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Scheme for the financing of schools

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Scheme for the financing of schools ...

    EDUCATION, ARTS AND LIBRARIES AND RESOURCES DIRECTORATES

    SCHEME FOR THE

    FINANCING OF SCHOOLS

Updated May 2008

    Incorporating revisions to May 2008

DCC Scheme for the Financing of Schools

    SCHEMES FOR FINANCING SCHOOLS:

    SECTION 48 OF THE SCHOOL STANDARDS AND FRAMEWORK ACT 1998

    LIST OF CONTENTS

    SECTION 1 5

    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 COUNTY COUNCIL 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

    FINANCIAL CONTROLS AND AUDIT 8 2.1 FINANCIAL CONTROLS 8 2.1.1 APPLICATION OF FINANCIAL CONTROLS TO SCHOOLS 8 2.1.2 PROVISION OF FINANCIAL INFORMATION AND REPORTS 8 2.1.3 ACCOUNTING ARRANGEMENTS; PAYMENT OF SALARIES AND BILLS;

    COLLECTION OF REVENUE 9 2.1.4 CONTROL OF ASSETS 10 2.1.5 ACCOUNTING POLICIES (INCLUDING YEAR-END PROCEDURES) 10 2.1.6 WRITING OFF OF DEBTS 10 2.2 BASIS OF ACCOUNTING 10 2.3 SUBMISSION OF BUDGET PLANS 11 2.4 BEST VALUE 11 2.5 VIREMENT 11 2.6 Arrangements for Audit 12 2.7 SEPARATE EXTERNAL AUDITS 12 2.8 AUDIT OF VOLUNTARY AND PRIVATE FUNDS 13 2.9 REGISTER OF BUSINESS INTERESTS 13 2.10 PURCHASING, TENDERING AND OTHER CONTRACTING REQUIREMENTS 13 2.11 APPLICATION OF CONTRACTS TO SCHOOLS 14 Incorporating revisions to May 2008

    2.12 CENTRAL FUNDS AND EARMARKING 14 2.13 SPENDING FOR THE PURPOSES OF THE SCHOOL 14 2.14 CAPITAL SPENDING FROM BUDGET SHARES 14

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DCC Scheme for the Financing of Schools

    2.15 FINANCIAL MANAGEMENT STANDARD 15

    2.16 NOTICE OF CONCERN 16

    ADMINISTRATION OF THE BUDGET SHARE 18 3.1 OPTIONS AVAILABLE TO SCHOOLS 18 3.2 CENTRAL PAYMENTS SCHEME 18 3.3 LOCAL PAYMENTS SCHEMES - INSTALMENTS, FREQUENCY AND INTEREST

    DEDUCTIONS 18 3.3.1 INTEREST ON LATE PAYMENT OF BUDGET SHARE 20 3.4 BUDGET SHARES FOR CLOSING SCHOOLS 20 3.5 BANK AND BUILDING SOCIETY ACCOUNTS 20 3.5.1 RESTRICTIONS ON ACCOUNTS 21 3.6 DEBIT & OTHER CHARGE CARDS 23 3.7 BORROWING BY SCHOOLS 23 3.8 LENDING BY SCHOOLS 23

    THE TREATMENT OF SURPLUS AND DEFICIT BALANCES ARISING IN RELATION

    TO BUDGET SHARES 24 4.1 THE RIGHT TO CARRY FORWARD SURPLUS BALANCES 24 4.2 REPORTING ON THE INTENDED USE OF SURPLUS BALANCES 24 4.3 INTEREST ON SURPLUS BALANCES 24 4.4 OBLIGATION TO CARRY FORWARD DEFICIT BALANCES 24 4.5 PLANNING FOR DEFICIT BUDGETS 24 4.6 CHARGING OF INTEREST ON DEFICIT BALANCES 24 4.7 WRITING OFF DEFICITS 24 4.8 BALANCES OF CLOSING AND REPLACEMENT SCHOOLS 24 4.9 LICENSED DEFICITS 25 4.10 LOAN SCHEMES 25 4.11 GM SCHOOLS' BALANCES 26 4.12 CAPPING OF CARRY FORWARD BALANCES 26 4.13 ALLOWABLE EXCEPTIONS 27 4.14 GROUNDS FOR CARRYING FORWARD PLANNED EXCESSIVE BALANCES 27 4.15 GROUNDS FOR CARRYING FORWARD UNPLANNED EXCESSIVE BALANCES 27

