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FOR ENFIELD SCHOOLS 2011-2012
Schools’ Finance Manual - Introduction
Introduction Changes from previous Manual Index List of Contacts List of Appendices Glossary Financial Regulations Financial Guidance Children’s Centres VAT Guidance
Schools’ Finance Manual - Introduction
Introduction This manual is written in conjunction with the Scheme for Financing Schools and the Council’s Constitution. It replaces the previous Finance Manual that was issued in November 2010. All the changes have been completed in a blue colour. An electronic version of the manual will be made available to schools on Fronter. How to use the Manual The index provides the structure on which the manual is written. When looking for a subject, you can choose to look at the regulatory section that details the framework in which the school operates and what rules and procedures have to be followed. This framework is designed to meet the external requirements made on the Authority and to protect the interests of the Authority as a whole as well as individuals within it. The regulatory section is at the front of the manual and all paragraphs begin with FR. Alternatively, you can look at the guidance section that provides best practice and advice on financial management. It also gives guidance in dealing with external bodies such as HM Revenue & Customs. It is the second section of the manual and all paragraphs start with FG. The third section is for Children’s Centres. It provides guidance and best practice on financial matters for Children’s Centres. This section should be used in conjunction with the rest of the manual as the regulations and guidance still apply to the Extended Schools and Children’s Centres. The prefix CC refers to children’s centres. The schools VAT manual forms the fourth section. All the paragraphs start with V. Hyper links have been inserted for ease of navigation within the manual. To activate a link, move the cursor over the underlined text in the index and left click the mouse. The cursor should then move to the relevant area in the document.
Background Legislation and regulation The Local Government Act 1972 Chapter 70 Section 151 requires that “Every local authority shall make arrangements for the proper administration of their financial affairs and shall secure that one of their officers has responsibility for the administration of those affairs”.
Schools’ Finance Manual - Introduction
The Accounts and Audit Regulations 1996 require the Section 151 officer to be responsible for the accounting systems and records of the authority. It also requires him to maintain an adequate and effective system of internal audit. The Local Government Finance Act 1988 Section 114 requires Authorities to stop and to disclose any items of unlawful expenditure or any items of expenditure that would cause a loss to that Authority. The School Standards and Framework Act 1998 require Authorities to produce a Scheme for Financing Schools. This dictates the financial relationship the Authority has with schools. Enfield In Enfield, the Director of Finance, Resources and Customer Services has been nominated as the Section 151 officer. He discharges his duties under Section 151 by means of Financial Regulations and Contract Procedures Rules. These are written in general terms so that they can be applied throughout the Council. This document aims to extract the relevant rules and regulations that relate to schools. Feedback It is envisaged that the manual will be updated and re-issued regularly. It is important that it meets your needs and is in a format that you find useable. Therefore, if you have any comments regarding the format or contents of the manual, please send them to: Rafia Khalid Principle Financial Advisor (Education) Director of Finance, Resources and Customer Services Civic Centre E-mail: firstname.lastname@example.org
Schools’ Finance Manual – Changes from previous manual
Changes / Additions From Previous Manual
Subject Schools Financial Value Standard (SFVS) Gift Aid for Charities Academies Council’s Loan Scheme as an alternative to Leasing School Balances Early Intervention Grant Payment of Grant Income Returns to Authority Procurement Former Grant Funding Pupil Premium Leasing Queries on direct debits Financial Regulation FR1.23 FR 9.14 FR 12.14 CC4.4 CC4.7 CC5.8 FR 4.1 Financial Guidance FG 1.44 FG 1.45 FG 2.43 FG 3.21
FG 4.1 FG 5.14 FG 5.17 FG 12.1 FG 7.44
Appendices Tips for successful leasing in schools Monthly VAT return Standard Terms & Conditions for Schools’ Purchase Orders Example of a VAT Invoice – over £250 Example of a VAT Invoice – Less than £250 Business and non-business supplies Eligible bodies – education Letting flowchart for VAT Guide to Sizes for VAT Common Audit Findings Contract Procedure Rules End of year procedures for cashless systems
Appendix Number 3 8 9 17 18 21 22 23 24 27 41 48
Schools’ Finance Manual – Index
Finance Manual Index
Subject Financial Management and Responsibility Responsibility Delegation of Authority Governing Body Finance Sub-Committee Headteacher Bursar/Finance Officer Internal Controls Staff Expertise Segregation of Duties Documentation Register of Business Interest Disputes Financial Records and the local accounting system Financial Records – storage Internal Audit Accounting Principles Whistle-blowing Federated Governing Bodies Charitable status for schools Gift Aid for Charities Schools Financial Value Standard (SFVS) Notice of Concern Academies Financial Planning and Monitoring Principles Background Budgeting Tools and Benchmarking Budget Preparation Three year expenditure plans Resources Available Delegation to new school Delegation to amalgamating schools Funding for pupil numbers for new and expanding schools Expenditure Preparing the Budget Extended Schools Budgetary Monitoring and Control Deficit Budgets and the School Loan Scheme School Loan Scheme Separate Bank Accounts
Financial Regulation Financial Guidance
FR1.6 FR1.7 FR1.15 FR1.17 FR1.18 FR1.21 FR1.23 FR1.26
FG1.1 FG1.3 FG1.4 FG1.4 FG1.4 FG1.4 FG1.5 FG1.6 FG1.7 FG1.9 FG1.10 FG1.15 FG1.16 FG1.21 FG1.24 FG1.29 FG1.36 FG1.40 FG1.41 FG1.44 FG1.45 FG2.1 FG2.3 FG2.10 FG2.11 FG2.14 FG2.19 FG2.19 FG2.19 FG2.20 FG2.25
FR2.5 FR2.6 FR2.9 FR2.15
FG2.31 FG2.41 FG2.43 FG2.51
Schools’ Finance Manual – Index
Financial Reporting Financial Reporting to the Governing Body Financial Reporting to the Council - Three year financial plans - Financial Monitoring - Bank Reconciliation - VAT Returns - Year End - Use of Balances - Balances assigned for specific purposes For balances held as at 31st March 2012 and subsequent two years - Control of Surplus Balances - Financial Recovery Plan for schools with budget deficit - Failure to provide financial returns by specified date Financial Reporting to Parents Procurement Introduction Governing Body Responsibility Scheme of Delegation Contracts Best Value Achieving Value for Money Rental Agreements &Leasing The Formation of Companies Purchasing Organisation Purchasing Strategy Specification Choice of Supplier Monitoring Quotations Low Value Transactions/Contracts Intermediate Value Transactions/Contracts High Value Transactions/Contracts – Formal Tender Threshold Requirements Over EU Threshold Formal Tender Process Common Tendering Principles Call Off from existing Approved Contracts Advertising Pre-Qualification Pre-Tender Market Research and Consultation Waiving Contract Procedure Rules The Invitation to Tender Receipt of Tenders Tender Opening Tender Evaluation
FR3.1 FR3.2 FR3.3 FR3.5 FR3.8 FR3.11 FR3.12
FG3.1 FG3.3 FG3.4 FG3.6 FG3.7 FG3.8 FG3.10 FG3.16 FG3.20 FG3.21 FG3.24 FG3.34 FG3.37
FR 4.1 FR4.8 FR4.9 FR4.10 FR4.13 FR4.14 FR4.15
FR4.17 FR4.27 FR4.28 FR4.29 FR4.30 . FR4.31 FR4.32 FR4.33 FR4.34 FR4.35
FG4.1 FG4.2 FG4.5 FG4.7 FG4.14 FG4.15 FG4.20 FG4.21 FG4.22 FG4.23 FG4.26 FG4.29 FG4.31 FG4.32 FG4.33 FG 4.35 FG4.36 FG4.40 FG4.41 FG4.42 FG4.43 FG4.47 FG4.48 FG4.60 FG4.63 FG4.69
Schools’ Finance Manual – Index
Errors in Tenders Negotiation Award of Contracts Notification to Unsuccessful Tenderers Procurement by Consultants Contract Extension Termination of Contract Contracts and Other Formalities Contract Documents Letters of Intent Signature Contracts under Seal Bonds and Parent Company Guarantees Declaration of Interests Managing Contracts PFI/PPP Contracts On-Line Contracts through Catalist Contracting Services and Transfer Of Undertakings (Protection Of Employment) (TUPE) Ordering Goods and Services Receipt of Goods and Services Processing of All Invoices Invoices from Self Employed suppliers Late Payment Legislation Staffing and Payroll Pension Fund Admission Agreements for employees transferring to external providers Contribution rate Bond or Indemnity FRS 17 report Notification of details to the Pension Section Income Introduction Lettings and Fees and Charges Licensing for Raffles Income Control Debt Write Off Charging Policy Extended School Charging Former Grant Funding Pupil Premium Education During School Hours Education Partly During School Hours Education Outside School Hours Residential Activities Musical Instrument Tuition
FG4.72 FG4.74 FG4.84 FG4.87 FG4.90 FG4.93 FG4.96 FG4.97 FG4.98 FG4.101 FG4.103 FG4.104 FG4.105 FG4.108 FG4.109 FG4.112 FG4.114 FG4.118 FG4.122 FG4.128 FG4.131 FG4.134 FG4.135 FG4.142 FG4.152 FG4.157 FG4.162 FG4.165 FR5.1 FR5.11 FR5.14 FR5.15 FR5.17 FR5.21 FR 5.22 FG5.1 FG5.4 FG5.9 FG5.11 FG5.13 FG5.14 FG5.17 FG5.18 FG5.20 FG5.22 FG5.25 FG5.28
FR4.39 FR4.40 FR4.46 FR4.48 FR4.53 FR4.54 FR4.55 FR4.66 FR4.66
Public Examinations Activities not run by the school or the Local Authority Voluntary Contributions School Minibuses External Funding Opportunities Collection of “Cashless” Income Control of Assets Introduction Inventory Loan of Assets Disposal of Assets Disposal of Assets – Land and Buildings Disposal of Assets - Other Annual/Other Checks Banking Arrangements Introduction Advances Cheques Bacs Payments Credit Cards Business Cards How does it work? Internet Banking Cash Flow and Investment Overdrawn Accounts Bank Reconciliation Petty Cash Charging the School Budget Share Queries on Direct Debits Capital Asset Management Plan Definition of Capital Expenditure Devolved Capital Coding of Capital Expenditure Furniture and Equipment Funding Other Capital Funding Voluntary Aided Schools Capital Private and Voluntary Funds Private Funds held by the School Banking Arrangements Expenditure funded from the Private Fund Audit Insurance VAT Gift Aid for Charities
FR5.23 FR6.1 FR6.3 FR6.6 FR6.8
FG5.29 FG5.30 FG5.31 FG5.33 FG5.34 FG5.36 FG6.1 FG6.4 FG6.8 FG6.12 FG6.14 FG6.21
FR7.1 FR7.6 FR7.8 FR7.14 FR7.15 FR7.16 FR7.20 FR7.23 FR7.27 FR7.31 FR7.32 FR7.39
FG7.1 FG7.2 FG7.6 FG7.11 FG7.12 FG7.14 FG7.24 FG7.30 FG7.33 FG7.34 FG7.42 FG7.44 FG8.1 FG8.3 FG8.12 FG8.17 FG8.18 FG8.20 FG8.21 FG9.1 FG9.2 FG9.3 FG9.8 FG9.11 FG9.12
FR8.1 FR8.2 FR8.4 FR8.7 FR8.8 FR8.9 FR8.10 FR9.1 FR9.2 FR9.3 FR9.6 FR9.12 FR9.13 FR9.14
Insurance Minimum Cover Governor Run Extended School Activities Insurance – Contractors and Consultants Types of Insurance Combined Liability Insurance Other Liability Insurance Balance of Perils Buildings School Trips Laptops School Trips General Education During School Hours Education Partly During School Hours Education Outside School Hours Residential Activities Approval and Costing The Trip/School Journey Insurance Information to Parents Income Records One off day trips School Journeys Residential Activities Banking Payments Petty Cash Pocket Money Income and Expenditure Statement Retention of Documents Rental Agreements and Leasing Definition Controls Finance Lease Operating Lease Hire Purchase Council’s Loan Scheme as an alternative to Leasing Children’s Centres (CC) Provision of Service Developing Children’s Centre Activities Children’s Centres Surpluses Deficits Separate Bank Accounts
FG10.2 FG10.5 FG10.7 FG10.9 FG10.10 FG10.14 FG10.17 FG10.18 FG10.19 FG10.20 FG11.1
FR11.1 FR11.3 FR11.5 FR11.6 FR11.8
FG11.7 FG11.9 FG11.11 FG11.13 FG11.14 FG11.16 FG11.17 FG11.18 FG11.20 FG11.23 FG11.24 FG11.25 FG11.29 FR12.1 FR12.4 FR12.10 FR12.13 FR12.14 CC1 CC1.2 CC2 CC2.1 CC2.2 CC2.3 CC2.5 FG12.1 FG12.5
Budgeting for Expenditure Direct Costs External Providers Staffing Materials and Equipment Advertising and Marketing Indirect Costs Site Staff Cleaning Costs Energy Costs Apportionment of Costs Budgeting for Income Charging for Childcare Children’s Centres charging Assistance towards the cost of childcare Early Intervention Grant Payment of Grant Income Financial Monitoring Monitoring of Expenditure Monitoring of Income Returns to the authority Insurance Introduction Activities run through external providers, private limited companies, independent management committees, charities or separate legal entities The importance of agreements Insurance and indemnity wording Further insurance advice Value Added Tax General VAT Principles Introduction VAT Registration Number Business and Non-Business Activity Categories of VAT Standard Rate Reduced Rate Zero Rate Exempt Difference between Zero rate and Exempt VAT Non- Business Outside the Scope of VAT Input and Output Tax Penalties and Interest Civil Penalties Liaison with HM Revenue & Customs
CC3.2 CC3.2 CC3.3 CC3.5 CC3.6 CC3.7 CC3.7 CC3.8 CC3.9 CC3.10 CC4 CC4.1 CC4.2 CC4.3 CC4.4 CC4.7 CC5 CC5.4 CC5.7 CC5.8 CC6 CC6.1 CC6.10 CC6.11 CC6.13 CC6.14
V1.1 V1.1 V1.9 V1.12 V1.13 V1.14 V1.15 V1.16 V1_17 V1.18 V1.19 V1.20 V1.23 V1.29 V1.31
Recovery of VAT on Purchases Business Entertainment VAT incorrectly charged r Goods bought under the second-hand goods scheme
Services bought under the tour operators’ margin scheme (TOMS) VAT unpaid after six months Documentation Required to Recover VAT Requirements of a valid tax invoice Where the amount is less than £25 (including VAT Hybrid or Mixed Rates of VAT Pro-Forma Invoices VAT Only Invoices Deposits Discounts Compensation Payments Tax Point Timing of VAT Value of VAT Private Funds (Non-Council Funds)
V2.5 V2.6 V2.7 V2.8 V2.9 V2.11 V2.14 V2.15 V2.16 V2.17 V2.18 V2.19 V2.20 V2.21 V2.22 V2.23 V2.24 V2.25
VAT on Income General Calculation of VAT Discounts offered by the Council Compensation Payments Partial Exemption General Partial Exemption – Income Partial Exemption - Large transactions Specific Issues VAT Exemption for Education Statutory Education Extended Schools and Children's Centres VAT Where the Governing Body delivers Extended Schools’ Services Where the council provides Extended School services Governing body as the Council’s agent: Other/ third party as the Council’s agent Play-Schemes Supplies To Schools And Colleges Supplies to Academies Classroom Items Assisted Instrument Purchase Laptops
V3.1 V3.3 V3.7 V3.8
V4.1 V4.4 V4.5 V5.1 V5.3 V5.4 V5.5 V5.7 V5.14 V5.17 V5.18 V5.19 V5.20 V5.23 V5.24 V5.28 V5.31
Clothing School Trips School Trips Accounted for Through the School’s Private Fund School Trips Accounted for Through the Council’s Funds Trips related to Statutory School Curriculum Trips not related to the Curriculum Tour Operators’ Margin Scheme (TOMS) School Meals Catering Catering Invoices Catering (Provided by Catering DSO) Catering Not Provided by DSO Contractors acting as Principal Contractors acting as agents of the local authority Catering -Shops and Vending Machines School Photographs Sale of Photographs by the Photographer Directly to the Pupils/Parents Sales of Photographs by the Photographer directly to the Council (School Home to school transport Examination Fees Telephone Income Sales of Stationery and Other Office Supplies Advertising Compensation and Penalties for damage or loss Donations Sponsorships Combined donations and sponsorship Fund Raising Events Admission charges Donations in lieu of admissions Proceeds from Fund Raising Events Type of Events Teachers and Other Adults Climate change levy Online Purchases International Transactions Goods purchased from another EU member state Goods purchased from a non-EU member state VAT charged by foreign traders
V5.34 V5.39 V5.40 V5.41 V5.42 V5.43 V5.44 V5.45 V5.46 V5.47 V5.48 V5.49 V5.50 V5.51 V5.52 V5.53 V5.54 V5.55 V5.57 V5.58 V5.59 V5.62 V5.63 V5.64 V5.65 V5.66 V5.67 V5.68 V5.69 V5.70 V5.71 V5.72 V5.73 V5.74 V5.75 V5.78 V5.79 V5.81 V5.83 V6.1 V6.2 V6.4 V6.5
Land and Buildings Lettings VAT Liability of Lettings Hire of Non-Sports Facilities
Room Hire with Catering Supplied Hire of Sports Facilities Sports Lettings Conditions Where the Letting of Sports Facilities Let for Sport may be Exempt from VAT 24-hour rule Series of Lets Sport and Recreation Courses Definition of Club or Association
V6.6 V6.7 V6.7 V6.8 V6.9 V6.10 V6.11 V6.12 V7.1
Voluntary Aided Schools – Buildings Related Expenditure
Schools’ Finance Manual – List of contacts
List of Contacts
Title Director of Finance, Resources and Customer Services (Financial Management) Director of Finance, Resources and Customer Services (Financial Management) Director of Finance, Resources and Customer Services (Internal Audit & Risk Management) Director of Finance, Resources and Customer Services (Treasury Management) Assistant Director of Legal Services Director of Schools & Children’s Services (Resources Development Officer) Director of Schools & , Children’s Services (Asset Management) Director of Finance, Resources and Customer Services (Property Services) Director of Finance, Resources and Customer Services (Payroll) Director of Finance, Resources and Customer Services (VAT Accountant) Director of Finance, Resources and Customer Services (Insurance & Risk Manager) Name David Hunter Telephone Number 020 8379 4755 020 8379 3445 020 8379 4651 020 8379 4730 020 8379 6438 020 8379 3109 020 8379 3399 020 8379 4101 020 8379 4690 020 8379 4746 020 8379 4657 E-Mail Address
Yvonne Medlam Eileen Carberry Paul Reddaway Asmat Hussain Sangeeta Brown Peter Dyster Brian Smart
Julie Barker Paul Reddaway Vivian Uzoechi
Schools’ Finance Manual – List of Appendices
List of Appendices
Retention of Documents Policy Three year financial plan Tips for successful leasing in schools Quarterly Return Financial Cycle Scheme of Delegation Register of Business Interest Monthly VAT return Standard Terms & Conditions for Schools’ Purchase Orders Invoice Certification Form Employee or Self-Employed HM Revenue & Customs Dispensations Private Fund Record Private Fund Accounts and Statements Private Fund Profit Statement VAT Liability on Certain Items Example of a VAT Invoice – over £250 Example of a VAT Invoice – Less than £250 Example of a VAT Invoice VAT Liability of Business Supplies Business and non-business supplies Eligible bodies - education Letting flowchart for VAT Guide to Sizes for VAT Proposed School Trip Waiver of Contract Procedure Rules for Schools Common Audit Findings Whistle blowing Policy Model Charging Policy Guidance for schools on the Letting of School Premises Model School Policy on the Letting of School Premises Scale of Charges for the Letting of School Premises Conditions for the Letting of school Premises using the Council’s Letting Agency Leased Asset Register Vat and Extended Schools Children’s centres monthly returns CFR codes for Extended Schools & Children’s Centres Revenue & Customs Brief VA Schools Orders for Goods, Works or Services at VA Schools – VAT Recovery VAT flowchart – capital & revenue expenditure at VA schools Contract Procedure Rules - Flowchart Appendix Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41
Schools’ Finance Manual – List of Appendices
How to collect cash within a “Cashless” environment Debt Collection Errors made at the till Money paid into wrong account Refund Authorisation Form Transfer money to a sibling’s account End of year procedures for cashless systems
42 43 44 45 46 47 48
Schools’ Finance Manual – Glossary of Terms and Abbreviations
Glossary of Terms and Abbreviations
Acquisition (VAT) The importation of goods purchased from another EU state (see Importation) A demand to pay or a notice of repayment of under-declared or overdeclared VAT
Asset register Audit (External)
Also called an Inventory. A record of all assets and their details The statutory investigation by auditors appointed by the Audit Commission for Local Authorities in England and Wales. The process of checking a school has procedures and processes in place to meet financial requirements and that it adheres to those procedures. Formal list of the school's employees who the Governors have agreed may sign cheques (with stated financial limits), or authorise payments through payroll or make changes to payroll records. Asset Management Plan Bankers’ Automated Clearance System Debit card issued by the school’s bankers. Supplies by someone or organisation acting in trade, profession or vocation; who is concerned with making taxable supplies to customers for a consideration. Spending on the acquisition, enhancement or replacement of buildings and the acquisition, renewal or replacement of plant, machinery and major items of equipment. The Accounting Body that defines accountancy policy in relation to the public sector. Previously known as FRED (Finance, Resources and Economic Development Group). The body used for consultation between the Authority and representatives of head teachers.
AMP BACS Business card Business supplies [VAT]
Chartered Institute of Public Finance and Accountancy (CIPFA) Commissioning Group
Schools’ Finance Manual – Glossary of Terms and Abbreviations
A category of school defined by the School Standards and Framework Act 1998: The Local Authority is responsible for staffing, ownership of land and buildings and admission arrangements.
This is anything received in return for the supply of goods or provision of services. There must be a direct link between the payment and the supply. Consideration can be monetary or nonmonetary
Consistent Financial Reporting (CFR) Consortia
DfE initiative to define a consistent financial reporting requirement for all schools. Groups of schools coming together to buy goods at more competitive prices than a single school could achieve. The rules and procedures of the Authority. The part of the Council’s Constitution relating to the letting of contracts. The CPT is part of the Finance and Corporate Resources Department and is responsible for supporting the Council in its procurement activity. The school budget share allocated via the fair funding formula. The Central Government department responsible for education and Children’s Services Money allocated by the Authority separate from the school budget share, to be spent only for the purpose specified by the Authority. Year-end reporting may be required. Notice posted in the Supplement to the Official Journal of the European Union (OJEU).
Constitution Contract Procedure Rules Corporate Procurement Team (CPT)
Delegated funding Department for Education (DFE)
Schools’ Finance Manual – Glossary of Terms and Abbreviations
The financial threshold at which EC public procurement directives must be applied if expected to be exceeded by the total value of the contract.
Income on a business supply on which VAT is not charged. The VAT incurred towards making this supply can only be recovered subject to the 5% de minimus limit (see partial exemption)
Exempt Income (VAT)
Fair Funding Federated Governing Body
Fidelity guarantee [Insurance]
Finance Sub-Committee Financial Regulations
The principles governing the financing of maintained schools. Collaboration between schools where one Governing Body manages the finances of more than one school. Insurance protecting schools against the loss of money or property arising from dishonesty of school employees. A subgroup of the Governing Body. Part of the Council’s Constitution, these are the rules governing the operation of the Authority’s finances, which include schools. A category of school defined by the School Standards and Framework Act 1998: The Governing Body is responsible for staffing and admission arrangements. Ownership of land and buildings may be responsibility of either Governing Body or Trustees. This is the purchase of goods and services from outside the EU. The schools’ delegated budget. VAT paid on purchase. Controls set up within a school by governors and Headteachers to ensure that all systems and procedures are working efficiently
Individual Schools Budget (ISB) Input tax [VAT] Internal controls
Non-business supplies [VAT]
OJEU Output tax [VAT] Private Finance Initiative (PFI)
Register of business interests
Request for Quotation
Also called Asset Register. A record of all assets and their details. A way of procuring goods without the up front investment. The only type of leases allowed are operating leases, where the goods have to be returned at the end of the leasing period. Supplies which the local authority provides, which are governed by a special legal regime (which does not apply to the public sector) and which are not in competition with the public sector engaging in similar activities. Official Journal of the European Union VAT added to invoices for sales of goods or services. A form of Public/Private Partnership (PPP), whereby private firms build and maintain schools for the Authority’s use. A record of the Governors and staff's financial interests outside the school, which might possibly conflict, with the school's interests. A formal written invitation to at least 3 suppliers to provide written quotations for goods, services or works on the Council’s standard terms for requirements between £5,000 and £50,000.
This is a section of the VAT Act 1994 which applies specifically to public bodies
The Authority’s financial information system. Stands for “Systeme, Anwendungen, Produkte in den Datenverarbeitung” or “Systems, Applications and Products in data processing”. A record of the tasks and responsibilities within a school which are passed from the Governing Body to the Headteacher and from the Headteacher to the staff.
Scheme of delegation
School Improvement Plan
The overall statement of the school’s aims and objectives. All activities, purchases, sales and other procedures must fit within the financial and other aims of this plan.
A consensual arrangement involving the provision of something in return for consideration A supply of goods or services made for a consideration. It includes any supply in the UK other than Exempt Supplies. That is, any supply which is subject to VAT at the standard, reduced (lower) or zero rate. A specified document which must be held to support and validate input tax recovery The date when VAT has to be accounted for. For goods this is usually when the goods are sent to or taken away by the customer or for services, this is usually when the service is performed A regular period (usually 1 month for LBE) for which VAT is declared to HMRC
Virement Voluntary Aided School
Moving funding from one budget to another. A category of school defined by the School Standards and Framework Act 1998: The Governing Body is responsible for staffing and admission arrangements. Ownership of land and buildings may be responsibility of the Governing Body or Trustees. Must be in letter, fax or email and must be addressed personally, containing pricing information and delivery details for requirements between £1,000 and £5,000.
