UNDERSTANDING YOUR SOURCE OF FUNDS STATEMENT by jasonpeters

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									PART 1: UNDERSTANDING YOUR SOURCE OF FUNDS STATEMENT

PRIMARY AND SECONDARY SCHOOLS

G ENERAL CHARACT ERIST ICS O F T HE FO RM ULA

T H E I N D I V I D U AL S C H O O L S B U D G E T
The Individual Schools Budget (ISB) is the total budget made available by the Authority for
delegation to schools each year The total ISB will vary from year to year to take into account such
items as inflation, pupil numbers, scheme changes and County Council decisions. All cash amounts,
percentages, age-weightings and cash sums will be set annually by t he Authority. The budget relates
to the financial year rather than the academic year. W ith effect from 1 April 2004, nursery schools
have delegated budgets which are part of the ISB.

AG E W E I G H T E D P U P I L U N I T S ( AW P U ’ s )
At least 75% of the ISB must be delegated to schools on the basis of pupil numbers, mainly Age
W eighted Pupil Units. The Authority may allocate up to 25% of the ISB on the basis of other factors,
which relate to differences in need between schools, e.g. the size of a school, the floor area, t he
existence of a swimming pool.
The AW PU is a ratio; i.e. a statement of relative values, which reflect the relative weighting,
attributed to pupils of different ages. The AW PU ratios and values will vary from year to year to
accommodate changes in inflation and County Council decisions.

B U D G E T C AL C U L AT I O N
The total budget available for distribution to schools (ISB) is agreed by Full Council in February.
The starting point for the LMS budget calculation is to determine the total cost of the non -AW PU
25% items in accordance with the Authority's Scheme. Clearly values would need to be adjusted if
the 25% limit were breached.
The remaining budget is then available for distribution on the basis of Age W eighted Pupil Units.
The number of AW PUs required for each age band is calculated by multiplying the number of pupils
in each band by the relevant weighting ratio. From these calculations the total number of AW PUs
which the Authority funds is derived. The value of one AW PU can then be calculated by divi ding the
amount of budget available for pupil -related items (75% items) by the total number of AW PUs.
It may be necessary to effect some minor adjustment to all budgets calculated from the formula in
order that the total of all school budgets does not ex ceed the total budget provision available.

PUPIL NUMBERS
Pupil numbers are calculated by using 5/12ths of the January PLASC actual pupil numbers, which
reflect closely the numbers in school for the summer term (5/12ths of the financial year), and
7/12ths of the forecasted pupils for the coming January. Schools provide their own forecast of
school pupil numbers at the same time as completing PLASC. The Authority reserves the right to
vary forecasts up to the date of publication of the budget according to the latest information
available. Nursery pupil numbers are expressed as half time equivalent.

UNFORESEEN CHANGES IN FORECASTED PUPIL NUMBERS
Schools will not be required to absorb any increases in total mainstream pupil numbers against the
forecasted roll. PLASC actual pupil numbers are compared with the forecast. W here these exceed
the forecast budget, allocations, based on 7/12 of the AW PU value for the appropriate age group.
will be made to schools. W here PLASC pupil numbers fall short of the forec ast, budget reductions,
based on 7/12 of the AW PU value for the appropriate age group, will be made.
Budget increases and reductions will be calculated as soon as PLASC has been processed.
However the budget adjustments will be made in the subsequent year ’s budget allocation.
No adjustments are made in respect of nursery schools / units or special units.




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                                                                                Budget and Accounting Essentials

                                                                                      Source of Funds Statement
SOURCE OF FUNDS STATEMENT

The Source of Funds statement provides a complete breakdown of the schools formula allocation
based on AW PU (Age W eighted Pupil Units) and Other Factors. The level of detail in the Source Of
Funds Statement is not a statutory requirement nor is it intended to be a directive in any way but you
may find it helpful in building up your school budget.

    The Source of Funds Statement is split into sections:

    1.       Age W eighted Pupil Units and Budget
    2.       Summary of Budget
    3.       Analysis of Budgets Based on Other Factors
    4.       Schedule of Statistics
    5.       Devolved budget – Fully Devolved Standards Funds, Earmarked Standards Funds, and
             Other Government Grants
    6.       Analysis of Special Unit Budgets
    7.       Analysis of Nursery Unit Budgets (Primary Only)

    An explanation of the Source of Funds Statement follows (please refer to the copy of your own
    Source of Funds Statement at this point) to h elp you to understand the information it contains.

1. AGE WEIGHTED PUPIL UNITS (AWPU’S) BUDGETS
   The pupil numbers used to calculate individual schools budgets are detailed on this page along
   with the AW PU’s and their cash values.

