SCHOOLS FORUM by bIU33417

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									Summary of Proposed Changes to the Scheme for Financing Schools

1.   Changes to Titles and References
      The Scheme has been revised to reflect up to date titles and references, as follows:
             Crown Woods changed to Crown Woods College
             Kidbrooke Secondary School deleted as it has become an academy
             Greenwich changed to Royal Borough of Greenwich


2.   Consolidating Changes
      The following changes have been implemented since the last review in June 2011:

        Section      Details                        Change
        2.14.1       Joint Funded Capital           Wording simplified by replacing: “In all cases, except
                     Projects                       where otherwise agreed at the adoption of the project, the
                                                    central contribution will be a fixed sum or identifiable
                                                    proportion with the remainder of the total cost being the
                                                    responsibility of the school.” with the Governing Body and
                                                    the Council needing to agree “the level of the school’s
                                                    contribution prior to the adoption of the project”.
        3.2          Proportion of Budget           Delete references to catering as schools are being
                     Share Payable at Each          invoiced direct from GS Plus. Catering charges are no
                     Instalment (Cash               longer deducted from cash advances.
                     Advances)
        3.4.1        Restrictions on                Delete reference to Treasury Management Policy, as the
                     Accounts                       Royal Borough’s policy relates to investing not banking.
        Annex F      Responsibility for             Revised to reflect that funding for repair and
                     Repairs and                    replacement of loose kitchen equipment is now
                     Maintenance                    devolved to schools. Schools are required to pay for the
                                                    equipment itself instead of just parts e.g. replacement of
                                                    fridge, trolleys etc.


3.   Changes Prescribed by the DFE

        Section      Details                        Change
        2.4          Best Value                     Revised wording “Schools must seek to achieve efficiencies
                                                    and value for money, to optimise the use of their resources
                                                    and to invest in teaching and learning, taking into account
                                                    the Authority’s purchasing, tendering and contracting
                                                    requirements. It is for heads and governors to determine at
                                                    school level how to secure better value for money.”
        2.13         Spending for the               Delete the requirement to obtain the approval of the
                     Purposes of the School         Director of Finance prior to entering into any leasing
                                                    agreement or credit arrangements and replace this with:
                                                    “The Governing Body is not empowered to enter into any
                                                    finance leases or credit arrangements as these are classified
                                                    as borrowing and require the written permission of the
                                                    Secretary of State.”

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        Section      Details                        Change
        2.15         Schools Financial Value        Delete references to the Financial Management Standard
                     Standard                       in Schools (FMSiS) and replace with “All local authority
                                                    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 on an
                                                    annual basis. It is for the school to determine at what time in
                                                    the year they wish to complete the form.

                                                    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 an agreed owner. Governors must
                                                    monitor the progress of these actions to ensure that all
                                                    actions are cleared within specified deadlines.

                                                    Maintained schools that did not achieve the Financial
                                                    Management Standard in Schools (FMSiS) must submit the
                                                    form to the local authority before 31 March 2012, and
                                                    annually thereafter.

                                                    All other maintained schools with a delegated budget must
                                                    submit the form to the local authority before 31 March 2013
                                                    and annually thereafter.”
        2.17         Fraud                          Added “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 these
                                                    controls. This information must also be included in induction
                                                    for new school staff and governors.”
        5.1          Income                         Delete “provided there is no net cost to the budget share”
                                                    as section 50(3a) allows schools to spend the delegated
                                                    budget on community facilities.
        6.3          General Teaching               Delete section 6.3 as the GTC was abolished by the
                     Council                        Education Act 2011 with effect from 1 April 2012.
        Annex B      Responsibility for             In accordance with a revision to Section 37 of the 2002
                     redundancy and early           Education Act, replace reference to costs that must be
                     Retirement Costs               met by the Governing Body with “can be funded from the
                                                    school’s delegated budget if 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”.




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4.   Changes Proposed by Royal Borough of Greenwich

        Section Details                             Change
        2.13.1  Leasing of Equipment                In line with the DfE prohibiting finance leases, the
                                                    following guidance is added to clarify the position on
                                                    leasing for schools:
                                                    “Schools may enter into an “operating lease” to acquire
                                                    equipment, such as ICT and photocopiers, over its useful life
                                                    rather than at the time of acquisition. However, schools
                                                    should take care to ensure that such leases do not meet the
                                                    criteria for finance leases set out in Annex B.

