The Forum considered a report of the Directorate Finance Lead - Children’s and Schools which set out a proposal to review the existing mechanism to recoup surplus and uncommitted / un-earmarked school balances (with surplus defined as a balance of greater than 8% of the budget share for nursery, primary and special schools, and 5% of the budget share for secondary schools).  The decision to review the mechanism had been taken following a reported comparative increase in surplus balances across Manchester’s maintained schools of £2.1M over the period 2016/17 and 2017/18.  It was highlighted that amongst the schools with the highest level of balances, fourteen were in an excessive balance position for a period of more than two years and one Manchester school was reportedly in the top ten highest balances for primary schools nationally.  A further seven Manchester Primary schools were in the highest (revenue) balances in the North West.  It was asserted that Manchester’s increasing level of school balances did not support the city’s case for sufficient funding for additional need, following the full implementation of National Funding Formula reforms that are scheduled for 2020/21.

The report stated that Manchester’s maintained schools projected an overall revenue surplus balance of £16.97m and capital balance of £0.9m at quarter three. It was also reported that many schools predicted a deficit or low balance by year three of the multi-year budgeting requirements.  The current offer that is available to maintained schools in terms of support concerning financial issues was described as:

·         A ‘support and challenge’ mechanism

·         Regular briefings/updates at head teachers, school business managers & governors conferences.

·         Detailed budget guidance documentation going out to schools with their indicative budgets, to support with budget planning.

·         Where a school is causing significant concern the Council would arrange for an experienced business manager to help support and resolve issues.

·         The provision of a ‘Welcome Pack’ for Headteachers which includes a schedule of financial tasks of which the Head teacher needs to have oversight.

·         There is continuous communication with finance, quality assurance and audit, although formal Assurance meetings

·         Continuous improvement of the good working relationship with schools and their budget officers. 

In essence the proposed new process for recouping uncommitted excess balances was described as set out below:

“The proposed change to the mechanism is for the Council to clawback of balances above the allowable threshold that have been held for more than 2 years. It is proposed that the change apply to balances as of the 31 March 2019 and is phased 50% for 2018/19 excessive surplus balances (to be reviewed in 2019/20) and 100% for 2019/20 excessive surplus balances (to be reviewed in 2020/21).”

The Forum had been invited to comment on the proposed new mechanism for excessive surplus balance control and provide its views on the proposed consultation across Manchester maintained schools.

The Forum discussed the proposed new mechanism.  A member of the Forum commented that there may be an increased likelihood that local authority maintained schools would seek to transfer to academy status to avoid having their excess balances recouped.  The Directorate Finance Lead – Children and Schools indicated that there had been a suggestion that a similar mechanism to recoup excess balances existed within the ESFA’s powers, although this was not clear.  It was also suggested that there was now a requirement that schools seeking to transfer must do so on a multi-academy basis which may complicate the decision to take such action for the sole purpose of avoiding the clawback.

The Forum touched again upon the retention of excess balances weakening the argument about appropriate levels of funding for Manchester’s schools to deliver high quality education and extra-curricular activity in view of the continued reduction in school funding over the last nine years.  The Executive Member for Schools, Culture and Leisure stressed the importance that all schools, irrespective of their status, should spend the money that given by Government on delivering highest quality education and provision for the city’s school population.

The Chair then spoke about the importance of schools having ongoing dialogue with the Local Authority and the significance of the ‘support and challenge’ offer, where financial management and robust guidance on appropriate sources of funding may be explored. In particular, where a school may, for example, have been inappropriately advised that their funding body would no longer consider capital expenditure requests and instead have been guided to seek revenue funding for that work.

There was acknowledgement amongst the Forum that, mindful of significant concerns about the implementation of the NFF, schools had been exercising caution and had quite naturally, sought to mitigate the impact of those reforms.  However, it was also recognised that the retention of larger and more long term surpluses did not support Manchester’s case for sufficient funding for additional need.  There was therefore broad support for the proposed new clawback methodology and the Forum agreed that the matter should go out for consultation to Manchester’s maintained schools, the findings of which would be reported back in due course.

Decision

To note that Local Authority maintained schools will be consulted on the proposed clawback mechanism and that those findings will be reported back to the Forum for consideration.