    The current AW PU ratios can be found in Table 5 of the Section 52 Budget Statement.

2. SUMMARY OF BUDGET
   This details the budget allocation for all areas of expenditure e.g. Teachers, Premises, Supplies
   and Services. It shows the amounts allocated for each category based on AW PU’s and Other
   Factors. Descriptions of the formula funding can be found in Table 5 of the Section 52 Budget
   Statement.

3. ANALYSIS OF BUDGETS BASED ON OTHER FACTORS
   These allocations are provided on the basis of agreed criteria to meet a variety of needs in
   individual schools. W here lump sum allowances are allocated, they recognise an element of
   fixed costs regardless of the size of the school. Other allowances are specifically targeted at
   small schools e.g. Curriculum Protection. For further detai ls see Table 5 of the Section 52 Budget
   Statement.

4. SCHEDULE OF STATISTICS
   This is split into five sections. The first section calculates the rates element for the school, based
   on the rateable value of the property, adjusted for rate relief and other influences where
   appropriate e.g. Shared Property, Joint Use, transitional relief.

    The next section deals with the size of the school in square metres which is used to calculate the
    Energy, Cleaning and Building Maintenance budgets.
    The lower left hand section details the statistics used to calculate Family Stress. The lower right
    hand section details the statistics used to calculate non -statemented special needs allocations.
    The section on the left at the foot of the page gives total free school meals e ligibility which is
    used in the delegated school meals formula.

    N.B. The Source of Funds Statement no longer includes a list of Statemented Pupils in
    Mainstream for whom delegated funding allocations are made. Details of these pupils are now
    held on a database, access to which is via the Intranet. A hyperlink to the Intranet site has been
    sent to schools via email.



                                                    2
Budget and Accounting Essentials

Source of Funds Statement
5. DEVOLVED BUDGETS
   This shows the FULLY DEVOLVED Standards Fund, the accounting arrangements for which are
   also included in this booklet.

   This is followed by the EARMARKED DEVOLVED Standards Funds. This category includes your
   2004–05 entitlement to Formula Capital (N.B. there is no initial allocation for Aided schools).
   Formula Capital has unique carry-forward arrangements which are als o included in this booklet.

   For 2004-05 Other Government Grants includes the School Standards Grant allocation. The
   accounting arrangements for this can be found under the Accounting for Standards Funds and
   Devolved Allocations section.

6. ANALYSIS OF SPECIAL UNITS
   This details the budget allocation for schools with a special unit. This is for information purposes
   only, as the budget is already included in Part 2 of the Source of Funds Statement.

7. ANALYSIS OF NURSERY UNITS
   This details the budget allocation for schools with a nursery unit. This is for information purposes
   only, as the budget is already included in Part 2 of the Source of Funds Statement.

RECONCILIATION PROCESS

   It is recommended that the following details are checked for accuracy .

   1. PLASC pupil numbers as shown on page 1
   2. Statistics for your school as shown on page 5




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                                                                                  Budget and Accounting Essentials

                                                                                        Source of Funds Statement
SPECIAL SCHOOLS

G ENERAL CHARACT ERIST ICS O F T HE FO RM ULA

THE INDIVIDUAL SCHOOLS BUDGET
The Individual Schools Budget (ISB) in Special Schools comprises thre e factors: Place Element,
Pupil Element and Other Factors.

SPECIAL NEEDS WEIGHTED PLACE / PUPIL UNITS (SNWPPUs)
A large part of the ISB must be allocated to schools on the basis of SNW PPUs. The units are
weighted for different elements according to the nu mber of agreed places or actual number of pupils
and aggregated and distributed through the SNW PPUs.
The SNW PPU is a ratio, i.e. a statement of relative values which reflect the relative weighting
attributed to places or pupils with different special needs in Day or Residential Schools. The
SNW PPU ratios and values will vary from year to year to accommodate changes in inflation and
County Council decisions.

OTHER FACTORS
The Authority may allocate part of the ISB on the basis of other factors which rela te to differences in
need between schools, e.g. the size of a school, the floor area, the existence of a swimming pool.

BUDGET CALCULATION
The total budget available for distribution to schools (ISB) is agreed by Full Council in February.
The starting point for the LMSS budget calculation is to determine the total cost of the “Other Factor
items" in accordance with the Authority's policies.
The remaining budget is then available for distribution on the basis of SNW PPUs. The number of
SNW PPUs required for each special need band is calculated by multiplying the numbers of places or
pupils in each band by the relevant weighting ratio. From these calculations the total number of
SNW PPUs which the Authority funds is derived. The value of one SNW PPU can the n be calculated
by dividing the amount of budget available for place/pupil -related items by the total number of
SNW PPUs.
It may be necessary to effect some minor adjustment to all budgets calculated from the formula in
order that the total of all school budgets does not exceed the total budget provision available.