Schools’ Finance Manual – Financial Regulations
Schools’ Finance Manual – Financial Regulations
Financial Management and Responsibility
Responsibility The Governing Body is responsible for the financial management and control of the school’s budget, although it can delegate day-to-day matters to the Headteacher. However, as it is the Governing Body that is still ultimately accountable, these regulations always refer to it. The Governing Body must comply with the Scheme for Financing Schools and the Contract Procedure Rules and Financial Regulations of the Council. This document details the relevant framework to which the Governing Body must operate. Delegation of Authority The Governing Body can delegate authority to Sub-Committees, the Headteacher or other staff employed by the School. This must be formally documented in a scheme of financial delegation, which should detail any such delegation and clearly state the limits of authority and reporting requirements. A template for a Scheme of Delegation is attached in Appendix 6. The scheme of financial delegation should be maintained and annually reviewed and updated. Any changes to the scheme must be formally minuted. Internal Controls The Governing Body must ensure that there are adequate internal controls in the system i.e. that there is a segregation of duties to ensure that one person cannot complete a financial transaction without the involvement of somebody else. Register of Business Interests A Register of Pecuniary Interests of all governors and staff with financial responsibilities must be maintained and updated at least annually. It should be made available for inspection by the Council, governors, auditors and OfSTED Inspectors as necessary. Financial Records and the Local Accounting System The Governing Body is required to ensure that the school maintains an adequate local accounting system on an accounting package approved by the Director of Finance, Resources and Customer Services (Financial Management). The Council has nominated the school records, as the prime accounting records and therefore it is essential that these are accurate and up to date. At the yearend, a summary of these records must be made available, in a format specified by the Council, to upload to the Council’s financial system (SAP). Also, any supplementary information requested for use in the Council’s accounts must be supplied. The computerised financial records must be regularly backed up (at least monthly). The backup information should be regularly tested (annually or when there has been a change in hardware or software) to ensure that the information could be retrieved.
Schools’ Finance Manual – Financial Regulations
FR 1.10 FR 1.11 FR 1.12
The back up information must be stored in a secure place (fire-proof), away from the prime information. A duplicate copy should also be taken off-site. Access to the computer system must be limited to authorised staff only. Passwords must not be disclosed and must be changed termly. Financial records (orders, invoices etc.) must be kept for the period stated in the Retention of Documents Policy as shown in Appendix 1. They need to be available for inspection if required by the Director of Finance, Resources and Customer Services, the Audit Commission or an external body such as HM Revenue and Customs. The Governing Body must ensure that the financial records are stored securely to avoid loss, destruction or unauthorised alteration. When documents are disposed of, care must be taken regarding sensitive information. Internal Audit The Director of Finance, Resources and Customer Services has an internal audit function carried out by the Audit and Risk Management Division. The Governing Body must ensure that any information required by the Division is made available, along with any explanations requested. The Governing Body must ensure that any recommendations made in an audit report are considered and acted upon as soon as is practicable. Accounting Principles The accounts must be maintained based on the financial year. They need to be maintained on an accrual basis, i.e. transactions should be accounted for in the year that the goods or services are received and not when the cash changes hands. Whistle blowing The term “Whistle Blowing” means the confidential raising of problems or concerns within an organisation or an “independent review structure” associated with that organisation and not in the pejorative sense of leaking information or telling tales. In the case of a school the parent Local Authority (LA) would be regarded as the “independent review structure” with the school being the organisation. Schools and their LA’s are covered by the Public Interest Disclosure Act 1998. Following on from the Act, each LA has developed its own Whistle Blowing policy to provide protection for individuals who disclose malpractice and wrongdoing. This policy will apply to schools and it is recommended for the governing body to consider the Council’s policy as shown in Appendix 28 and endorse procedures for school staff and ensure its staff are made aware of its existence.
FR 1.13 FR 1.14
If there are any circumstances where financial irregularity is suspected, the Act requires the Governing Body to inform the Director of Finance, Resources and Customer Services (Audit and Risk Management) immediately. This includes instances of fraud or where the Council’s Standing Orders, Financial Regulations or the school’s Scheme of Delegation are not complied with.
If any member of staff suspects that there is financial irregularity within the school (including by the Governing Body or Federated Governing Bodies), they should contact the Director of Finance, Resources and Customer Services (Audit and Risk Management). Federated Governing Bodies If more than one school is “federated” under one governing body then the degree of federation must be determined. The governing bodies proposing to federate must publish the proposals by sending them to the Secretary of State within one week of publication via email@example.com. Schools Financial Value Standard (SFVS) The DfE have confirmed the introduction of the Schools Financial Value Standard (SFVS). The new Standard has replaced the Financial Management Standard in Schools and includes a requirement for schools to complete and submit to the Authority a SFVS on an annual basis. As all schools within Enfield were assessed and accredited with the Financial Management Standard in Schools, schools will not be required to submit the annual statement until the 2012/13 financial year. During 2011/12, the Internal Audit Service requires all schools to complete and return to them a copy of the London Borough of Enfield Schools’ Annual Risk Assessment. Please contact Eileen Carberry, tel: 020 8379 4794 or email, firstname.lastname@example.org, for a copy of the document or for further information'. Notice of Concern The authority may issue a notice of concern to the governing body of any school it maintains where, in the opinion of the Director of Finance, Resources and Customer Services and or the Director of Schools & Children’s Services, the school has failed to comply with any provisions of the scheme, or where actions need to be taken to safeguard the financial position of the authority or the school.
FR 1.21 FR 1.22
FR 1.27 Such a notice will set out the reasons and evidence for it being made and may place on the governing body restrictions, limitations or prohibitions in relation to the management of funds delegated to it. These may include: 1. Insisting that relevant staff undertake appropriate training to address any identified weaknesses in the financial management of the school; 2. Insisting that an appropriate trained / qualified person chairs the Finance Committee of the governing body; 3. Placing more stringent restrictions or conditions on the day-to-day financial management of a school than the scheme requires for all schools – such as the provision of monthly accounts to the authority; 4. Insisting on regular financial monitoring meetings at the school attended by the authority’s officers; 5. Requiring a governing body to buy into the authority’s financial support services and,
February 2012 29
6. Imposing restrictions or limitations on the manner in which a school manages extended school activity funded from within its delegated budget share – for example by requiring a school to submit income projections and / or financial monitoring reports on such activities. FR 1.28 The notice will clearly state what these requirements are, and the way in which, and the time by which, such requirements must be complied with in order for the notice to be withdrawn. It will also state the actions that the authority may take where the governing body does not comply with the notice.
Financial Planning and Monitoring Principles
Budget Preparation The Governing Body must ensure that there is a three-year financial plan agreed for the current financial year and the following two years. The three-year expenditure plans must be linked to priorities in the School Improvement Plan. It is important that the plan for the first year is as accurate as possible as it will be the basis for the budget monitoring and control. Three-Year Financial Plans The schools must prepare three-year financial plans from the income and expenditure data provided by the LA. The LA will provide resource information for three years. The governing body must send its three-year expenditure plans to the LA by the summer half term, accompanied by the details of the assumptions underpinning the expenditure plan. The three-year expenditure plan should include the school’s estimate of deficits or surpluses carried forward from the previous financial years. The formal three-year expenditure plan must be approved by the Governing Body. Extended Schools Before any extended schools activities are started, the Governing Body must consider a report setting out details of the proposed activities and give its approval to proceed. The report should include details of: 1. 2. 3. 4. 5. 6. The activity, The times and places the activities are to be held, Who it is to be provided for and how it will be of benefit, Who will provide it, school staff or a contractor, If school staff, the staffing requirements, If the activity is provided by contractors, the estimated fee to be charged and confirmation that the procurement arrangements will comply with Contract Procedure Rules. (See Section FR 4 and FG 4 of this manual) 7. The total expenditure on the activities e.g. staff, materials, equipment, overtime payments to site staff, marketing and advertising, additional cleaning and energy costs, 8. How the activity will be funded e.g. by charging, the schools delegated budget if there is an education benefit, if it is for either educational or community benefit and income from charging does not cover all the costs, 9. How the charges will be collected. Ideally they should be collected in advance in order to minimise collection and bad debt problems,
FR 2.3 FR 2.4 FR 2.5
Budgetary Monitoring and Control The Governing Body must ensure that there is an adequate process in place for controlling expenditure and monitoring it against the approved three-year financial plan. Where this process is delegated to the Headteacher, the Governing Body or the Finance Sub-Committee should receive regular updates (at least once a term) on the budget position, as detailed in the school’s scheme of delegation.
Where there are changes required to the three-year financial plans during the year, a virement of budget needs to be approved. This will also need to be reported as part of financial monitoring. Deficit Budgets and the School Loans Scheme Providing a school does not have an accumulated deficit at the preceding 31 March, it is possible to plan for a deficit budget over a three-year period. For primary and special schools, this is up to a maximum value of £50,000. For a secondary school, this is up to a maximum value of £100,000. If a school has an accumulated deficit at 31 March and plans to have a deficit budget then it needs to seek the LA’s support for such a decision. A school may set a deficit budget to prevent excessive instability within the school or to address specific short-term problems, i.e. emergency repairs, long term sickness. The total licensed deficits, together with any loans agreed under the loan scheme, will be limited to 20% of the value of all school balances at the end of the previous year. This is subject to any implications this may have on the cash balances of schools operating local banking arrangements. If the school requires a longer period in order to eliminate the deficit, or requires more than the limit, please refer to the loan scheme. The Governing Body cannot borrow funds or enter into a loan agreement with any bank or other organisation without the express permission of the Secretary of State. However, this does not apply to the Council’s school loan scheme. Where extended school activities and services generate more income than it costs to provide the services, this surplus can be used to help support other programmes in the school. Deficits on extended school activities must be met by the school. Charges can be subsidised for individual users of services who might be unable to pay, but who could benefit significantly from the activity or service. Charges cannot be subsidised for staff that work at the school and have children attending the extended school activities. Separate Bank Accounts It is not recommended that separate bank accounts are set up for extended school activities that use public funds.
FR 2.13 FR 2.14
Financial Reporting to the Governing Body Regular and succinct budget monitoring reports must be reviewed by the Governing Body on at least a termly basis. These reports should provide information on individual budget allocations, the current up to date position and any outstanding commitments. Financial Reporting to the Council Council’s Financial returns
Summary of Council Financial Returns Monthly VAT Return & Bank Reconciliation Bank Reconciliation Copy of latest bank Statement(s) Financial Monitoring Return Three-Year Financial Plans Use of School Balances where over 5% for Secondary and 8% For Primary & Special of budget Year end returns Including accruals Statement of Internal Controls Quarterly Annually Deadline(s) 22nd of the following Month 21st July, 31st October, 31st January & Final Year End return in April Summer Half-term Summer Half-term
Year-end visit (Will vary according to Easter holidays) Summer Half term
Three-Year Financial Plans The Governing Body must submit its three-year financial plans to the Council by the summer half-term. The return must be made in the format prescribed by the Council and which is dispatched to the schools with the budget information each year. See Appendix 2. The return must be signed and dated by the Headteacher and by the Chair of Governors. The return should be made electronically and a hard copy of the signed return must be sent to the Director of Finance, Resources and Customer Services (Financial Management). If it is not possible to get the return signed by the deadline, an interim three-year financial plan clearly labelled, as ‘DRAFT’ must be sent. A signed three-year financial plan must then be sent as soon as possible.
Financial Monitoring The Governing Body must complete and return the quarterly monitoring reports to the Council by the deadlines specified above, with all the supporting documentation necessary. The monitoring report must show the agreed working budget for year 1, a latest budget including virements etc. and a projection for the expenditure for the year. A template of the return is shown in Appendix 4. The quarterly monitoring report must be signed by the Headteacher and the Chair of Governors. The return should be made electronically and a hard copy must be sent to Education Financial Management Services. If it is not possible to get the return signed by the deadline then an electronic copy must be sent and the signed hard copy must be sent as soon as possible. Any changes to the electronic copy must be highlighted. VAT return A VAT analysis report must be produced monthly, showing the VAT paid and received by the school in the preceding month. The VAT analysis report must be used to complete the electronic VAT Return workbook (Appendix 8). The school must investigate and rectify any errors on the return prior to closing down the current period on the school’s financial software. Financial Management Services must receive an electronic copy of the return by the 22nd of the following month. This includes nil returns. A signed hard copy of the VAT return must be retained by the school. If HM Revenue & Customs fines the Council as a result of a school not complying with these requirements, that fine will be passed on to the school concerned. Year End At the year-end, the Director of Finance, Resources and Customer Services will request certain information from the schools. This must be provided by the deadlines stipulated and in the format required. Examples of information needed are: 1. 2. 3. 4. 5. Consistent Financial Reporting return Creditor and debtor reserves Other grant information Information on Capital expenditure Leasing information
Use of Balances return The Scheme for Financing Schools requires the Governing Body to provide details on the intended use of balances where the total accumulated balances exceed 5% for secondary schools and 8% for primary & special schools, of the budget share for the year. The return must be made to the Director of Schools & Children’s Services (Resources Development Manager) by the end of the summer term.
Where there are any balances, which are considered to be outside the criteria for use of balances, these will be returned to the LA for redistribution to all schools through the normal funding formula in the following financial year. Any funds redistributed would be exempt from the calculation of the minimum-funding guarantee. See section FG 3.16. Financial Recovery Plan for schools with a budget deficit If a school is falling into deficit or is predicting it will fall into deficit, and the school is likely to have to remain in deficit for more than one year, the Governing Body must notify the Director of Finance, Resources and Customer Services (Financial Management) as soon as possible, even if the deficit has not been quantified. The Governing Body will have to produce a Financial Recovery Plan. This plan will show how, over a set period of time between one and three years, the school will improve its financial position and come out of deficit. It must include: 1. A brief introduction as to the extent of the problem and the reasons why it occurred. 2. Realistic pupil number projections for each age group for the period. 3. Estimated income for each financial year including the expected budget shares delegated by the Council. 4. A detailed staffing plan for the period. 5. The total estimated expenditure for each year, using the headings on the three-year financial plan document. 6. A summary of the effects of the plan on the school, including the pupil/adult teacher ratios and a curriculum plan.
Failure to provide financial returns by specified date The following procedure will be followed should a return not be received on time by the Council: 1. A reminder will be sent to the Headteacher. 2. A follow up reminder will be sent to the Headteacher and the Chair of Governors. 3. Four weeks after the deadline, the Director of Finance, Resources and Customer Services may make arrangements for the financial returns to be prepared and charge the school as appropriate. 4. Persistent failure to provide financial returns may result in the initiation of a special internal audit review and, in extreme cases, the withdrawal of responsibility for managing the budgets.
Introduction The Scheme for Financing requires all maintained schools to comply with the Council’s Contract Procurement Rules (CPRs) for the procurement of goods, works and services. A summarised version providing the key information for schools is set out below, and the full version of these rules can be found on the following link http://www.enfield.gov.uk/info/200003/council_contracts_and_procurement
FR 4.2 FR 4.3
A flow-chart is attached at Appendix 41 that describes the process to be followed. The CPRs set out the procedures which must be adhered to in order to; 1. ensure proper procurement practices are used, 2. comply with procurement legislation, 3. demonstrate that schools achieve Best Value, 4. show competition in the award of public contracts, and 5. be open and fair in spending public money. The requirement to comply with CPRs applies when the provision of the goods, works and services is undertaken by an organisation which is external to the Council. However, schools must ensure that Best Value is achieved even when using Council services especially when the school does not seek alternate tenders from external suppliers. For the purposes of the CPRs, the Council’s service providers are those included in the Traded Services to Schools brochure, plus any other Joint Venture or partnership arrangement agreed by the Council. Wherever possible, schools should procure works, goods and services using the Government Procurement Service, Buying Solutions and other frameworks, as these arrangements have already been established following competitive tendering processes. Schools must comply with the terms of any framework agreement when using the framework: use of frameworks saves procurement time and cost. Details of these can be found on the DfE procurement website: http://media.education.gov.uk/assets/files/pdf/s/schools%20procurement%2 0resource.pdf
Schools must follow the 10 Core Values of procurement as listed below. Core Value 1 Core Value 2 Core Value 3 Only procure what is necessary to support achievement of the school’s strategic and corporate priorities Procure what is most cost effective for the school as a whole Purchase goods, works and services that provide the best combination of value for money and quality outcomes and that meets UK/EU Safety standards. Ensure that decisions on procurement are based upon good governance, comprehensive and robust supporting data, analysis of options and assessment of risks Treat suppliers fairly and transparently and improve opportunities to do business with the school Take a planned and coordinated approach to procurement and effectively communicate the approach to all stakeholders Comply with procurement legislation and best practice Minimise costs of buying activities where this is consistent with the achievement of best value for money Provide information on what we spend, who spends it and with whom it is spent and ensure that it is routinely available. Work in partnership to achieve optimum results, quality outcomes and sustainable delivery of services.
Core Value 4
Core Value 5 Core Value 6 Core Value 7 Core Value 8 Core Value 9 Core Value 10
Governing Body Responsibility The Governing Body is responsible for the purchasing within their school and has the responsibility for ensuring compliance with the legislation, regulations and guidance as defined within: 1. 2. 3. 4. 5. 6. The Scheme for Financing Schools The Council’s Contract Procedure Rules, The Finance Manual for Enfield schools; The Audit Commission publication; “Keeping Your Balance (2000)”; The DFE “Guide to the Law for School Governors (updated Jan 2010)”; Any formal guidance issued by the Director of Finance, Resources and Customer Services. 7. UK and European legislation in force in England. The Governing Body may delegate authority for purchasing within their school to the Headteacher and other school staff. Any such delegation must be recorded in school’s Scheme of Delegation. The Governing Body may delegate authority for purchasing within their School to the Headteacher and other School staff. Any such delegation must be recorded in the school’s scheme of delegation.
Scheme of Delegation The Governing Body must ensure that the delegated powers given to the Headteacher and other school staff to incur expenditure are recorded in the school’s Scheme of Delegation and are available for inspection. The Scheme of Delegation should be reviewed by the Governing Body on an annual basis. Contracts The Governing Body must obtain the best terms, which are reasonably obtainable for each contract. This requires the Governing Body to obtain the most economically advantageous price in respects to quality and price. All contracts must be in writing. In an emergency, an order for goods, services and works may be given orally but this must be confirmed in writing as soon as possible after the event. Best Value The Governing Body must ensure that the school uses and can demonstrate that it uses the principles of Best Value as defined in Section 3 of the Local Government Act 2003. Rental Agreements and Leasing Please refer to the Rental Agreements and Leasing sections FR 12 and FG 12 for specific guidance. The Formation of Companies The Education Act 2002 allows Governing Bodies to form companies (as defined by the Companies Act 1985) for the purpose of purchasing or supplying goods, services and works to schools. Before setting up such a company, the Governing Body must receive consent from the Council in writing. Please refer to sections FG 4.15 to FG 4.19 for specific guidance. Quotations – General Principles Obtaining Best Value for money is an underlying requirement of the CPRs. The complexity of the procurement procedures that must be followed will vary depending on the value and risk of the purchase. The Total Value of the procurement is defined as the total anticipated contract/purchase value and this will be calculated as follows: • • Where the contract is a capital or one-off purchase or for a fixed period, by taking the total price to be paid or which might be paid during the whole of the period of the contract, Where the purchase involves recurrent transactions for the same type of items, by aggregating the value of those transactions over the contract period, including any allowable extension periods or options to vary the purchase, Where the total contract value over the full duration of the contract (not just the annual value) is uncertain, by multiplying the monthly payment by 48. See FG 4.31 for further guidance,
FR 4.11 FR 4.12
• • • • FR 4.19 FR 4.20
Where the service has not previously been the subject of a competitive tender, the contract value is calculated by multiplying the annual value by the number of years since the contract was first awarded, For Framework Agreements with no guaranteed commitment the contract value will be the estimated value of orders placed/commissions let under the Framework Agreement over the full duration of the contract; Where an in house service provider is involved, by taking into account TUPE workforce matters, redundancy and similar/associated costs, For income generation contracts the Total Value will be the estimated revenue stream payable to the School over the period of the contract.
The value must be calculated in pounds sterling exclusive of Value Added Tax. Contracts must not be artificially under estimated or divided into two or more separate contracts, either in scope or length of contract, where the effect is to avoid the application of these Contract Procedure Rules or UK/EU Legislation by dis-aggregation. The School should make the best use of its purchasing power by aggregating purchases wherever practical. External consultants and technical officers engaged to supervise contracts must follow these Rules as applicable and their contracts for services must state this requirement. All contracts for external consultants and advisors shall explicitly require that the consultants or advisors provide without delay any or all documents and records maintained by them relating to the services provided on request of the authorised officer, and lodge all such documents and records with the appropriate officer at the end of the contract. The authorised officer shall ensure that any consultant working for the school has appropriate indemnity insurance. Where consultants also arrange for the provision of goods or services or undertake works, any tender must differentiate between the cost of the consultancy services and the cost of providing the goods or services or undertaking the works. Any invoices received using these arrangements must show the consultant’s fee separate from the cost of any goods, services or works. The requirements for quotes and tenders are set out below by value. Low Value Transactions/Contracts: Defined as transactions valued at or below £10,000 for goods or services, (or below £20,000 for Works) that cannot be obtained via an existing Approved Contract. Please refer to section FG 4.32 for specific guidance. Intermediate Value Transactions/Contracts Defined as transactions for goods or services valued at or over £10000 (£20,000 for works) but below £50,000 that cannot be obtained via an existing Approved Contract. Please refer to sections FG 4.33 & FG 4.34 for specific guidance.
FR 4.21 FR 4.22
FR 4.24 FR 4.25
FR 4.26 FR 4.27
High Value Transactions/Contracts – Formal Tender Threshold Defined as transactions for goods or services valued at or over the formal tender threshold of £50,000 but below the relevant current EU Threshold. The formal tender process applies as set out in section FG 4.40 of this manual. Requirements over EU Threshold Defined as intended purchases for goods, services and works that exceeds the current EU Threshold of £173,934 for goods and services and £4,348,350 for works from January 2012. The contract value of each year of the contract term needs to be totalled to reach the full cost. For example, if a contract for cleaning is valued at £60,000 per year and the contract is for 3 years, the total contract value is £180,000. Include any extension periods when calculating total value. Please refer to sections FG 4.36 to FG 4.39 for specific guidance. Common Tendering Principles Formal tenders can be obtained through: 1. A list of suppliers on a framework produced or maintained by the Council’s Property Procurement Team, which has been subjected to the appropriate level of competition in relation to threshold value. 2. Purchasing organisations such as Eastern Shires Purchasing Organisation (ESPO), Yorkshire Purchasing Organisation (YPO) and London Contracts and Supplies Group (LCSG), provided that the protocol of the framework provider is maintained. Full details of purchasing organisations can be obtained from the Council’s Corporate Procurement Team. 3. Open tendering. 4. On-line framework contracts through OGC buying solutions. 5. Tendering as defined by European Regulations.
Advertising All requirements over £50,000 must be publicly advertised through at least two of the following: 1. 2. 3. 4. Publication of an OJEU notice, where appropriate; Advertisement in the local press; Publication on the School’s and LBE website; Advertisement in a relevant trade journal.
Please refer to section FG 4.42 for specific guidance. FR 4.33 Pre-Qualification Please refer to sections FG 4.43 to FG 4.46 for specific guidance.
Pre-Tender Market Research and Consultation FR 4.34 Please refer to Section FG 4.47 for specific guidance. FR 4.35 Waiving Contract Procedure Rules The Contract Procedure Rules may be waived so long as it does not lead to a breach of EU & UK regulations. If there are specific reasons why the Contract Procedure Rules relating to tendering or getting quotations cannot be adhered to, they can be waived by the Governing Body or by the Headteacher acting under the delegated authority of the Governing Body. In such circumstances the “Waiver of Contract Procedure Rules
for Schools” form (Appendix 26) needs to be completed and held by the school for inspection by Internal Audit. In all cases the decision taken and the reason for it must be fully minuted in the Governing Body minutes. Please note contracts with a value deemed over the EU threshold cannot be waived. FR 4.36 Every contract must say that the school can cancel it if, in the school’s opinion, the contractor does anything which is contrary to the Prevention of Corruption Acts 1889-1916, or pays any bribes as set out in the Section 117(2) of the Local Government Act 1972. The contract must also say that if the school does cancel the contract for either of these reasons, it will claim from the contractor any losses, which result from that cancellation. There are standard contract templates available from the Corporate Procurement Team. These will need to be signed off by the Legal department once any amendments have been made. Every contract must say that the relevant Approved Codes of Practice and Guidance must be complied with. They must also say that contractors must ensure that they, and their subcontractors, must comply with law on health and safety at work and on discrimination on the grounds on gender, age or race. Where a contract is worth more than £10,000 all tenderers must satisfactorily complete a questionnaire on racial equality. The conditions of contract for construction works must be the current edition of either the standard form of JCT or standard form ICE, whichever is appropriate. These forms must not be altered without the approval of the Assistant Director of Legal Services. Contracting Services and TUPE If the school is intending to contract out services that are currently provided by Council staff (e.g. Catering), they should be aware of the responsibilities that they have to the staff involved, even though the school does not directly employ them. In particular, the school must take into consideration the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) that safeguard the rights of employees when businesses change hands between employers. Please refer to sections FG 4.118 to FG 4.121 for specific guidance. Ordering goods, services and works The authorised signatory must be satisfied that the goods, services or works are appropriate and needed, that there is adequate budgetary provision available and that contract procedures have been correctly adhered to. Official orders must always be raised before any goods and services are purchased. All orders must be made on official school order forms. It is the responsibility of the school to ensure that all suppliers are made aware of the LBE Schools’ Purchase Standard Terms & Conditions, Appendix 9. Official, pre-numbered orders should be used for all goods and services except utilities, rents, rates, direct debit payments and petty cash payments. Where urgency requires an oral order, this should be confirmed by a written order. The official order forms are controlled stationery and as such must be securely retained when not in use. If applicable, records must be maintained of blank order forms, which are issued to staff.
FR 4.41 FR 4.42
FR.4.44 FR 4.45
Completed order forms must be signed and dated by an authorised signatory. The completed order form must be ruled off to avoid any additions at a later date. When an order is placed, the estimated cost should be committed against the appropriate budget allocation, on the school’s accounting system, so that it features in subsequent budget monitoring. Receipt of Goods, Services and works The goods, services and works received must be checked immediately to ensure that they are in accordance with the order. This should be evidenced with the date and a signature of the person receiving the goods or monitoring the service, and not the person who signed the order. Incomplete, disputed or unsatisfactory deliveries should be noted on the order. Process for all invoices - for services, goods or works Payment, manual or by BACS, can only be made upon the receipt of a proper VAT invoice. The invoice must be in the name of the school and must be checked against the order to ensure the goods have been received, that the price is correct and that all discounts have been taken into account. All invoices must be paid within 30 days of receipt, unless specific arrangements have been made with the supplier. An authorised member of staff must certify the invoice for payment. This should be a person other than the person who signed the order or the person who checked the receipt of the goods or services. The payment must be recorded in the school’s accounting system as soon as the cheque is drawn or BACS payment is made. Payment cannot be made against a photocopied or faxed invoice. Payment can be made against a Certified Copy Invoice, where the school has requested one. Invoices from Self-Employed Suppliers Self employed suppliers who are providing a service to the schools must issue an invoice to the schools. Payment of these invoices should also follow the guidelines detailed in FR 4.29 – FR 4.34 above. See Appendix 11 for clarification of “employee or self-employed”. Late payment legislation The Late Payment of Commercial Debts Act 1998 gives businesses a statutory right to claim interest where another organisation pays its bills late. The rate of interest is the Bank of England base rate at the close of business on the day payment should have been made plus 8%. Any such charge will fall on the school to pay. Staffing and Payroll The Governing Body should establish procedures for the administration of personnel activities, including appointments, terminations and promotions.