    INCOME 29 Incorporating revisions to May 20085.1 INCOME FROM LETTINGS 29 5.2 INCOME FROM FEES AND CHARGES 29 5.3 INCOME FROM FUND-RAISING ACTIVITIES 29 5.4 INCOME FROM THE SALE OF ASSETS 29

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DCC Scheme for the Financing of Schools

    5.5 OTHER INCOME 29 5.6 GENERAL 29

    THE CHARGING OF SCHOOL BUDGET SHARES 31 6.1 GENERAL PROVISION 31 6.2 CIRCUMSTANCES IN WHICH CHARGES MAY BE MADE 31

    TAXATION 33 7.1 VALUE ADDED TAX 33 7.2 CONSTRUCTION INDUSTRY SCHEME (CIS) 33

    THE PROVISION OF SERVICES AND FACILITIES BY THE COUNTY COUNCIL 34 8.1 PROVISION OF SERVICES FROM CENTRALLY RETAINED BUDGETS 34 8.2 TIMESCALES FOR THE PROVISION OF SERVICES BOUGHT BACK FROM THE

    COUNTY COUNCIL USING DELEGATED BUDGETS 34 8.2.1 PACKAGING 34 8.3 SERVICE LEVEL AGREEMENTS 34

    PFI/PPP 36 9.1 PRIVATE FINANCIAL INITIATIVE/PRIVATE PUBLIC PARTNERSHIPS (PFI/PPP)

    SCHEMES 36

    INSURANCE 37 10.1 INSURANCE COVER 37

    MISCELLANEOUS 38 11.1 RIGHT OF ACCESS TO INFORMATION 38 11.2 LIABILITY OF GOVERNORS 38 11.3 GOVERNORS' EXPENSES 38 11.4 RESPONSIBILITY FOR LEGAL COSTS 38 11.5 HEALTH AND SAFETY 38 11.6 RIGHT OF ATTENDANCE FOR DIRECTOR OF FINANCE 39 11.7 DELEGATION TO NEW SCHOOLS 39 11.8 OPTION TO RECEIVE DELEGATED BUDGETS 39 11.9 SPECIAL EDUCATIONAL NEEDS 39 11.10 EX-GRATIA PAYMENTS 39 11.11 EXTERNAL FINANCE 39 11.12 WHISTLEBLOWING 39 11.13 CHILD PROTECTION 40 Incorporating revisions to May 2008

    11.14 SCHOOL MEALS 40

    GM AND GM SPECIAL SCHOOLS 41 12.1 GM SCHOOLS' BALANCES 41

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DCC Scheme for the Financing of Schools

    RESPONSIBILITY FOR REPAIRS AND MAINTENANCE 42 13.1 RESPONSIBILITIES 42 13.2 DELEGATION 42 13.3 AIDED SCHOOLS 42 13.4 COUNTY COUNCIL / SCHOOL OBLIGATIONS 42 13.5 AGREEMENTS 43 13.6 DISAGREEMENTS 43 13.7 OBJECTIVES 43 13.8 DE MINIMIS LIMITS 43

    DIRECTED CHANGE - GTC SUBSCRIPTIONS 44 14.1 FEES TO BE DEDUCTED FROM TEACHERS‟ SALARIES AND REMITTED TO THE

    GENERAL TEACHING COUNCIL FOR ENGLAND 44 ADDENDUM 46 Additional scheme provisions for schools providing community facilities 46 1 Legislative framework 46 2 Consultation with the Council 46 3 Funding agreements 47 4 Restrictions and limitations 48 5 Supply of Financial Information 49 6 Audit 49 7 Treatment of Income and Surpluses 50 8 Health & Safety 51 9 Insurance 51 10 Taxation 51 11 Banking 54 ANNEX A 56 Schools maintained by the County Council on 1 September 2004 56 ANNEX B 60 Premises costs capital /revenue split 60 ANNEX C 65 Principles of Best Value for Schools 65 Obligation on schools 65 Best Value requires the governing body of a school to ensure: 65 Incorporating revisions to May 2008

    1. The setting of performance targets for all services 65 2. The detailed review of all services within specified principles 65 3. The formulation of an improvement plan and revised targets 65

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DCC Scheme for the Financing of Schools

    4. The scrutiny of performance information 65 ANNEX D 66 ACCOUNTING CONCEPTS 66 THE QUALITATIVE CHARACTERISTICS OF FINANCIAL INFORMATION RELEVANCE 66 RELIABILITY 66 COMPARABILITY 67 UNDERSTANDABILITY 67 MATERIALITY 67 PERVASIVE ACCOUNTING CONCEPTS 68 ACCRUALS 68 GOING CONCERN 68 PRIMACY OF LEGISLATIVE REQUIREMENTS 68

    SECTION 1

    INTRODUCTION

    1.1 THE FUNDING FRAMEWORK Incorporating revisions to May 2008

    The funding framework which replaces Local Management of Schools is based on the

    legislative provisions in sections 45-53 of the School Standards and Framework Act

    1998.