PLACE NUMBERS
The number of planned places will be redetermined at least biennially by Cheshire Education
Authority through its special needs planning process. This will not necessarily refl ect either the
maximum number of children for which special schools have been approved by the DfES or the
maximum number of children who can be accommodated in the school. However if PLASC numbers
exceed the number of planned places in any school, the num ber of pupils will be funded for the
following financial year.

PUPIL NUMBERS
Pupil numbers are calculated by using children on roll as on PLASC i.e. January actual pupil
numbers.

SIGNIFICANT UNFORESEEN CHANGES IN PUPIL NUMBERS IN SPECIAL SCHOOLS
Schools will be required to absorb minor changes in pupil and or place numbers during the financial
year. W here the number of pupils at a special school on PLASC exceed the initial number of
planned places, or increase beyond those on PLASC, an adjustment will be made in the financial
year concerned. The total number of SNW PPUs generated by the total pupil numbers on PLASC in
the January of the financial year will be calculated. If the resulting SNW PPU total is more than 3%
above the total SNW PPUs generated by the original budget, a budget adjustment of 7/12 will be
made based on the value of a SNW PPU.
Additional budget will be made available to qualifying schools as soon as PLASC has been
processed.



                                                   4
Budget and Accounting Essentials

Source of Funds Statement
SOURCE OF FUNDS STATEMENT
The Source of Funds statement provide s a complete analysis of the school’s formula allocation
based on SNW PPUs (Special Needs W eighted Place / Pupil Units) and Other Factors. The level of
detail in the Source Of Funds Statement is not a statutory requirement nor is it intended to be a
directive in any way but you may find it helpful in building up your school budget.

The statement is split into sections:

1.+2.   Special Needs W eighted Place Pupil Units and Budget
3.      Summary of Budget
4.      Analysis of Budgets Based on Other Factors
5.      Schedule of Statistics
6.      Devolved budget – Fully Devolved Standards Funds, Earmarked Standards Funds, and Other
        Government Grants

   An explanation of the Source of Funds Statement follows (please refer to the copy of your own
   Source of Funds Statement at this point) to help you to understand the information it contains.

1.+ 2. SPECIAL NEEDS WEIGHTED PLACE PUPIL UNITS (SNWPPUs) BUDGETS
   A large part of the ISB is allocated to schools on the basis of SNW PPUs. The units are weighted
   for different elements according to the number of agreed places or actual number of pupils, and
   the actual number of pupils are aggregated and distributed through the SNW PPUs. The place
   and pupil numbers shown on these pages are used to calculate each schools budget
   The SNW PPU is a ratio. The current ratios can be found in Table 5 of the Section 52 Budget
   Statement.

3. SUMMARY
   This details the budget allocation for all areas of expenditure e.g. Teachers, Premises and
   Supplies and Services. It shows the amounts allocate d for each category based on SNW PPUs
   and other factors. Full descriptions of the formula funding can be found in Table 5 of the Section
   52 Budget Statement.

4. ANALYSIS OF BUDGETS BASED ON OTHER FACTORS
   These allowances are provided on the basis of agre ed criteria to meet a variety of needs in
   individual schools. W here lump sum allowances are allocated they recognise an element of fixed
   costs regardless of the size of or the type of need of the school. For further details see Table 5 of
   the Section 52 Budget Statement.

5. SCHEDULE OF STATISTICS
   This is split into two sections. The first section calculates the rates element for the school, based
   on the rateable value of the property, and the Council Tax payable by residential schools for
   empty staff property.

   The second section deals with the size of the school area which is used to calculate the Grounds
   Maintenance, Cleaning, Energy and Building Maintenance budgets. The area of the swimming
   and hydrotherapy pools (if applicable) is also shown.

   N.B. The Source of Funds Statement no longer includes a list of Statemented Pupils in
   Mainstream for whom delegated funding allocations are made. Details of these pupils are now
   held on a database, access to which is via the Intranet. A hyperlink to the Intranet site has been
   sent to schools via email.




                                                   5
                                                                                   Budget and Accounting Essentials

                                                                                         Source of Funds Statement
6. DEVOLVED BUDGETS
   This shows the FULLY DEVOLVED Standards Fund, the accounting arrangements for which are
   also included in this booklet.

    This is followed by the EARMARKED DEVOLVED Standards Funds budget. T his category
    includes your 2004–05 entitlement to Formula Capital. Formula Capital has unique carry -forward
    arrangements which are also included in this booklet.

    For 2004-05 Other Government Grants includes the School Standards Grant allocation. The
    accounting arrangements for this can be found under the Accounting for Standards Funds and
    Devolved Allocations section.