FR 4.47 FR 4.48
FR 4.49 FR 4.50
FR 4.51 FR 4.52
Governing Bodies are responsible for ensuring that the salaries of all categories of teaching staff are determined in accordance with the statutory framework laid down in the School Teachers' Pay and Conditions document. The pay ranges for senior teachers, including Headteachers, Deputy Headteachers and Assistant Headteachers should be determined taking into account any criteria that may be specified in the School Teachers' Pay and Conditions document. When setting the ranges, Governing Bodies are advised to consider, as appropriate: The school's size and circumstances The background of the pupils attending the school The responsibilities of the post Anticipated difficulties in recruiting and retaining a Headteacher, Deputy Headteacher or an Assistant Headteacher The need to maintain appropriate differentials between members of the Leadership Group.
In exercising their discretionary powers in relation to salary determination, Governing Bodies should also try to balance budgetary considerations and the needs of the school to recruit and retain staff with the need to act fairly. The Governing Body must adhere to the dispensations agreed with the HM Revenue and Customs relating to payments of expenses and benefits. An Annual Benefits Questionnaire must be completed and returned to Payroll by the end of April each year. The Director of Finance, Resources and Customer Services reserves the right to access any payroll records if necessary, whether the school uses the Director of Finance, Resources and Customer Services (Payroll) service or that of an external bureau. The Governing Body must ensure that the processes of completing, checking and authorising all documents, and claims relating to appointments, terminations of employment and expenses, are not the sole responsibility of one person. The Governing Body should ensure that, where practicable, the duties of authorising appointments, making changes to individuals’ conditions or terminating the employment of staff are separated from the duties of processing claims. The Governing Body must ensure that a list of authorised signatories is maintained for payroll purposes. The Director of Finance, Resources and Customer Services is able to request a copy of this if required. If the school fails to comply with any of the requirements placed upon it and, as a result, the Council is penalised, the school’s budget share will be charged with that penalty, as set out in the Scheme for Financing Schools, section 6.2.
Pension Fund FR 4.66 Admission Agreements for employees transferring to external providers If schools opt out of services, currently provided by the Council, as a result of a best value exercise and have employees who will be transferred, via TUPE arrangements to an external employer, the school and the external provider must be aware of the implications to employees’ pension arrangements. In accordance with the Local Government Pension Scheme regulations, the Enfield Pension Fund can make an admission agreement with an external employer, which will protect the current members of the Local Government Pension Scheme who will be transferring.
Introduction Income is a valuable asset and is, therefore vulnerable to fraud. It is vital that appropriate controls are in place to ensure its security. It is also important that the school does not exceed its insurance limit on holding cash on school premises. Since the introduction of extended schools, grant funding has been provided from central government in order to develop the services. However in the medium to longer term there is no certainty that this source of funding will be maintained and so services need to be planned on the basis that they will become self-sustaining. In almost all cases this will mean that charges need to be introduced that cover the cost. Schools are able to retain all the income that they generate unless it refers to a sale of certain assets (see section on control of assets). It is important that procedures include a proper cash handover process. Wherever any money passes from one staff member to another, it must be evidenced by a signature of the recipient who will then assume responsibility for the cash until it is either banked or handed over to another member of staff. All income should be banked promptly and in full. Prior to banking, the income must be held in a secure location. For limits on amounts of cash held at any one time in the safe, please refer to the insurance limits of your policy. As soon as the income has been received, it must be recorded in the financial system. It should be coded to an income code, even if it is planned to offset specific expenditure items. Segregation of duties must be applied to the invoicing and receipt of income and to the recording and banking of receipts if at all practical. The arrangements for this must be included in the scheme of delegation. Receipts must be issued for all cash income. The Headteacher should ensure that transfers of school money between staff are recorded and signed for. Income collections should not be used for the encashment of personal cheques. Lettings and Fees and Charges Income scales for the letting of school premises and the use of school facilities must be reviewed and approved annually by the Governing Body and minuted in the formal records. See Appendices 27 & 28 of this manual. Any delegated powers to allow individuals at the school to negotiate with the hirer should be put in writing by the Governing Body and included in the Scheme of Delegation. The charging of VAT on lettings is the subject of specific rules. Please refer to the VAT chapter for details.
FR 5.3 FR 5.4
FR 5.8 FR 5.9 FR 5.10 FR 5.11
Licensing for Raffles Schools must obtain a “lottery license” from the Council’s Licensing Unit if they intend to hold a raffle. The license runs from 1st January to 31 December each year. Income Control Consecutively numbered invoices must be used by schools that issue invoices. Spoiled invoices must be marked as such and retained in order to ensure completeness of income. Debt Write Off The Governing Body can write off debts owed to the school up to a value of £500. Individual debts above that level, but not exceeding £2,500, may be written off with the approval of the Director of Schools & Children’s Services. All debts above £2,500 may only be written off with the additional approval of the Director of Finance, Resources and Customer Services. The Governing Body may delegate authority for debt write offs to the Headteacher. Details of the delegation must be formally documented with the school’s scheme of delegation. Where the Headteacher proposes to write off any debts, they must be reported to the Governing Body at least annually as follows: 1. Individual debts of up to £100 inclusive of VAT should be reported in total. 2. Individual debts between £100 and £500 inclusive of VAT should be reported in detail. 3. For debts between £500 and £2,500 inclusive of VAT, the Governing Body must seek approval from the Director of Schools & Children’s Services. 4. For debts over £2,500 inclusive of VAT, the approval of the Director of Finance, Resources and Customer Services (Audit Risk Management) is also required.
FR 5.15 FR 5.16
FR 5.18 FR 5.19
Charging Policies FR 5.21 The Governing Body may not charge for anything unless it has drawn up a statement of general policy on charging (Appendix 29). A policy statement will take account of each type of activity that can be charged for and explain when charges will be made. If a charge is to be made for a particular type of activity, for example “optional extras” parents need to know how the charge will be worked out and who might qualify for help with the cost (or even get it free). Parents have a right to ask for this information and a summary must be included in the prospectus published by the school. The governing body is responsible for ensuring that the school’s funding for educational purposes is not drawn upon as a result of a letting agreement. The school is able to cross-subsidise charges made to voluntary and community organisations with income from commercial lettings subject to no net overall cost falling on the school’s delegated budget.
Extended schools charging FR 5.22 In considering the introduction of extended school activities, consideration must be given to whether or not the users should be charged. Schools will continue to be governed by existing legislation and local authority policies regarding charging. (See Appendix 29 of this manual). The level of the charge will be a key factor, which determines the level of usage, and it will be essential to try to achieve the optimum balance between the amount charged and the cost of providing the activity. Clearly if the income from the charges does not fully meet the cost, the shortfall must be met from the schools resources and a judgement will need to be made on the extent to which any shortfall can be justified in terms of the benefits and outcomes that may be achieved from the activity. Cashless Payment System FR 5.23 A new cash collection system has been introduced by The London Borough of Enfield enabling parents to make payments through ParentPay for meals and trips without using physical cash. The system is being installed in schools which use the Council’s Catering Service, although other schools also use the system. Payments may be made • via the Internet with a debit or credit card at www.parentpay.com • with cash at a local PayPoint store
Control of Assets
Introduction The Governing Body is responsible for the proper management and security of the school premises and the custody and physical control of all other assets including machinery, furniture, equipment, stock and other assets such as cash. All items should be security marked (identified as school property), with a mark, which is visible and permanent. Any theft should be reported to the police and to the school’s insurers as soon as possible. Inventory Schools are required to maintain an (inventory) of all portable, valuable and desirable goods. Schools are free to determine their own arrangements for keeping a register of assets worth less than £1,000. However, schools must keep a record in some form. A copy of the inventory must be kept in a safe, fireproof place and be available for inspection. The Governing Body must ensure that the inventory is kept up to date and is reviewed at least once a year. When reviewed, the inventory should be certified and dated. Loan of Assets Items of school property must not be removed from school premises without the appropriate delegated authority. The school must make a record of any loan in a “loans book”. The records must be updated when the asset is returned. Staff may take assets home but the position relating to insurance must be clarified and explained to staff before assets are taken from school premises. Disposal of Assets The Governing Body must not dispose of any land or buildings without consulting with the Director of Schools & Children’s Services (Asset Management and Development) and the Director of Finance, Resources and Customer Services (Financial Management). If an asset is leased, or was purchased using Government or European funding, it cannot be disposed of without first consulting with the Director of Finance, Resources and Customer Services (Financial Management). In some instances, any sale proceeds may have to be returned to the Council for reimbursement to the grant funding body. The Governing Body must ensure that it receives the best price possible for the disposed items, after deducting the costs associated with the disposal. Where an asset is sold, VAT must be charged as appropriate and accounted for accordingly. The income from the sale must be paid into the school’s main bank account.
FR 6.4 FR 6.5
FR 6.10 FR 6.11
Disposals must be recorded in the inventory. The entry should include the reason for the disposal, the authority under which it was disposed and, if applicable, the sale proceeds and the person(s) receiving the asset.
Introduction The Governing Body can only use a high street bank or building society to provide a banking service for the school. The Council’s own bankers, HSBC, offer a specific scheme for Enfield’s schools. The Governing Body must notify the Director of Finance, Resources and Customer Services (Treasury Management) of all the bank accounts it uses to hold public funds. If a Governing Body decides to change the banking arrangements of the school, the Director of Finance, Resources and Customer Services (Treasury Management) must be informed, in writing, at least one month before. All bank accounts must have the London Borough of Enfield and the school name as part of the description. Arrangements must be in place to ensure that statements are received at least monthly and these should be reconciled with the school financial accounting records. Any discrepancies should be investigated. The Director of Finance, Resources and Customer Services must be given access to all documents and records relating to any bank account used to hold public monies. Advances Funds advanced to the school by the Council will be paid into the main bank account directly. Funds held in the main bank account cannot be transferred to the private fund or other similar accounts. Cheques All cheques must be signed in manuscript by two authorised members of staff (not governors). The authorised signatories must not be the same staff who authorise orders or certify payments. The same person may not sign a cheque and also prepare and issue it. It is recommended the school/establishment have a pool of at least three signatories available to choose from, of which two signatories are needed on each cheque. All cheques must be crossed and marked ‘a/c payee’. Blank cheques must be kept in a safe place and must not be pre-signed. Any cheque, which requires cancellation, must be clearly marked “CANCELLED” and retained for audit purposes. All standing orders and direct debit arrangements must be authorised in accordance with the current bank mandate held i.e. by two of the signatories for signing cheques. Rubber signature stamps, signature machines or facsimile signatories must not be used.
FR 7.3 FR 7.4
FR 7.6 FR 7.7
FR 7.9 FR 7.10 FR 7.11 FR 7.12
BACS Payments The same person who creates a BACS payment must not authorise it. Segregation of duties must be adhered to. Credit Cards Schools cannot be issued with or use a credit card or store credit facilities under any circumstances. These are a form of borrowing and schools are not legally allowed to borrow, other than from the LA. Business Cards Schools can use a business card connected to their bank account. This is a charge card that operates in a similar way to a debit card but the charges on it will automatically be taken from the school’s bank account on a monthly basis. If school wishes to have a business card, the Governing Body must formally record the decision for future audit purposes. It must also decide on the limit on the card. The Director of Finance, Resources and Customer Services has recommended a maximum limit of:£5,00 for Primary and Special Schools £10,000 for Secondary Schools
The Director of Finance, Resources and Customer Services requires that: 1. The safe custody of the card(s) must be ensured at all times. 2. The card must not be used to extract cash from cash point machines or through cash back services in stores. 3. A VAT invoice will still be needed where VAT is payable. Without it, VAT cannot be reclaimed. 4. The monthly statement should be reconciled to the vouchers issued immediately. 5. The card must not be used for personal use. 6. If a card is lost or stolen, this must be reported to the bank immediately.
For internet purchases, card details must be sent in encrypted form. A confirmation of the transaction should be printed which should be attached to the payment voucher. Internet Banking Schools banking within the HSBC Scheme have the facility to use telephone and internet banking. This will allow schools to stop cheques, order bank statements and raise any other banking enquiries. Using internet banking will allow schools to download bank statements and obtain their current bank balance. Schools not in the HSBC Scheme must make their individual arrangements with the bank they use. The local authority will only access the banking details with the express permission of the schools.
FR 7.21 FR 7.22
Cash Flow and Investments The Governing Body must ensure that there are sufficient resources available to meet immediate commitments (via cheque, standing order, direct debit or debit card). Where a school operates a bank account outside the Council’s banking scheme with HSBC, the Governing Body can approve procedures to make investments. This must be in line with the Council’s own Treasury Policy on approved Financial Institutions. The investments must be recorded in sufficient detail. This information will include: 1. The date of purchase, 2. The cost, and 3. A description of the investment.
FR 7.25 FR 7.26
Investments can only be made where it can be shown that there is no risk to the capital sum invested. For those schools that operate the Enfield schools’ scheme with HSBC, all public funds must be left in that account. Overdrawn Accounts Where a school’s current account goes into deficit, immediate action must be taken to rectify the situation. The Governing Body must notify the Council immediately of the issue and how it is going to rectify the situation. The school must meet any additional charges arising from the school’s account going into deficit. For schools within the HSBC scheme the rate of interest for overdrawn accounts will be 2% above the base rate. The schools will be billed quarterly for overdrawn accounts. A charge of £25 for administration will be applied for each occasion a school has to be billed for overdrawn charges. Schools cannot borrow funds other than from the Council. Bank Reconciliation Each month, the school must receive and check the bank statement to ensure there are no irregularities. It must also reconcile its local financial accounting package to its bank statement. The bank reconciliation should be signed and dated by the person performing the reconciliation. They should also be reviewed and countersigned by an independent member of staff. Any irregularities should be investigated immediately and, where necessary, reported to the Director of Finance, Resources and Customer Services (Audit and Risk Management). Petty Cash The Governing Body must agree an appropriate level of Petty Cash to be held on the school premises. The cash should be kept locked, in a secure location at the school. Only authorised staff may have access to petty cash. Payments must be limited to minor items for which there is proper authority and provision in the budget.
FR 7.30 FR 7.31
FR 7.32 FR 7.33 FR 7.34
FR 7.35 FR 7.36
All payments must be supported by invoices or receipts. The petty cash must be reconciled monthly against the school’s financial accounting system. It should also be reviewed and countersigned by an independent member of staff. Personal cheques must not be cashed from the petty cash fund. Replenishment of petty cash must be made through the correct bank account and not through other sources of income collected by the school. Charging the school budget share The Scheme for Financing Schools details the instances where the Council can charge the school budget share without the permission of the Governing Body when it is able to demonstrate that it has incurred additional expenditure as a result of the school’s actions. The Council will notify the school of the amount of the charge and when it will be made. If the Governing Body wishes to dispute it, it should do so, in writing, within 2 weeks of this notification. This must be sent to the manager of the service, the Director of Schools & Children’s Services (Resources Development Manager) and to the Director of Finance, Resources and Customer Services (Financial Management).
FR 7.37 FR 7.38
Asset Management Plan Schools must produce their own Premises Development Plans showing the improvements, repairs and maintenance planned for the school buildings. Definition of capital expenditure All expenditure that the Governing Body wants to treat, as capital must meet capital criteria as defined in the Consistent Financial Reporting guidance issued by the DFE in the “School Finance Pack” published in 2002 and updated in 2007. The definition is as follows: 1. The acquisition, reclamation, enhancement or laying out of any land; 2. The acquisition, construction, preparation, enhancement, replacement or demolition of any building or part of a building (including any fixtures and fittings affixed to a building), wall, fence or other structure, or any playground or other hard-standing; 3. The acquisition, installation or replacement of any movable or immovable, plant, machinery, apparatus or furniture; used or intended to be used for the purpose of the school.
“Enhancement” in relation to any asset, means the carrying out of works which are intended: 1. To lengthen substantially the useful life of the asset; or 2. To increase substantially the open market value of the asset; or 3. To increase substantially the extent to which the asset can or will be used for the purposes of or in connection with the school concerned.
Devolved Capital All capital expenditure must be linked with the Premises Development Plan. Where the scheme being undertaken is not the highest priority in the plan, the Governing Body must be prepared to justify this to the DFE if necessary. The devolved formula capital allocation must be spent on capital works. It cannot be vired to fund revenue expenditure, although revenue funding can be used to supplement the devolved capital allocation. The Governing Body must spend its devolved capital allocation within three years and five months. Funds not used at the end of this period may be deducted from future allocations. The VA schools must spend this allocation within three years. Coding of capital expenditure When capital expenditure is incurred, it must be recorded in the school’s financial system as capital, in line with the DFE CFR framework. Furniture and Equipment funding If the Council requests information on the expenditure incurred by the school, this must be returned in the timescale specified in the request. Other Capital Further information must be provided as requested by the Authority.
Voluntary Aided Schools Capital The school has the option to receive the Devolved Formula Capital Grant directly to the governor’s bank account. The Church of England diocese will hold the money on behalf of the Church of England schools. The three-year rule must be adhered to (see FR 8.6). The grant will also include funding for ICT (for capital and hardware items, not software or revenue/leased items). The grant will be paid in two instalments, April and July. VAT cannot be reclaimed for capital expenditure by Voluntary Aided Schools. See VAT section. Certification will need to be provided at the end of the year: 1. To show how the capital has been spent or whether the money is being carried forward to next year. If only part of the money is being carried forward, then confirmation of this amount will be needed. 2. To show how the 10% statutory contribution has been made 3. Compliance with local planning and other approvals e.g. Building Regulations has been carried out 4. VAT has been paid (where relevant) and will not be reclaimed 5. Trustees of the buildings have been consulted about any work to the school premises (N.B. Church of England schools are under a legal responsibility to do so).
FR 8.11 FR 8.12 FR 8.13 FR 8.14
Further details will be sent direct to VA schools by the DFE in Darlington.
Private and Voluntary Funds
Private Funds held by the School The Director of Finance, Resources and Customer Services (Treasury Management) must be informed of the existence of any private or voluntary fund held by the school, the name(s) of the person(s) responsible for its operation and the bank account details. Banking Arrangements The same rules apply to private fund banking arrangements as to the school’s main bank account e.g. segregation of duties (Keeping Your Balance (2000), item L5, page 19: “ The headteacher should ensure that the same standards of financial accounting which apply to income and expenditure for the school’s delegated budget are applied to the voluntary funds”. Also refer to section FR 7 – Banking arrangements. Expenditure funded from the Private Fund The DFE, through CFR, has deemed that any expenditure from Private Funds on behalf of the school must be recorded in the school’s financial records i.e. the main school accounts and it should be included in the CFR return made at the year-end. The funds should be transferred over from the private fund to the school’s Council funds and recorded as income. Funds cannot be moved from the school’s main bank account to the private fund. All receipts, invoices etc. must be recorded in an appropriate format. Audit An Annual Statement of Account in the form of a receipts and payments account, showing the financial position of the account, must be produced and certified by approved auditors. The certified statement must be received and approved by the Governing Body on an annual basis. The Governing Body must appoint the auditors. Suitably qualified, independent persons appointed by the Governing Body, who have professional indemnity cover in respect of such work, must carry out the annual audit of these funds. This should ideally be a qualified accountant who is registered for such work. They cannot be employees of the school, or related to any members of staff. Governors are also excluded from auditing the private and voluntary fund accounts. The auditor must prepare a certificate at the conclusion of their work, showing the standard to which they have completed the work and the basis on which they have formed their opinion. This certificate along with the accounting statements must be presented to the Governing Body on an annual basis. Any audit fees incurred in the preparation of these statements must be charged to the private account, which has been audited. In cases where there is a profit making venture (e.g. tuck shop) contributing to the fund, a profit statement should also be prepared at least once a year (preferably more often).
FR 9.4 FR 9.5 FR 9.6
FR 9.9 FR 9.10
The Director of Finance, Resources and Customer Services reserves the right to undertake an audit of any unofficial (private) funds and to inspect related records where considered appropriate, including bank statements, cash books and vouchers. Insurance The Governing Body must ensure that the school has appropriate insurance cover for the unofficial school funds and parent / teacher association funds. VAT Schools’ Private Funds are not part of the Council’s VAT registration and need to be separately VAT registered if the total annual taxable turnover exceeds the statutory threshold; from the 1 April 2011, the threshold is £73,000. HM Revenue & Customs do not allow schools’ Private Funds to be disaggregated in order to keep each individual “fund” or accounts below the transaction threshold. Gift Aid for Charities
School charities (that is schools run by charities, charities associated with schools and charitable groups that support schools - for example, a charitable Parent Teacher Association) often find Gift Aid is an effective way of boosting funding. While many donations made to school charities are eligible for Gift Aid it often goes unclaimed as school charities are unaware of what they can claim or feel Gift Aid is too complicated. HM Revenue and Customs (HMRC) have published 'Gift Aid & Payroll Giving: a reference guide for school charities' to help school charities make the most of Gift Aid and Payroll Giving. It provides a summary of how Gift Aid and Payroll Giving work and which donations qualify including simple examples relating to funds received by school charities. More information can be found on the HMRC website here http://www.hmrc.gov.uk/charities/gift_aid/rules/school-charities.htm
Minimum cover The Governing Body is responsible for ensuring the school has adequate insurance cover. Where a Governing Body decides to arrange its own insurance for the school, it must demonstrate that it has obtained sufficient cover of the Council’s insurable interest consistent with the Council’s minimum requirements. In detail: 1. The cover must match the level of cover provided by the Council and the school must provide written confirmation of this to the Director of Finance, Resources and Customer Services (Insurance Manager). 2. The Council’s insurable interest is fully protected according to its specification. 3. A copy of the policy document is provided to the Director of Finance, Resources and Customer Services (Insurance Manager). 4. A copy of the renewal receipts is provided to the Council within 14 days of the policy renewal or inception. 5. The school’s insurer or broker provides written confirmation to give 21 days notice in writing of their intention to cancel or not renew the policy. If any notification is received this must be passed on to the Director of Finance, Resources and Customer Services (Insurance Manager).
Where the insurance cover arranged by the school fails to meet the Council’s required level, the Council will inform the Headteacher and advise on the required action. If appropriate action is not taken, the Council will take the necessary action to ensure that its interests are covered and will charge the school for any costs incurred.
CHARGING FOR SCHOOL TRIPS/JOURNEYS
General FR 11.1 All educational visits must be arranged according to the Requirements for Educational Visits 2006. The LA endorses and adopts the following DfE guidance, which should be considered, where appropriate, alongside the LA guidelines contained within that document: 1. ‘Health and Safety of Pupils on Educational Visits’ 1998 (HASPEV) 2. ‘Part 1 supplement: Standards for LEAs in Overseeing Educational Visits’ July 2002 3. ‘Part 2 supplement: Standards for Adventure’ July 2002 4. Part 3 supplement: A Handbook for Group Leaders’ July 2002 5. ‘Group Safety at Water Margins’ (DfES / CCPR) FR 11.2 All schools are required to develop their own Educational Visits Policy. The policy should be based on the DFE and LA guidance, and be adopted by the Governing Body. Education During School Hours No charge can be made for admitting pupils to maintained schools. Education provided during school hours must be free. This includes materials and equipment, and transport provided in school hours by the Local Authority (LA) or by the school to carry pupils between the school and an activity. “School hours” are those when the school is actually in session and do not include the break in the middle of the school day. It would be good practice for schools to make this information available to parents and others. All three- and four-year-olds are entitled to fifteen free hours of nursery education per week, for 38 weeks per year. A school’s governing body can also provide community services and facilities on the school’s premises (guidance is available in the Department of Education website) and set up a company in accordance with the powers for governing bodies set out in Section 11 of the Education Act 2002 Education Partly During School Hours Sometimes an activity may happen partly during and partly outside school hours. If most of the time spent on a non-residential activity occurs during school hours, that activity counts as taking place entirely in school hours and no charge may be made. (Time spent on travel only counts as being during school hours if the travel takes place during school hours.) As an example, a long-distance trip might involve much travel before and after normal school hours, but if the time spent at the destination fell mainly within school hours, the trip would count as happening in school time and be free of charge. By contrast, a trip that involved leaving school an hour or so earlier than usual in the afternoon, but then went on until quite late in the evening, would be classified as taking place outside school time. Charges would then be allowed.
Education Outside School Hours Parents can only be charged for activities that happen outside school hours when these activities are not a necessary part of the national curriculum or do not form part of the school’s basic curriculum for religious education. In addition, no charge can be made for activities that are an essential part of the syllabus for an approved examination (see paragraph on public examinations). Charges may be made for other activities that happen outside school hours if parents agree to pay. The Education Act 1996 describes activities that can be charged for as “optional extras”. It is up to the LA or governing body providing the activities to decide whether to make a charge.
Residential Activities FR 11.8 Special rules apply for residential activities. A trip counts as falling within school time if the number of school sessions missed by the pupils amounts to half or more of the number of half-days taken up by the activity. Each school day is normally divided into two sessions and each 24-hour period is divided into two half-days beginning at noon and at midnight. FR 11.09 If a residential activity takes place largely during school time, meets the requirements of the syllabus for a public examination, or is to do with the national curriculum or religious education, no charge may be made either for the education or for the cost of travel. However, charges can be made for board and lodging in these circumstances except for pupils whose parents are receiving: 1. 2. 3. 4. Income Support Income based Jobseeker’s Allowance; Support under Part 6 of the Immigration and Asylum Act 1999; Child Tax Credit (providing that they are not entitled to Working Tax Credit and have an annual income, assessed by Her Majesty’s Revenue and Customs, that does not exceed £15,860 (from HM Revenue Customs website) for the year 2011–12); 5. The guaranteed element of State Pension Credit. FR 11.10 The headteacher should advise all parents of the right to claim free activities if they are receiving these benefits.
RENTAL AGREEMENTS AND LEASING
Definition Where a school acquires the use of equipment and does not pay for it in full from the outset, but spreads the cost over a period of time, this arrangement constitutes a rental agreement or lease. Rental agreements tend to be for minor items of equipment, and the term lease is usually used for larger items, but in essence they are the arrangements are the same and in the following paragraphs, the term lease is used to describe both. Enfield Council adopts the definition of leases, in accordance with best accounting practice, as described in the Statement of Standard Accounting Practice (SSAP) number 21. This defines two main categories of leases - finance leases (including hire purchase) and operating leases.
