Agenda item

To consider a report from Assistant Director, Finance and Director, Education to provide an update in relation to the DSG Contingency Fund.

Consideration was given to a report of the Assistant Director of Finance and the Director of Education, which provided an update in relation to the DSG Contingency Fund.

Members were reminded of the intent and purpose of establishing a schools’ contingency fund.  They were also informed that, in 2019-20, mainstream secondary maintained schools had voted to de-delegate budget for contingency and had continued to do so, with mainstream maintained primary schools also voting to establish this in 2021-22.  It was outlined that this contingency had been established to support those schools facing a deficit budget position or support the DSG against future pressures, where schools were closing or through forced academy conversion, where this would leave a deficit balance

Members attention was drawn to section 2 of the report, which outlined the approach taken with those schools who are in deficit.  It was stated that this was a rigorous process in order to ensure that appropriate action was taken to address the deficit.

The criteria for allocations from the fund, which had been previously agreed by Schools’ Forum, were outlined as follows:

·         Allocations from the fund should not be made until the fund reaches the suggested level

·         Allocations should be sector-specific unless all sectors agree to contribute to the fund

·         Decision on approvals from the fund will be agreed by Director of Education and the Assistant Director Finance

·         There should be school sector representation as part of the approval process but the representation should not be include the requesting school

·         When a school is facing financial difficulty a request should be submitted by the school outlining their case for consideration

·         Allocations will only be made where sufficient funds are available.

Members were informed that support would be provided for schools in deficit and, therefore, in financial difficulty through the normal deficit recovery process, in line with the LA approach to managing licensed deficits.  Alongside this, it was also highlighted that the LA would support any schools with closing deficit balances in order to minimise the impact and potential pressure on the DSG.

Members were reminded that the aim was to create a contingency fund of approximately £159k and were informed that both sectors were 2 financial years away from the contributions reaching the targeted amount.  With this in mind, it was recommended that a minimum balance should be maintained.

Members were made aware that this report had previously been shared with Schools Funding Group (SFG), in order to consider the following areas:

• Are there any further criteria that should be considered as part of the allocation basis?
• If the sectors reach the targeted balance should the funds be merged?
• In terms of the school sector representative who would make the decisions on allocations who do we think is the appropriate representative, Head Teacher? Business Manager? Governor or a mix?
• Should there be criteria for the schools representative/s in terms of their own school financial health?
• De-delegation does not apply to special schools, however special representatives can choose to make contributions to establish a contingency fund that will work in the same way, is this something to be considered?

Following discussion on these matters, SFG had then made the following proposals for Schools’ Forum to consider:

• The group discussed the nature of the fund and agreed that the criteria outlined in the original paper to Schools Forum were still relevant and appropriate so did not feel further areas should be considered.  As funding was limited for schools, they felt it was not appropriate to create expectations that a fund was readily available to invite bids from schools, but it should be there to support schools who were in significant and extenuating circumstances.
• Fund levels – The initial balance recommended was £159,000 which represented 10% of deficit balances at the time.  There has been significant work by the schools in deficit, with support from the Finance team, which means 10% of balances in 2020/21 stands at £42,400.  However the amount currently held would not cover the largest deficit if that school were to become a Sponsored Academy.  There was a recommendation from the group that there should be a collar and cap approach taken to the fund.
• It was proposed that to apply a minimum level of 10% of deficit balances, with a maximum of the total outstanding deficit balances in the prior full financial year.  To address the deficit risk to the DSG, the levels for 2022/23 would be:

Minimum                                 £42,400

Maximum.                               £424,200

• The group discussed school representation in the decision-making on requests from the contingency fund.  It was felt that appropriate support to the decision making by the Directors, should be via recommendations from SFG as opposed to any one individual.  This would enable colleagues to maintain relationships with schools requesting support from contingency.
• SFG discussed the contributions in each sector, and whilst it was recognised that the values in each sector would be different, due to pupil numbers and number of contributing school,  all parties discussed the fact that primary schools were later to contribute to the fund than secondary schools.  With this in mind, it was felt that merging of the pot could be considered when the contributions were more evenly matched and with the agreement of the separate sectors.  No specific recommendation was made by the group in relation to this and, therefore, Schools’ Forum opinion was sought.
• In relation to the special schools creating a contingency fund, it was agreed that the special sector would be written to and asked if they would like to establish a separate fund.

RESOLVED

(i)    That school-led representation for contingency allocation decisions via recommendations from the Schools Funding Group (SFG) be approved

(ii)  That the proposed fund limits be approved

(iii)That the decision to approve the merging of primary and secondary sectors be delayed and re-considered at a later date