The report of the Directorate Finance Lead – Children’s and Schools is enclosed.

The Forum considered a report of the Directorate Finance Lead – Children’s and Schools which discussed the annual analysis of reserves review for each maintained school that has an excessive revenue balance. Schools  that had been identified as having a eligible surplus were listed in an appendix to the report.  It was reported that in 2021/22, Manchester schools’ excessive balances had decreased by £1m in comparison with 2020/21 balances and an overview of commitments for retained balances was provided.

The report sought School Forum’s decision on the rate of the automatic clawback mechanism for the upcoming academic year (2022/23), with all maintained Schools Forum members being invited to vote on the clawback of eligible excessive balances for the next academic year at a rate of either 50% or 100%.

Key questions/comments in the meeting were:

• Given the current financial climate, whether consideration had been given for reducing the number of years an allowable balance may be retained before becoming eligible for the clawback mechanism.
• Whether a decision concerning the clawback of excessive balances could be taken earlier in the year to allow schools a greater period of notice in terms of spend, in view of the financial landscape
• That whilst the scheme in itself was reasonable in terms of its purpose, there was a degree of unfairness that the process did not also apply to the academy sector.

With regard to the number of years a surplus may be retained within the scheme, the Directorate Finance Lead - Children and Schools advised that due to current concerns of the cost of living increases and the significant challenges around rising energy costs and the COVID legacy, the Authority was not seeking to narrow the mechanism any further for the 2022/23 financial year, however this could be considered for future financial years. The Chair commented that it had been noted that Manchester’s approach to the clawback of excessive balances was very generous in comparison to other practises in other authorities. In contrast, some Authorities opted to clawback surpluses at the end of the same financial year. He also highlighted the Authority’s duty to manage surpluses in conjunction with the Forum where allocated funds had not been spent on pupils in the time allocated, and drew attention to the established mechanism in place to support schools who were seeking to save for a particular project (eg capital or similar) to manage and protect those funds until such time that they were required.

In respect of giving schools a greater notice period by taking decisions of this nature at the start of the academic year, it was highlighted that the scheme was only applicable to a retained surplus of over 4 years or more, meaning that ample opportunity to spend uncommitted funds could be argued. In addition, a member who had previously been involved in the previous year’s Appeals Panel noted that a number of schools listed in the report’s appendix had been through the clawback process in the previous financial year, indicating an awareness of the process. The Directorate Finance Lead - Education and Schools gave emphasis to all schools facing the same challenge around inflationary factors, energy increases etc, that schools were appropriately informed of the mechanism through being given access to the Authority’s calculator to support effective financial modelling and that an added complexity was the requirement to finalise the Authority’s year end budget calculation prior to any decision being taken. The Directorate Finance Lead - Children and Schools added that DfE /ESFA had noted a national trend in rising retained balances which had led to them forming the view that further financial help in respect of energy increases as a direct consequence of those retained surplus balances.

In response to a comment about the process being solely confined to maintained schools and not applying to Academies, the Chair said that whilst the Forum had no jurisdiction in terms of the management of academy reserves, a similar process was emerging in multi academy trusts because of recognition that equity across the sectors was the fairest approach. The Director of Education confirmed this and drew the Forum’s attention to an upcoming item of business scheduled for the Forum’s September meeting about to balance the High Needs block of the Dedicated Schools Grant. Given the long standing pressures of that particular funding block, the paper would again propose that any funding clawed back through this mechanism would be allocated to  support the needs of pupils with High Needs  in the city and would help mitigate the impact on other aspects of provision to support the High Needs Recovery Plan.

Maintained members of the Forum then proceeded to vote on the clawback of eligible excessive balances for the upcoming academic year at a rate of either 50% or 100%. A majority of eligible members present at the meeting (5:2) voted for 100% clawback for the 2022/23 academic year. The Chair confirmed that all schools would be duly notified of the changed approach. Noting that an appeals process was required to support the process, the Forum appointed the following Panel members: Alan Braven, Hatim Kapacee, Councillor Reid and Andy Park

Decision

1.         To note the level of maintained school balances 2021/22.

2.         To note the excessive clawback mechanism for maintained schools in the academic year 2022/23.

3.         To agree that for the 2022/23 academic year, the rate of clawback shall be at a rate of 100% ofall excessive surplus balances held for more than four years.

4.         To appoint the following Forum members to the Appeals Panel for the 2022/23 academic year’s clawback mechanism.