FR 12.2 Schools should seek an opinion from the LA (Financial Management Team) before entering into any lease agreement. This should be done irrespective of any advice given by the leasing company on the nature of the lease. FR 12.3 A copy of any new lease agreement entered into must be sent into Yvonne Medlam, Assistant Head of Finance, Schools & Children’s Services, Civic Centre, Silver Street, Enfield, EN1 3DX, when requested. FR 12.4 FR 12.5 FR 12.6 Finance Lease A finance lease transfers substantially all the risks and rewards of ownership to the school. It is a form of borrowing and must not be entered into by schools. Although strictly the leased asset remains the property of the leasing company, in substance the school may be considered to have acquired the asset and financed the acquisition by obtaining a loan from the company. A finance lease usually involves payment by the school of the full cost of the asset together with a return on the finance provided by the company. It should be presumed that the risks and rewards of ownership transfer if, at the start of the lease, the present value of the minimum lease payments (including any initial payments) amounts to substantially all (normally 90% or more) of the fair value of the asset. The fair value is the price at which the asset could be exchanged with an independent third party less any grant receivable towards the purchase or use of the asset.
FR 12.7 FR 12.8
Operating Lease FR 12.10 An operating lease is any lease, which is not a finance lease. FR 12.11 This will have the character of a rental agreement, with the leasing company usually being responsible for the repairs and maintenance of the asset. Normally the period of the lease will be for substantially less than the useful economic life of the asset. FR 12.12 An operating lease is the only type of lease available to schools.
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Hire Purchase FR 12.13 A hire purchase agreement is similar in substance to a finance lease and must not be entered into by schools. The difference in law is that under a hire purchase agreement the school eventually become entitled to exercise an option to purchase the asset (under a leasing agreement the asset remains the property of the lease company). Council’s Loan Scheme as an alternative to Leasing FR 12.14 When a school is considering entering into a leasing arrangement, it should seek alternative quotes. In addition, the cost of funding the acquisition of the equipment by way of the Council’s Loan Scheme should also be considered. For further information on the Council’s Loan Scheme, please contact David Hunter, Finance Business Partner (SCS) Finance, Resources and Customer Services. FR 12.15 Further guidance has been provided by the DfE – see appendix 3, Tips on Leasing FR 12.16 The link to the website is: http://www.education.gov.uk/schools/adminandfinance/procurement/b0069801/b uying/mfds-photocopiers/types-of-leases
Schools’ Finance Manual – Financial Guidance
Schools’ Finance Manual – Financial Guidance
Financial Management and Responsibility
Responsibility The Governing Body is responsible for the financial management and control of the school’s budget. However, in order for the Governing Body and the school to function effectively, it is important that the decisions are taken by the appropriate people or bodies, and those people or bodies are given the appropriate authority. In order to assist in the planning of the school’s financial management, Appendix 5 shows the financial management cycle of schools in relation to the Council. Delegation of Authority In order to delegate authority to take such decisions, the Governing Body must establish a ‘schedule of delegated powers’, which is formally approved at a Governing Body meeting. The scheme should cover: 1. What authority is being delegated 2. To whom is it being delegated (a named sub-committee, the headteacher, the senior leadership team or other responsible officer) 3. What limits to the authority are there (values, timescales or specific areas) 4. What reporting arrangements are required for actions taken under delegated authority A draft scheme of delegation is attached at Appendix 6 for consideration.
A possible scenario would be: The Governing Body will: 1. Undertake the overall financial planning in line with the School Improvement Plan including the approval of the three-year expenditure plans. 2. Approve significant budget virements (over £x). 3. Consider audit reports and agree an action plan to meet recommendations. 4. Approve the charging policy for lettings and other income. 5. Authorise the disposal of assets with a value above £x. 6. Ensure there is a Register of Business Interests. 7. Consider the Finance Sub-Committee’s minutes. Undertake actions necessary to administer the bank account (authorise signatory lists etc.) The Finance Sub-Committee will: 1. Consider the three-year financial plans. 2. Approve budget virements up to the value of £xxx (Governing Body to decide limit). 3. Monitor and control the annual budget. 4. Consider the charging policy for lettings and other income. 5. Authorise the disposal of assets with a value above £xxx (Governing Body to decide limit). 6. Ensure there are adequate internal controls for the financial processes of the school, including banking arrangements.
Schools’ Finance Manual – Financial Guidance
The Headteacher will: 1. Prepare the three-year expenditure plans. 2. Prepare reports to Governing Body and Finance Sub-Committee for consideration and approval, including termly financial monitoring reports. 3. Prepare budget virement requests for consideration. 4. Approve budget virements up to the value of £x. 5. Consider audit reports and develop action plan to implement recommendations. 6. Develop / review the charging policy for lettings. 7. Review the Register of Business Interests. 8. Ensure the operation of the bank account is timely and accurate. 9. Ensure there are adequate controls on purchasing and procurement. 10. Ensure that assets are secure. The Bursar / Finance Officer will: 1. 2. 3. 4. 5. 6. FG 1.5 Update / maintain the School’s financial system. Monitor the expenditure against budget and report any variances. Produce financial reports as requested for the Headteacher. Ensure the cash flow of the school is adequate. Ensure that all CIS and VAT legislation is adhered to. Ensure that the internal controls in place are adhered to and make recommendations for changes.
Internal Controls There are a number of managerial processes that can and should be considered by the Governing Body to ensure that the risks of errors or of fraudulent activities are minimised. These are known as internal controls. Staff expertise The qualifications, skills and experience of those involved in the financial arrangements of the school are a vital part of the control system. The Governing Body should consider what sort of expertise is necessary for supporting Governors and the Headteacher in financial management. This could lead to additional training or updating skills, employing additional staff or buying in support. Segregation of Duties In order to reduce the risk of error or fraud, all financial transactions should not be able to be undertaken by one individual. This protects both the school and the individual concerned. The functions that should be separated are: 1. The authorisation of a transaction such as an order or payment. 2. The execution of a transaction such as the placing of an order, the receiving of goods or the charging of a fee. 3. The custody of assets or monitoring of services. 4. The recoding of transactions in the accounts.
It is acknowledged that it is not always possible (or appropriate) to allocate each of the tasks within a process to a separate individual. However, as long as the process is split between 2 or 3 staff and no individual can process the whole transaction on their own, this should be adequate. The Director of Finance, Resources and Customer Services (Audit and Risk Management) can advise on the segregation of duties, either as a request from the school or as part of their audit. Documentation All such procedures and practices should be documented so that, in periods of change or staff absence, continuity can be maintained. Such documents should include: 1. The schedule of delegated authority from the Governing Body. 2. Manuals such as the RM Finance manual or other Finance Software manual. 3. Backup procedures for the computer system etc. 4. Instructions on the completion of VAT Returns. 5. Year end procedures.
Register of Business Interests A Register of Pecuniary Interests of all governors and staff with financial responsibilities must be maintained and updated at least annually. It should be made available for inspection by the Council, governors, auditors and OfSTED Inspectors as necessary. The register must record the business and pecuniary interests and other personal interests of the individuals and can be used to demonstrate that decisions taken have been made solely on their own merit. All governors, the Headteacher and other staff who influence financial decisions at the school are required to complete the register. The register must include all pecuniary interests such as directorships, major share holdings and other appointments of influence within a business or other organisation, which may have business with the school. The disclosure should also include the business interests of immediate family. The register must be kept up to date, especially when new staff or Governors start. There should be a process for individuals to update the register and an annual review of the whole document. Where an individual has no interests to declare, a nil return must be made. If an individual has more than one interest, separate entries can be made. Governors, staff, parents and the Council must make the register available for examination. However, the information is sensitive and therefore the register must be kept in a secure location and the Governing Body should decide under what circumstances interested parties may inspect the register. A suggested format for the register is attached at Appendix 7.
Disputes There is no specific mechanism for complaining about breaches of the Code of Practice on Local Education Authority – School relations. However, the Secretary of State has powers to determine disputes between Local Education Authorities and Governing Bodies, to prevent Authorities or governing bodies from acting unreasonably in relation to their education functions, and to secure that Authorities adequately perform their education functions. Financial Records and the Local Accounting System The Governing Body is required to ensure that the school maintains an adequate local accounting system on an approved accounting package. The Council supports the use of RM Finance, Pearson Phoenix E1 or Capita FMS Sims via the Finance Service Level Agreement. However, schools can use other systems if the Governing Body wishes. In this instance, the Director of Finance, Resources and Customer Services (Financial Management) needs to be confident that the system being used is technically compatible with the Council’s software and is adequate in providing t the information required during the year and at the year end. Please contact the Director of Finance, Resources and Customer Services (Financial Management) if you require individual advice on any aspect of the system. The records held at the school are deemed to be the prime accounting records of the Local Council. This means that the local system at the school and all the documents held by the school are part of the Council’s accounts. They are subject to the same inspection conditions, i.e. they can be inspected by the Director of Finance, Resources and Customer Services, the external auditors appointed by the Council, auditors of grant funding organisations, HM Revenue & Customs and, if requested through the appropriate channels, by members of the public. Therefore, it is very important that these records are kept in line with the Council’s accounting practices. Various procedural notes and guidance (including training or briefings) are provided to school staff to update them on the accounting requirements and any changes being implemented. The computerised financial records must be regularly backed up (at least monthly). The backup information should be regularly tested (annually or when there has been a change in hardware or software) to ensure that the information could be retrieved. The period end back up should be tested each month. It is important to ensure that the backup data is physically located away from the computer system so that, if anything were to happen to that system, the backup would be available to use. A duplicate copy should also be stored off site. Financial record storage The Headteacher needs to ensure that prime financial documents and other supporting records are filed and stored in an accessible way. When records are no longer in day-to-day use, they should be placed in storage boxes or files clearly labelled to describe the contents, the financial period and a date for destruction. They must also be available for inspection if the need arises. Prime documents include: paid invoices; copies of accounts raised; bank statements; copies of receipts; paid (returned) cheques; paying-in books and a complete record of transactions for each year from the computerised accounting system. Other supporting records include official orders, hiring records and school meal records.
The regulations to this section reflect provisions in law to retain accounting records. For example, a HM Revenue & Customs investigation may require detailed records dating back several years. Records should also be available to auditors or other officials and inspectors who may wish to examine them. Another example of the use of historical records is during an investigation of suspected fraud or financial irregularity. The extent of any suspected fraud is assessed by investigating primary documentation over a number of years. Financial records (orders, invoices etc.) must be kept for the period stated in the retention of documents policy of the Council shown in Appendix 1. The Governing Body needs to ensure that they can be made available for inspection, should the need arise. This does not mean that historic data has to be instantly available but that it can be made available in a reasonable space of time. Internal Audit The Director of Finance, Resources and Customer Services has an internal audit function carried out by the Audit and Risk Management Division. They carry out regular compliance audits of all schools to ensure that adequate systems of control are in place and are being adhered to. A review of the internal financial controls of all schools within the Authority will be carried out on a regular basis. The frequency of audits will be dependant on risk: • Schools perceived to pose a greater risk will be subject to more regular audits focusing on the risks identified. • Schools assessed as low risk will be selected on a sample basis for audit each year. Any audit will be light touch and will include an audit of the information submitted to the Council. All schools should receive some form of internal audit coverage at least once every four years. The scope and timing of each school’s audit will be discussed and cleared with the headteacher or other nominated person prior to the issue of the final report. The Governing Body should view an audit as a tool to help them improve the financial controls of the school. The audit report produced at the end of the audit will provide an evaluation of the current controls and, possibly, a list of improvements that should be implemented. It will also categorise the potential risks related to any weaknesses identified. In addition to the audit carried out by the Director of Finance, Resources and Customer Services (Audit and Risk Management), the Governing Body can arrange for independent auditors to undertake audits or to assist in the preparation of the financial accounts. Accounting Principles The Council maintains the accounts on an accruals basis, which means that the figures in the accounts in respect of expenditure relate to goods and services supplied during the year, whether the actual invoices have been paid or not, and in respect of income relates to monies due to be received in the year, whether or not the money has actually been received. In practice, this means that for the majority of the year, the Council’s accounts are kept on a cash basis but, at the year end, an exercise is undertaken to identify any
goods and services that have been received but have not yet been paid for or income due but not yet received. The exercise also identifies payments made in advance where the service has not been delivered by 31st March. These transactions are known as accruals and prepayments or creditor and debtor reserves. FG 1.31 It is important to decide the de minimus level for creditor and debtor reserves. The general rule is that there should be no reserves made for small items (under £500) unless there is a significant impact on a budget area if the reserve is not done. For example, a reserve of £200 on an agency budget may not be seen as significant but the same value may be significant in relation to a specific learning resources budget. The accounting treatment for extended school services requires careful consideration, depending on the purpose of the activities. In deciding the extent to which the costs of activities are met from the schools budget share, a distinction needs to be made between those that are aimed at achieving an educational benefit for pupils and even their parents and those that are provided for the community. Funding from the school’s budget share can only be used on activities aimed at producing an educational benefit. Activities aimed at providing a community benefit must be funded from charging for the services or grant from the Authority. This distinction is also important for the purposes of reporting expenditure and income via the Consistent Financial Reporting (CFR) framework. The following section provides guidance to assist in the assessment of how services are accounted for. From April 2006, schools have the power to use their delegated budget or “Budget share” that they receive from their local authority for the “Purposes of the school”. The term “purposes of the school”, as per DFE guidance, may be taken to include all activities that bring an educational benefit to the pupils registered at the school. Provision of community facilities and community activities are not for the “purposes of the school” and are therefore not eligible for funding from the school’s delegated budget. Whistle blowing Schools and their local authorities are covered by the public Interest Disclosure Act 1998. To quote from the Act itself, it is: “An Act to protect individuals who make certain disclosures in the public interest; to allow such individuals to bring action in respect of victimisation; and for connected purposes,” Following on from the Act, each LA has developed its own Whistle Blowing policy to provide protection for individuals who disclose malpractice and wrongdoing. This policy will apply to schools and it is recommended for the governing body to consider the Council’s policy as shown in Appendix 28 and endorse procedures for school staff and ensure its staff are made aware of its existence. In particular, they should be made aware of: 1. The categories of staff to whom the protection is available. 2. The areas of malpractice and wrongdoing that are covered. 3. The routes available within the LA for raising issues.
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FG 1.33 FG 1.34 FG 1.35
Malpractice and Wrongdoing will include the following: Any unlawful act, whether criminal or a breach of civil law. Mal-administration, as defined by the Local Government Ombudsman. Breach of any statutory Code of Practice. Breach of or failure to implement or comply with Financial Regulations or Contract Procedure Rules. 5. Any failure to comply with appropriate professional standards. 6. Fraud, corruption or dishonesty. 7. Actions, which are likely to cause physical danger to any person, or to give rise to a risk of significant damage to property. 8. Loss of income to the school. 9. Abuse of power, or the use of the school’s powers and authority for any unauthorised or ulterior purpose. 10. Discrimination in employment or the provision of education. 11. Any other matter you consider you cannot raise by any other procedure. Further information can be sought from, John Austin, Assistant Director, Corporate Governance on 020 8379-4094. 1. 2. 3. 4.
The Governing Body and the staff employed by the school have a duty to ensure that the public funds held by the school are used in an appropriate manner. If a body or an individual thinks that there may be an issue, they have a duty to inform the Director of Finance, Resources and Customer Services (Audit and Risk Management). All information will be treated seriously and in confidence. Federated Governing Bodies If more than one school is “federated” under one governing body then the degree of federation must be determined. There are two types of federation – a “soft” federation, which is collaboration between schools, or a “hard” federation, which is a joint governing body. The two budgets are the responsibility of the one governing body. The Governing Body may spend money across the two schools but audit trails must ensure that one school was not being treated unfairly. A separate set of annual accounts must be produced for each school. The Governing body must lay out rules in advance, as to how the ownership of resources might be allocated. They must also detail in advance how the “federation” of Governors might be dissolved if this becomes necessary at a future time. Charitable Status for Schools All voluntary aided, foundation and foundation special schools are exempt charities. They are automatically classed as charities without needing to apply for charitable status. If a school has exempt charitable status then they may carry out activities to raise funds. No further registration with the Charity Commission is necessary. Community schools and community special schools cannot be classified as charities or apply for charitable status.
A school which is not eligible for charitable status may set up a charitable institution in order to legally raise funds of more than £5,000 a year. This institution would be regarded as a separate legal entity and can be administered by the parent teacher association or the governing body. Gift Aid for Charities
HM Revenue and Customs (HMRC) have published 'Gift Aid & Payroll Giving: a reference guide for school charities' to help school charities make the most of Gift Aid and Payroll Giving. It provides a summary of how Gift Aid and Payroll Giving work and which donations qualify including simple examples relating to funds received by school charities. See also FR9.14 Academies Schools may decide to transfer to academy status and if they do, there are a number of financial implications which must be dealt with. Once the decision to become an academy has been agreed by the Governors, the Finance, Resources and Customer Services Department (FMS) must be notified. The school's financial accounts must be closed in the same way as at the end of a financial year and the closing balance determined. As the school will no longer exist after the date of transfer and there will be will be no school employees, the work necessary to close the financial accounts will be undertaken by staff from Finance, Resources and Customer Services (FMS). In practice, the former school staff are very likely to be employed by the new academy and in the transfers so far, have given full cooperation in the closedown process. A timetable of events must be agreed with FMS staff to facilitate a smooth transfer to academy status. The following financial issues must be addressed: 1. Has the school an outstanding loan? If so, arrangements must be made to transfer the outstanding balance to the YPLA /Education Funding Agency, 2. All direct debits must be cancelled. The services provided may be taken over by the academy, but this would require payments from their bank account, 3. Consider continuation of any traded services and seek costings for the service to be provided to the academy. Charges to academies are slightly different to the charges made to schools, 4. Does the school receive an annual advance? If so, then the budget share received for the period after the date of transfer up to the end of the financial year needs to be calculated and returned to the Authority, 5. Does the school have any leases? If so, consideration needs to be given to whether or not these will transfer to the academy. If not, then the leases must be terminated with the cost of settlement being charged to the school, 6. VAT implications. The balance of VAT either owing to or from the Authority must be determined and an adjustment made, 7. FMS staff needed to be allowed access to school financial systems if required,
FG 1.46 FG 1.47
FG 1.48 FG 1.49
8. The Payroll Service need to be advised of the transfer because of the different pensions arrangements which apply to academy staff in the Local Government Pension Scheme, 9. Arrangements must be made for processing all outstanding items after the school's closure, 10. From the date of transfer, the members of staff who operated the bank account are no longer employed by the school and so do not have authority to operate the school's bank account, The signatories to the school's bank account must write to their bankers at least four weeks before the date of transfer advising them of the new signatories for operating the bank account who will be three Council employees from FMS, 11. Once the end of year balance has been determined by FMS staff, arrangements will be made to transfer any surplus or invoice for any deficit to the academy, 12. FMS staff will close the school bank account after the final payment has been actioned, 13. Under the arrangements for transferring to academy status, the Academy should store all financial records for the school for the year of transfer, plus the preceding six financial years. Council staff will be allowed to access the financial records of the former school if necessary during this period.
Financial Planning and Monitoring Principles
Background The purpose of financial planning is to align the school’s resources to its educational priorities as set out in the School improvement Plan. It is a check to ensure that the school has the resources available to meet its targets. It then becomes a benchmark in terms of the expenditure being made through the year. The focus of the budget setting exercise should be the aims and objectives of the school rather than a simple incremental process from one year to the next. If this is done successfully, it can become a useful tool for the Governing Body to assess whether requests for additional expenditure are in line with the School Improvement Plan and, if agreed, the outcomes of the investment can be measured. Budgeting Tools and Benchmarking The Council provides a Benchmarking Publication for Enfield schools that compares the amounts spent on the major expenditure headings of each school. The Headteacher and Governors can use this document to provide an indication of how their decisions compare to those in similar schools. The introduction of Consistent Financial Reporting will enhance the use of benchmarking information. The Council will continue to provide financial benchmarking information and in addition the Audit Commission website contains data from every school in the country. Schools are able to access it and make comparisons. OfSTED and the Audit Commission also produce tools and guidance that can help the Governing Body set the strategy of financial decision-making in the school. “Keeping Your Balance” provides guidance on how a school can operate its financial administration and control. It is available from OfSTED or can be downloaded from their website. The diagnostic software “Finances Self Evaluation Tool” goes into greater detail and helps the Governing Body to assess the robustness of the school’s financial controls and management. It scores various aspects of the procedures and provides an action plan to make improvements. It can be found on the Audit Commission website.
The Director of Finance, Resources and Customer Services (Financial Management) has developed a three-year budgeting tool, which enables schools to: 1. Calculate and profile salaries using comprehensive spreadsheets. 2. Set up and maintain the school’s three year financial plans using the Consistent Financial Reporting structure and enable schools to plan effectively for three years. 3. Produce mandatory returns i.e. three year income and expenditure plans and quarterly returns. 4. Monitor the Budgets. 5. Project income figures based on changes in pupil numbers. 6. Incorporate costings based on the School Improvement Plan into the budgets. 7. Provide graphical illustrations of key expenditure. A copy of the Three Year Strategic Financial Planning and Monitoring tool is sent to all schools with the Schools’ Budget Information each year in early March.
FG 2.8 FG 2.9
The Payroll Monthly report provides a detailed breakdown of the payment made to staff in the preceding month. The Payroll Monitoring tool provides a link between the Three Year Strategic Financial Planning and Monitoring Tool and the Council’s Payroll report. The Three Year Strategic Financial Planning and Monitoring Tool projects staffing figures into the monitoring report on a monthly basis. Once the Payroll Monthly report has been received, the information is transferred into the Payroll Monitoring tool to provide a comparison between the estimated figures and the actual amounts paid to staff. Variance figures are then reported which can be investigated as necessary. Budget Preparation and Three-Year Expenditure Plans The purpose of the three-year expenditure plan is to budget for all of the resources available to the school, and to plan how those resources are to be spent. It should link to the School Improvement Plan and the medium term plan. Three-Year Expenditure Plans Schools are required to set three year expenditure plans. The plan must be updated annually. The objective of the three-year expenditure planning is to enable the school to take a longer-term view of its development including the phasing of school development priorities. The first year of the plan is the working budget for the year ahead. In this context it is important that the plan for the first year is as accurate as possible as it will be the basis for budget monitoring and control. The accuracy of the plan for the second year and, in particular for the third year, for which less firm information is available, is likely to be lower. The expenditure plan must be submitted in the format provided by the council electronically and with a signed hard copy.
Resources Available The school will be allocated resources from various sources, the main one being the delegated budget from the Council. This is based on various factors including the number and age of pupils, the makeup of the school population and the size of the school. School Budget Shares are published in early March. As this is dependent on the correct information on pupil numbers etc. being available on time, it may be necessary to issue subsequent amendments if there are delays or errors in the submission of the PLASC returns by schools in January. Other resources available include direct government grants. These are now much fewer in number than previously as the former grants have been “mainstreamed” into school budget shares. There are also sources of funding generated at the school, such as income from lettings etc. and contributions from the PTA or individuals. Finally, a further resource available would be the under spend from the previous year, which would include the unspent balances of grants allowed to be carried over and Devolved Formula Capital allocations. The budget should be prepared on the financial year and should be on an accruals basis, i.e. that goods and services received in that year are chargeable, whether the actual cash is likely to be paid in that year or the next. DELEGATION TO NEW SCHOOLS, EXPANDING AND AMALGAMATING SCHOOLS For the purposes of the Scheme for Financing Schools, the term new school includes an amalgamation of two different schools but not a consolidation onto one site of an existing school. 1. 1.1 New School The Council will determine a provision for start up costs for the governing body of a new school prior to the school first admitting pupils. The amount will be sufficient to fund some employee related costs, provision for books and non-capital equipment and other running costs. The extent of the funding delegated will be determined by the individual circumstances of the new school. A new school will receive a delegated budget not later than the date on which it opens (i.e. the date on which it first admits pupils) unless the Council obtains the Secretary of State’s approval to a postponement beyond that date. Such permission will only be given in exceptional circumstances.
FR 2.16 FG 2.17
2. Amalgamation of two schools 2.1 When two schools amalgamate, the amalgamated school will receive one block allocation through the local funding formula. In addition to this, the amalgamated school will receive budget protection for the first three full years following amalgamation. The table below provides details of the protection the school will receive. Years 1 and 2 3 . 3 3.1 Protection An additional block allocation 50% of an additional block allocation
Funding for Pupil Numbers for New and Expanding Schools New Schools New schools would receive funding for the estimated numbers of pupils due to start during the financial year. The funding would be based on the AWPU and calculated from when the pupils are due to start and not be subject to a re-determination. Temporary and permanent expansion When there is an agreed expansion with the Council of a school or year group then the school will receive for: Permanent expansion of the school: Year 1: Funding of 7/12th of the AWPU funding for the agreed number of projected pupil numbers from the start of the academic year. Year 2: 5/12th of the AWPU funding for the difference in the number of additional pupils recorded on PLASC and the number of projected pupils agreed with the Council. Temporary expansion for a year group: Year 1: AWPU funding for agreed number of projected pupil numbers from the start date to the end of the financial year. Year 2: AWPU funding for the difference in the number of additional pupils recorded on PLASC and the number of projected pupils agreed with the Council. Year 3: If the pupil numbers recorded on January PLASC are below 20 then the school would be funded for the difference between 20 and the number of pupils recorded on PLASC. Year 4: If the pupil numbers recorded on January PLASC are below 15 then the school would be funded for the difference between 15 and the number of pupils recorded on PLASC.
Expenditure As the main expenditure of a school is the cost of it’s staffing, this is the area where the most detailed budget calculations should be undertaken. In order to facilitate this, the Council provides a printed salary ready reckoner as part of the budget pack. This details the costs of staff on specific grades, including overheads such as NI and Superannuation, for teaching and non-teaching staff. In addition, the Director of Finance, Resources and Customer Services (Financial Management) offer a salary spreadsheet calculator as part of the Finance Service Level Agreement.