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    DCC Scheme for the Financing of Schools

    Under this legislation, local authorities determine for themselves the size of their Local Schools Budget (LSB). The categories of expenditure which fall within the Local Schools Budget are prescribed under regulations made by the Secretary of State, but included within the LSB is all expenditure, direct and indirect, on an authority's maintained schools. Local authorities may retain funding for purposes defined in regulations made by the Secretary of State under s.46 of the Act. The amounts to be retained centrally are decided by the authority concerned, subject to any limits or conditions prescribed by the Secretary of State. The balance of the LSB left after deduction of centrally retained funds is termed the Individual Schools Budget (ISB). Local authorities must distribute amounts from their ISB amongst their 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 s.51 of the Act. The financial controls within which delegation works are set out in a scheme made by the Local Authority in accordance with s.48 of the Act and approved by the Secretary of State. All revisions to the scheme must also be approved by the Secretary of State, who has power to modify schemes or impose one.

    Subject to provisions of the scheme, governing bodies of schools may spend budget shares for the purposes of their school. They may also spend budget shares on any additional purposes prescribed by the Secretary of State in regulations made under s.50.

    A Local Education Authority may suspend a school's right to a delegated budget if the provisions of the school financing 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 (s.17 of the SSAF Act 1998).

    Each authority is obliged to publish each year a statement setting out details of its planned Local Schools Budget, showing the amounts to be centrally retained, the budget share for each school, the formula used to calculate those budget shares, and the detailed calculation for each school. After each financial year the authority must publish a statement showing out-turn expenditure at both central level and for each school, and the balances held in respect of each school. Both types of statement are subject to audit certification by the Audit Commission, and information in them may be collated and published by the Secretary of State.

    The detailed publication requirements for financial statements and for schemes are set out in regulations, but each school must receive a copy of the scheme and any amendment, and each year's budget and out-turn statements so far as they relate to that school or central expenditure.

    1.2. THE ROLE OF THE SCHEME

    The Scheme sets out the financial relationship between the County Council and

    Incorporating revisions to May 2008maintained schools in Devon. It sets out requirements relating to financial management and associated issues, binding on both the County Council and on schools.

    1.2.1. APPLICATION OF THE SCHEME TO THE COUNTY COUNCIL AND MAINTAINED

    SCHOOLS

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    DCC Scheme for the Financing of Schools

    The scheme applies in respect of all county, voluntary, maintained special and

    foundation schools maintained by the County Council. A list of schools maintained by stthe County Council on 1 September 2002 is included at Annex A.

    stNew maintained schools opening after 1 September 2002 will be covered by the

    scheme by virtue of s.48 of the Act.

    The principles of the scheme will so far as possible be applied to nursery schools

    maintained by the authority.

    1.3. PUBLICATION OF THE SCHEME

    A copy of the scheme will be maintained on the County Councils‟ official web site.

    Revisions will be published as they are approved. Schools will be advised electronically

    when changes are effected. Hard copies will be provided periodically to schools at the

    County Council‟s discretion.

    Comment

    Use of the internet will ensure that all schools and Governors will have immediate

    access to an up-to-date copy of the scheme.

    1.4. REVISION OF THE SCHEME

    Any proposed revisions to the scheme will be the subject of consultation with schools

    and will require approval by the Secretary of State.

    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 headteacher, and to record its decision (and any revisions) in

    the minutes of the governing body. The first formal budget plan of each financial year

    must be approved by the full governing body.

    Advice on best practice on this matter is included within the County Council's 'Finance

    Manual for Schools'.

    Governors must adopt a formal policy which clearly defines the roles and

    responsibilities of governors and school staff. Individuals must not exceed the authority

    delegated to them by resolution of the governing body.

    1.6. MAINTENANCE OF SCHOOLS

    The Local Education Authority is responsible for maintaining the schools covered by the

    scheme, and this includes the duty of defraying all the expenses of maintaining them

    (except in the case of voluntary aided schools where some of the expenses are, by

    statute, payable by the governing body;). Part of the way an authority maintains schools

    is through the funding system put in place under sections 45 to 53 of the School

    Standards and Framework Act 1998.

