Agenda item

To consider a report from Assistant Director, Finance and Director, Education to provide an update on the surplus balances held by schools at the end of 2020-21 financial year.

Consideration was given to a report of the Assistant Director of Finance and  Director of Education, which provided an update on the surplus balances held by schools at the end of 2021-22 financial year.  It was explained that this was a preliminary report in advance of the planned agenda item relating to surplus balances scheduled for the next meeting of Schools’ Forum.

Members were informed that balances were at £9.3m for the financial year 2020-21, which represented a £2.3m increase compared to the previous financial year.  There had been a significant increase within the secondary sector (£1.4m), which was a planned increase relating to 2 schools in particular, which had significantly reduced their deficit. 

It was highlighted that 2020-21 would be the first year where the clawback mechanism, which had previously been agreed by Schools’ Forum, could be applied.  Members were reminded that, where schools held an excess surplus balance for 2 consecutive years, the excess would be subject to potential clawback at 50%, with this balance then used to support recovery of the High Needs Deficit. 

Members were informed that 12 schools had been identified as being at risk of claw back from 2020-21 balances and that this would equate to £452,500.

Members were made aware that this issue had been raised at the meeting of Schools’ Funding Group (SFG) in May 2021, where discussion had ensued regarding whether a general exemption should be given to all schools due to the pandemic and the impact of multiple lockdowns.  It was the recommendation of Schools’ Funding Group that reviews on a case by case basis should be made and that the claw back mechanism should be invoked, as per the scheme, where circumstances were not extenuating.  It was also recommended that, where a school was holding monies for a capital scheme, that it should be passed over to the council to be held in the specific reserve that was established for such purposes.

In advance of the next meeting, members were asked to consider:

a)    Whether exceptional circumstances should be applied across all schools for 2020-21

and no claw back should take place?

b)    Whether claw back should be reviewed on an individual school basis?

c)    Whether claw back should go ahead as planned and the £0.452m at risk be removed

from schools?

Discussion ensued and it was noted that considering exceptional circumstances could be perceived as being subjective and, as such, could be problematic.  As a result, it was suggested that perhaps a formulaic process may be more beneficial with capital reserve held centrally.

Questions were raised as to whether, if funds were set aside and held centrally, this would still be accessible following academisation.  In response, it was suggested that this could potentially still be used for planned capital schemes if they had previously been ear-marked for this.  However, if this was not the case, it would be used to support the High Needs Block, as previously agreed.

Concerns were raised regarding the impact of the pandemic on schools being able to carry out planned works.  It was highlighted that there had been various projects, which had been planned but had been unable to happen due to lack of available tradespeople and resources.  It was explained that this had led to significant delays and surplus balances and that Members should be mindful of this.

It was acknowledged that there needed to be a significant degree of challenge and accountability in terms of surplus balances, particularly as some schools had needed to make very difficult funding decisions whilst others had surplus balances available. 

Members were reminded that any claw back would be focussed on surpluses beyond 2 years and that any money required for capital purposes could be ring fenced in the capital reserve.  

Members were in agreement that this report would be considered, alongside further recommendations from Schools Funding Group in relation to exceptional circumstances, at the next meeting of Schools’ Forum.

RESOLVED

That the position of Schools Balances 2021-22 be noted