The Governing Body should not set a deficit budget i.e. a budget where the planned expenditure exceeds the total resources available. However, there may be a time when the Governing Body feels that it needs to for a specific reason. Providing a school does not have an accumulated deficit 31st March, it is possible to plan for a deficit budget over a three-year period. For primary and special this is up to a maximum of £50,000. The limit for Secondary schools is £100,000. This is over a three-year period i.e. by the end of the third year the school will have a surplus to carry forward. If the Governing Body wishes to have a deficit for a longer period than three years, or it wishes to exceed these limits, it must inform the Director of Finance, Resources and Customer Services (Financial Management) as soon as is practical. The school should keep a small contingency available for unexpected items of expenditure that may arise during the year. In addition to this, the school can ‘save up’ resources in order to fund large projects, such as major repairs or improvements. However, if the balance exceeds 5% of the budget share for secondary schools and 8% for primary and special schools, the Governing Body will be required to report to the Council on the proposed use of the balances being carried forward at the year-end. Preparing the Budget There are two main approaches that can be used to prepare the budget. The first is known as an incremental budget. This is where the existing budget for the current year is costed for the new year, using new pay rates, inflation rates and any other known pricing changes. It shows how much it will cost in the new year to operate the school at the existing staffing levels etc. This approach will then give you a “gap” (surplus or deficit) in resources, which can assist the Governing Body to decide what changes could or should be implemented. The other approach is to adopt a zero base budget approach. This is where each activity in the school is analysed in detail to determine what resources are needed. Both options have advantages. The first is relatively easy to undertake and, because it uses existing policies, is easier to justify. The second is harder to undertake but, if done properly, questions the use of all available resources to ensure that all expenditure is necessary and in line with the School Improvement Plan. In practice, it is sensible to use a mixture of the two. Where a more stringent analysis is required, the zero base budget option is better but where the budgets are small or the budget area is non controversial, the incremental method could be used. In this way, the whole budget could be examined in detail over a period of time.
FG 2.26 FG 2.27
Once the budget has been set, a comparison should be made between the income for the year and the expenditure planned for the year. If the expenditure exceeds the income, this means that balances brought forward from the previous year will need to be used to fund some of that expenditure. Whilst this in itself is not a problem, it may indicate a longer-term issue in that the on-going effects of the expenditure plan are not sustainable, as the school’s balances will eventually run out. In this situation further investigation is required to identify the reasons for the funding shortfall. Potential reasons for the expenditure budget to exceed the income budget may include, for example, one-off expenditure planned for the year such as one-off purchases or major repairs. A record should be kept of any assumptions that have been made in setting the budget. This will help when looking back at how the budget is made up and will be essential when you undertake budget monitoring during the year. There is a set format for the three year financial plans return to be made to the Council. It is therefore recommended that this format be used for the preparation of the budget. The template to be used for the return is shown in Appendix 2. Budgetary Monitoring and Control Once the budget has been set, it is essential that all expenditure and income be monitored against it. This allows the Governing Body to measure financial performance and take remedial action where necessary. Detailed monitoring would normally be delegated to the Headteacher, who should then provide termly updates to the Finance Sub-Committee. The format of the report should include the subjective headings (teacher salaries, wages etc.) and show the budget, the expenditure to date, the projected expenditure for the year and a variance between the budget and projected actual. Where there are variances, the Headteacher should report why they have occurred and possible actions that could be taken (budget virements or changes to the expenditure plan). The Council has instigated a financial monitoring framework for schools. The framework is designed around the quarterly returns to be made to the Council but it should also be used for the school’s internal monitoring. A financial monitoring return is attached in Appendix 4. There are a number of columns that need completing. 1. Original Budget – This is the budget as set by the Governing Body and these figures will not change throughout the year. 2. Latest Budget – This is the latest budget agreed by the Finance SubCommittee, including any virements agreed by Governors or the Headteacher since the Original Budget was set. 3. Actual to Date – This is the expenditure and income that has been spent or received up to the end of the period. It can be recorded in cash terms (how much has been physically paid out or received to date) or on an accruals basis (the goods and services and income due received during the period).
4. Projected Outturn – This is the amount that you are predicting will be spent at the end of the financial year. This is the critical column, as it will highlight any changes between the budget and what is actually happening. FG 2.35 How to calculate the projected outturn figures: 1. Salaries and Wages - This is probably the most straightforward budget to monitor and it is also the most important. As stated before, you should keep the budget assumptions made when the budget was set. This would include the detailed salary calculations. By considering any staff movements (starters and leavers) plus any other changes such as promotions, you should be able to revise the forecast. Other factors to consider would include the supply budget and the predictions for staff cover and sickness. Has the expenditure been in line with those initial predictions and does current knowledge indicate any changes in the foreseeable future? 2. Other Headings - When predicting the outturn, you should examine the actual to date, as this will help to show what is currently happening. Then, you can use it to help to predict the projected outturn figure. One simplistic approach is to assume that the spending on the particular budget is constant throughout the year. This would mean that, if you had spent £1,000 in the first quarter, you would spend £4,000 in a full year. This is acceptable for some small budgets but it is unlikely that many budgets can be predicted that way. Alternatively, you should consider the expenditure profile of the individual budget headings. The expenditure profile shows a predicted pattern of expenditure throughout the year. For example, the rates bill may be paid in full at one date whereas the energy expenditure would be spread over the year (although not uniformly). With this profile in mind, the actual to date can give you an indication as to whether the predicted outturn is in line with the budget. FG 2.36 Once the projected outturn for the whole school’s budget is completed, the overall financial position of the school can be seen. This may indicate that actions are required, either to address a problem being predicted, or to use resources that are now available. If the Governing Body or the Finance Sub-Committee needs to make any decisions, the Headteacher should attach a briefing note to the schedule to provide options for the Governors to consider, with recommendations where appropriate. A potential course of action is to approve a virement. This is a movement of funding from one budget area to another. The person /body who needs to take the decision to make the virement would depend on the Scheme of Delegation and the limits of authority within it. Any such virements would change the latest budget figures for the following quarter. The current report would show the position before the virement had been approved.
Some useful questions when undertaking the financial monitoring would include: 1. Have any contracts or service agreements been entered into that have not been recorded in the system? 2. Has any member of staff been appointed who has not started yet? 3. Is a member of staff leaving later in the year? 4. Are there pay awards or other price increases due to happen during the year?
Some potential reasons for variances on budgets would be: 1. Price increases or decreases not allowed for in your budget 2. Volume or workload changes 3. Unforeseen events such as changes in grant allocations, repair and maintenance work etc.
Deficit Budgets A deficit budget occurs when the expenditure for the year exceeds the total resources available to the school. It can occur at the start of the year when the Governing Body is setting the budget or it can happen during the year due to an issue or a series of issues that require additional expenditure. If this happens, the Governing Body should decide whether the deficit is going to be within the licensed deficit limits (up to £50,000 for a Primary or Special school, up to £100,000 for a Secondary school, over a period of 3 years). If it is not, the Governing Body must inform the Director of Finance, Resources and Customer Services (Financial Management) as soon as possible. School Loan Scheme The Council’s Scheme for Financing Schools provides for Governing Bodies to submit requests to the Council for a loan to be repaid over an agreed period not exceeding ten years. Schools may borrow up to 10% of their delegated budgets from the Council. Interest will be fixed at the start of the loan. It is envisaged that loans will only be made in exceptional circumstances where it is clear that the Governing Body is not in a position to meet the cost of essential and urgent work from its accumulated balances. The exceptional circumstances are defined as: 1. Major building investments that are consistent with the asset management plan or an agreed priority for capital expenditure; 2. Works to support the achievement of objectives as identified in the School Improvement Plan; 3. Or essential works to comply with legislative/regulatory requirements.
FG 2.44 FG 2.45
Schools seeking a loan would be required to submit: 1. A letter from the Chair of Governors setting out plans for which a loan is sought and how this contributes to the school’s improvement plan; 2. A demonstration that the school would be able to make the loan repayments over the period of the loan from within its financial resources. 3. A commitment from the Governing Body that the loan repayment may be made by way of a deduction from the school’s budget share.
The Director of Schools & Children’s Services will decide if any of the exceptional circumstances for giving loans apply. If this is the case, the Director of Finance, Resources and Customer Services (Financial Management) will review the school’s financial position, taking into account the accumulated balance of the school, the schools spending plans and the schools ability to repay the loan. Any loan granted under £250,000 will be subject to the approval of the Director of Finance, Resources and Customer Services under the Council’s delegated decision making procedures. Loans over £250,000 are a Key Decision of the Council. Under this process advance public notification of the proposal to give a loan needs to be given. The agreement to grant a loan can be in advance of the need for the money, with the actual payment of the loan delayed until such times as the school’s bank account is about to go into deficit. The Council will need at least 7 working days notice in order to make the loan payment to the school. Interest will be payable from the date the loan is advanced, based on the latest available investment rate if the Council were to invest the money on the London money market for the period of the loan. A written agreement between the Council and Governing Body of the school will be required, setting out the terms for the granting and repayment of the loan. Loans will be limited so that the total amount outstanding from schools under all loan agreements at any one time does not exceed 20% of the value of all school balances at the end of the previous year. Separate Bank Accounts If a school does decide to set up a separate bank accounts for extended school activities, they will need to issue invoices and pay by cheque for services supplied, maintain separate accounting records that reconcile to the bank account and merge the accounts into the year-end CFR return. A separate bank is not considered to be necessary. Where the services are run by the governing body as distinct from the school, a separate account must be set up as the governing body is a separate legal entity.
FG 2.49 FG 2.50
Financial Reporting to the Governing Body As stated previously, the Governing Body is responsible for the financial management of the school, although it would usually delegate certain tasks to officers in the school and to sub-committees. It is therefore essential that the Governing Body receive regular reports on these financial matters. The reports that it receives will depend on the level and nature of delegation that is in place. However, a typical Governing Body would receive the following reports on at least an annual basis: 1. 2. 3. 4. 5. 6. 7. Medium term plan Annual financial plan Quarterly financial monitoring reports Virements Disposed assets Debts written off Audit reports and action plans
In addition to the above, the Headteacher should provide budget-monitoring reports to the finance committee at least once a term. These should show any significant variances against the budget with explanatory notes and, where necessary, remedial action plans including virements. FG 3.3 Financial Reporting to the Council There are a number of returns that must be sent to the Council. detailed below: These are
The Three-Year Financial Plans The Governing Body should schedule a meeting to discuss and agree the threeyear expenditure plans in time to sign it off and return it to the Council by the summer half term. If this is not practical, an electronic copy and a hard copy of the three-year expenditure plans clearly labelled “DRAFT” should be sent to the Council by the due date. Then, as soon as it is agreed, the signed three-year financial plans should be sent. The format of the return is based on the Consistent Financial Reporting (CFR) framework. The Council supplies, with the budget information, a spreadsheet to aid and assist the detailed planning of the budget and the production of the return. Financial Monitoring The three-year financial plans spreadsheet also includes the quarterly monitoring sheets that need to be completed and returned to the Council. Again, governor meetings should be scheduled so that this item can be discussed before the return deadline. Bank Reconciliation At the same time as the financial monitoring return, the school must return a statement showing the reconciliation of the school’s bank account to its local accounting system.
VAT return The Council requires this information monthly in order to make a return to HM Revenue & Customs on the VAT implications of the whole Council’s income and expenditure. As stated in the VAT chapter, the Council can claim back VAT that it has paid out in the period, netted down by the amount of VAT that it has received in that period. Usually, a financial computer system will be able to generate a report that will give all of the information required. As a guide, however, Appendix 8 shows a copy of a report from RM Finance. The return must show input and output tax separately, and differentiate between the various tax rates. The information from the schools’ financial software must be used to complete the electronic VAT return shown in appendix 8. The electronic copy of the monthly VAT return must be submitted by the 22nd of the following month in the format specified, together with a bank reconciliation statement to Education Financial Management Services. For more details, please refer to the VAT Section. Year End At the year-end, the school’s accounts must be incorporated into the Council’s account so that it can fulfil its various financial responsibilities, such as producing the published accounts and the various returns to Government Departments. The DFE also requires the information for Consistent Financial Reporting (CFR). In order to make the process as simple as possible, the Council uses the information on the CFR return as input to its financial system (SAP). Once the school’s financial system has been finalised for the year, one return will be required from it, based on the CFR accounting structure and will need to be in an electronic format. Supplementary information will be requested in the letter advising schools of the year end procedures in order to provide more detailed information than is included in the CFR return. For those schools using RM Finance, software to collect this data is provided. For other schools, alternative arrangements will need to be made from their accounting systems. As the accounts need to be recorded on an accrual basis and not on a cash basis, creditor and debtor reserves need to be completed in the school system. A copy of the creditor and debtor reserves report needs to be signed by the Headteacher and sent to the Council. A subset of creditors and debtors information showing money owed to or by the Council should also be sent. A report from the school’s financial system, showing the supplier name, the CFR budget heading, the type of accrual i.e. debtor or creditor, prepayment or receipts in advance and the amount must be submitted at the preparation of final accounts. Schools must write to their bank in March each year giving them the authority to respond to a written request from the Council’s external auditors to provide information on the school’s year-end bank balance. Where any other information is required by the Council to complete its year-end accounts or to substantiate grant claims, information requests will be circulated to schools as appropriate.
Use of school balances The Director of Schools & Children’s Services in line with Audit Commission guidelines, requires Governing Bodies to report on the intended use of balances where the total accumulated balances exceed 5% of that financial year’s budget share for a secondary school and 8% for a primary school. The statement should identify: 1. The purpose for which the governing body has allocated the balances e.g. staffing, learning resources, building maintenance & improvement, specified planned developments, contingency and/or any other use. 2. How these financial plans link with the School Improvement Plan and identified school priorities. 3. How much of the balance will be spent on each of the above areas of expenditure. 4. The year, in which the balance will be used, including the current year. 5. The forecasted balance for the following year-end.
The return must be made to the Director of Schools & Children’s Services (Resources Development Manager) by the end of the Summer Term. It can be sent as a hard copy or in electronic format. The criteria for retaining balances of 5% or more for secondary schools and 8% or more for primary and special schools is as follows: 1. To support prior year financial commitments that have not been charged to the accounts by the preceding 31st March.. 2. To fund specific purposes as assigned by the Governing Body and permitted by the Authority, as detailed below, which the Authority is satisfied are properly assigned. To count as properly assigned, amounts must not be retained beyond the period stipulated for the purpose in question without the consent of the Authority. This provision is intended to ensure that schools can build up reserves towards particular projects but cannot defer implementation indefinitely.
Balances Assigned for Specific Purposes Schools may declare balances to be assigned for specific purposes only within the permitted categories given below. Such declarations must be set out in the minutes of the governing body and information on such declarations given to the Authority in a format determined by the Authority. The Authority may take such steps as appropriate to determine that such declarations are properly assigned. Permitted Categories 1. For a maximum of three years* - a reserve to finance planned capital works for the purposes of the school, as set out in the school improvement plan. 2. For a maximum of three years* - a reserve to finance planned replacement of equipment/purchase of new equipment, as set out in the school improvement plan. 3. •For a maximum of two years* - a reserve to finance planned building repairs and maintenance, as set out in the annual maintenance plan. 4. For a maximum of two years* - a reserve to enable the school to maintain staffing levels in the short/medium term in the face of changing rolls, as set out in the school improvement plan.
Within each permitted category, the commencement of the time period indicated will be deemed to be the date of the appropriate declaration in the minutes of the governing body.
For balances held as at 31st March 2012 and subsequent two years: Schools with balances above the 8% and 5% threshold would be required to provide information on the use of balances against the criteria for retaining balances as detailed in the Scheme for Financing Schools 2011-12, to the Authority by the date specified by the Authority. Any balances above the percentages stated in the table below would be recycled:
Sector Upper Limit as at 31/03/12 Upper Limit as at 31/03/13 Upper Limit as at 31/03/14
Primary Secondary Special FG 3.23
11% 6% 11%
10% 5.5% 10%
9% 5% 9%
If a school needs to retain balances above these upper limits then the Governing Body would be required to seek the written permission of the Authority in the first half of the Spring term preceding the end of the financial year to retain any balances above the upper limit. Control of surplus balances The Authority shall calculate each year the surplus balance, if any, held by each school as at the preceding 31 March. For this purpose, the balance will be recurrent balance category as defined in the Consistent Financial Reporting Framework. Then the prior years commitments as reported by the school shall be deducted from the calculated surplus balance. This relates solely to financial commitments that the school has entered into prior to the end of the financial year, e.g. placed an order, but the goods or services were not received by 31st March and so no invoice has been paid, nor an accrual raised. Then the amount assigned for specific purposes as reported by the school and permitted by the Authority (as detailed above) shall be deducted from the calculated surplus balances. If the result of steps FG 3.24 to FG 3.26 above is that the school has surplus balances of more than 5% of the current year’s budget share, in the case of secondary schools, or 8% of the current year’s budget share, in the case of primary and special schools, then the amount above these thresholds will be deducted from the current year’s budget share. If the school does not send in their information on surplus balances as required under this Scheme and does not provide the authority with any reason for not providing the information then, in the case of a secondary school, any balance above 5% and, in the case of primary or special school, any balance above 8%, shall be deducted from the current year’s budget share.
Funds deriving from sources other than the authority will be taken into account in this calculation if paid into the budget share of the school, whether under provisions of this scheme or otherwise. Funds held in relation to a school’s powers under section 27 of the Education Act 2002 (community facilities) will not be taken into account, unless added to the budget share surplus by the school as permitted by the authority. The returns will be summarised and discussed with the Commissioning and Positive Contribution Thematic Group (previously FRED Policy Group), after which approval will be sought from the Cabinet Member for Schools & Children’s Services to recycle any balances that are considered by the Council to be outside the agreed criteria. Individual schools will have the right to appeal against any decision to recycle their balances. The Schools Forum would consider any appeals. Any balances that are recycled will be redistributed to all schools through the funding formula in the following financial year. Schools will be sent confirmation of their end-of-year balances as shown in the Council’s accounts. Financial Recovery plan for schools with a deficit budget Where a Headteacher is predicting, through the financial monitoring process or otherwise, that the school is going to go into deficit for more than one year, the Governing Body must notify the Director of Finance, Resources and Customer Services (Financial Management) immediately. Specific indicators that may highlight a potential problem are: 1. 2. 3. 4. 5. Predicted variances on the monitoring. Emergency works being required. A fall in pupil numbers. A cash flow problem during the year i.e. going overdrawn at the bank. Staff turnover (high agency / supply costs).
Once notified the Director of Finance, Resources and Customer Services (Financial Management) will work with the school staff to produce a Financial Recovery Plan. This plan will show how, over a set period of time between one and three years, the school will improve its financial position and come out of deficit. It will sit alongside the working budget for the following year(s) and will be agreed by both parties. It should include: 1. A brief introduction as to the extent of the problem and the reasons it occurred. This is to update all interested parties as to the specific circumstances of the school and to focus the plan on the specific problem areas that the school has had to deal with. It is not intended to apportion blame. 2. Realistic pupil number projections for each age group for the period. As this is the major factor that affects a school’s funding, it is essential that any changes to those numbers be identified. 3. Estimated income for each financial year including the expected budget shares delegated by the Council. The budget shares based on the estimated pupil numbers and other financial changes should be calculated
so as to identify expected levels of funding. Also, other income should be examined to see if there is likely to be changes over the period. 4. A detailed staffing plan for the period. As the major cost of running a school is the staffing, it is essential that the salary and wages estimates are as accurate as possible. 5. The total estimated expenditure for each year, using the headings on the working budget document. It should include any financial implications arising from plans such the Asset Management Plan (AMP) and the School Improvement Plan. 6. A summary of the effects of the plan on the school, including the pupil/adult teacher ratios and a curriculum plan. As the resources available are unlikely to be enough to cover all the expenditure that the school would like, there are going to be shortfalls. It is best to plan these and state what effect they will have on the school. For example, if an urgent repair is to be put off for a year, what impact will that have on the AMP and on the children and adults using those facilities. FG 3.36 The plan should be costed at current prices, i.e. costs should not be increased to take account of pay awards or inflation. By ignoring these factors, the figures are directly comparable with the current year’s budget and actual. It therefore focuses on any growth or reductions being made. Financial Reporting to Parents Schools are no longer required to prepare this. They must now complete a School Profile, which does not include any financial information.
Scheme of Delegation The Governing Body is responsible for preparing a Scheme of Delegation for the school. This document sets out the relative roles and responsibilities of members of staff in relation to financial administration to ensure that there is an adequate separation of duties throughout the processes. The scheme of delegation should incorporate the school’s purchasing arrangements to safeguard financial management and probity, whilst supporting the devolution of budgets and financial responsibility. (Model document attached at Appendix 6). Contracts Before any contract is made, the proper authority for such a contract must be received and there should be adequate budgetary provision. There are many requirements placed on the Governing Body when letting contracts, both from the Council in terms of its constitution and from UK and EU law. In some cases, grant funding organisations also impose grant conditions relating to procurement. It is the Governing Body’s responsibility to ensure that all these requirements are met. It is therefore recommended that advice be sought from the Council and/or external professionals when the school is letting a large contract. For guidance on property related issues, please refer to the Property Manual for Enfield Schools, published jointly by the Director of Schools & Children’s Services (Asset Management and Development) and the Director of Finance, Resources and Customer Services (Property). Best Value The Governing Body has a duty to ensure that it is embracing the principles of Best Value, although it is not bound by the legislation in the same way as the Council’s services. The four main principles of Best Value are: Challenge Compare Consult Compete By providing the current services are they needed and could they be provided in a better way? How does the current service provision compare with other providers? Are all stakeholders given the opportunity to Comment on the service provision? Are there areas of service delivery where a competitive market exists to allow for the testing service provision and price?
FG 4.2 FG 4.3
Achieving value for money As responsibility for providing more services is delegated to schools, along with the associated funding, and the market for schools services widens, there is an increasing need for schools to seek value for money. “Value for money” recognises that cheapest is not necessarily best and being expensive does not guarantee quality. In addition to price, key factors to be considered in making purchasing decisions include: 1. 2. 3. 4. 5. 6. Capacity and reputation of provider Quality of output Range of service provision Responsiveness Reliability; and Compatibility with school ethos and culture
Value for Money is achieved through a combination of: 1. Economy 2. Efficiency 3. Effectiveness
Economy is a simple matter of ensuring that expenditure incurred does not exceed what has been planned and that wherever possible efforts are made to reduce the level of expenditure on school provision. For example, schools should seek a number of quotations or tenders when refurbishing accommodation to establish the most economical price. Efficiency is an expression of the ratio of output to input. For example, the number of books purchased for a fixed amount per pupil. Schools should be seeking to examine this ratio. Two alternate routes are possible. Firstly, it can be improved by increasing the number of books purchased but maintaining the related expenditure at a constant level e.g. bulk discounts. Secondly, schools could take the economising route and, following the example above purchase the same number of books at a lower level of expenditure. Schools should be most concerned with effectiveness. Economy and efficiency are focused on lowering costs and the ratio of costs to output respectively but effectiveness is about objectives. To demonstrate effectiveness schools must establish the extent to which outcomes, such as exam results and literacy levels, meet targets. Considering effectiveness therefore encourages a focus on setting clear objectives for improvements in standards and the quality of education provided and monitoring against them. Combining these 3 definitions provides the essence of value for money. In a school context it is about achieving the best possible outcomes for pupils in the most efficient way and at a reasonable cost. Value for money considerations should form part of all decision-making within schools. Financial and non-financial decisions should be made that consider a number of alternative courses of action so that the school achieves the desired outcome in the most economic, efficient and effective way.
For more information on Best Value, the Audit Commission and OfSTED have published the document “Getting the Best from Your Budget: A Guide to the effective management of school resources” that can be found on the OfSTED web site. Also, the DFE have issued a “Purchasing Guide for Schools” Ref. DfES/0547/2001. Rental Agreements and Leasing Please refer to the Rental Agreements and Leasing sections FR 12 and FG 12 for specific guidance Formation of Companies The Education Act 2002 allows Governing Bodies to form companies (as defined by the Companies Act 1985) for the purpose of purchasing or supplying goods and services to schools. The company would purchase collectively goods and services for member schools. This could lead to savings through economies of scale. It would also allow schools to share experience and expertise and to provide staff with development opportunities through supporting other schools. The Council must give its permission for a Governing Body to join or form a company. That permission can be refused if the school is subject to special measures, has serious weaknesses, has weak management or has participated in a company that failed to act in accordance with the regulations within the previous three years. The Council, if it denies permission, must provide written reasons to the Governing Body for its decision. If a Governing Body would like to consider joining or setting up a company, please refer to the Act or contact the Director of Schools & Children’s Services (Resources Development Manager). Purchasing In order to ensure that the school is a good purchaser, the Governing Body should ensure that the process for purchasing is effective. Key elements of the process are: 1. The administration of the purchasing function is organised and all involved parties have defined roles. 2. There is a purchasing strategy linked to the school’s aims and objectives. 3. For each purchase, a specification of that purchase is defined 4. For each purchase, the right supplier is chosen. 5. There is adequate monitoring of goods and supplies received. Organisation In order to operate an effective purchasing function, the Governing Body must strive to ensure that decisions on purchasing are taken at the appropriate level. The Governing Body should not decide how many pens are to be purchased but should decide on a contract for major building works. The scheme of delegation discussed in FG1 should specify decision-making authority.
FG 4.18 FG 4.19
Purchasing Strategy In order to deliver the priorities within the School Improvement Plan, the Governing Body must use the resources available to it in the best possible way. It is therefore essential to have a purchasing strategy that fits in with the improvement plan and with the working budget. To do this, schools should: 1. Make a list of the services available. 2. Try to break down the services required to small, discrete elements that could be purchased separately, although this must not be done to avoid the tendering thresholds. 3. Develop a set of criteria to help decide what goods and services are essential, desirable or optional in achieving the school’s aims. 4. Target those areas of the plan that the Governing Body feels need the most scrutiny.
Specification When an item is to be purchased, a specification of what is required should be drawn up. Obviously, the type and cost of the goods will have a bearing on the detail in which this goes into, but the principle remains for all goods. For example, when purchasing a personal computer, the specification would be very detailed but when purchasing some pens, it may just be the colour. The purchaser should decide what are the most important characteristics of the item that is required and is the minimum level of specification (and not necessarily what is the best available). The specification for services should be outcome/output focused in order to benefit from market innovation on the solution. This will provide the criteria against which the various options can be assessed. Also, if there are other considerations that the supplier needs to know about, such as delivery dates, then these should be included in the specification. This will allow the potential suppliers to accurately price the goods and will give you the criteria on which to base your decision on whom to use. Choice of supplier There are specific requirements placed on all Council services (including schools) that must be adhered to when choosing a supplier, especially for large contracts. These are covered in some detail in this chapter. However, there is also the need for the school to decide how it wants to procure the required goods or service. The school could opt to enter into a consortium in order to gain economies of scale and increase their purchasing power. In general, the following are key considerations that should be addressed when looking at choosing a supplier. 1. 2. 3. 4. What is the track record of the supplier? Does the supplier have experience of the education sector? Is the supplier financially sound? Can the supplier be flexible to meet the school’s needs if they change?
