Scheme for Financing Schools - 2021/2022 Chief Executive
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Schemefor
Scheme for
Financing Schools
2021/ 2022
Chief Executive
1
Contents
1 Introduction 5
1.1 The funding framework 5
1.2 The role of the scheme 6
1.2.1 Application of the scheme to the authority and maintained schools 6
1.3 Publication of the scheme 7
1.4 Revision of the scheme 7
1.5 Delegation of powers to the Headteacher 7
1.6 Maintenance of schools 7
2. Financial controls 8
2.1.1 Application of financial controls to schools 8
2.1.2 Provision of financial information and reports 8
2.1.2a Fully funded schools 8
2.1.3 Payment of salaries and invoices 9
2.1.4 Control of assets 9
2.1.5 Accounting policies (including year-end procedures) 9
2.1.6 Writing off debts 9
2.2 Basis of accounting 10
2.3 Submission of budget plans 10
2.3.1 Submission of financial forecasts 10
2.4 School resource management 10
2.5 Virements 11
2.6 Audit: general 11
2.7 Separate external audits 11
2.8 Audit of voluntary and private funds 12
2.9 Register of business interests 12
2.10 Purchasing, tendering and contracting requirements 12
2.11 Application of contracts to schools 13
2.12 Central funds and earmarking 13
2.13 Spending for the purposes of the school 15
2.14 Capital spending from budget shares 15
2.14a Devolved Formula Capital (DFC) 16
2.15 Notice of concern 16
2.16 Schools Financial Value Standard (SFVS) 17
2.17 Fraud 17
3 Instalments of budget share – banking arrangements 18
3.1 Frequency of instalments 18
3.2 Proportion of budget share payable at each instalment 18
3.3 Interest claw back 18
3.3.1 Interest on late budget share payments 18
3.4 Budget shares for closing schools 18
3.5 Bank and building society accounts 18
3.5.1 Restrictions on accounts 19
3.6 Borrowing by schools 19
3.7 Other provisions 20
24 The treatment of surpluses and deficit balances arising 21
in relation to budget shares
4.1 The right to carry forward surplus balances 21
4.2 Controls on surplus balances 21
4.3 Interest on surplus balances 22
4.4 Obligation to carry forward deficit balances 22
4.5 Planning for deficit balances 22
4.6 Charging of interest on deficit balances 22
4.7 Writing off deficits 22
4.8 Balances of closing and replacement schools 23
4.9 Licensed deficits 23
4.10 Asset loan scheme 24
4.10.1 Credit union approach 25
4.10.2 Salix energy efficient loan scheme 25
5 Income 26
5.1 Income from lettings 26
5.2 Income from fees and charges 26
5.3 Income from fund-raising activities 26
5.4 Income from the sale of assets 26
5.5 Administrative procedures for the collection of income 26
5.6 Purposes for which income may be used 26
6 The charging of school budget shares 27
6.1 General provision 27
6.1.1 Charging of salaries at actual cost 27
6.2 Circumstances in which charges may be made 27
7 Taxation 29
7.1 Value Added Tax (VAT) 29
7.2 Construction Industry Taxation Scheme (CIS) 29
8 The provision of services and facilities by the LA 30
8.1 Provision of services from centrally retained budgets 30
8.2 Provision of services bought back from the LA using delegated 30
budgets
8.2.1 Packaging 30
8.3 Service level agreements 30
8.4 Teachers Pensions 31
9 Private Finance Initiative/Public Private Partnership (PFI/PPP) 32
10 Insurance 33
10.1 Insurance cover 33
11 Miscellaneous 34
311.1 Right of access to information 34
11.2 Liability of governors 34
11.3 Governors’ expenses 34
11.4 Responsibility for legal costs 34
11.5 Health and safety 34
11.6 Right of attendance for Assistant Chief Executive 35
(Enabling Services)
11.7 Special Educational Needs 35
11.8 Interest on late payments 35
11.9 Whistleblowing 35
11.10 Child protection 35
11.11 Redundancy / early retirement 35
12 Responsibility for repairs and maintenance 38
13 Community facilities 39
13.1-2 Introduction 39
13.3 Consultation with the LA – financial aspects 40
13.4-5 Funding agreements – authority powers 40
13.6-7 Other prohibitions, restrictions and limitations 40
13.8-9 Supply of financial information 40
13.10-11 Audit 41
13.12-13 Treatment of income and surpluses 41
13.14-15 Health and safety 41
13.16-17 Insurance 41
13.18-20 Taxation 42
13.21-23 Banking 42
Appendices 43
Appendix A Schools to which the Scheme applies 43
Appendix B Licensed deficit recovery plan 45
Appendix C Schedule of works deemed capital which are the 46
responsibility of the LA
41 Introduction
1.1. The Funding Framework
Bedford’s Scheme for Financing Schools is based on the legislative provisions in
sections 45 – 53 of the School Standards and Framework Act 1998 (the Act) and
the Schools and Early Years Finance (England) Regulations 2018.
Under this legislation, the Local Authority (LA) will determine for itself on an
annual basis, the size of the schools budget and the non-schools education
budget, although at a minimum the LA must appropriate its entire Dedicated
Schools Grant (DSG) to the schools budget.
The categories of expenditure which fall within the two budgets are prescribed
under regulations made by the Secretary of State, but included within the two,
taken together, is all expenditure, direct and indirect, on the LA’s maintained
schools except for capital and certain miscellaneous items.
The LA may deduct funding in the schools budget for purposes defined in
regulations made by the Secretary of State under Section 45A of the Act
(centrally retained expenditure). The amounts to be deducted for these purposes
are decided by the LA annually, subject to any limits or conditions (including
gaining the approval of the Schools’ Forum or the Secretary of State in certain
circumstances) as prescribed by the Secretary of State. The balance of the
schools budget remaining after deduction of the centrally retained expenditure is
termed the Individual Schools Budget (ISB).
