Section 5 Guidance for Schools in Financial Difficulty and guidelines for approval of redundancy costs

Transcription

1 Section 5 Guidance for Schools in Financial Difficulty and guidelines for approval of redundancy costs 1. Introduction The Kent County Council (KCC) Scheme for Financing Schools states that schools cannot plan for a deficit budget. This means that if a potential deficit is identified at any stage of the budget planning or monitoring process for any year, the school is responsible for ensuring that appropriate management action is identified and undertaken to achieve a balanced budget. It is essential that the Headteacher ensures that the Governors are kept informed throughout the process. The Local Authority (LA) may intervene if a school refuses to set a balanced budget by identifying the action a school could take and ultimately by suspending delegation.1 This guidance is designed for schools in financial difficulty. It provides a procedure that must be followed if a school considers, and the authority agrees that a balanced budget cannot be achieved. The LA s expectations are set out along with the process for producing a Deficit Recovery Plan and the support that will be provided. If a school submits a Three Year Plan to the LA that contains a deficit in the second or third year of the plan, then it will be returned. The school will be required to undertake Step 1; Preparation prior to Notification as detailed below. It will be necessary to identify management action and resubmit a plan which does not show a deficit in any of the three years. If this is not possible or the plan shows a deficit in the first year then the school should proceed to Step 2 Step 6. The LA will inform the school if a resolution can be achieved before there is a need for a Deficit Recovery Plan. For advice on staff terms and conditions the school s personnel provider should be contacted. If at any point you need further clarification you should contact Schools Financial Services. 1 Kent County Council Scheme for Financing Schools. Section 4. 5 June 2017 Page 1

2 Schools Financial Services Contacts: - Head of service: Schools Statutory Manager: Schools Support Officers: Siobhan Cheeseman Kay Holland Emma Standen Maxine Gibson Lisa Halford Liz Knight If the school requires assistance in constructing a Three Year Plan, a service can be purchased from Schools Financial Services. Please contact the Service Delivery Manager: Suzanne Lowe schoolsfinancialservices@kent.gov.uk Start the subject with the word Support or telephone: Steps in the process 1. Preparation prior to Notification of Financial Difficulty 2. Notification and Supporting Documentation 3. Initial Meeting 4. Submitting a Deficit Recovery Plan 5. LA Approval 6. Monitoring a Deficit Budget Step 1 Preparation prior to Notification of Financial Difficulty When first aware of a potential deficit the school should: Check all the figures and the assumptions that have been made Identify the cause of the forecasted deficit, for example, a falling roll Undertake a benchmarking exercise Discuss and draw up a range of Management Action This action should be incorporated with a view to being able to amend the figures so that the Three Year Plan does not result in a deficit in any of the three years. If this is not possible a further step should be undertaken: Identify why the potential deficit cannot be rectified by Management Action. Only after undertaking this work, which must be documented within the Governor minutes is it acceptable to approach the LA to discuss the possibility of having a Deficit Recovery Plan approved. The LA will expect sound arguments to be offered June 2017 Page 2

3 as to why early remedial action cannot be taken or why it was not taken in the past. Without KCC s approval to a planned deficit, the school would be acting illegally in setting a deficit budget. Following this course of action represents sound financial management practice and schools that contact the LA having completed the preparatory work will be viewed as following the correct procedures. On the other hand, schools that fail to follow these steps and go into deficit or produce a deficit budget without this analysis could result in further action being taken by the LA. Step 2 Notification and Supporting Documentation Once the preparatory work has been completed and the Governing Body is satisfied that a potential deficit is unavoidable without a significant impact on the provision of education, then Schools Financial Services should be contacted. This must be done immediately, by , outlining the deficit position. The Chair of Governors must be made aware that the LA has been contacted regarding the budget situation. On receipt of the notification the school will be asked to submit supporting documentation for analysis. This will include details of the actions that would be required to avoid a deficit and why those actions are not possible or acceptable. In the extreme case of a current year deficit that was not previously anticipated, a full explanation will be required as to how this has arisen, together with evidence of internal monitoring and reports to Governors. Any delays in planning to recover from a deficit is likely to result in more significant savings being necessary than if action had been taken on a more timely basis. In addition to the above you may be asked to provide the following information: A current full Three Year Budget Plan or access to the schools Budget Planning Software (BPS) 3 Year Salary Calculations cost using BPS or equivalent details The staffing structure for the school Copies of relevant Governing Body/Committee minutes Full Income and Expenditure statement/trial Balance report Printout of latest payroll report The above requirements may vary according to the time of year or the precise nature of the school s difficulty. You will be allocated a member of staff from Schools Financial Services, who will undertake a review of all documentation and will be your liaison through the whole June 2017 Page 3