FG 4.27 FG 4.28
Monitoring As part of the on-going process of procurement, it is important to use the experiences of previous purchases to inform current actions. Therefore, a supplier’s performance should inform future decisions about whether to use them again or not. You should be aware that it is not always the person ordering the goods who is the recipient of them. For example, the Headteacher may formally approve a purchase but may not be involved in the use of that service. Therefore, it is important that the monitoring is done in association with the user of the goods or services. Where appropriate, references should be obtained from other customers. For further guidance on purchasing, please refer to the “Guidance for schools on procurement of service provision from Enfield Council and alternative suppliers” distributed in September 2002. QUOTATIONS AND TENDERS The requirements for purchases and contracts are determined by value: CONTRACT VALUE Low Low Under £1,000. Over £1,000 but Under £10,000 (£20,000 for works). NUMBER OF QUOTATIONS One verbal quote, confirmed in writing One written quotation officers must give due consideration to a local organisation Three written quotations, one of which to be sought from a local organisation where possible. Formal Tendering process required minimum of 5 tenderers Formal Tendering process required – must adhere to the award process defined in the OJEU Contract Notice and the OJEU Contract Award Notice.
Intermediate Over £10,000 (£20,000 for works) but below £50,000. High Value Over £50,000 but below the relevant EU Threshold. Over relevant EU Threshold
In FR 4.18 above, where the contract value is uncertain reference is made to the total contract value being determined by multiplying the monthly payment by 48 over the full duration of the contract (not just the annual value). The purpose of this Rule is to quantify the value of contracts which roll on from year to year where the goods or services will always be required. Where a school knows that it will need goods and services for the foreseeable future but usually carries on the contract with the existing supplier for a number of years, it is not able to demonstrate that it has complied with the CPRs and has not demonstrated that it is achieving Best Value.
Low Value Transactions/Contracts: Defined as transactions valued at or below £10,000 for goods or services, (or below £20,000 for works) which cannot be obtained via an existing approved contract. 1. Transactions under £1000 a verbal quotation confirmed in writing is sufficient. 2. Transactions over £1000 but under £10,000 a written quotation must be obtained before any order is processed and this must specify: a. The goods, services or works to be supplied; b. Where and when they are to be supplied; c. The value of the transaction; d. The Terms and Conditions including Payment Terms. e. The order is made on the basis that the Council’s Standard Conditions of Purchase for Goods and Services (short-form) applies in all circumstances. These conditions are available from the Corporate Procurement Intranet site or by contacting Corporate Procurement via email on email@example.com or via the Corporate Procurement helpdesk on 020 8379 3844. In the case of works contracts and consultancy contracts the use of pre agreed hourly/day rates is acceptable.
Intermediate Value Transactions/Contracts Defined as transactions for goods or services valued at or over £10,000 (£20,000 for works) but below £50,000 that cannot be obtained via an existing approved contract. The criteria for selecting the most advantageous quotation must be established before the written quotations are invited. 1. At least 3 comparable written quotations must be sought, one of which to be sought from a local organisation where possible. 2. The criteria for selecting the most advantageous quotation must be established before the written quotations are invited. 3. At least 3 comparable written quotations must be sought using the Council’s Request for Quotation documentation. 4. If less than 3 potential contractors can be identified seek approval to proceed using the Waiver Request Form. Please contact Corporate Procurement to request a waiver form. 5. The Request For Quotation (RFQ) is available from the Corporate Procurement Intranet site or by contacting Corporate Procurement via email on firstname.lastname@example.org or via the Corporate Procurement helpdesk on 020 8379 4567.
FG 4.35 FG 4.36
High Value Transactions/Contracts Transactions for goods or services valued at or over £50,000 but below the relevant current EU Threshold, require a Formal Tendering process. Requirements over EU Threshold Defined as intended purchases for goods, services and works that exceeds the current EU Threshold. There are specific processes relating to the requirements of EU Procurement Procedures and Schools must adhere to these at all times.
Where the anticipated value of the contract exceeds the current EU Threshold then the formal advice of the Council Procurement Team (CPT) must be sought prior to any tendering activity commencing. All planned contracts where the value exceeds the current EU threshold must be reported to the CPT. All EU Notices will be published centrally by the CPT and sufficient time must be built into the planning process for requirements subject to EU Procurement Procedures. Any tender activity following the EU Procurement Procedures must adhere to the award process defined in the OJEU Contract Notice and the OJEU Contract Award Notice. Formal Tender Process Formal tenders can be obtained through: 1. 2. A list of suppliers on a framework produced or maintained by the Council’s Property Procurement Team, which has been subjected to the appropriate level of competition in relation to threshold value. Purchasing organisations such as Eastern Shires Purchasing Organisation (ESPO), Yorkshire Purchasing Organisation (YPO) and London Contracts and Supplies Group (LCSG), provided that the protocol of the framework provider is maintained. Full details of purchasing organisations can be obtained from the Council’s Corporate Procurement Team. Open tendering. On-line framework contracts through the Government Procurement Service, Buying Solutions http://www.buyingsolutions.gov.uk/ Tendering as defined by European Regulations.
3. 4. 5. FG 4.41
Call Off from existing Approved Contracts Where the requirement can be satisfied from an existing approved contract then the order will be considered an exception to these rules as long as the call-off arrangements defined within the individual contract are followed. Advertising All requirements over £50,000 must be publicly advertised through at least two of the following: 1. Publication of the Official Journal of the European Union (OJEU) notice, where appropriate; 2. Advertisement in the local press; 3. Publication on the school’s or the LBE website; 4. Advertisement in relevant trade journal. 5. As a minimum all requirements between £10,000 (£20,000 for works) and £50,000 must be advertised on the Council’s website. 6. Once a framework agreement is in place for specific goods, works or services then further global advertising is not needed for those requirements. Opportunities need only be advertised amongst those on the framework list. As a minimum, all requirements between £10,000 (£20,000 for works) and £50,000 must be advertised on the School/Council’s website.
Once a framework agreement is in place for specific goods, works or services then further global advertising is not needed for those requirements. Opportunities need only be advertised amongst those on the framework list. FG 4.43 Pre-Qualification Non EU notices, no matter how transacted, must specify a time limit of not less than 10 working days, within which interested parties must express their interest in tendering. Establish and publish the criteria for short listing. After the expiry of the advertised time limit, invitations to tender should be despatched to a shortlist of interested parties assessed to be the most suitable from the expressions of interest measured against the stated criteria. The Council’s Pre-Qualification Questionnaire must be used. This document can be obtained by contacting the Council’s Corporate Procurement Team via email at email@example.com Pre-Tender Market Research and Consultation Schools may review the market for a proposed procurement through discussions with suppliers and other research; but may not: 1. Base any specification on one supplier’s offering such as to distort competition; 2. Make any indication or commitment to suppliers that their offering may be preferred by the school; 3. Suggest any procurement route which is not consistent with these rules; or 4. Enter into negotiations about price where a competitive procurement process has yet to take place. 5. Any pre-market research undertaken, including discussions with contractors and others must be fully documented on file. FG 4.48 The Invitation to Tender At least 5 suppliers must be invited to tender, unless there is overriding business or legal justification that this is not required and in these circumstances an exemption must be sought. If due to special circumstances less than 3 suppliers are to be invited then a waiver/exemption must be sought. The specification and evaluation criteria must take into account the school’s priorities regarding equality, sustainable procurement, health and safety and value for money. The specification for the requirement must be adequate and fair to allow tenders to be sought and fit for purpose. There must be an assessment of the quality of both tenderers and tenders by pre determined non-discriminatory evaluation criteria and weightings, including whole life cycle cost where appropriate. The risks associated with the contract must be assessed and documented on file. Appropriate actions should be taken by schools to ensure that their potential and actual exposure is minimised.
FG 4.44 FG 4.45
FG 4.50 FG 4.51
FG 4.53 FG 4.54
A tender file must be maintained to record all matters associated with the tender. The standard terms and conditions, which apply, must be stipulated. Where it is proposed that a form of contract be used, which does not adopt the Council’s approved standard terms or industry standard terms such as JCT or ICE; the use of such form must be approved by the Assistant Director of Legal Services. The tender must explain how information provided in the tender will be treated with regard to statutory requirements. Non EU threshold tenderers must be given adequate time to respond, consistent with the level of complexity of the requirement and, except where the industry norm is otherwise, this should be a minimum of 15 working days. The invitation to tender must request that the tender is submitted in a plain envelope or package bearing a tender label giving only the tender title and opening date. The tender label must not identify the name of the tenderer. Tenderers must be required to hold their tenders open for acceptance for a minimum of 90 days from the date of opening. Invitations to tender must include a statement that the school does not bind itself to accept the lowest tender or any other tender. Receipt of Tenders Every reply to an Invitation to Tender must be addressed to the Chair of Governors or the Headteacher. Tenders submitted by fax, e-mail or other electronic means will not be considered unless specifically instructed by the school, in the Invitation to Tender. Tender packets or envelopes received must be date stamped and locked away until the specified time for their opening. Tender Opening Tenders for a particular contract must be opened at the same time in the presence of a least two officers, one of which should be the Headteacher. The opened tenders must be date stamped and signed by the officers present. A record of the tenders must be maintained and the officers present should sign the record to confirm its accuracy. Tenders should be opened within 24 hours of the closing date and time. Tenderers must be informed that tenders received after the closing date or tenders not submitted in accordance with these Rules will be disqualified from consideration.
FG 4.55 FG 4.56
FG 4.58 FG 4.59
FG 4.60 FG 4.61 FG 4.62
FG 4.63 FG 4.64 FG 4.65 FG 4.66 FG 4.67
Tenders, which do not meet the above criteria, may only be considered if: 1. The failure to comply was the school’s fault or, 2. The tender was received late but it is clear that, without any contact with the tenderer, it was sent in such a way that it would have arrived on time in the normal course of events. 3. The Authorised Officer is notified in advance
Tender Evaluation Tenders must be assessed in accordance with the pre-determined evaluation criteria and weightings. Evaluation should be carried out by a minimum of 2 officers to demonstrate probity and objectivity. The results of the tender evaluation must be retained on the tender file. A financial reference should be taken up for all contracts with an anticipated value of over £100,000, which are not currently on the Council’s Standing List, or Framework Agreement, or are sourced under a joint procurement arrangement. Errors in Tenders The appropriate Service Director, with the prior approval of the Assistant Director of Legal Services, may permit a tenderer to correct an error or omission that, in the opinion of the Service Director, is an obvious one. Any such corrections will be recorded on the tender file. Where financial error is identified in a tender for works contracts the tenderer is required to standby or withdraws their tender. This is applicable for single stage tenders or quotes where the evaluation criterion is lowest price. Negotiation Officers may only carry out negotiations if: 1. The tender is to be a single or multiple negotiated tender (and a waiver of these rules has been granted); 2. The tender is above the EU Thresholds and is in accordance with the EU requirements for a negotiated tender (and a Waiver of these Rules has been granted); 3. They are post tender negotiations in accordance with the rules set out below.
FG 4.70 FG 4.71
Where a competitive tender exercise cannot be carried out in accordance with the Councils Contract Procedure Rules, a single or multiple negotiated tender exercise may only be sought if a waiver of Contract Procedure Rules has been granted first. This negotiated process should only be used in exceptional circumstances. Where procurement is conducted through either the Open or Restricted procedures within the EU Regulations no negotiations are permitted (including post tender negotiations), which may have the effect of distorting competition (for example fundamental changes to aspects of the contract, including price changes and variations to the authority’s requirements).
FG 4.77 FG 4.78
The authority may seek clarification from the tenderer on their bid where appropriate. Post-tender negotiations may only be entered into if the tender documents provide advance notice of this intention and the basis upon which the post tender negotiations will take place. This notification must be clear in the tender documents. The Chair of Governors must provide written approval for negotiations to be entered into. Negotiations are to be conducted with all tenderers, unless there are clear reasons for excluding one or more tenderers. The reasons for any exclusion must be clear and, with regards post tender negotiations, the reasons must have been made clear in the tender documentation. Where dialogue with tenderers is permitted, negotiations shall be conducted by a team of at least two officers, at least one of whom shall be from the CPT unless agreed otherwise in advance by the CPT. Written records must be made and retained of all negotiations. If an officer is in doubt on any negotiations, they should contact CPT and Legal Services for guidance. Award of Contracts A contract may only be awarded by the Governing Body or the person with the requisite delegated authority to award contracts. For contracts subject to the full scope of the EU Directives, the school must notify all tenderers of the intended award of contract, and must allow a minimum standstill of 10 calendar days between notification of a proposed award and entering into a contractually binding agreement. The school may not make an award of contract, or a conditional award of contract, until this standstill period has expired. Where a contract exceeding the EU Threshold has been awarded, the school must ensure that a Contract Award Notice is published in the OJEU no later than 48 days after the date of award of the contract. Notification to Unsuccessful Tenderers Following contract award, the school must notify unsuccessful tenderers in writing. The school shall provide a debriefing to unsuccessful tenderers on written request from the contractor. The debriefing may be oral or in writing, and must strictly relate to the tenderers strengths and weaknesses as assessed against the tender evaluation criteria. Information regarding other tenderers must not be divulged under any circumstances. A written record of the debriefing must be retained on file.
FG 4.79 FG 4.80
FG 4.82 FG 4.83
FG 4.87 FG 4.88
For EU threshold contracts the school shall, within 15 days of receipt of a request in writing from the contractor, inform them of the reasons why they were unsuccessful.
Procurement by Consultants Where the School uses consultants on its behalf in relation to any procurement, then the school shall ensure that the consultants carry out any procurement in accordance with these contract procurement rules. No consultant shall make any decision on whether to award a contract or whom a contract should be awarded to unless specifically empowered to do so in writing by the Governing Body or body authorised to confer that power. The school must ensure that the consultant’s performance is monitored. Contract Extension Any contract that provides for extensions may be extended in accordance with its terms subject to any necessary authorisation within the school’s scheme of delegation. The school must seek legal advice for any intention to extend a contract. Where the terms of the contract do not expressly provide for an extension, a waiver is required and a subject to any necessary authorisation with the school’s scheme of delegation. These should only be extended in exceptional circumstances following legal advice. Termination of Contract Termination of any contract may be carried out by the school in accordance with the terms of the contract. However, the school must seek legal advice prior to terminating the contract. CONTRACT AND OTHER FORMALITIES The full Contract Procedure Rules are available by request from the Procurement section. Contract Documents Schools must seek legal advice on the wording of contract terms and conditions, especially if the contractor wants to use their company contract. A suite of standard tender forms and terms and conditions of contract are available from the CPT. There are shortened terms and a Request for Quotation (RFQ) form for procurements between £10,000 and £50,000. There is also a suite of tendering documents for procurements above £50,000 and EU threshold values. These include Invitation to Tender (ITT) documents for: 1. 2. 3. 4. Supply of Goods Supply of Services Supply of Consultancy Services Supply of Carriage of Goods by Road in the UK
FG 4.92 FG 4.93
FG 4.94 FG 4.95
These documents are available from available from the Corporate Procurement Intranet site or by contacting Corporate Procurement via email on firstname.lastname@example.org or via the Corporate Procurement helpdesk on 4567. FG 4.99 Every Contract over £50,000 must, as a minimum, state clearly: 1. Description of the goods required or the scope of works or services to be provided; 2. That the supplier may not assign or sub-contract without prior written consent; 3. Any insurance requirements; 4. Ombudsman requirements; 5. Requirements relating to legislative requirements; 6. That charter standards are to be met if relevant; 7. Compliance with the law on health and safety at work; 8. Race relations, disability, anti-discrimination and equalities requirements; 9. A right of access to relevant documentation and records of the contractor for monitoring and audit purposes; 10. Pricing mechanism and arrangements for payments; 11. Right of termination; 12. Protection against the contractor’s defective performance by default provisions which are appropriate to the contract; 13. The contract period. FG 4.100 Contract documentation must be retained in accordance with the Council’s Retention of Document Policy (Appendix 1) Letters of Intent FG 4.101 In exceptional circumstances and with prior legal approval a letter of acceptance can be issued to allow work to commence in advance of contract completion. FG 4.102 In the case of a works contract a tender acceptance letter is acceptable in order to allow work to commence provided the school has sought legal advice on the wording of the letter. A formal contract must follow without delay. Letters of intent are only binding on schools and the contracting party where the letter expressly states that their tender has been accepted and the school agrees to pay them the tender sum. The letter of intent should normally seek to incorporate the terms and conditions of the relevant industry standard contract (e.g. JCT, ICE, NEC) indicating the school's intention to enter into a formal, written contract with the contracting party, to carry out the works/services described in the letter, such work/services to commence on a date specified or at any rate before the parties execute the formal, written contract, until then the contracting parties obligations to the school shall be governed by the Invitation to tender documentation. The wording of the letter of intent should be reviewed by both CPT and Legal Services prior to issue, to ensure the letter is fit for its intended purpose. For the purposes of an EU Procurement a letter of intent is treated as a “Contract Award” and the procedure set out in FG 4.85 shall apply.
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Signature FG 4.103 The officer responsible for signing the contract must have been granted the appropriate authority under the school’s scheme of delegation and they must ensure that the person signing for the other contracting party has authority to bind for it. Contracts Under Seal FG 4.104 Refer to the Council’s Contract Procedure Rules (CPR 41), for guidance in this area. Bonds, Parent Company Guarantees and Insurances FG 4.105 For every contract over £250,000 a parent company guarantee or performance bond shall be required unless agreed otherwise with the Director of Finance, Resources and Customer Services. FG 4.106 Schools must never give a bond. FG 4.107 For all works contracts, the appropriate officer or Head Teacher must notify in writing the school’s insurance officer giving full details of the nature, duration and value of the works being undertaken on any particular project. Declaration of Interests FG 4.108 Any pecuniary interest which either a member of the Governing Body or staff member of the school may have, in a contract which has been or is proposed to be entered into by the school, must be recorded in the school’s Register of Business Interests. Managing Contracts FG 4.109 Contract management is the process that enables both parties to the contract to meet their obligations in order to deliver the outputs required from the contract. It involves building a good working relationship between the school and the supplier. It continues throughout the life of the contract and involves managing proactively to anticipate future needs as well as reacting to situations that arise. FG 4.110 The key objective of contract management is to obtain goods and/or services as agreed in the contract and to achieve value for money. This involves balancing costs against risks and actively managing the customer-provider relationship. It also involves developing the supplier’s continuous improvement capability over the life of the contract. FG 4.111 All contracts over the value of £50,000 and those of a complex nature below this value must have a designated contract manager whose name should be notified to the supplier. Likewise, the supplier must have a designated contract manager, i.e. the Headteacher. These resources must be identified and agreed before the contract is awarded.
During the life of the contract the contract manager must monitor the contract in respect of: • • • • • Performance against contract standards Compliance with specification and Contract terms and conditions Cost Any Value for Money requirements User satisfaction and risk management where appropriate
and record such information on a regular basis, proportionate to the risk and value of the contract. FG 4.112 PFI/PPP Contracts Where services are being provided to a school under a PFI/PPP contract the LA will discuss with the governing body the basis of apportionment of the annual charge between the LA and the school.
FG 4.113 The apportionment of the charge will be calculated by the LA and will be based on the following general principles: 1. The school’s share of the annual charge will be related specifically to the elements of the service provision for which the school holds the delegated budget. 2. The school’s share will be calculated with reference to the cost information provided by the PFI/PPP operator. 3. The indexation of the school’s share will be calculated in accordance with the PFI/PPP contract and the elements of the costs subject to indexation. 4. The school will benefit from payment deductions relating to performance and availability in so far as they relate to delegated services and also from any income sharing arrangements. 5. The school’s share of the unitary charge will be adjusted to take account of increases or decreases in costs that arise from agreed variations where these relate to services for which the school has delegated responsibility. On-line contracts through Buying Solutions FG 4.114 Buying Solutions is an online catalogue based procurement scheme for public sector organisations. It is designed to provide public sector organisations with a simplified means of procuring and contracting for a wide range of IT and telecommunications products and related services. Further information can be found on the OGCbuyingsolutions.gov.uk website. FG 4.115 On line contracts can be entered into with Buying Solutions, which are legally binding. Prime contractors have been appointed through competitive procurement conducted under European Union procedures. A Participation Agreement has to be signed which sets out the terms and conditions applicable to Buying Solutions contract. There is no charge for this service. FG 4.116 Where the Council has established a framework of contractors via another local council or an approved external organisation, selection of tenderers from that framework may be made in accordance with the rules for using framework.
FG 4.117 Details of the categories of work and list of contractors will be held by the Council department responsible for creating the framework. Any framework supplied by Central Government will fall into this category and may be used. The Buying Solutions (IT and Business Services Catalogue) frameworks are in this category. Contracting Services and TUPE FG 4.118 If the school is intending to contract out services that are currently provided by Council staff (e.g. Catering, or changing their current regular service provider), they should be aware of the responsibilities that they have to the staff involved, even though the school does not directly employ them. In particular, the school must take into consideration the Transfer of Undertakings (Protection Of Employment) Regulations 1981 (TUPE) that safeguard the rights of employees when businesses change hands between employers. Schools must ensure that when any employee or contractor arrangement may be affected by any transfer arrangement under TUPE that advice is obtained from the Corporate Procurement Team and Legal Services before proceeding with inviting tenders or quotations. Schools must consult Pensions and Payroll concerning all TUPE and pension issues before the advert for the contract opportunity is placed, as this will affect the financial value of the contract. FG 4.119 If the school decides to terminate existing arrangements and change the contractor for these services, these regulations will apply to the staff currently carrying out these services. The contractor taking on the service would be obliged to take on these staff, under the same terms and conditions that currently apply. This may affect the cost quoted for the service provision by the contractor. FG 4.120 If the school fails to take TUPE into consideration, it could be liable to any costs associated with the transfer of staff, and even the redundancy and pension costs of these employees, if they cannot be re-deployed elsewhere within the organisation. FG 4.121 It is therefore important that schools must obtain advice, in writing, on both the legal and human resource implications, before starting the process of contracting out these services. Schools should also contact the existing contractor who will be able to advise them on these issues, and would be able to provide information on the employees involved. Ordering Goods and Services FG 4.122 All orders must be made on official schools’ order forms. Official order forms are deemed controlled stationery and must be held in a secure store by the school. Alternatively, the school’s financial system can be used to print orders, as long as it can print all the necessary details included on an official order. It is the schools’ responsibility to ensure that all the suppliers are made aware of the LBE Schools’ Purchase Order Standard Terms & Conditions, in Appendix 9. FG 4.123 The details that must be included in the order are: 1. The name and address of the supplier (and fax number if appropriate) 2. The delivery date and address 3. The school contact name and telephone/fax numbers 4. A clear description and specification of the goods and services (including the quotation or tender reference) 5. The quantity 6. The unit price
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7. The total cost 8. Any discounts that are expected 9. The relevant code to charge the expenditure to 10. The terms and conditions of the order 11. The signature of the authorising person. FG 4.124 A completed order form must be ruled off after the last item on the order. This is to ensure that nobody (either at the school or at the supplier) can add items to the order once it has been authorised. FG 4.125 The ordering stationery, both manual orders and any pre-printed orders to use with the computer system, must be stored securely when not in use. Access to the stationery should be limited to authorised personnel. FG 4.126 When an order is placed, a commitment must be raised on the financial system. This will help the monitoring process by providing financial information on where the school has entered into a contract to supply goods or services and, assuming those goods or services are received, how much of the budget remains for further orders etc. FG 4.127 Orders should be used only for goods and services provided to the school. Individuals must not use official orders to obtain goods or services for their private use. Receipt of Goods and Services FG 4.128 The goods and services received must be checked immediately to ensure that they are in accordance with the order. This should be evidenced with the date and a signature of the person receiving the goods or monitoring the service and not the person who signed the order. FG 4.129 The actual goods or services received should be checked against the delivery note (where applicable) and the copy order to verify quality and quantity. Incomplete, disputed or unsatisfactory deliveries should be noted on the order before it is passed to the officer responsible for making the payment. FG 4.130 Where goods are returned to the supplier, there should be clear systems and documentation. This will ensure that no payments are made for goods already sent back, or that refund are requested where payment has already been made. Processing of Invoices FG 4.131 Before an invoice can be paid, the following checks must be made: 1. 2. 3. 4. 5. The invoice is arithmetically correct. The goods or services were actually ordered. The goods or services have actually been received. The invoice is chargeable to the school The supplier is charging the correct price after taking account of qualifying discounts. 6. The invoice has not been duplicated and already passed for payment. Payments should not be made on the basis of statements, copy invoices, photocopies or delivery notes. 7. The invoice complies with the requirements of a VAT invoice where appropriate (see chapter on VAT)
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A template is attached in Appendix 10, which it is recommended that schools use to provide written confirmation that these checks have been carried out. FG 4.132 An authorised member of staff must certify the invoice for payment. This should be a person other than the person who signed the order or the person who checked the receipt of the goods. This is in line with the practice of segregation of duties, making the likelihood of fraud or error smaller. FG 4.133 The Council has a policy to pay all suppliers within 32 days of receipt and is monitored against this measure. As school expenditure accounts for a large proportion of the total expenditure of the Council, it is essential that schools try to achieve this target. Late Payment Legislation FG 4.134 The Late Payment of Commercial Debts Act 1998 gives businesses a statutory right to claim interest where another organisation pays its bills late. The rate of interest is the Bank of England base rate at the close of business on the day payment should have been made plus 8%. Any such charge will fall on the school to pay. Staffing and Payroll FG 4.135 Schools currently buying back Payroll & Pension Services have been issued with a comprehensive Guide to Employee Expenses and Benefits. The guide describes the scope of the relevant PAYE legislation and provides guidance on employer obligations ensuring compliance. Amendments to these guides will be issued periodically. FG 4.136 The Payroll and Pension Services Schools User Guide, provides comprehensive information on relevant statutory and contractual aspects of employment. This guide has been issued to schools; any amendments will be issued periodically. FG 4.137 One of the main issues facing a school is deciding whether an individual is an employee or self-employed. Appendix 11 provides guidance but schools should also complete a Tax Status Questionnaire and send it to the Payroll Compliance Team for assessment. The ultimate ruling can only be made by HM Revenue & Customs and it should be noted that it is the employer who is liable for penalties if the correct tax and NI deductions are not made. FG 4.138 If a reimbursement payment is made or an employee receives a benefit, as a direct result of their employment, there may be a taxable liability. The Council (on behalf of the employees paid through the Council’s payroll section) has agreed a list of dispensations with HM Revenue and Customs. Details can be found in the Schools Guide to Taxable Benefits and Expenses. A dispensation is an agreement with HM Revenue and Customs, relieving the employer from reporting expenses and benefits that have been covered within the terms of agreement. A dispensation means that particular expenses and benefits do not need to be declared, as HMRC are satisfied that no additional tax or national insurance is payable. Dispensations are reviewed annually and the agreement can only be used provided that the circumstances applicable to the provision of the expense or benefit are strictly adhered to. Dispensations often have conditions attached to them and it is important that these are all met. Any item covered by these dispensations do not have to have a P11D form completed and returned to HM
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Revenue and Customs, and the individual does not have to declare the item on their tax return. Dispensations agreed between HMRC and the Council are only applicable to schools that “buy back” the Payroll and Pension Service. FG 4.139 Following a decision by Payroll or HMRC that a benefit/expense provided to an employee attracts a tax liability, the school needs to decide who pays the additional tax. There are two options: 1. The employee is liable for the tax and is sent a form P11D at year –end. The school is liable for the cost of Class 1A national insurance contributions on all benefits reported on form P11D, or 2. A PAYE Settlement Agreement (PSA) is established. A PSA is a voluntary written agreement between the employer and HMRC. The school agree that they will be responsible for the payment of tax and Class 1B national insurance contributions that are due on the expenses and benefits covered within the agreement. The Payroll Compliance Team will negotiate PSA’s with HMRC and calculate the tax liability on behalf of the school. An invoice will be issued to the school in order to recover the agreed computation. FG 4.140 There are strict penalties for failure to adhere to these regulations. Also, HM Revenue and Customs may withdraw the dispensations for the whole Council if it feels that the dispensations are not being administered correctly. FG4.141 An Annual Benefits Questionnaire must be completed and returned to Payroll by the end of April each year. Pension Fund Guidance FG 4.142 The following guidance will explain Admissions Agreements however if you require further advise please contact the Pension Service (0208 379 4670). Refer also to FR 4.55 FG 4.143 All applications are subject to agreement by Enfield Council that the terms of the transfer comply with the regulations in force at that time. FG 4.144 In the case of employees who are eligible for membership of the Local Government Pension Scheme the new employer can apply for Admitted Body status within the LGPS (Local Government Pension Scheme). Transferred staff can then continue to contribute to the LGPS for their future service. FG 4.145 If the transferred staff are not to be given this option they must be offered membership of an alternative scheme by the new employer which must be certified as being broadly comparable with the LGPS. FG 4.146 The test of comparability will be undertaken by the council's appointed actuary. FG 4.147 The actuary referred to in these notes, is the firm of actuaries appointed by Enfield Council for consultation on matters relating to the pension fund. FG 4.148 Enfield Council will operate a closed scheme under the admission agreement, which will require a separate employer's contribution rate, calculated by the actuary, based on the age profile and service of the members transferred.