                                                    Before any agreement on a lease is reached, the Governing
                                                    Body must ensure:
                                                    • that the procurement provisions outlined in the Scheme
                                                        are followed, to ensure value for money
                                                    • there must be funds available to meet the payments
                                                        throughout the term of the agreement.

                                                    For guidance on leasing equipment, such as photocopiers,
                                                    follow this link:
                                                    http://www.education.gov.uk/schools/adminandfinance/procur
                                                    ement/b0069801/buying/mfds-photocopiers

                                                    The school may need to procure professional advice before
                                                    entering into any leasing agreement.

                                                    Another option is for schools to buy equipment outright
                                                    funded via the Councils Loan Scheme.”
        2.14         Capital Spending from          Capital expenditure on premises owned by the Council
                     Budget Shares                  is the responsibility of the Director of Regeneration,
                                                    Enterprise and Skills within the Council’s capital
                                                    programme. Capital expenditure may, nevertheless be
                                                    incurred by the Governing Body providing that:

                                                        the Director of Regeneration, Enterprise and Skills is
                                                         notified of any building projects which are his
                                                         responsibility i.e. when the premises are owned by
                                                         the Council. Consent to capital expenditure can only
                                                         be withheld on health and safety grounds;
                                                        contract work is subject to the procurement
                                                         provisions outlined in section 2.10 of the Scheme
                                                        the total expenditure on a project can be met from
                                                         within the school’s delegated budget, after taking
                                                         into account any surplus or deficit brought forward
                                                         from previous years
                                                        it takes advice from the Director of Children’s
                                                         Services as to the merits of the proposed
                                                         expenditure where the estimated cost is in excess of
                                                         the prescribed threshold. This applies both to
                                                         premises owned by the Council or where the school


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                                                         has voluntary controlled status

                                                    The limit above which the Governing Body is required to take
                                                    advice from Children’s Services as to the merits of the
                                                    proposed capital expenditure increased from £15,000 to
                                                    £100,000.
        4.8          Framework for                  To promote consistency, replace approved deficits with
                     Managing Deficits              revenue loans to bring this into line with arrangements
                                                    for expenditure on assets, improvements or repairs.
                                                    Revised wording “Governing Bodies may plan for deficit
                                                    budgets only in exceptional circumstances and require the
                                                    express approval of the Director of Children’s Services and
                                                    the Director of Finance. This will be in the form of an
                                                    agreement to a loan to cover the deficit. The maximum
                                                    period for over which schools may repay the loan should not
                                                    exceed three years, the loan may attract interest.

                                                    Governing Bodies shall comply with the Royal Borough’s
                                                    Deficit Recovery/ Intervention Framework as outlined in the
                                                    School Finance Manual. This provides detail of the conditions,
                                                    approval process and monitoring arrangements.”




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ANNEX B

Leasing of Equipment

Finance Leases

A finance lease is defined by international accounting standards as a lease that transfers to the lessee
(the school) substantially all the risks and rewards incidental to ownership of an asset. Title may or
may not eventually be transferred. Whether a lease is a finance lease or an operating lease depends
on the substance of the transaction rather than on the form of the contract. Examples of features
which individually or in combination would normally lead to a lease being classified as a finance lease
are:

1.      the lease automatically transfers ownership of the asset to the lessee by the end of the lease
        term

2.      the lessee has the option to purchase the asset at a price that is expected to be sufficiently
        lower than the market value to make it reasonably certain that the lessee will wish to
        purchase

3.      the lease term is for the major part of the economic life of the asset

4.      the present value of the minimum lease payments amounts to at least substantially all of the
        fair value of the leased asset (i.e. the lessor need not rely on the sale proceeds to recover his
        investment)

5.      the leased assets are of such a specialised nature that only the lessee can use them without
        major modifications.

6.      if the lessee can cancel the lease, the lessor’s losses associated with the cancellation are
        borne by the lessee

7.      gains or losses from the fluctuation in the fair value of the residual accrue to the lessee (e.g.
        in the form of a rent rebate equalling most of the sales proceeds at the end of the lease

8.      the lessee has the ability to continue the lease for a secondary period at a rent that is
        substantially lower than market rent

Points (3) and (4) mean that most computer leases are likely to be finance leases, as computer
equipment is not likely to have any market value at the end of the lease.

Operating Leases

Schools are allowed to enter operating leases of equipment (including vehicles and
plant if appropriate) provided that they are satisfied that those leases do not satisfy the
test of being a finance lease.

If the lease term relates to a minor part of the assets useful life and the asset is returned to the
lessor at the end of the lease term it more likely to be an operating lease.




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