4 process. You may be contacted with specific questions related to the information you have submitted and at this point you may also be asked to provide additional documentation. Step 3 Initial Meeting Schools Financial Services will contact the school to arrange a meeting with the Headteacher to go through the process and to discuss the documentation previously provided by the school. Any observations that Schools Financial Services have made relating to the data will be reviewed and potential savings will be discussed with the school. The school may wish to have the Chair of Governors or the Governor responsible for finance present at the meeting. In certain circumstances the LA may require attendance of the Chair of Governors/Finance. Notes of the meeting will be circulated to the Headteacher, Chair of Governors, and the Area Education Officer. The school will then be required to make any agreed adjustment to the Three Year Plan and/or salary calculations and resubmitted to Schools Financial Services within five working days of the initial meeting. Your contact at School Financial Services will undertake further checks in order to reach a decision on whether a Deficit Recovery Plan is appropriate. The school will be notified by recording any decisions made at the meeting and confirming if an approved deficit should be sought, at this point a Deficit Recovery Plan form will be provided to any school that does not use the Budget Planning Software(BPS). For those schools which purchase BPS, this acts as a Deficit Recovery Plan providing the scenarios used to identify the savings are clear on the assumptions made. The will include the date by which the completed Deficit Recovery Plan will be required, normally within six weeks of the . The scrutiny of the supporting documentation, the initial meeting and discussion of options are services provided by the LA free of charge as part of its statutory monitoring role. If the school requires additional work or has difficulty in preparing the financial documentation, support is available from Schools Financial Services; however there will be a charge for this service. The LA reserves the right to charge for further school visits, or other significant time that has to be spent in supporting the school to reach this, or any other stage. June 2017 Page 4

5 Step 4 Submitting a Deficit Recovery Plan The Deficit Recovery Plan must be approved by the Governing Body and signed by the Chair of Governors prior to the final submission. This may require the school to call an extraordinary meeting of the Governing Body. The signed Deficit Recovery Plan must be submitted to the Schools Support Manager in line with the date stated in the written confirmation. The Deficit Recovery Plan will become the formal application for an approved deficit and must show that the school will return to a surplus position. Any deficit must be recovered within a maximum of three years. If the Deficit Recovery Plan does not meet the requirements of the LA and the DfE it will be rejected and the school will be required to resubmit. If BPS is used, permission will be sought from the school for Schools Financial Services to be granted access to the Budget Planning Software (BPS) in order to facilitate the deficit recovery process. Step 5 Local Authority Approval The Deficit Recovery Plan requires formal approval by School Financial Services. After the plan has been approved a confirmation letter will be sent to the school. The approval will detail the maximum limit of any deficit in any year and any other conditions if applicable. Confirmation of approval will normally be issued within four weeks of submission. Any school showing an actual deficit will be reviewed by the LA with regard to their overdrawn bank balance and a loan may need to be arranged. Loan scheme If the school has a cash flow problem whilst in deficit, a loan may be granted. The loan may be given to the school in one of two ways: Cash lump sum Cash profiled over the months of the year The method used will be selected following negotiations with the school and should match the school s cash flow requirements. Note: schools may need a deficit plan but not need any cash e.g., creditors set up at the financial year-end may take a June 2017 Page 5

6 school into a deficit in budget terms but the school may still have sufficient cash in the bank: Cash payments are included in the Monthly Advance, and therefore automatically paid into the school s current account. Until the loan is repaid, the school will be required to pay interest to the LA. This is calculated on a daily basis at ½% above the current bank base rate and will be recharged to the school on a monthly basis. Interest is shown through the Revenue Budget as an expense. See section 3 of the financial controls for more details on the loan scheme. Repayment of the loan will be over an agreed period of time (maximum of 3 years). Annual repayments will be recovered as: Cash deduction profiled over the months of the year, or Cash lump sum Step 6 Monitoring a Deficit Budget The confirmation letter will include details of the LA s deficit monitoring requirements, with which the school must comply. During the period covered by the Deficit Recovery Plan schools will not be permitted to make any staff changes that are above the agreed level of staffing within the plan, without prior agreement of the LA. The schools progress against the Deficit Recovery Plan will be reviewed regularly and further meetings may be required. Failure to keep within the terms of this guidance will put the school at risk of being issued with a formal Notice of Concern, while further failure to comply may lead to the withdrawal of financial delegation. 3. Notice of Concern Extract from the KCC Finance Scheme The authority may issue a notice of concern to the governing body of any school it maintains where, in the opinion of the Director of Education, Planning and Access and Corporate Director, Children, Young People and Education 1) the school has failed to comply with any provisions of the scheme, or June 2017 Page 6

