To update Schools Forum on the consultation with schools regarding the reintroduction of a balance clawback mechanism for local authority schools.

The Forum was informed of the outcome of the consultation with schools regarding the reintroduction of a balance clawback mechanism and considered whether such a mechanism should be introduced.

The School Finance Manager presented the report.  He acknowledged that this was a difficult matter for the Forum because it did not affect all schools equally.  He reminded the Forum that the issue had been brought before the Forum by the Budget Working Group (BWG) which had been concerned at the level of balances held.  The Forum had approved a consultation with schools.

He emphasised that the purpose of a clawback scheme was not simply to remove excess balances from schools but to encourage schools to spend their annual budget on their current pupils. The introduction of a clawback scheme would require the Forum to approve the amendment of the Scheme of Financial Management.

He noted that advice had been received from the Department for Education (DfE) that only maintained schools should vote on the proposed amendment of the Scheme of Financial Management.  The implication of legal advice provided on this point set out in the report was that the Forum should take a decision confirming that it would adopt this approach.

The report set out the following options for consideration:

A – introduction of a clawback mechanism for the 2015/16 financial year;

B – phasing in of a clawback mechanism over 3 years; and

C – inclusion of academies in a clawback mechanism on a voluntary basis – (with the additional option if academies chose not to join the scheme of proceeding with a scheme for local authority schools only or not proceeding with the proposals unless all academies participated.)

The Schools Finance Manager (SFM) reported  the outcome of the consultation exercise, a copy of which had previously been circulated to the members of the Forum.  In summary only about a quarter of schools had responded.  The response was heavily against the introduction of the full clawback scheme from 1 April 2015, moderately in favour of a phased introduction over 3 years, in favour of the inclusion of academies within the scheme and strongly of the view that the clawback scheme should not proceed unless all academies were included.

He also referred the Forum to paragraph 8 of the report which set out the action the local authority proposed to take if the Forum declined to adopt a clawback mechanism.

In discussion the following principal points were made:

·        There were a number of reasons why schools chose to hold balances and the Authority should seek clarification from schools of those reasons before a decision on the introduction of a balance clawback scheme was taken.

·        The phased approach offered by Option B  was preferable to the implementation of Option A.

·        A number of schools were holding excessive balances and that was not acceptable  when representations continued to be made to the BWG that schools had insufficient funding.

·        The level of school balances held within the County as a whole did not assist the County’s case for extra school funding from Government.

·        The SFM confirmed that no funds had ever been clawed back from schools within the County.  However, one of the objectives of the clawback scheme was to encourage schools to spend annual budgets on current pupils.

·        The issue of a common approach to all schools in the County including academies was raised.  It was noted that academies’ accounts were audited and the expectation was that they would hold balances equivalent to one month’s expenditure.  The SFM noted that this would be close to the average balance held by maintained schools of 10%. 

·        It was asked if there was any evidence that schools holding high balances were failing to meet educational standards.  The Assistant Director commented that there was no simple link and that the Authority considered a range of information on schools performance and worked with school leaders and school governors to address standards issues.  Balances and budget management could be a factor in this.

·        The proposal to claw back balances in excess of 8% would affect more than half of the locally maintained schools in the County and this was surely unacceptable.

·        More respondents to the consultation had been opposed to clawback at all than had favoured any of the proposed options.

·        The response rate to the consultation had been low.

·        One view expressed was that introduction of a clawback scheme risked precipitating inappropriate, unnecessary expenditure.  An opposing view was that such an approach to a scheme’s introduction would represent poor management.

·        There might be merit in checking that schools were allocating balances correctly between revenue and capital budgets, noting the need to save for capital schemes.

The Chairman of the BWG invited any headteacher with a high balance to attend the BWG to justify their approach.

A number of proposals were put forward including deferral; a variation of option B (the phased introduction of a clawback mechanism); and the version of Option C that involved not proceeding with the proposals unless all academies participated.

A motion that the Scheme of Financial Management be amended and a balance clawback scheme be introduced for 2015/16 on the basis of a clawback of any balance in excess of 25% of a school’s annual budget, subject to an annual review of the percentage of any further balance clawback, was carried.

A motion that as a matter of principle the Forum as a whole should agree that it was not acceptable for a school to hold excessive balances and that a school’s annual budget should be spent on children currently in school was carried, requesting that the Director of Children’s Services should advise Headteachers and Chairmen of Governors of all Schools in the County, including academies and free schools, of the Forum’s view and invite then to confirm their agreement with this principle.

RESOLVED: 

That      (a)     the results of the consultation with schools on the introduction of a balance clawback mechanism be noted;

              (b)     the Director of Children’s Services be requested to write to Headteachers and the Chairmen of Governors of all Schools, including academies and free schools, in the County holding a balance of more than 10% of their annual budget asking them to provide reasons for holding such a balance;

              (c)     as a matter of principle the Forum unanimously considers that it is not acceptable for a school to hold excessive balances and is of the view that a school’s annual budget should be spent on children currently in school; and the Director of Children’s Services be requested to advise Headteachers and Chairmen of Governors of all Schools in the County, including academies and free schools, of the Forum’s view and invite then to confirm their agreement with this principle;

              (d)     the Scheme of Financial Management be amended and a balance clawback scheme be introduced for 2015/16 on the basis of a clawback of any balance in excess of 25% of a school’s annual budget, subject to an annual review of the percentage of any further balance clawback, (noting that participation in the mechanism by non-maintained schools would be voluntary).

                        (Note:  The Forum agreed, taking note of the advice from the Department of Education, that only maintained schools should vote on the proposed amendment of the Scheme of Financial Management (resolution d).)