Expenditure items in the non-schools education budget must be retained centrally
(although earmarked allocations may be made to schools).
The LA must distribute the ISB amongst all maintained schools, using a formula
which accords with regulations made by the Secretary of State and enables the
calculation of a budget share for each maintained school. This budget share is
then delegated to the governing body of the school concerned, unless the school
is a new school which has not yet received a delegated budget, or the right to a
delegated budget has been suspended in accordance with Section 51 of the Act.
The financial controls within which delegation works are set out in Bedford
Borough Council’s Financial Regulations for Schools in accordance with Section
48 of the Act and regulations made under that section.
All proposals to revise this scheme must be approved by the Schools Forum,
though the LA may apply to the Secretary of State for approval in the event of the
forum rejecting a proposal or approving it subject to modifications that are not
acceptable to the LA.
Subject to the provisions made by or under the scheme, governing bodies of
schools are empowered to spend such amounts of their budget shares as they
think fit for any purposes of their school* and for any additional purposes
prescribed by the Secretary of State in regulations made under Section 50 of the
Act (*Section 50 has been amended to provide that amounts spent by a
governing body on providing community facilities or services under section 27 of
5the Education Act 2002 are treated as if they were amounts spent for the
purposes of the school (s50(3A) of the Act).
The LA may suspend a school’s right to a delegated budget if the provisions of
this scheme (or rules applied by the scheme) have been substantially or
persistently breached, or if the budget share has not been managed satisfactorily.
There is a right of appeal to the Secretary of State. A school’s right to a
delegated budget share may also be suspended for other reasons (Section 17 of
the Act) but in that case there is no right of appeal.
The LA is obliged to publish each year a statement setting out details of its
planned schools budget and other expenditure on children’s services, showing
the amounts to be centrally retained and the funding delegated to schools After
each financial year the LA must publish a statement showing outturn expenditure.
The detailed publication requirements for financial statements are set out in
directions issued by the Secretary of State.
The LA Section 251 budget and outturn statements detailing centrally held
expenditure along with the funding formula can be found on the Council website.
Regulations also require the LA to publish their scheme and any revisions to it on
a website accessible to the general public, by the date that any revisions come
into force, together with a statement that the revised scheme comes into force on
that date.
1.2 The role of the scheme
This scheme sets out the financial relationship between the LA and the
maintained schools which it funds. A list of maintained schools covered by this
scheme can be found in Appendix A.
This scheme and the requirements relating to financial management and
associated issued as set out in Bedford Borough Council’s Financial Regulations
for Schools are binding on both the LA and on schools.
1.2.1 Application of the scheme to the authority and maintained schools
With effect from 1 April 2014 the following maintained schools have been subject
to the requirements of this scheme:
Community schools
Community special schools
Voluntary schools
Foundation schools
Foundation special schools
Nursery schools
Pupil Referral Units
It does not apply to schools situated in the authority’s area which are maintained
by another authority. Nor does it apply to academies.
6Any new schools opening after 1 April 2014 will be subject to the requirements of
this scheme by virtue of Section 48 of the Act.
1.3 Publication of the scheme
The scheme will be published on a website which is accessible to the general
public and any revised version will be published by the date that revisions come
into force, together with a statement that the revised scheme comes into force on
that date.
1.4 Revision of the scheme
Any proposed revisions to the scheme will be subject to consultation with the
governing body and the head teacher of every school maintained by the LA
before they are submitted to the schools forum for approval by members
representing maintained schools. Where the schools forum does not approve
them or approves them subject to modifications which are not acceptable to the
LA, the LA may apply to the Secretary of State for approval.
It is also possible for the Secretary of State to make directed revisions to
schemes after consultation. Such revisions become part of the scheme from the
date of the direction.
1.5 Delegation of powers to the Headteacher
The governing body is required to consider the extent to which it wishes to
delegate its financial powers to the head teacher and to record its decision (and
any revisions) in the minutes of the governing body.
However, the first formal budget plan of each financial year must be approved by
the governing body, or by a committee of the governing body.
1.6 Maintenance of schools
The LA is responsible for maintaining the schools covered by this scheme, and
this includes the duty of defraying all the expenses of maintaining them (except in
the case of a Voluntary Aided School where some of the expenses are, by
statute, payable by the governing body). Part of the way the LA maintains
schools is through the funding system put in place under sections 45 to 53 of the
School Standards and Framework Act 1998.
72 Financial controls
2.1.1 Application of financial controls to schools
Further to paragraph 1.2 above, all schools are required, in the management of
their delegated budgets, to abide by the LAs requirements on financial controls
and monitoring , not only those in the scheme but also those requirement
contained within the Bedford Borough Council’s Financial Regulations for
Schools. These regulations encapsulate approved financial management
procedures appropriate to all phases and categories of schools in Bedford. These
regulations cover the accounting procedures approved for operation in Bedford
schools and associated banking arrangements, where appropriate.
2.1.2 Provision of financial information and reports
Provision by schools of financial information and reports to the LA will be detailed
in the Fully Funded Bank Account Scheme, updated for April 2020. The scheme
reflects the fact that as of 1st April 2020, all maintained schools will be fully
funded.
2.1.2a Fully funded schools
Schools must satisfy the minimum requirements with regard to financial controls,
procedures and systems in operation so far as necessary for the discharge of the
LA’s Assistant Chief Executive (Enabling Services)’s responsibilities under
Section 151 of the Local Government Act 1972. As this option involves all
financial records being maintained in school, these documents become the prime
record and, therefore, are subject to a more rigorous LA and external audit.
