuing growth in deficits on HNB budgets, in January 2020, the DfE updated the status of the DSG ring-fence to make clear that any deficit must be carried forward to the Schools Budget in the next financial year or future financial years. This is intended to confirm that no liability for a deficit will fall onto an LAs General Fund.
6.19 In the overall context of the financial challenges LAs are facing with their HNB budgets, the ESFA recognises that there may be some LAs which will not be able to pay off their historic deficit from the DSG over the next few years. In these cases, the DfE expects to work together with the LA to agree a plan of action to enable the LA to pay off its deficit over time.
6.20 As part of an appropriate agreed package of measures, the ESFA will, if necessary, make funds available from within the overall total of DSG so that the local authority can pay off its deficit over time. The ESFA will need convincing evidence from the LA that it would be impracticable to pay off a historic deficit from the DSG it would expect to receive in future years.
2020-21 Education Capital Programme
Approved budget
6.22 The current Education Capital budget approved by the council amounts to £10.585m, and comprises £2.097m of council funding, £1.760m from housing developers and £6.728m from various grants and other income. Of this total, £4.412is new funding for 2021-22 with £6.173m brought forward from previous years to finance the completion of approved projects.
6.23 The major scheme in the programme are:
· School related projects, including schools’ Devolved Formula Capital £5.872m
· School Planned Maintenance £2.988m
· Other projects £1.725m
Annex 2 provides a summary of the approved schemes, including current progress and key targets.
Forecast budget variances
6.24 At this stage, a £0.120m under spending is being reported which relates to the project proposed by Holly Spring Primary School for and SEN / Nurture Hub which is not now ready to proceed . No variances are being reported elsewhere as in general, variances are recycled within the school related projects.
6.25 At this stage, there is expected to be sufficient DfE grant funding and developer contributions plus the investment from the Council to fully finance the schemes required in the short term, with funding pressure expected to arise over the medium term.
6.26 Due to a substantial number of high-cost roof repairs, the planned maintenance programme is also facing pressure in delivering all the works required within available funds. This is being severely impacted on through the roof failure at Sandhurst Secondary School which has required the closure of 10 classrooms and a drama studio. Additional grant was allocated to LAs in-year to support school condition works, with BFC receiving £0.796m which has been directed towards part funding this project.
Next steps
6.27 Budget monitoring will continue with any emerging issues incorporated into budget proposals and presented to the Forum at the appropriate time.
7 ADVICE RECEIVED FROM STATUTORY AND OTHER OFFICERS
Borough Solicitor
7.1 The relevant legal provisions have been considered within the main body of the report.
Director of Resources
7.2 The financial implications arising from this report are set out in the supporting information.
Equalities Impact Assessment
7.3 There are no specific impacts arising from this report.
Strategic Risk Management Issues
7.4 There are a number of risks associated with managing these revenue and capital budgets:
· financial and economic factors, in particular the need to maintain services whilst achieving significant savings;
· the impact of demand led services and the need to forecast changes and reshape service delivery to meet changing needs;
· staffing and the need to recruit, train and retain staff with the relevant skills and expertise;
· IT infrastructure availability and information accuracy;
· failure to design, monitor and control the implementation of major programmes and projects;
· effective safeguarding of children;
· effective maintenance of assets;
· working effectively with partners, residents, service users, the voluntary sector and local businesses;
· impact of litigation and legislation;
The budget includes resources sufficient to enable the Council to monitor these key risks and where possible to minimise their effects on services. Specific risk reduction measures included as part of budget monitoring are:
· A robust system of budgetary control with regular reporting to CYPL Departmental Management Team and the Corporate Management Team
· Quarterly Service Reports (QSR’s) to Members
· Exception reports to the Executive
Climate Change Impact
7.5 Not applicable to this report on financial performance. Any relevant implications would have been reported when budget decisions were taken.
8 CONSULTATION
8.1 Not applicable.
Background Papers
None.
Contact for further information
Paul Clark, Finance Business Partner – People Directorate (01344 354054)
mailto:paul.clark@bracknell-forest.gov.uk
Doc. Ref
https://bfcouncil.sharepoint.com/sites/fina/bpm/FIBPSCB-FIN9.6/Schools Forum/(106) 181121/2021-22 Schools Budget Monitoring etc.docx