    Incorporating revisions to May 2008

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    DCC Scheme for the Financing of Schools

    SECTION 2

    FINANCIAL CONTROLS AND AUDIT

    2.1 FINANCIAL CONTROLS

    2.1.1 APPLICATION OF FINANCIAL CONTROLS TO SCHOOLS

    Governors must having regard for the proper separation of duties allocate sufficient resources to ensure effective systems of financial control are operating and comply with the Scheme and any amendments that are approved from time to time. Schools must comply with Financial Regulations and minuted decisions of the County Council but only in so far as the rules set out in these documents are compatible with the terms of the scheme.

    Governors must ensure that moneys provided to the school are spent only for the purposes intended. They will achieve this through ensuring:

    that proper records both financial and non-financial are accurately maintained in

    a timely manner

    that management systems ensure proper controls over assets (physical and

    monetary) are in place including safeguards against fraud.

    Both governors and staff have a duty to expose mismanagement and fraud. Financial Regulations require that the Director of Finance is immediately notified where there are grounds to suggest any irregularity affecting cash stores or other assets. Normally such notification will be by the headteacher. However, it may be that circumstances make it inappropriate for the person alleging irregularity to raise the matter with the headteacher or governors. An alternative route is therefore available as described in paragraph 11.11.

    The Director of Finance is responsible for advising committees of the County Council on all financial matters. He may bring to the notice of the relevant committee any financial matter relating to a school.

    2.1.2 PROVISION OF FINANCIAL INFORMATION AND REPORTS

    Governors will wish to be assured that school financial affairs are progressing according to plan and must ensure regular and timely budget monitoring takes place and receive appropriate formal reports from the headteacher. Such reports must be sent to governors no less than one week prior to the meeting at which they will be considered. Reports must identify emerging financial issues and recommend the management action necessary to resolve them. Responsibility for management action rests with the headteacher or governing body depending on the powers delegated to the headteacher.

    Where such monitoring reports suggest that a school will be unable to keep within budget the Director of Finance must be notified.

    Schools are required to provide the authority with details of actual and anticipated

    Incorporating revisions to May 2008expenditure and income set alongside their budgets (a budget monitoring statement), at three specified dates in the year. Relevant dates will be notified each year but will approximate to;

     Mid June

     Mid November

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    DCC Scheme for the Financing of Schools

     Mid May following the financial year to account for actual over and under spends In making the June and November returns schools will have flexibility in the selection of the return date: which will not be earlier than the half term nor later than the end of the relevant term. Schools will be able to select a date to suit the pattern of their governors meetings. This date must be notified to the Director of Finance, where schools do not select a date the due date will be that notified by the Director.

    Such statements will be in a format consistent with minimum standards set out by the County Council in the 'Finance Manual for Schools' but enabling individual schools flexibility in its precise format and content. The aim of producing such statements is to provide governors with a forecast of the end of the end of year position and to identify such financial issues as may require management action. Advice on best practice is also to be found in the same document. The County Council's intention in this requirement and the flexibility afforded to the school is to receive a statement which, under guidelines of best practice, would, in any case, be submitted to the governing body adjacent to these times.

    Schools should note that the requirement to submit annual budget plans to the County Council is shown elsewhere within the scheme (see 2.4).

    Schools may, where arrangements for licensed deficits are in place or in other circumstances where the Director of Finance has reason for concern over financial management, be required to submit budget monitoring statements at more frequent intervals.

    The submission of budget monitoring returns is discrete from any requirements to furnish information in connection with bank reconciliation, tax, or other statutory requirements.

    2.1.3 ACCOUNTING ARRANGEMENTS; PAYMENT OF SALARIES AND BILLS;

    COLLECTION OF REVENUE

    All schools are responsible for:

    (a) the timely payment of creditors in accordance with the provisions of the Late

     Payment of commercial Debts (Interest) Act 1998;

    (b) the timely payment of all staff and compliance with all relevant tax, national

     insurance and superannuation legislation;

    (c) the proper management of debtors and the collection of cash;

    (d) timely and accurate accounting for VAT;

    (e) the correct application of the Construction Industry Scheme regulations; (f) compliance with Financial Regulations;

    (g) meeting the costs of any failure to comply with statute or common law where

     applicable;

    (h) compliance with the Charities Acts; and

    (i) maintenance of appropriate records. Incorporating revisions to May 2008

    Funding for the provision of these services has been delegated to schools. Services provided by the County Council, which may be purchased by schools, are offered through the Service Portfolio. Each service operates under separately published administrative procedures.

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