Schools are required to provide the LA with various financial reports in order for
the LA to consolidate school expenditure onto its own accounting system. These
reports shall be returned to the LA, in accordance with the timetable set out in the
Fully Funded Scheme.
In order for the Assistant Chief Executive (Enabling Services) (Section 151
officer) to prepare the annual accounts, schools will be required to provide
financial information in accordance with the timetable determined by the Assistant
Chief Executive (Enabling Services) in consultation with the LA external auditor.
The content and frequency of returns to the LA are prescribed through Bedford’s
Fully Funded Bank Account Scheme. From 1st April 2020, the LA will require fully
funded schools to provide quarterly income and expenditure statements; cash
flow forecasts and updates, in addition to budgeted and year end (actual) balance
sheets. The frequency and format of returns will be subject to change in light of
the fact that all maintained schools will have fully funded status as of 1st April
2020.
Financial reporting must be in line with the Consistent Financial Reporting (CFR)
framework which standardises, simplifies and streamlines the coding and
reporting of school finances in all maintained schools in England. It applies to all
budgets, forecasts, recovery plans and outturn returns.
8An annual return, in CFR format, is required to be submitted to the LA in
accordance with the timetable issued each year.
2.1.3 Payment of salaries and invoices
The procedures for these will vary according to the choices schools make about
the holding of bank accounts and buying back of services.
Where the LA’s preferred payroll supplier is also used by schools, the Assistant
Chief Executive (Enabling Services) will arrange for the completion and return of
all payroll related financial statements which are required by law.
Where a school has elected to use an alternative provider of payroll services all
associated responsibilities (e.g. effective administration, payments and
submissions of returns) will rest with the school. Specific details of these
requirements are included in Bedford’s Financial Regulations for Schools.
Schools should use their best endeavours to ensure that payments can be made
within 30 days of invoice date. This is both central government and Council
policy. Where an invoice is disputed, the query should be raised, with the
supplier, as soon as is known. The invoice should be promptly cleared for
payment, once the query is resolved, or credit note received. All invoices should
be cleared, or query made, prior to major holiday periods.
2.1.4 Control of assets
Each school must maintain an inventory of its moveable assets, in a form
determined by the LA, setting out the basic authorisation procedures for disposal
of assets. These procedures are set out in Bedford's Financial Regulations for
Schools. The prescribed format must be used and in the form of an electronic
spreadsheet. (This is available from the Schools’ LA website) This should be
downloaded and completed at 31 March each year and certified as verified and
submitted to the LA as required. Schools are free to determine their own
arrangements for keeping a register of assets worth less than £1,000. Schools
are encouraged to register anything that is portable and attractive, such as a
camera. They should keep a register in some form.
2.1.5 Accounting policies (including year-end procedures)
Schools must abide by the procedures and timetables issued by the LA in relation
to accounting policies and year-end procedures. The year-end procedures and
timetable will be issued by the LA each year, during February.
2.1.6 Writing off debts
Governing Bodies are only authorised to write off debts up to £5,000.
In the case of larger debts the school must refer such cases to the Assistant
Chief Executive (Enabling Services) or his nominated officer for approval.
92.2 Basis of accounting
Bedford Borough Council’s accounting policies are based on the Chartered
Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Local
Authority Accounting in Great Britain and all accounts are prepared on an
accruals basis.
Fully funded schools operating local accounting systems (as outlined in
paragraph 2.1.2b above) are required to provide the LA with reports and
accounts on an accruals basis in accordance with an agreed timescale.
Schools are free to use whatever software they wish, provided they meet any
costs of modification to provide output require by the LA.
2.3 Submission of budget plans
Each school is required to submit at least a 3 year budget plan approved by the
Governing Body or by a committee of the governing body to the LA no later than
15 June of each year.
The budget plan must show the school’s intentions for expenditure in the current
and the following financial years and details of any assumptions made
underpinning the budget plan e.g. expected income. In determining the budget
plan, schools are required to take into account estimates of any surplus or deficit
projected for the previous year financial end.
The format of the budget plan and any supporting documents shall comply with
that provided by the LA when distributing individual school budgets to take into
account the CFR framework and the desirability of compatibility with that.
The LA may also require the submission of revised plans at any time where the
LA deems it necessary. The intervals at which revisions may be required will not
be more often than every 3 months.
The LA will supply schools with all income and expenditure data that it holds and
which is necessary for efficient planning by schools.
2.3.1 Submission of financial forecasts
As part of budget management, schools are required to undertake regular
forecasts of outturn against budget. Schools are required, to provide at least one
forecast outturn return to the LA, once the October income and expenditure
reports have been issued. These forecasts will be used to confirm if schools are
undertaking effective financial planning or not.
2.4 School resource management
Schools must seek to achieve effective management of resources and value for
money, to optimise the use of their resources and to invest in teaching and
learning, taking into account the LA’s purchasing, tendering and contracting
requirements.
10It is for heads and governors to determine at school level how to optimise the use
of resources and maximise value for money. There are significant variations in
the effective management of resources between similar schools, and so it is
important for schools to review their current expenditure, compare it to other
schools and think about how to make improvements.
2.5 Virements
Schools are free to vire between budget headings identified in the school’s
budget plan and governors are required in their Schemes of Delegation to
establish criteria for virements and financial limits above which the approval of
the governors is required. Decisions should be recorded in governing body
minutes.
2.6 Audit: general
Schools are required to co-operate within the audit regime determined by the LA
as regards internal audit, and also within the LA’s external audit regime as
determined by the Local Audit and Accountability Act 2014.
With regard to internal audit, all maintained schools are within the scope of the
audit regime determined by the LA.
The internal audit of schools is an obligation imposed upon the Council by the
Accounts and Audit Regulations 1996 which require the maintenance of an
adequate and effective system of internal audit of the accounting records and
systems of the Council. The responsibility for internal audit has been delegated to
the Assistant Chief Executive (Law and Corporate Governance).