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FG 4.149 This means that only those employees transferred will be eligible for membership of the pension scheme. This also includes those employees transferred not currently members of the scheme. FG 4.150 If the transferred staff become members of the external provider's scheme they can transfer their benefits to the new scheme. FG 4.151 Some external providers will not accept transfers without an equalization agreement and as we have been advised by our actuary not to enter into such an agreement, transfers to these providers cannot take place. Contribution Rate FG 4.152 The employee's contribution rate ranges from 5.5% to 7.8% and is based on full time equivalent salary, FG 4.153 The employer's rate is calculated by the actuary and is reviewed at each triennial valuation. As a guide the 2011/12 employer's rate for Enfield Council employees is 19.7%. FG 4.154 The last valuation was carried out in 2010. FG 4.155 Payment of the employer's contribution is by direct credit to Enfield Council's bank account at the end of each calendar month. FG 4.156 Schools who use outside payroll providers must ensure the employer’s and employee’s pension fund contributions are paid to the Pension Section by the 19th of the following month, at the latest, otherwise fines will be incurred. Bond or Indemnity FG 4.157 The successful bidder will be required to enter into a bond or indemnity in respect of each admission agreement, in an approved form, assessed by the actuary. FG 4.158 The bond is designed to protect the fund from any permanent loss, which may arise on the premature termination of the contract. FG 4.159 The initial bond amount is calculated on the assumption that the bond should cover the early retirement costs on the fund if all employees over age 50 are made redundant on the premature termination of the contract. FG 4.160 The level of the bond will be reviewed each year to account for any change in the membership profile and funding position of the contractor's share of the Fund. FG 4.161 There is a charge for calculating the bond and employer's contribution rate, which currently ranges from £800 for one member to £3,000 for 25 members and above. FRS17 Report FG 4.162 The council is required to produce a report each year to comply with Financial Reporting Standard (FRS17), in relation to the assets and liabilities of the pension fund. This report is produced by the actuary and charged accordingly. FG 4.163 The contractor should consult with their auditors as to whether the report can be merged with that produced for Enfield Council or whether a separate report is required for accounting purposes.
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FG 4.164 A merged report is currently charged at £950 plus VAT. If a separate report is required the charge is currently £2,100 plus VAT. Notification of details to the Pension Section FG 4.165 The pension section requires a schedule each month showing the pensionable pay, employee and employer contribution for each employee. FG 4.166 The section also requires timely notification of any changes to a member’s personal and pay details.
Introduction The school receives income from a number of sources, both in cash and by cheque. Cash and cheques must be banked as soon as practicable, in order to reduce the risks associated with such payments. For example, if a cheque was received for the hire of a room, by banking the cheque before the letting takes place, the letting could be cancelled if there is was a problem with the payment. Also, early banking of cheques would ensure that the school is maximising the bank balance available to the school and therefore the interest receivable on the balance. If income is received in cash, it must be receipted and held securely until it can be banked. The school’s insurance policy will state the amount that can be held by the school at any given time and the conditions that apply (for example, the minimum specification of the safe). Arrangements should be made to conform to these requirements or to change the insurance policy to fit with the working practice at the school. The Governing Body must ensure that there is adequate segregation of duties for the collection of income and these are recorded within the school’s scheme of delegation. The officer collecting it must receipt all cash income. Lettings, Fees and Charges Charging scales for the letting of school premises and the use of school facilities should be approved by the Governing Body on an annual basis. The scale of charges should maximise the income available to the school. This requires getting the balance right between being too expensive which will drive hirers away and being too cheap so as to make only a small contribution per letting. In determining the charges to apply it is necessary to take into account, where appropriate, the cost of staff time and training, insurance, equipment and material, cleaning, heating, lighting, water, etc. A scale of charges should be produced with the charges for evenings, weekends, and holidays set out for each type of facility available for hire e.g. hall, classroom, playing field, small hall etc Also, the Governing Body should consider the nature of the group. Concessionary rates would be appropriate to apply to any non-commercial organisation engaged in activities which meet the ‘Every Child Matters’ outcomes, benefits the pupils of the school and contributes to community cohesion. The lettings overall, must still cover the cost of opening the school outside normal hours. The administration of the lettings function may be undertaken by staff within the school or alternatively, the school may use the services of the Lettings Department, under the service level agreement arranged by the Schools and Children’s Services Department. The Governing Body needs to assess the relative benefits of each system in order to put into place arrangements that are the most beneficial to the school.
FG 5.4 FG 5.5
Income Control It is essential that the Governing Body establishes and maintains an adequate system of control for the school’s income. This system should ensure that: 1. 2. 3. 4. 5. 6. 7. 8. All income due to the school is identified Official pre-numbered receipts must be issued for all cash income. All income received is receipted and banked as soon as possible Income held prior to banking should be held securely Where appropriate, invoices are issued and recorded The invoices are consecutively numbered Spoiled invoices should be marked as such and retained for audit purposes The financial system including the invoice / debtors records are updated as soon as is practical 9. There is adequate segregation of duties so that no one member of staff can issue invoices or payment requests and be responsible for the collection of the income. (This can be difficult in small schools but should be implemented if possible.) 10. There is a process for the collection of debt 11. There is a process for the writing off of debt
The Governing Body must draw up a debt collection policy. This should include: 1. The normal settlement period and how it is communicated 2. The actions to be taken to chase unpaid debt once the settlement period has passed 3. Other actions to be taken such as removing further credit facilities or the use of facilities from the debtor concerned 4. Whether the additional costs associated with the debt recovery should also be chased 5. Whether any individual or body has the right to exercise discretion on specific debts and what the limits of the discretion are. 6. A process for debt write-off.
Debt write-off The criteria for assessing whether a debt can be written off should include: 1. Have all reasonable steps been taken to collect the debt? 2. There is no reasonable prospect of receiving the income without significant investment in time or resources 3. Can the school afford to write the debt off?
Where the Headteacher proposes to write off any debts, they must be reported to the Governing Body at least annually as follows: 1. Individual debts of up to £100 inclusive of VAT should be reported in total. 2. Individual debts between £100 and £500 inclusive of VAT should be reported in detail. 3. For debts between £500 and £2,500 inclusive of VAT, the Governing Body must seek approval from the Director of Schools & Children’s Services. 4. For debts over £2,500 inclusive of VAT, the approval of the Director of Finance, Resources and Customer Services (Audit and Risk Management) is also required.
Charging Policies The Governing Body may not charge for anything unless it has drawn up a statement of general policy on charging. A policy statement will take account of each type of activity that can be charged for and explain when charges will be made. A model charging policy is available in Appendix 29. Former Grant Funding The funding for many specific grants which were previously paid to schools has been mainstreamed into the Dedicated Schools Grant (DSG) and are now included in the schools budget allocation. For 2011/12 the following specific grants have been transferred into the DSG • School Standards Grant • Schools Standards Grant (Personalisation) • School Development Grant, including Post-LIG Transition • Specialist Schools (revenue funding) • School Lunch Grant • Ethnic Minority Achievement (EMAG) • 1-2-1 Tuition • Extended Schools – Sustainability • Extended Schools - Subsidy • Targeted Support for the Primary National Strategy • Support to all Schools • Targeted schools • Leading Teachers • Every Child Elements • Early Years Foundation Stage • Modern Foreign Languages • Targeted Support for the Secondary National Strategy • Support for all schools • Targeted schools • Leading Teachers • London Pay Addition Grant (LPG)
Funding for the following activities will not continue: • Aimhigher (Secondary Schools only) • ABG Extended Schools Start-up Grant • Harnessing Technology • Some of the Secondary and Primary National Strategies, • AfL, • SEAL • Level 6 Science • Specialist Schools Capital • Funding for the Early Years Extended and Flexible Offer will be incorporated into the main DSG and schools and PVI providers will continue to be funded for up to 15 hours per week per child.
Pupil Premium This grant was introduced in 2011/12. Details of the grant are included in the School Budget Guidance Pack sent to schools in March each year.
Education during School Hours FG 5.18 No charge can be made for admitting pupils to maintained schools. Education provided during school hours must be free. This includes materials and equipment, and transport provided in school hours by the Local Authority (LA) or by the school to carry pupils between the school and an activity. “School hours” are those when the school is actually in session and do not include the break in the middle of the school day. It would be good practice for schools to make this information available to parents and others. FG 5.19 All three- and four-year-olds are entitled to fifteen hours of nursery education per week, for 38 weeks per year. A school’s governing body can also provide community services and facilities on the school’s premises (guidance is available in the Department for Education website) and set up a company in accordance with the powers for governing bodies set out in Section 11 of the Education Act 2002. Education Partly During School Hours FG 5.20 Sometimes an activity may happen partly during and partly outside school hours. If most of the time spent on a non-residential activity occurs during school hours, that activity counts as taking place entirely in school hours and no charge may be made. (Time spent on travel only counts as being during school hours if the travel takes place during school hours.) FG 5.21 As an example, a long-distance trip might involve much travel before and after normal school hours, but if the time spent at the destination fell mainly within school hours, the trip would count as happening in school time and be free of charge. By contrast, a trip that involved leaving school an hour or so earlier than usual in the afternoon, but then went on until quite late in the evening, would be classified as taking place outside school time. Charges would then be allowed. Education Outside School Hours Parents can only be charged for activities that happen outside school hours when these activities are not a necessary part of the national curriculum or do not form part of the school’s basic curriculum for religious education. In addition, no charge can be made for activities that are an essential part of the syllabus for an approved examination (see paragraph 11 on Public examinations). Charges may be made for other activities that happen outside school hours if parents agree to pay. The Education Act 1996 describes activities that can be charged for as “optional extras”. It is up to the LA or governing body providing the activities to decide whether to make a charge.
Residential Activities FG 5.25 Special rules apply for residential activities. A trip counts as falling within school time if the number of school sessions missed by the pupils amounts to half or more of the number of half-days taken up by the activity. Each school day is normally divided into two sessions and each 24-hour period is divided into two half-days beginning at noon and at midnight.
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On this basis, a term-time trip from noon on Wednesday to 9.00 p.m. on Sunday would last for nine half-days, include five school sessions and would count as taking place in school time. A trip from noon on Thursday to 9.00 p.m. on Sunday would count as seven half-days, include three school sessions and would be classified for charging as taking place outside school time. If fifty per cent or more of a half-day is spent on a residential trip, you should treat the whole of that halfday as spent on the trip. If a residential activity takes place largely during school time, meets the requirements of the syllabus for a public examination, or is to do with the national curriculum or religious education; no charge may be made either for the education or for the cost of travel. However, charges can be made for board and lodging in these circumstances except for pupils whose parents are receiving: 1. 2. 3. 4. 5. Income Support Income based Jobseeker’s Allowance Support under Part 6 of the Immigration and Asylum Act 1999 Child Tax Credit (providing that they are not entitled to Working Tax Credit and have an annual income, assessed by HMRC, that does not exceed £15,860 (HM Revenue Customs website) for the year 2011-12) The guarantee element of State Pension Credit.
The headteacher should advise all parents of the right to claim free activities if they are receiving these benefits. Musical Instrument Tuition FG 5.28 There is an exception to the rule about not charging for activities in school hours. The Education and Inspections Act 2006 introduced a regulation-making power which allowed the DFE to specify circumstances where charges can be made for music tuition. The new regulations, which came into force in September 2007, provide pupils with greater access to vocal and instrumental tuition. Charges may now be made for teaching either an individual pupil or groups of any appropriate size (provided that the size of the group is based on sound pedagogical principles) to play a musical instrument or to sing. Guidance about the charging regulations can be found on the DfE website. Public Examinations FG 5.29 No charges may be made for entering pupils for public examinations that are set out in Regulations. The governing body must enter a pupil for each examination in a public examination syllabus for which the school has prepared the pupil. This does not apply if the governing body thinks there are educational reasons for not entering the pupil, or if the pupil’s parents request in writing that the pupil should not be entered. The LA may not override the governing body’s decision on whether to enter a particular pupil for an examination. An examination entry fee may be charged to parents if: 1. The examination is on the set list, but the pupil was not prepared for it at the school; 2. The examination is not on the set list, but the school arranges for the pupil to take it;
3. A pupil fails without good reason to complete the requirements of any public examination where the governing body or LA originally paid or agreed to pay the entry fee. Charges may not be made for any cost associated with preparing a pupil for an examination. However, charging is allowed for tuition and other costs if a pupil is prepared outside school hours for an examination that is not set out in Regulations FG 5.30 Activities not run by the School or the Local Authority Where an organisation acting independently of a school or LA arranges an activity to take place during school hours and parents want their children to join the activity, such organisations may charge parents. Parents must then ask the school to agree to their children being absent, just as they would if they wanted to take their children out of school for a family holiday. However, where the activity is organised by a third party and is approved by the school, is educational, or is supervised by someone authorised by the school, then it is the DFE view that it should be treated as if it were provided by the school and no charge should be made to parents or pupils. Such an activity, if it takes place outside the school premises, is an “approved education activity” within the meaning of Regulation 4A of the Education (Pupil Registration) Regulations 1995 (as amended). Voluntary Contributions Although schools cannot charge for school-time activities, they may still invite parents and others to make voluntary contributions (in cash or in kind) to make school funds go further. All requests to parents for voluntary contributions must make it quite clear that the contributions would be voluntary. Governing bodies should also make it quite clear that children of parents who do not contribute will not be treated any differently. If a particular activity cannot take place without some help from parents this should be explained to them at the planning stage. Where there are not enough voluntary contributions to make the activity possible and there is no way to make up the shortfall, the activity must be cancelled. The essential point is that no pupil may be left out of an activity because his or her parents cannot, or will not, make a contribution of any kind. The school must first decide which class, or group of pupils, will benefit from the activity and then look for voluntary contributions, either from that activity, or by general fund-raising.
School Minibuses FG 5.33 Only the school’s pupils, staff or parents may travel for a charge in a school’s minibus. For charges relating to school trips/journeys and further information, please refer to chapter 23 in “A Guide to the Law for School Governors”. FG 5.34 FG 5.35 External Funding Opportunities A monthly bulletin is provided on the Extranet detailing information on various external funding opportunities. Schools who are interested and who want assistance and support with bid-writing, developing consortiums / partnerships to bid for funding can contact Schools & Children’s Services, Regeneration and Development Manager: Schools & Children’s Services, Regeneration and Development Manager Enfield Civic Centre 020 8379 3872
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Collection of Income via cashless systems A new cash collection system has been introduced by The London Borough of Enfield. The Schools’ Governing Body must set the following policies under cashless collection of income for: • • • • • Minimum spend Credit limit Trigger for reminder letters Credit limits for free school meal children Debt management
FG 5.37 FG 5.38 FG 5.38 FG 5.39 FG 5.40 FG 5.41
A dinner money refund authority form must be used to request any refunds from Enfield Catering Services (Appendix 46) Advice on how to collect cash within a cashless environment is provided in Appendix 42. Advice on debt collection guidance is provided in Appendix 43. Advice on rectifying errors made at the till for meals is provided in Appendix 44. Advice on transferring money between the accounts of siblings is provided in Appendix 47. Advice on end of year procedures is provided in Appendix 48.
FG 6 Control of Assets
FG 6.1 Introduction Schools have items of equipment that are at risk of being stolen. Such items include computers, televisions and video equipment. It is therefore essential that such items be kept under suitable control. All such equipment must be suitably marked with the school name and address and should be subject to the appropriate security controls, for example ensuring the computer room is kept locked when not in use. The school also holds stocks and other consumables. It is harder to keep these items secure but one way of checking their usage is to monitor the number of orders made and the quantities ordered in order to replenish stocks. Inventory Schools are required to maintain an Asset Register (inventory) of all portable, valuable and desirable goods. Schools are free to determine their own arrangements for keeping a register of assets worth less than £1000, however, schools must keep a record in some form. The register must be updated promptly for all new assets and for the disposal of obsolete assets as soon as ownership changes hands. An independent annual review of the register should be undertaken, with all significant discrepancies reported to the Governing Body. Evidence of the annual inventory should be recorded with a signature and date in the inventory register. By maintaining the inventory, it becomes an important tool for management to control the assets of the school. It informs as to usage and where additional resources may be needed, it helps to plan for future replacements and it can help to support insurance claims should something be stolen or damaged. The inventory should include, for each item: 1. 2. 3. 4. 5. 6. A description of the asset Any serial numbers / unique ID marks The date of acquisition Value (excluding VAT) The location of the asset Disposal details
If assets are leased the source of funding must be included in the inventory list above. FG 6.8 Loan of Assets Where equipment is loaned, within the school, to members of staff, a separate loans record must be maintained. Equipment should only be loaned for educational purposes and must not be used for private purposes.
Loans of equipment should be authorised by the Headteacher, or an alternative member of the senior management team, and this should be documented in the record, with an intended return date. The member of staff receiving the equipment should sign the records, to show that transfer of responsibility is accepted. The authorisation should be made before the equipment leaves the school premises. The Headteacher, or an alternative member of the senior management team should sign to confirm its return and that the equipment has not been damaged. Where the Headteacher wishes to borrow equipment, the authorising officer should be the chair or vice-chair of governors. If assets are loaned to individuals, on a regular basis or for extended periods of time, the situation may give rise to a benefit in kind. This has implications, both for tax purposes for the individual and for the proper use of public funds. If clarification on the tax implications is required, it is recommended that advice be sought from the Director of Finance, Resources and Customer Services (Payroll). Members of staff who borrow equipment should ensure that they have relevant home insurance cover, in the event of a loss of the item whilst on loan. Disposal of Assets – Land and Buildings The procedures for the disposal of land and buildings will depend on who currently owns the assets and how the assets were originally funded. The Secretary of State will also be involved in the furtherance of his responsibility to safeguard the disposal of assets purchased or improved using public funds and the Council will also have an interest as the owner or former owner of the assets. It is essential that any school considering the disposal of land and buildings contact the Director of Schools & Children’s Services (Asset Management and Development) for advice before entering into any commitment. The ownership of the school land and buildings under the framework is set out below: Community Schools Voluntary Aided Schools Assets owned by the Council Assets owned by the trustees except where the Council continues to own certain subsidiary premises such as for the provision of meals Assets owned by the governing body where there is no foundation constituted or by the trustees where the school forms or joins a new foundation.
Disposal of Assets -Other The Governing Body can delegate authority to the Headteacher or a subcommittee to dispose of certain assets up to a stated value. Any such authorisation should be detailed in the school’s scheme of delegation. If the asset to be disposed of is leased or was purchased from grant funding, there are certain restrictions on the disposal and the treatment of any proceeds. Please refer to the Director of Finance, Resources and Customer Services (Financial Management) if in any doubt.
The Governing Body has a duty to ensure that it receives as much net income (i.e. income after the cost of disposal is taken off) as is possible. To achieve this, you should consider the estimated value of the asset, the potential market for the asset and the cost of advertising etc. The cost of staff time may also be considered if the sale is likely to result in considerably more time invested by staff than if the asset were scrapped. Where an asset is sold, VAT must be charged as appropriate and accounted for accordingly. If there is any doubt as to the VAT chargeable, please refer to the Director of Finance, Resources and Customer Services (VAT Accountant). The income from the sale must be paid into the school’s main bank account. It should be paid in on an income code within the CFR framework. Disposals must be recorded in the inventory. The entry should include the reason for the disposal, the authority under which it was disposed and, if applicable, the sale proceeds and the person(s) receiving the asset. The governing body should ensure that all data held on IT equipment is deleted prior to these items being sold, scrapped or disposed of. Annual/Other Checks A comparison should be made between the inventory record(s) and the physical items, on at least an annual basis. The checks should be carried out by an appropriate person (someone other than the person in charge of the inventory), and recorded in the inventory records. All discrepancies identified by the check must be initially followed up with the person responsible, to ascertain if the equipment exists elsewhere or whether the records have not been updated correctly. In the event that inventory items are stolen, or misappropriated the Police should be informed, a crime number obtained and recorded against the item within the inventory.
FG 6.18 FG 6.19
FG 6.21 FG 6.22 FG 6.23
FG 7 Banking Arrangements
FG 7.1 Introduction The school can operate its banking arrangements in one of two ways. The school can enter the Council’s scheme with the HSBC, whereby all funds are kept in one current account and attract interest on all those funds. Or, it could operate a current account with any high street bank and make its own arrangements for investments. Advances For those schools in the Council’s scheme, they can elect to have the whole of their delegated budget advanced at the start of the year (with a cash flow deduction) or they can receive monthly advances. For those schools receiving their entire budget share in April, it will be paid less the pupil premium at the beginning of the year. All schools will receive the pupil premium in their bank account on a monthly basis. For those schools receiving a monthly advance, the timing of that advance will depend on the pay date of the school and on whether the school uses the payroll system of the Council or makes it own arrangements. This is because the Council’s Payroll Service charge the school for superannuation and tax payments immediately, whereas the schools operating its own system can hold on to the payments for a period before paying them over to the relevant bodies. To compensate for this cash flow, the Council makes the advances to the schools using the Payroll Service, five days in advance of the pay date. The advance, whether monthly or annually, will include an element for VAT. This is a sum advanced to allow schools to pay VAT on invoices without cash flow implications. At the year-end, the Council will reconcile the amount advanced for VAT with the amount paid out and received by the school. It will then make an adjustment in the new financial year. Cheques The school will hold a chequebook and, possibly, printed cheques for use with the school’s accounting system. The Governing Body must ensure that the school takes all the reasonable steps that it can to minimise the chance of fraudulent activity. This means that cheques must be marked “a/c payee” and blank cheques are kept securely and are accessible by designated staff only. Where a cheque is drawn but it has an error on it, or a cheque is returned and has to be redrawn, the cheque must be clearly marked “cancelled” and retained. If a supplier contacts the school asking for a cheque to be redrawn, the school should contact the bank and stop the original cheque. Confirmation of this should be received from the bank before a new cheque is issued. The financial system should reflect the cancellation and the redrawing of a new cheque. All signatures must be originals. Under no circumstances should any form of copy signature be used.
FG 7.6 FG 7.7
FG 7.8 FG 7.9
Credit Cards Schools cannot be issued with or use a credit card or store credit facilities under any circumstances. These are a form of borrowing and schools are not legally allowed to borrow, other than from the LA. Business Cards Schools can be issued with a business card connected to their bank account. A business card is a charge card that operates in a similar manner to a credit card. The card offers schools the opportunity to make purchases when the company concerned is reluctant to accept an official order. It may also be used for purchases via the Internet. All purchases made on such a card will be included on monthly-itemised statements sent to the school and the full amount will be debited from that school’s bank account a few days after the date of the statement. Please note that the usual rules regarding procurement of goods and services still apply, i.e. separation of duties, authorisation controls, etc. How does it work? An application form will need to be completed and the approval of the Governing Body sought before entering into these arrangements. The decision of the Governing Body will need to be recorded for future audit purposes. The school’s scheme of delegation should include who is authorised to use the cards and the extent of their authority. Banks usually make an annual charge for each card provided. The card must bear the name of the school and the person(s) authorised to use the card. The Director of Finance, Resources and Customer Services has recommended a maximum credit limit for the card of £10,000 for secondary schools and £5,000 for primary and special schools. The Governing Body should approve these limits. The Governing Body must arrange for the safe custody of the card/s. Should the card be lost or stolen, the bank must be notified immediately. A suitable invoice must be obtained and retained to verify the expenditure. This is especially important in relation to VAT, as without such an invoice, any VAT paid cannot be recovered. The details on the monthly statement should be reconciled to the vouchers issued during the month as soon as possible after the statement has been received. Any discrepancies should be investigated immediately. The card must not be used for personal use under any circumstances. The school should decide what type of expenditure will be made in this way, who should be the cardholder and who should authorise payments. The school should also determine who can use the card and in what circumstances.
FG 7.15 FG 7.16 FG 7.17
FG 7.18 FG 7.19
FG 7.21 FG 7.22
For internet purchases, card details must be sent in encrypted form. A confirmation of the transaction should be printed which should be attached to the payment voucher. Cash Flow and Investments The Governing Body should aim to manage the school’s cash flow in order to maximise income by investing funding but ensuring that there are sufficient resources available to meet current payments (via cheque, standing order, direct debit or debit card). Where a school operates a bank account outside the Council’s banking scheme with HSBC, the Governing Body can approve procedures to make investments. The Governing Body should ensure that the scheme of delegation gives authorisation to allow the appropriate person to make such investments. All investments should be recorded in sufficient detail so that they can be identified and the investment must be in accordance with the Council’s Treasury Strategy. This information will include: 1. The date of purchase, 2. The cost and 3. A description of the investment.