7 2) where actions need to be taken to safeguard the financial position of the LA or the school. A notice may be issued as a first step to signal the LA s serious concerns, and will hopefully be a precautionary measure. It should be seen by the Headteacher and the Governing Body as signalling the need for major improvements in financial management. A notice will be issued if the LA exercises its right to withdraw financial delegation responsibility from the Governing Body. Withdrawal of delegation will not normally be initiated as we expect to work in partnership with Governors to address concerns before such a stage is considered necessary. The authority will not hesitate, however, to withdraw delegation if a school consistently fails to meet the LA s stated requirements, and/or continues to exceed agreed deficit recovery plan limits. 4. Approval for Payment of Redundancy Cost for Essential Redundancies From 1st April 2012 KCC approval to meet the cost of redundancies will only be given where the redundancies are necessary due to budget constraints. Definition of budget constraints The school will go into deficit and remain in that position if there is no reduction in staffing cost. Reserves are reduced to a level which would result in the school not being sustainable in financial terms. An in year deficit is not necessarily assessed as being a financial reason if this is caused by one off expenditure or if there is not a continuous trend of in year deficits. Any other redundancy and early retirement (on redundancy grounds), the cost must be met by the school. To enable KCC to make an in principle decision, the school must meet the criteria stated in these guidelines. Please note the redundancy process has very clearly defined deadlines and if the requirements listed below are not adhered to then this could result in a delay in the process and the planned redundancy. In turn this could lead to the school incurring additional cost. Please review your budget in line with Step 1. If it is determined that redundancies are still required due to budget constraints the Headteacher should then contact Schools Financial Services. The following documents will be required to be submitted/available for viewing on BPS. June 2017 Page 7

8 1. Application for Approval for Payment of Redundancy Costs in a Kent Maintained School (Section 5a, Form FR1), all sections completed 2. Governing Body minutes where the budget constraints and possible action have been discussed 3. A 3 Year Budget Plan prior to any staff changes or any other savings, which clearly shows that the school is forecasting a deficit. The plan should include the outturn figures from the previous year 4. A 3 Year Budget Plan post management action showing a return to a balanced budget and ensuring that the school is in a sustainable position after the reductions are made 5. Salary Calculations (Employee scenario on BPS or equivalent) Please note the Budget Planning Software will provide the data for 3, 4 and 5 by identifying pre and post action scenarios which show the deficit and the revised figures. For 2017/18 budget setting process BPS will not include the previous years outturn figures. Any queries please contact Schools Financial Services. The Application for Approval for Payment Form FR1 along with all other documents listed should be ed to Schools Financial Services at: schoolsupport@kent.gov.uk and start the subject with the word Support. Exceptions for the LA funding Redundancy/Early Retirement The costs arising from redundancy/early retirement of school based staff may be funded centrally by the LA, in accordance with the relevant legislation. Exceptions to this are: Where the school is making staffing reductions which the LA does not believe are necessary to either set a balanced budget or meet the conditions of a licensed deficit If a school has decided to offer more generous terms than the authority s policy, then it would be reasonable to charge the excess to the school If a school is otherwise acting outside the LA s policy Where the school has excess surplus balances and no agreed plan to use these Where the school has failed to make reasonable attempts to redeploy at risk June 2017 Page 8

9 staff within the school If the only cause of the revenue deficit is due to the school making a revenue contribution to capital. The only circumstances that this would be agreed would be if there was an outstanding capital loan and the amount contributed was equal to or less than the shortfall in the loan repayments Where staffing reductions arise from a deficit caused by factors within the school s control. This could be demonstrated by a school that has previously submitted a 3 Year Plan or monitoring which indicates management action is required in the next two years but makes decisions which contribute to the deficit. For example appointing permanent staff or authorising a building project Any criteria listed above is in addition to and not contradictory to Personnel requirements or the guidance given by Schools Personnel Service (SPS). Personnel Service providers other than SPS must also adhere to the criteria. Recovery of Funds Please note that for the two financial years after the redundancy the LA will consider whether the financial circumstances of the school have improved or if staffing costs increased post redundancies. If it is shown that the cost could have been borne by the school then the funding will be reclaimed and returned to the centrally held budget to allow other schools to access this funding. June 2017 Page 9