Schools must allow both internal and external auditors full access at all times to
all papers and records of the school and provide explanations the auditors
consider necessary. Schools must pass on any information to the auditors that
they should be aware of to carry out their audit.
In relation to external audit, all maintained schools are within the scope of the LA
external audit regime as determined by the Local Audit and Accountability Act
2014. The governing body must bear in mind that whilst external auditors must
plan, perform and evaluate their audit work to have a reasonable expectation of
detecting material misstatements arising from error or fraud, the duty to deter and
detect fraud rests primarily with the governing body.
2.7 Separate external audits
Where a school wishes to seek an additional source of assurance at its own
expense; a governing body is permitted to spend funds from its budget share to
obtain external audit certification of its accounts, separate from any LA internal or
external audit process. Where a school chooses to seek such an additional audit
it does not remove the requirement that the school must also be subject to and
co-operate with the LA’s internal and external auditors. In the event of a
difference of opinion between the LA’s external auditors and a governing body
appointed auditor, the views of the LA’s external auditor will prevail.
112.8 Audit of voluntary and private funds
In addition to the normal internal and external audits, schools must provide
annual audit certificates to the LA in respect of any voluntary and private funds
they hold and of the accounts of any trading organisations controlled by the
school. Where a school wishes to establish a trading organisation it must consult
with the LA regarding the nature of the trading activity.
The procedures for providing the audit certificates and advice on the handling of
such voluntary and private funds are set out in Bedford's Financial Regulations
for Schools
2.9 Register of business interests
The governing body of each school is required to maintain a register which lists
for each member of the governing body, the Headteacher, and any member of
staff involved in any way in the selection of suppliers:
Any business interests they or any member of their immediate family have;
Details of any other educational establishments that they govern;
Any relationships between school staff and members of the governing body;
And to keep the register up to date with notification of changes and through
annual review of entries, to make the register available for inspection by
governors, staff, parents and the LA and to publish the register, for example on a
publicly accessible website.
More detailed guidance on the maintenance of such a register can be found in
Bedford's Financial Regulations for Schools.
2.10 Purchasing, tendering and contracting requirements
Schools are required to abide by Bedford's Financial Regulations for Schools,
Contract Procedure Rules and Financial Procedure Rules in purchasing,
tendering and contracting matters. Notwithstanding this, schools are required to
assess in advance, where relevant, the health and safety competence of
contractors, taking account of Bedford Borough Council’s policies and
procedures.
The policies and procedures will not require schools:-
a) to do anything incompatible with any of the provisions of the scheme, or any
statutory provision, or any EU Procurement Directive;
b) to seek LA Officer countersignature for any contracts for goods or services for
a value below £60,000 in any one year;
c) to select suppliers only from an approved list;
12d) to seek fewer than three tenders in respect of any contract with a value
exceeding £10,000 in any one year, subject to specific listed exceptions.
Schools may seek advice on a range of compliant deals via Buying for schools.
2.11 Application of contracts to schools
Schools have the right to opt out of any contracts arranged by the LA.
Although governing bodies are empowered to enter into contracts (Education Act
2002 Schedule 1 paragraph 3), in most cases they do so on behalf of the LA as
maintainer of the school and the owner of the funds in the budget share.
However, other contracts may be made solely on behalf of the governing body,
when the governing body has clear statutory obligations e.g. contracts made by
aided or foundation schools for the employment of staff.
2.12 Central funds and earmarking
The LA is authorised to make sums available to schools from central funds in the
form of allocations which are additional to and separate from the schools’ budget
shares. Such allocations shall be subject to conditions setting out the purpose for
which the funds may be used and while these conditions need not preclude
virement (except, of course, where the funding is supported by a specific grant
which the LA itself is not permitted to vire), this should not be carried to the point
of assimilating the allocations into the school’s budget share.
Such allocations might, for example, be sums for SEND or other initiatives funded
from the central expenditure of the LA’s Schools Budget or other authority
budget.
Schools are required to spend such earmarked funding from centrally retained
funds only on the purposes for which it is given, or on other budget heads for
which earmarked funding is given, and it is not to be vired into the budget share.
Earmarked funds must be returned to the authority if not spent within any period
stipulated by the authority over which schools are allowed to use the funding.
The authority is not permitted to make any deductions, in respect of interest
costs to the authority, from payments to schools of devolved specific grant.
The declaration of Earmarked Funds form can be found at:
https://www.bedford.gov.uk/secure-school-area/finance/year-end-information/.
Section B01 must include:
a) any unspent revenue grant where the grant determination allows for a carry
forward of unspent grant; and
b) balances held for capital projects, where written contracts have been entered
into.
Furthermore, schools may apply for funds to be earmarked and retained by the
LA where balances relating to future significant capital projects meet the following
criteria:
13a) the school scheme will be taking place within 3 years, and:
b) it appears on the LA capital programme, or:
c) is detailed on minutes of Governor’s meetings and has received written
support from the LA that the scheme is appropriate.
School’s that wish to transfer funds to the LA in line with the above criteria must
apply in writing to the Chief Education Officer by 1 February preceding the
financial year-end.
Subject to approval, arrangements will be made within the following month to
transfer funds from the individual school to a ring-fenced reserve on the LA
balance sheet for use against a specific future scheme. These funds can only be
assigned towards capital schemes that meet the LA’s definition of capital.
Supporting evidence must be submitted for the LA to authorise earmarking.
Schools must maintain and present accounting records in support of such
expenditure.
Schools will receive a statement when the first contribution is made and then at
least annually thereafter confirming:
• the value of contributions made to date,
• the timescales for utilising funds and
• the mechanism for drawing down funds when expenditure occurs.
