Agenda item

That the school reserves as at 31 March 2016 be noted.

The Chief Officer (Education & Youth) and Finance Manager presented a report on financial reserves held by schools in Flintshire as at March 2016.

In the primary sector, school positive balances generally remained stable with pupil numbers increasing due to demographic changes.  It would take time for this increase to reach secondary school level where many schools were experiencing difficulties in balancing their budgets.  This was indicative of the national position where continuing austerity measures and growing cost pressures were contributing factors.  Whilst school budgets were largely predictable through medium-term financial planning, the short-term movement in pupil numbers was a more challenging issue for some schools.  The importance of equipping school business managers with the necessary skills had been identified as a key risk and was also recognised at national level.  Schools in a deficit position were receiving additional support and training from the Council to develop their deficit recovery plans.  The establishment of a multi-disciplinary team providing clear, consistent advice on Human Resources, finance and curriculum planning was also having a significant positive impact on recovery planning.

The Chief Executive said that licensed deficits were amongst a number of financial pressures faced by schools.  School balances were being closely monitored by officers alongside the statutory Schools Budget Forum and Education & Youth Overview & Scrutiny Committee.  However, the extent of intervention and support by the Council was limited due to the self-governance model.

Following a query by Councillor Haydn Bateman, it was clarified that deficit balances were carried forward each year by deducting those amounts from the following year’s budget share.  The importance of planning and timely actions to mitigate risks was emphasised as it was difficult for a school to move out of a deficit position.  A deficit could not be written off and stayed with the school until paid off or closure of the school.

When asked by Councillor Alison Halford about greater flexibility to help schools with ongoing balance deficits, officers explained the need to work within the statutory framework and stressed the importance of early recognition of changes in demographics and cost pressures.  Approval for a licensed deficit was only granted where a deficit recovery plan set out realistic actions and took account of issues such as curriculum planning, workforce changes and other income streams.  On the impact of long-term employee absences, details were shared on protection available through the Council’s maternity scheme.

The Chairman referred to the approach to surplus balances and was advised that the regulations specified the limits by which local authorities must intervene.  The agreed treatment of surplus balances enabled some flexibility on those above 5%.  Schools facing more significant challenges - particularly in the secondary sector where there were more Head Teacher changes - were referred to the School Standards Monitoring Group.

The Chairman spoke about the negative effect on the morale of schools and suggested that performance monitoring could take account of a school’s position before it reached a deficit balance.  The Chief Officer said that the first target of the recovery plan was to achieve a positive in-year balance.

The Chief Executive suggested that an annual report on school balances would help the Committee to seek assurance of the management of these risks.

As Chairman of the Education and Youth Overview & Scrutiny Committee, Councillor Ian Roberts referred to detailed discussions on surplus balances.  He gave examples of various factors such as mis-alignment of the financial year and school year, the larger workforce in secondary schools and the potential for reserves to be accumulated for a specific purchase.  He felt that the Council’s financial systems were appropriate and that levels of support varied from school to school.

The Chief Executive drew comparison with the Council’s approach to reserves and their management for which the same principles applied.

RESOLVED:

That the school reserves as at 31 March 2016 be noted.