RECONCILIATION PROCESS
It is recommended that the following details are checked for accuracy.

    1. PLASC pupil numbers as shown on pa ge 1.
    2. Statistics for your school as shown in section 5




                                                   6
Budget and Accounting Essentials

Source of Funds Statement
PART 2: OTHER FORMULA ISSUES

FORMULA ERRORS
Budgets will usually be adjusted to compensate for any errors in the data or in the application of the
LMS formula. However, the Authority will proc ess budget allocations based on schools’ PLASC
returns.

UNFORESEEN EMERGENCIES
Cover is provided for significant overspending arising from circumstances not covered by the
Authority’s insurance and deemed by the Authority to be unavoidable.
Cover is provided for costs arising from the need to withdraw delegation from a governing body (for
example as result of excessive and recurrent overspending).
Cover is provided for costs arising from suspension or dismissal of school staff when agreed by the
Authority.

RATES
The Authority wishes to protect schools from the current uncertainty of their rates liability. It
therefore undertakes to support rates adjustments from central reserves. The ISB includes the
forecasted rates liability for each school. It is commo n however for significant and unexpected
variations or corrections to occur during the year. The Authority will assess the difference between
the forecasted and the actual cost and make the appropriate adjustment to the schools budget.
Should the County Council in the future consider that this support is no longer appropriate then the
Authority will deal with rates through the Schools Specific Contingency.

PAY AND PRICE INCREASES
Assumptions about pay and price increases will be built into the total Genera l Schools Budget and
therefore into each school's budget share. Schools’ budgets are therefore cash -limited at estimated
outturn prices in order to minimise the need for significant in -year adjustments. Schools will be
notified of the assumptions used in the determination of budget levels. Any support provided to
schools in response to significant variations from pay and price assumptions would normally come
from central reserves. Similarly, if pay and price increases have been significantly over estimated,
for example fuel oil, the over provision may exceptionally be "clawed -back" from the schools’
budgets the following year, as a one -off budget adjustment in addition to the formula.



PART 2a: OTHER BUDGET ISSUES

BUDGETING FOR NON-STATEMENTED SEN
Members of the ISIS Board wish to remind mainstream schools that they should plan to use part of
their basic budgets to meet the additional needs of pupils where they have SEN but no statement
i.e. up to school to action plus in the Code of Practice. The LEA doe s not currently specify the
proportion of budget to be spent on such pupils, but expects the governing body to determine and
commit an appropriate amount – e.g. to fund SENCO time and differentiated curriculum approaches.

Some schools receive additional funding to this proportion of basic budget. They are schools in
areas of high family stress, schools likely to have pupils with additional learning needs as reflected
in free school meals eligibility levels, and schools with special units.




                                                  7
                                                                                 Budget and Accounting Essentials

                                                                                       Source of Funds Statement
SUBMISSION OF BUDGET INPUT FORMS (VB1A)

For secondary schools and those primary and special schools who do not buy in the Area Office
Financial Management package, there is an electronic version of the form (VB1A) for the school to
complete in order to enter your scho ol budgets on to the mainframe computer. The updated version
will be e’mailed to relevant schools and a copy placed on the INTRANET. I should be grateful if you
would ask your Bursar/Registrar/Finance Officer or Area Office to complete and submit your VB 1A
by e’mail to the LMS Team Education Finance (copy to your Area Office for primary schools), by
Tuesday 4 May 2004. For primary schools who buy -in the Area Office Financial Management
package your budget input form will be completed and submitted by the Area Office on your behalf.
(Please contact your Area Office if you have any queries).

There is no need to wait for your Governors to have approved the budget, as it is possible to make
such changes as necessary during the year. Virement can also be mad e throughout the year to
reflect policy changes decided by your Governing Body.

Until budget input is submitted, the monthly Budgetary Control W eb reports will not be able to
provide detailed budgetary information.



CONSISTENT FINANCIAL REPORTING

All Local Education Authorities now have to report schools accounts to the DfES in Consistent
Financial Reporting (CFR) format by statute. Over the next couple of months during the closure
program Education Finance will be sending out copies of this report on a regular basis for schools
to familiarise themselves with the format and content. This will be a process of refining the report
until schools are satisfied that this reflects a fair view of their account for the year. In particular
schools should refer to the CFR UNC – UNALLOCATED ACCOUNT CODES SECTION. This section
shows account codes that do not have a CFR category and as a result of this, schools should move
the expenditure by completing an electronic 5AQ to a relevant code that does have a CFR category.
Please refer to the white account code section of this booklet.




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Budget and Accounting Essentials

Source of Funds Statement

								
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