Interest is payable on funds held by the LA for this purpose. The current rate of
interest on such loans is the Local Authority 7 day Rate.
Any unspent balances remaining at the end of the 3 year term will be transferred
to the LA capital scheme and will no longer be available for use by the school.
However, in exceptional circumstances the Chief Education Officer may approve
requests for an extension to the original 3 year expenditure deadline. Such
circumstances may include (but are not exclusive to):
1. Capital works arising from the 2 tier conversion programme or school
expansion;
2. Unavoidable delays in completing the project(s) within the original
timescales envisaged when the funds were originally transferred.
Any extension requests must be submitted to the Schools Finance Team by 3
February preceding the original 3 year deadline.
Requests will be approved by the Chief Education Officer.
Requests must:
• include brief, reasoned arguments for the extension request (up to a
maximum of 2 years) and
• be supported by minutes of Governor meetings where the request was
agreed.
14Requests for extensions beyond 2 years will not be considered.
Any balances remaining thereafter will be transferred to the LA capital scheme
and will no longer be available for use by the school.
2.13 Spending for the purposes of the school
Governing bodies are free to spend budget shares ‘for the purposes of the
school’ (Section 50(A) of the Schools Standards and Framework Act 1998),
subject to any provisions of this scheme and the regulations made by the
Secretary of State
By virtue of Section 50(3A) (which came into force on 1 April 2011), amounts
spent by governing bodies on community facilities or services under section27 of
the Education Act 2002 will be treated as if spent for any purposes of the school.
Under Section 50(3) (b) the Secretary of State may prescribe additional purposes
for which expenditure of the budget share may occur. He has done so in the
School Budget Shares (Prescribed Purposes) (England) Regulations 2002
(SI2002/378), which have been amended by the Schools Budget Shares
((Prescribed Purposes) (England) (Amendment) Regulations 2010 (SI2010/190).
These allow schools to spend their budgets on pupils who are on the roll of other
maintained schools or academies.
2.14 Capital spending from budget shares
Governing bodies are permitted to use their budget shares to meet the cost of
capital expenditure on the school premises 1 in accordance with the Councils
accounting procedures. However, schools are not permitted to use their budget
shares to contribute to capital works if:
a) this results in a revenue deficit or
b) existing devolved formula capital balances are held by the school for the
current or previous financial years.
Where the premises are owned by the LA, or the school has voluntary controlled
status, then the Governing Body will seek the written consent of the LA to:
• the extension of existing buildings
• any internal or external alterations to existing buildings
• the construction of any new buildings
• any external works impacting on play areas or playing fields
However, consent for building work can only be withheld by the LA on health and
safety grounds.
The reason for these provisions is to help meet responsibilities with the the
School Premises (England) Regulations 2012, the Workplace (Health, Safety and
Welfare) Regulations 1992, the Regulatory Reform (Fire Safety) Order 2005, the
Equality Act 2010, and the Building Regulations 2010.
1 This includes expenditure by the governing body of a voluntary aided school on work which is their
responsibility under paragraph 3 of Schedule 3 of the Act.
152.14a Devolved Formula Capital (DFC)
DFC is delegated to schools; however, this must only be used in line with the LA
capital guidance and definition and not for revenue purposes e.g. repairs and
maintenance.
Schools are required to return to the LA, on a timely basis as prescribed by the
LA, control schedules identifying actual capital spend, supported by copy
invoices.
DFC must be spent within the three year time frame or claw back may be applied.
Direct Revenue Finance (DRF) entries are not permitted where a school has a
Licensed Deficit agreement or where sufficient capital balances are held.
Exceptions will be made where earmarked funds authorised by the LA in a
previous financial year have detailed a capital contribution.
Voluntary Aided (VA) Schools must ensure a separate bank account is held for
DFC and only the contribution from the school budget share is shown in the LA
school accounts. VA Schools must ensure that they follow LA guidance and
definitions for capital. It is the responsibility of the school to comply with
deadlines and returns as prescribed by the Diocese or the Department for
Education (DfE).
2.15 Notice of concern
The LA may issue a notice of concern to the governing body of any school it
maintains where, in the opinion of the Assistant Chief Executive (Enabling
Services), the Chief Education Officer and Director of Children’s Services, the
school has failed to comply with any provisions of the scheme, or where actions
need to be taken to safeguard the financial position of the LA or the school.
Such a notice will set out the reasons and evidence for it being made and may
place on the governing body restrictions, limitations or prohibitions in relation to
the management of funds delegated to it. These may include:
• insisting that relevant staff undertake appropriate training to address any
identified weaknesses in the financial management of the school;
• insisting that an appropriately trained / qualified person chairs the finance
committee of the governing body;
• placing more stringent restrictions or conditions on the day to day financial
management of a school than the scheme requires for all schools – such as
the provision of monthly accounts to the LA;
• insisting on regular financial monitoring meetings at the school attended by
local authority officers;
• requiring a governing body to buy into an LA’s financial management systems;
and
• Imposing restrictions or limitations on the manner in which a school manages
16extended school activity funded from within its delegated budget share – for
example by requiring a school to submit income projections and / or financial
monitoring reports on such activities.
The notice will clearly state what these requirements are and the way in which
and the time by which such requirements must be complied with in order for the
notice to be withdrawn. It will also state the actions that the LA may take where
the governing body does not comply with the notice.
Where the authority issues a notice of concern, the notice will be withdrawn once
the governing body has complied with the requirements it imposes.
2.16 Schools Financial Value Standard (SFVS)
All LA maintained schools (including nursery schools and pupil referral units
(PRUs) that have a delegated budget) must demonstrate compliance with the
Schools Financial Value Standard (SFVS) and complete the assessment form
and financial dashboard on an annual basis.
Governors must demonstrate compliance through the submission of the SFVS
assessment form signed by the Chair of Governors. The form must include a
summary of remedial actions with a clear timetable, ensuring that each action has
a specified deadline and agreed owner. Governors must monitor the progress
of these actions to ensure that all actions are cleared within specified
deadlines.
All maintained schools with a delegated budget must submit the return to the LA
annually by the 31st December.
2.17 Fraud
All schools must have a robust system of controls to safeguard themselves
against fraudulent or improper use of public money and assets.
The governing body and head teacher must inform all staff of school policies and
procedures related to fraud and theft, the controls in place to prevent them and
the consequences of breaching those controls. This information must also be
included in the induction for the new school staff and governors.
173 Instalments of the budget share and banking arrangements
For the purposes of this section, budget share includes any place-led funding for
special schools or pupil referral units.
As of 1st April 2020, all maintained schools will be fully funded using the
school’s own nominated bank account.
3.1 Frequency of instalments
The entire schools budget share will be made available to the governing body on
a monthly basis. Top up payments for pupils with high needs will be made on a
monthly basis unless alternative arrangements have been agreed with the
provider.
3.2 Proportion of budget share payable at each instalment
Fully funded school budget shares will be transferred into the school bank
account in 12 monthly instalments. Any re-determinations of school budget will
result in amendments to the instalments lodged in the school’s bank account.
Schools may request an adjustment to the proposed instalments by writing to the
Manager (Business Partner) for Schools and Children, with a supporting
cashflow, demonstrating the school’s requirements. Any accelerated instalments
will be deducted from future instalments. The operation of the bank account will
be subject to the Fully Funded Bank Account Scheme.
3.3 Interest clawback
Where the LA standard proportion of instalments is used (Section 3.2), no
deduction will be made from school budget share instalments for the estimated
loss of interest.
3.3.1 Interest on late budget share payments
Where there is a delay in part or all of a scheduled payment, due to an error by
the LA, interest will be paid on the unpaid amount at the relevant Bank of
England base rates for the period.
3.4 Budget shares for closing schools
Budget shares of schools for which approval for discontinuation has been
secured will be made available until closure on a basis agreed by the LA. This
may either reflect the existing banking arrangements or an alternative
arrangement that suits both the LA and the school concerned.
3.5 Bank and building society accounts
All maintained schools may have an external bank account into which their
budget shares will be paid in accordance with the provisions contained at
paragraphs 3.1 and 3.2 of this scheme. Where schools have such accounts they
18shall be allowed to retain all interest payable on the account and be subject to
any bank charges arising.
New bank account arrangements may only be made with effect from the
beginning of each financial year and any such change must be requested prior to
1 January preceding the start of the new financial year.
3.5.1 Restrictions on accounts
Fully funded bank accounts may only be held at either a bank or building society
that has been approved by the LA’s Assistant Chief Executive (Enabling
Services) and appears on the approved list held by the LA Treasury and
Technical Accounting Team.
Any school closing an account used to receive its budget share and opening
another must select the new bank or building society in line with the authority’s
treasury management policy.
The scheme allows schools to have accounts for budget share purposes which
are in the name of the school rather than the LA. However, if a school has such
an account the scheme requires that the account mandate provides that the LA is
the owner of the funds in the account; that it is entitled to receive statements; and
that it can take control of the account if the school’s right to a delegated budget is
suspended by the LA.
The LA can continue to have arrangements negotiated with certain banks
whereby the accounts are in the name of the LA but specific to each school, and
offer such arrangements to schools.
Budget share funds paid by the LA and held in school accounts remain LA
property until spent (s49 (5) of the Act)
The LA may decide to restrict signatories for bank accounts, but should allow at
least LA employees and school employees to be signatories. Such a provision
should not be limited to authority employees only, because this is not practicable
for foundation or aided schools. The LA may not allow governors who are not
members of staff from being signatories. In this case the LA may choose to
nominate a signatory.
The use of direct debits or standing orders for a bank account operated by a
school is permissible, except where the account is part of an LA contract.
3.6 Borrowing by schools
Governing bodies may borrow money (which includes the use of finance leases)
externally only with the written permission of the Secretary of State 2 following
consultation with the LA.
2 This does not apply to Trustees and Foundations, whose borrowing, as private bodies, makes no impact on
Government accounts. These debts may not be serviced directly from the delegated budget, but schools are
free to agree a charge for a service which the Trustees or Foundation are able to provide as a consequence of
their own borrowing. Governing bodies do not act as agents of the LA when repaying loans.
19The Secretary of State’s general position is that schools will only be granted
permission for borrowing in exceptional circumstances.
Schools are allowed to use any scheme that the Secretary of State has said is
available to schools without specific approval, currently including the Salix
scheme, which is designed to support energy saving.
This does not apply to loan schemes run by the authority (see section 4.10).
Schools are not permitted to use interest bearing credit cards, which are
regarded as borrowing. However, schools are encouraged to use procurement
cards, as these cards can be a useful means of facilitating electronic purchase.
Charge cards are also permitted. However, no interest charges should be
incurred by the school, with balances fully cleared on a monthly basis.
3.7 Other provisions
Bedford's Financial Regulations for Schools sets out in further detail the
operational requirements of the banking schemes outlined in 3.1 above. In
addition the Regulations include information on the Bank and Cash Imprest
Schemes, which can be used in conjunction with centralised payments.
Where two or more schools are federated under Section 24 of The Education Act
2002, the LA may allocate a single budget share to the governing body of that
federation. Applications to pool or un-pool budgets for federated schools must be
received by 01 November to take effect from the following financial year.
204 The treatment of surplus and deficit balances arising in relation to budget
4.1 The right to carry forward surplus balances
Schools may carry forward from one financial year to the next any surplus or
deficit in net expenditure relative to the school's budget share for the year plus or
minus any balance brought forward from the previous year.
4.2 Controls on surplus balances
Surplus balances held by schools as permitted under this scheme are subject to
the following restrictions with effect from 1 April 2008:
a. the LA shall calculate by 31 May each year the surplus balance, if any, held
by each school as at the preceding 31 March. For this purpose the balance
will be the recurrent balance as defined in the Consistent Financial
Reporting Framework;
b. the LA shall deduct from the calculated balance any amounts for which the
school has a prior year commitment to pay from the surplus balance and
any unspent grants for the previous financial year where the grant
conditions allow carry forward to a future financial year;
c. the LA shall then deduct from the resulting sum any amounts which the
governing body of the school has declared to be assigned for specific
purposes permitted by the LA, and which the LA is satisfied are properly
assigned. To be properly assigned, amounts must not be retained beyond
the period stipulated for the purpose in question, without the consent of the
LA. In considering whether any sums are properly assigned the LA may
also take into account any previously declared assignment of such sums but
may not take any change in planned assignments to be the sole reason for
considering that a sum is not properly assigned.
d. if the result of steps a-c is a sum greater than 6% of the current year's
budget share for secondary schools or 9% for nursery, lower, primary and
special schools, and this is the 3rd consecutive occurrence, then the LA will
consider the excess balances by review through the Surplus Balance Sub
Group (a sub group of the Schools Forum) and may recommend the
clawback of any excessive surplus or direct the use of these funds within
the school for specific purposes in future financial years,.
Funds deriving from sources other than the LA will be taken into account in this
calculation if paid into the budget share account of the school, whether under
provisions in this scheme or otherwise.
The total of any amounts deducted from school budget shares by the LA under
this provision are to be applied to the Schools Budget of the LA.
The LA has regard to the principle that schools should be moving towards greater
autonomy, should not be constrained from making early efficiencies to support
their medium-term budgeting in a tighter financial climate, and should not be
burdened by bureaucracy. The mechanism will therefore, be focused on only
21those schools which have built up significant excessive uncommitted balances
and / or where some level of redistribution would support improved provision
across a local area.
To assist the LA in carrying out its financial monitoring role, governing bodies are
required to report to the LA on the use which the school intends to make of
surplus balances (after taking account of any earmarked funds, as per the annual
CFR return) in cases where the total balance exceeds the threshold’s set out in
section d above.
Relevant evidence must support B02/B06 Uncommitted/Community Focused
Revenue Balances and be in written form and examples may comprise of:-
• Finance governors meeting minutes
• Three year plans
• Projected pupil numbers
• Correspondence with contractors
• Any other relevant information
4.3 Interest on surplus balances
Balances held by the LA on behalf of schools do not attract interest. Balances
held by schools in their own bank accounts, (option b) referred to in paragraph 3),
may attract interest for the school depending on the type of account.
4.4 Obligation to carry forward deficit balances
Deficit balances will be carried forward by the deduction of the relevant amounts
from the following year's budget share (see also 4.8).
4.5 Planning for deficit budgets
Schools may only plan for a deficit budget in accordance with the terms of
paragraph 4.9 below. All schools must notify the LA immediately should it
become apparent at any time that there will be a deficit budget in any of the years
covered by the multi-year financial plan,
4.6 Charging of interest on deficit balances
Fully funded schools operating their own bank account are not permitted to allow
their account to become overdrawn.
4.7 Writing off deficits
The LA has no power to write off the deficit balance of any school. Funds to
support mainstream maintained schools in financial difficulty are available from a
de-delegated contingency budget where this has been agreed through Schools
Forum.
224.8 Balances of closing and replacement schools
When a school closes, any balance (whether surplus or deficit) shall revert to the
LA; it cannot be transferred as a balance to any other school, even where the
school is a successor to the closing school, except that a surplus transfers to an
academy where a school converts to academy status under the provisions of the
Academies Act 2010.
However, the LA may, if they wish, make allocations to schools, which have the
effect of giving them the benefit of additional sums that are equal to or less than
the surplus balances of relevant closing schools.
The LA may also recognise the deficit of the preceding school by reducing the
amount of extra funding allocated to a new school, by an amount equal to the
deficit from the previous school. Any deficit cannot be set against the ‘normal’
elements of funding the new school, such as elements of funding it would receive
anyway if it were not new.
4.9 Licensed deficits
The general provision in paragraph 3.6 above forbidding governing bodies to
borrow money shall not apply to schemes run by the LA as set out below.
The LA will permit schools which do not have a deficit at the start of a financial
year to plan for a deficit budget in particular circumstances subject to the
approval of the Chief Education Officer by delegation of the Director of Children’s
Services and the Assistant Chief Executive (Enabling), or their nominated
representative. The funding to allow such a deficit budget shall be provided from
the collective surplus of school balances held by the LA on behalf of schools 3.
The Licensed Deficit (LD) shall be in accordance with the following conditions /
requirements:
(a) The normal maximum length of time over which schools may repay the deficit
(i.e. to reach at least a zero balance), will be three years. Schools’ requests for
licensed deficits will need to be supported by a detailed recovery plan.
Progress against the plan will be reviewed formally each month and schools
are required to submit a formal Licenced Deficit Outturn which is available to
download within the Licenced Deficit section of the Schools’ secure website.
This submission must be supported by a system report confirming expenditure
to date. Should the financial position of the school deteriorate then schools will
need to adjust their plans accordingly to achieve the terms of their agreed LD.
If the school forecasts that the approved LD recovery cannot be met they
should submit in writing a request for additional funds, supported by a revised
recovery plan, as soon as possible.
In exceptional circumstances the recovery period may be extended, but only
with the express approval of the Assistant Chief Executive (Enabling Services)
3It is open to the LA, in circumstances where there is no such surplus, to make alternative arrangements if it
can do so within the relevant local authority finance legislation.
23and the Chief Education Officer by delegation of the Director of Children’s
Services.
(b) Licensed deficits will normally only be agreed where circumstances affecting
the school change in ways which could not have reasonably been foreseen
and the school concerned needs a period in excess of one financial year in
order to effect a reduction in its annual level of expenditure and / or an
increase in its annual level of income sufficient to eliminate the budget deficit;
(c)Licensed deficits shall not normally exceed 10% of a school budget share;
(d) No more than one third of the collective balances held by the LA will be used
to back these arrangements. The collective balances will include any balances
held in external bank accounts where the funds were initially made available
by the authority.
(e) The format of the Licensed Deficit Recovery Plan is shown in Appendix B. This
plan is available to download from the Licensed Deficit section of the school’s
secure website. To accompany this plan, detailed notes are required to be
submitted to support the recovery plan.
If the recovery period is less than three years, the plan only needs to cover the
recovery period i.e. an additional one or two years. If exceptionally, a longer
period has been agreed as set out above, the plan must be extended to the
financial year of recovery.
4.10 Asset loan scheme
The LA operates an Asset Loan Scheme which does not operate by way of a
licensed deficit but rather by way of expenditure by the LA, on asset purchases,
in respect of a particular school on condition that repayments of principal and
interest are repaid from the budget share. The current rate of interest on such
loans is the Bank of England base rate.
The loan shall be in accordance with the following conditions / requirements:
(a) the maximum length of time over which schools may repay the loan will be
three years. Schools’ requests for loans will need to be supported by the
School’s Development Plan. At no stage will the loan period be extended
beyond three years;
(b)loans will only be agreed if they meet the approval of the Assistant Chief
Executive (Enabling Services);
(c)the maximum permitted value of a purchase will be such that in the period
over which the school elects to spread the cost, each annual payment
(comprising both principal and interest) will not exceed one per cent of the total
budget share (formula allocation excluding balance brought forward), as
calculated in the year in which the agreement commences;
24(d) the minimum value of a purchase considered to be appropriate to the loan
scheme is £10,000;
(e) no more than one third of the collective balances held by the LA will be used to
back these arrangements.
(f) loans must only be used to spread the cost over more than one year of large
one-off individual items of a capital nature that have a benefit to the school
lasting more than one financial or academic year. Loans must not be used as a
means of funding a deficit that has arisen because a school’s recurrent costs
exceed its current income. If loans are made to fund a deficit and a school
subsequently converts to academy status, the Secretary of State will consider
using the power under paragraph 13(4)(d) of Schedule 1 to the Academies Act
2010 to make a direction to the effect that such a loan does not transfer, either
in full or part, to the new Academy school’.
4.10.1 Credit union approach
Schools may wish to group together to utilise externally held balances for a Credit
Union approach to loans. Where schools choose to borrow money through such
a scheme the LA will require audit certification of the running of the scheme,
unless the LA itself acts as the administrator of the arrangement. Details of the
arrangements can be found in Bedfordshire's Financial Regulations for Schools.
4.10.2 Salix energy efficient loan scheme
Funded by the DfE, Salix launched a Schools programme in 2012 providing
100% interest-free loans specifically for schools in England for Energy Efficiency
Initiatives. There is a minimum value for any single project of £500 and a total
minimum application and loan value of £5,000. There is not a maximum loan
value. The repayment of the loan will be a minimum of 4 years up to a maximum
of 8 years, dependent on the project payback. The loans must be paid back to
Salix by direct debit every March and September over the confirmed period.
As noted in paragraph 3.6 above, Secretary of State approval is required for
schools to borrow externally. In the case of Salix loans, blanket approval has
been given for the scheme and schools are not required to obtain individual
approval.
For detailed accounting guidance for this loan, please contact your School
Financial Anaylist.
255 Income
Schools shall be able to retain income except in certain specified circumstances.
5.1 Income from lettings
Schools may retain income from lettings of the school premises which would
otherwise accrue to the LA, subject to alternative provisions arising from any joint
use or PFI/PPP agreements. Schools are permitted to cross-subsidise lettings for
community and voluntary use with income from other lettings, provided the
governing body is satisfied that this will not interfere to a significant extent with
the performance of any duties imposed on them by the Education Acts, including
the requirement to conduct the school with a view to promoting high standards of
educational achievement. Schools whose premises are owned by the LA shall be
required to have regard to directions issued by the LA as to the use of school
premises.
Income from lettings of school premises should not normally be paid into
voluntary or private funds held by the school. However, where land is held by a
charitable trust, it will be for the school’s trustees to determine the use of any
income generated by the land.
5.2 Income from fees and charges
Schools may retain income from fees and charges except where a service is
provided by the LA from centrally retained funds. Schools are required to have
regard to any policy statements on charging produced by the LA.
5.3 Income from fund-raising activities
Schools may retain income from fund-raising activities.
5.4 Income from the sale of assets
Schools may retain the proceeds of sale of assets except in cases where the
asset was purchased with non-delegated funds (in which case it should be for the
LA to decide whether the school should retain the proceeds), or the asset
concerned is land or buildings forming part of the school premises and is owned
by the LA.
5.5 Administrative procedures for the collection of income
Schools are required to comply with the LA’s guidance on VAT as expressed in
Bedford Borough’s VAT Guide. (This is available from the school’s secure
website within the VAT section). The LA will inform schools of any changes to
approved procedures, which may arise from time to time in the light of advice
from HM Revenue and Customs.
5.6 Purposes for which income may be used
Income from the sale of assets purchased with delegated funds may only be
spent for the purposes of the school.
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