Investments can only be made where it can be shown that there is no risk to the capital sum invested. This means that there can be no investment made in stocks and shares or anything similar. Also, the school cannot lend money to third parties. If a school is part of the Council’s HSBC scheme, all public funds must be left in that account. This attracts a higher rate of interest than a normal current account and one of the benefits of the scheme is that the interest is calculated daily on the whole amount held in the account. Minimal cash flow management is needed i.e. checking the current account to see if the balance can meet immediate commitments and moving funds to/from the investment account as necessary. The school should at no point be in an overdrawn position. Interest is paid to all schools within the HSBC bank scheme. Interest is paid at 1% below the Bank of England base rate and is paid quarterly. If the Bank of England base rate is 1% or below, no interest will be paid to schools within the HSBC scheme. Overdrawn Accounts There are two instances where a school may find that its bank account goes overdrawn. This first is where there is a short-term issue regarding cash flow, such as if the school incurs some one-off expenditure for an unplanned repair. The second is where there is an underlying budget problem that will take months or even years to recover from. The school will be charged 2% above the bank base rate, on overdrawn balances, plus a £25 administration charge. In either case, the school must work closely with the Council to remedy the situation. In certain circumstances, the Council may offer the Governing Body a short-term loan to assist the cash flow situation.
The school can only borrow funds from the Council. Schools who do not bank with the HSBC may not overdraw on their accounts as that is a form of borrowing. Bank Reconciliation It is vital that the financial system of the school is reconciled to the bank account at least monthly. The bank reconciliation should be signed and dated by the person performing the reconciliation. They should also be reviewed and countersigned by an independent member of staff. There are a number of reasons for the reconciliation. Firstly, it should help to identify any errors or fraudulent activities with regard to the bank account, for example if a cheque produced by the school has been altered before being presented to the bank. Secondly, it means that the financial records are up to date to allow the Governing Body, Headteacher and Finance Officer to undertake their role in the financial management of the school. Thirdly, it provides information to use for cash flow planning, especially important if the school is not within the Council’s banking scheme. Petty Cash The Governing Body must agree an appropriate level of petty cash to be held on the premises. This amount should represent a balance between convenience and the risk of holding cash on the premises. The Headteacher should ensure that the petty cash fund is held securely (preferably in the school safe) and that only authorised staff has access to it. Petty cash should only be used to refund staff for minor items of expenditure, up to a pre-determined limit. A petty cash refund voucher should be completed for all refunds. These should be held in sequential order. Receipts, identifying any VAT paid, must support all expenditure from the fund. The refund voucher must be signed for, by the recipient and countersigned by an authorised member of staff. Petty cash details should be entered onto the school’s financial accounting records on at least a weekly basis. The petty cash held should be reconciled monthly to the monthly reconciliation figure produced from the school’s financial accounting records. An authorised member of staff should sign the reconciliation to confirm its accuracy. The petty cash should also be reviewed and countersigned by an independent member of staff. Personal cheques must not be cashed from the petty cash fund. Replenishment of petty cash must be made through the correct bank account and not through other sources of income collected at the school. Charging the school budget share The Scheme for Financing Schools outlines the circumstances in which the Council can charge the school’s budget share without the prior approval of the Governing Body. However, this will only be done in exceptional cases.
FG 7.35 FG 7.36 FG 7.37
FG 7.38 FG 7.39
FG 7.40 FG 7.41
The Governing Body has the right to dispute these charges if it does not agree with them. To do this, the following procedure should be followed: 1. Write to the originator of the charge to register the grievance within two weeks of the notice of the charge (not when the deduction is actually being made). 2. Copy this letter to the Director of Schools & Children’s Services (Resources Development Manager) and the Director of Finance, Resources and Customer Services (Financial Management). 3. The Council will then have two weeks from the date the letter is received in which to respond. 4. If there were still no agreement, the issue would be referred to the Director of Schools & Children’s Services to make a decision. NB. This procedure is not in place for charges made through direct debit facilities such as operated by the Payroll Service, as the school is agreeing to the direct debit before it is being taken. However, if there were an instance where an item was disputed and no resolution could be found, then this procedure could be used.
Queries on direct debits Queries on the direct debits charged to the schools bank account should be directed to the following telephone numbers:
School name begins with letter:
AB CD FHJ EGKY LM NRTV SOUZQ P W1X Duty line 1 Duty line 2
020 8379 8147 020 8379 3581 020 8379 1920 020 8379 8073 020 8379 8174 020 8379 3069 020 8379 4705 020 8379 1213 020 8379 3331 020 8379 8056 020 8379 4727
SARAH BETTY CAROL CHRIS S PATSY LEAH SONIA JOSEPHINE JO
Asset Management Plan The Council has an Asset Management Plan and a Statement of Priorities that covers all the school premises in the Borough. This sets out the priorities for the capital development of schools. Schools must produce their own School Premises Development Plan showing the improvements, repairs and maintenance planned for the school buildings. This should cover any expenditure, capital or revenue, incurred on the fabric of the buildings. Please refer to your Education Building Development Officer and the Property Manual for further guidance. Definition of capital expenditure The definition as issued by the DFE is as follows: 1. The acquisition, construction, preparation, enhancement or laying out of land 2. The acquisition, construction, preparation, enhancement or replacement of roads, buildings and other structures 3. The acquisition, installation or replacement of movable or immovable plant, machinery, apparatus, vehicles and vessels.
The DFE go on to say that capital works should: 1. Lengthen substantially the useful life of the building/asset 2. Increase substantially the open market value of the building/asset 3. Increase substantially the extent to which the building/asset can be used for local council purposes.
The Chartered Institute of Public Finance & Accountancy (CIPFA) advocates the use of de minimus levels to apply to a scheme when defining capital expenditure. In Enfield only building projects, furniture, equipment and vehicles costing £10,000 or more for a single item should be treated as capital. For VA schools the de minimus level is £2,000 where the devolved formula grant received directly from the DFE is being used. If appropriate, low value works can be amalgamated into a single project, which can then be considered for capitalisation. These arrangements will also apply to kitchens. Under the scheme of delegation, the Council is responsible for certain capitalised repairs and maintenance items. The determination of priorities is undertaken in accordance with the Local Policy Statement of the Council’s Asset Management Plan. For VA schools these limits would only apply to buildings on playing fields.
FG 8.6 FG 8.7 FG 8.8
Where schools have capital schemes, they will need to be funded by the schools themselves where the expenditure is lower than the de minimus limits. The agreed de minimus limits, which will be applied over the next two years, are sums greater than: Years 2011/2012 Primary & Special £36,000 Secondary £53,000
These limits will be reviewed and increased in line with the building price indices at the start of each multi year period. Schemes costing more than the de minimus limits will be funded by the Authority, subject to resources being available. FG 8.10 In addition to revenue works, schools continue to retain responsibility for various works, which was previously part of the extended scheme of delegation, irrespective of the cost. These are: 1. Internal painting 2. External redecoration 3. Drainage 4. Playgrounds 5. Boundary fencing and walls The DFE have issued further guidance with the introduction of Consistent Financial Reporting. The manual “School Finance Pack” published in 2002 and updated in February 2007, sent out by the Council on behalf of the DFE defines how they would like schools to record their expenditure. One of the sections defines the capital expenditure codes. It broadly follows the CIPFA definition but is more focused on schools. Therefore you should use these definitions, along with the de minimus levels, when deciding whether expenditure is capital or not. Types of Formula Funding Devolved Capital Devolved Formula Capital helps schools improve and maintain the condition of school buildings. The funding is devolved to schools using a formula set by the DFE based on a lump sum per school plus an allocation per pupil. The DFE recognises that individual schools may not wish to undertake relatively small schemes each year and so the allocation for a year may be spent in the following two financial years and up to five months in the third year. VA schools must spend this within the three years. All expenditure must be linked with the Premises Development Plan. The DFE expect that the devolved capital allocation be used for the highest priorities in the plan and that, where this is not the case, a letter of explanation is written. The allocation must be spent on capital works. It cannot be vired to fund revenue expenditure, although revenue funding can be used to supplement the devolved capital allocation. Schools should only move revenue funds into direct revenue financing (Revenue contributions to capital) if the funds have been spent on capital projects. Under the CFR framework, it is not possible to move capital balances back from capital to revenue therefore it is advised to only vire sufficient funds to meet the capital expenditure already undertaken.
Asset Management and Development Coding of capital expenditure When the school incurs capital expenditure, it is vital that it is recorded as such. Under the Consistent Financial Reporting initiative, separate capital expenditure headings exist for the various types of capital expenditure, regardless of its funding. These codes must be used as defined. Furniture and Equipment funding Major capital developments being undertaken by the Council usually have funding to provide furniture and equipment. This will be devolved to the school to spend. Schools will usually be required to provide the Council with a list of items that they propose to purchase from the capital budget. It may be necessary for the Council to get confirmation from the school that the amount provided to the school has been fully spent and used for the purpose that it was intended. If this is the case, a specific request for such information will be sent to the school. Other Capital funding There are other potential sources of funding that could fund capital expenditure, such as ICT in Schools. Also, the school could contribute its general revenue funding towards a capital project. If the expenditure falls under the capital definition then it should be treated as direct revenue financing of a capital project. A transfer between Consistent Financial Reporting (CFR) codes (E30 and CI04) must be made. For further details, please refer to the ’School Finance Pack’, distributed by the Council on behalf of the DFE. Voluntary Aided Schools Capital The de-minimus level for Voluntary Aided Schools is £2,000. VA governing bodies are liable for: 1. The existing school buildings (internal and external) 2. Those buildings previously known as “excepted” (kitchens, dining areas, medical/dental rooms, swimming pools, caretakers’ dwelling houses) 3. Perimeter walls and fences, even if they are around the playing fields 4. Playgrounds 5. Furniture, fixtures and fittings – and ICT hardware but not software. 6. Other capital items (which can include boiler replacements and replacement of services)
FG 8.21 FG 8.22
The Council is liable for: 1. Playing fields (including sports pitches and hard surfaced games areas e.g. tennis courts unless also used as playgrounds) 2. Buildings on those fields and related to their use
Under the new arrangements, the responsibility for all revenue work has been transferred to the LA, with the responsibility and funding delegated to VA schools in the same way as for all other schools. There is now no statutory governing body contribution to revenue work, and the Formula Repair grant, previously paid to VA schools for revenue expenditure on their liabilities, has been discontinued.
Voluntary Aided Schools should refer to the DfE guidance “Capital Funding for Voluntary Aided Schools in England” 2006-07 version (updated 2011) available on the DfE website –see FG 8.26 below. Further information can also be obtained from the Diocesan representative (where appropriate) or from Sue Watson, Education Building Development Officer for Voluntary Aided Schools telephone number 020 8379 3222, e-mail: Sue.email@example.com. The Blue book: can be accessed on https://www.education.gov.uk/publications/standard/Download?DownloadPublicati onReference=DFE-000272011&DownloadItemReference=Capital%20Funding%20For%20Voluntary%20Aid ed%20Schools%20in%20England%20%20Blue%20Book%20Guidance%20PDF(DfES%20Online%20Store)&Document Type=DOC&Url=%2Fpublications%2FeOrderingDownload%2FBlue%20Book%20 DfE%20Feb%202011.doc
Private and Voluntary Funds
Private Funds held by the School The guidance in this section deals with private funds held by the school. Other funds held by bodies who may be closely associated to the school but not part of the school, such as parent teacher associations, are excluded from this guidance and should be held completely separate from any school funds. Banking Arrangements The same rules apply to private fund banking arrangements as to the school’s main bank account. Please refer to the chapter on Banking Arrangements for details. Expenditure funded by donation from the Private Fund The DFE, through CFR, has deemed that any expenditure on behalf of the school must be recorded in the financial records of the school i.e. that the expenditure with a matching amount of income as a donation from the private fund should be included in the CFR return made at the year-end. This does not mean that the expenditure and the income has to go through the main bank account but it must be recorded in such a way as to be added to the CFR return. In practice, most expenditure should go through the main bank account. Any employee expenditure should go through the school’s payroll service and therefore the bank account. Any goods and services that attract VAT should go through the bank account so that it can be reclaimed. Expenditure through the private fund is not subject to the same VAT exemptions. Therefore, the most efficient way of operating the private fund is to put all educational expenditure through the main bank account and then record the donation from the private fund as income. Non-educational expenditure such as purchasing flowers for an individual should be paid from the private fund. However, guidance from the DFE states that even this type of expenditure can go through the main bank account and appear on CFR as long as the cost is met by a donation from the private fund. All invoices, receipts etc. must be recorded in a ledger book or equivalent, for example in a spreadsheet. The format is not prescribed but a proposed format is attached in Appendix 13. Audit The annual statement of accounts must be produced and certified by approved auditors. The certified statement must be received and approved by the Governing Body on an annual basis. The format of the return is not prescribed but a proposed draft is attached in Appendix 14. In cases where there is a profit making venture (e.g. tuck shop) contributing to the fund, a profit statement should also be prepared at least once a year (preferably more often). A proposed format is attached at Appendix 15.
FG 9.9 FG 9.10
Insurance The Governing Body must ensure that the school has appropriate insurance cover for the unofficial school funds and parent / teacher association funds. The amount covered should equate to the maximum amount held. The PTA funds are not covered by the Insurance held at the schools. The school must ensure separate insurance is taken out to cover any funds held by the PTA. These costs must be met by the PTA. VAT Schools Private Funds are not part of the Council’s VAT registration and need to be separately VAT registered if the total annual taxable turnover exceeds the statutory threshold; from the 1 April 2011, the threshold is £73,000. HM Revenue & Customs do not allow schools’ Private Funds to be disaggregated in order to keep each individual “fund” or accounts below the transaction threshold.
The Council provides buyback arrangements for Insurance which ensure that the Council’s minimum requirements are met. Minimum cover Where a Governing Body decides to arrange its own insurance for the school, it must demonstrate that it has obtained sufficient cover of the Council’s insurable interest consistent with the Council’s minimum requirements. In detail: 1. The cover must match the level of cover provided by the Council and the school must provide written confirmation of this to the Director of Finance, Resources and Customer Services (Insurance Manager). 2. The Council’s insurable interest is fully protected according to its specification. 3. A copy of the policy document is provided to the Director of Finance, Resources and Customer Services (Insurance Manager). 4. A copy of the renewal receipts is provided to the Council within 14 days of the policy renewal or inception. 5. The school’s insurer or broker provides written confirmation to give 21 days notice in writing of their intention to cancel or not renew the policy. If any do give notice not to renew the policy, this must be sent to the Director of Finance, Resources and Customer Services (Insurance Manager).
Where the insurance cover arranged by the school fails to meet the Council’s required level, the Council will inform the Headteacher and advise on the required action. If appropriate action is not taken, the Council will take the necessary action to ensure that its interests are covered and will charge the school for any costs incurred. Enfield Council cannot obtain insurance for extended school activities run by private limited companies, independent management committees, charities or separate legal entities which should all have their own insurance cover. A written agreement should exist which indicates who bears what risk and imposes an obligation to insure. If schools themselves provide an activity as part of the operation of their school, then the Council’s standard policy will provide cover, subject to standard terms and conditions. Governor Run Extended School Activities Generally, governing bodies must ensure that they have insurance covering the extended school activities that they intend to run. The insurance requirements of each governing body will depend on the particular activities being undertaken at the school. Those schools purchasing the Council’s “buy back” scheme are not automatically covered for governor run extended activities (the exception to this is out of hours learning attended by the school’s own pupils).
Insurance – Contractors and Consultants All contractors and consultants must have Public and Employer’s liability insurances, and all schools should ensure that, before a contractor or consultant begins work on site, that they have the appropriate level of Public and Employer’s Liability Insurance. This should be confirmed by seeing the insurance certificate or, as a minimum, a letter of confirmation from their insurers/brokers. A contractor or consultant should also have other insurance cover, dependent upon the nature of business in which they are engaged (e.g. Professional Indemnity). The school must also be satisfied that this insurance is in place and is at an appropriate level, before allowing work to commence. Types of Insurance Below is a brief description of the types of insurance that are required. For a detailed description of the cover needed, please refer to the Insurance Services Service Level Agreement. Alternatively, please contact the Director of Finance, Resources and Customer Services (Insurance Manager) directly. There are four main types of insurance and these can be subdivided as follows:
Combined Liability Insurance FG 10.10 Employers’ Liability - This insurance covers any person under a contract of service or apprenticeship with the Council or the school against claims for compensation for injury or disease where the claim arises in the course of their employment. It also covers costs and expenses incurred in the defence of any prosecution brought against the Council and/or Governors for breach or alleged breach of the Health and Safety at Work Act 1974. FG 10.11 Public Liability - Often referred to as Third Party Liability, it covers claims made against the Council or the school by pupils, visitors and members of the public in respect of accidental bodily injury or illness and accidental loss of, or damage to, property. FG 10.12 Officials’ Indemnity - This insurance covers the Council, Governors and Employees for compensation that they must pay to third parties for financial loss arising from negligence or accidental error or omission during the course of official school business. FG 10.13 Libel and slander - This covers Members, employees and Governors against damages for libel or slander arising during their school duties. Other Liability Insurance FG 10.14 Money - The policy should cover the loss of cash or negotiable money (e.g. postal orders, stamps) both in transit and at the school. Adequate security precautions must be taken. Please refer to the Insurance Services SLA or, for specific queries, please contact the Director of Finance, Resources and Customer Services (Insurance Manager) directly. FG 10.15 Fidelity Guarantee - This covers the loss of money or property belonging to or in the custody of the School as a result of fraud or dishonesty on the part of Governors or employees.
FG 10.16 Personal Accident - This insurance is in many parts and should cover the employees, governors, volunteers and work experience placements for any personal injury incurred in the course of their duties at the school. Balance of Perils FG 10.17 This insurance should cover the buildings and their contents, where a claim would have to be met by the school, against: 1. 2. 3. 4. 5. 6. Malicious damage Accidental damage Theft Burst pipes Storm, or flood Impact by road vehicle or animal..
Buildings FG 10.18 The insurance needs to cover the buildings against: 1. 2. 3. 4. 5. 6. 7. Fire Lightning Explosion Aircraft Earthquake Riot and civil commotion. Storm or flood
School Trips FG 10.19 All schools that buy back into the Council’s central insurance arrangement are automatically covered for all school trips. The school is not required to request cover or complete a proposal form, but must maintain evidence of the authorisation for the trip and written records of which pupils attend which trips. This insurance extends only to Enfield pupils on the trip, together with staff and any volunteers authorised by the school. Lap Tops FG 10.20 The school’s insurance does not extend to cover laptop computers taken home by pupils as they are not then in the custody and control of the school. In the event that pupils are required to take the computers home, the parents should be asked to extend their own household contents insurance to provide cover for the equipment. Laptops taken home by teachers will be covered by the school’s insurance. However, the insurance specifically excludes equipment left in unattended vehicles.
General FG 11.1 All educational visits must be arranged according to the Requirements for Educational Visits 2006. The LA endorses and adopts the DFE guidance, which should be considered, where appropriate, alongside the LA guidelines contained within the document: FG 11.2 The Governing Body is responsible for ensuring that there are safe and efficient systems in place, for the organisation of school trips, including the control and custody of related funds. Wherever possible a sufficient division of duties should exist between staff to prevent one person being responsible for all the activities of the trip. If not, there is an increased risk of errors not being identified and corrected and the opportunities for theft and misappropriation of cash received. In the case of residential trips the school must keep accounts on an individual trip basis. This can be achieved by setting up separate income and expenditure lines on R M Finance or other financial management/accountancy packages used by schools. Normal systems already in place at the school to deal with collecting income and authorising expenditure are usually sufficient for dealing with trips and school journeys. An official audit trail must be maintained to show the whole process, from approval for the trip/journey to take place, to the receipt of money, through to its official record on the school’s financial management records and its allocation and use. Approval and Costing the Trip/School Journey Approval to provide a school journey/trip must be sought from the Headteacher and the Educational Visits Co-ordinator, in accordance with the School’s Educational Visits policy. A full breakdown of the associated costs for the trip/journey, including the cost of any remissions or subsidy that is to be made from the school budget, should be provided to and approved by the headteacher.
Insurance FG 11.9 Cover for school trips and journeys is automatically included for all schools that buy back into the Council’s central insurance arrangements. For further advice in this area, please contact the council’s insurance section.
FG 11.10 Schools that do not ‘buy-back’ into the Council’s central insurance arrangements should ensure that adequate cover for their school journeys is arranged prior to commencement of the trip. The minimum levels of cover should reflect those provided by the Council, as detailed below: 1. 2. 3. 4. 5. Cancellation £1000 per person Medical expenses £1,000,000 Personal Accident £3500 Personal Effect & Money £1500 Legal Liability £3,000,000 any one event.
Information to Parents FG 11.11 Parents/guardians should be provided with details of the costs of any trip/school journey in writing. All requests to parents/guardians for voluntary contributions towards the cost of the trip/journey, must make it quite clear that the contributions are voluntary and that children of parents who do not contribute will not be treated any differently. However it can emphasise that without substantial voluntary contributions the trip/journey may have to be cancelled. FG 11.12 For school journeys, the letter should also include details of the payments schedule and amounts and clearly indicate if deposits are not returnable. Income Records FG 11.13 Staff responsible for collecting school journey money must keep a record of the income received. FG 11.14 Education Partly During School Hours As an example, a long-distance trip might involve much travel before and after normal school hours, but if the time spent at the destination fell mainly within school hours, the trip would count as happening in school time and be free of charge. By contrast, a trip that involved leaving school an hour or so earlier than usual in the afternoon, but then went on until quite late in the evening, would be classified as taking place outside school time. Charges would then be allowed. For one off day trips FG 11.15 A class list of pupils’ names, headed up with the name of the trip can be used. A tick against pupils’ names on the class lists is sufficient to show which pupils have paid/contributed to the costs of the trip. How much each child has paid must also be recorded. This dispenses with the need to issue individual receipts to each child. The staff member collecting the cash must make sure that when the cash is handed over to the person responsible for banking, that person signs and dates the class list to confirm the total sum of the cash they receive. For school journeys FG 11.16 Staff may use their own school journey book or a spreadsheet, to record the details of the journey. A clear audit trail must be recorded of the pupils attending the journey and the dates and totals of the individual contributions collected. Any refunds to pupils must be clearly highlighted. If payment/contribution cards are to be used, staff must ensure that they sign and date the cards as proof to parents that the school has received the monies.
FG 11.17 Residential Activities Special rules apply for residential activities. On this basis, a term-time trip from noon on Wednesday to 9.00p.m. on Sunday would last for nine half-days, include five school sessions and would count as taking place in school time. A trip from noon on Thursday to 9.00 p.m. on Sunday would count as seven half-days, include three school sessions and would be classified for charging as taking place outside school time. If fifty per cent or more of a half-day is spent on a residential trip, you should treat the whole of that half-day as spent on the trip. Banking FG 11.18 All trips/school journey income collected should be banked into the school’s official bank account. Income must be banked intact and without deductions. The bank paying-in slip details, amounts and date should be recorded on the class list or the school journey book, in order to ensure a clear audit trails. FG 11.19 Details of income banked must be recorded onto the school’s financial management system as soon as possible. Payments FG 11.20 All invoices must be processed in accordance with normal payment procedures and Contract procedure rules. FG 11.21 Where trips are undertaken which require entrance fees to be paid, schools should try to obtain an invoice in advance for the necessary tickets. Where appropriate, a proper VAT invoice/receipt must be obtained otherwise schools will not be able to reclaim the VAT. FG 11.22 All expenditure must be recorded on the school’s financial management records as soon as possible. Petty Cash FG 11.23 There may be a need to have cash during the residential trips. In which case, a float should be authorised just prior to the trip. A handover of petty cash should be documented to identify the amount and to whom the cash has been issued. It is the responsibility of the staff member holding the petty cash to ensure that details of any expenditure taken from the petty cash and the associated receipts are retained. These should be handed over to the finance/administrative officer as soon as possible after the trip for accounting purposes. Wherever possible, a VAT receipt should be detained for petty cash purchases, so that the VAT can be recovered. Pocket money FG 11.24 Any additional pocket money, taken by pupils on the trip, must be properly accounted for if members of staff or other adults in the party control it. A record of the individual amounts received and the payments handed over to the pupils must be maintained. Income and Expenditure Statement FG 11.25 The school journey account should be reconciled as soon as possible after the trip/school journey has taken place and all the costs paid for. An income and expenditure statement must be produced and signed by the person in charge of the trip. The headteacher should check the statement to verify the figures and sign it once they are satisfied that the figures are correct.
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FG 11.26 If the income and expenditure statement shows a surplus balance, which equates to more than £5 per pupil, then the school must arrange to refund those pupils who contributed to the trip/journey, with their share of the surplus. Refunds to parents should be made by cheque, where possible. If a cash refund is requested, than the parent/guardian must sign a receipt to confirm that they have received the refund. FG 11.27 If the income and expenditure statement shows a surplus balance, which equates to less than £5 per pupil, then the school should use the surplus balance for the benefit of the pupils who attended the trip/journey. FG 11.28 If the income and expenditure statement shows a deficit balance, the governing body may subsidise any shortfall from the budget allocation. It may also be subsidised from the school funds by fund raising or other voluntary contributions. Retention of Documents FG 11.29 All trip/school journey records should be retained for 6 years.
RENTAL AGREEMENTS AND LEASING
General Leasing, rental or other deferred payment agreements for equipment, such as telephone systems, computers and photocopiers, must not conflict with the Council's application of Government capital expenditure controls. When considering options for funding acquisition of new or replacement equipment, you should compare the prices charged by more than one provider. You should also compare the cost with payments using the Council’s School Loan Scheme. Details of loan repayments can be provided by the Director of Finance, Resources & Customer Services (FMS). Where lease agreements are entered into, details of all the information relating to the equipment and the rented cost must be shown in the agreement. Copies of all agreements must be sent to the Director of Finance, Resources & Customer Services (FMS). Controls As a result of the need to comply with these controls, any such agreements entered into must meet the following criteria: 1. The agreements must not allow you to become the owner of the equipment. This means that you cannot buy the equipment at any stage, or receive any proceeds from the sale at the end of the period. 2. The term of the agreement must be short enough for the estimated value of the equipment at the end of the agreement period to be at least 10% of its original cost, and this should be specified in the agreement. 3. The responsibility for maintenance and insurance must lie with the lessor. 4. The agreement must not give an automatic right to continue with the lease at the end of the agreement period, although this could subsequently be arranged at an open market rental. 5. A leased asset register must be maintained at the school (See Appendix 34). This should be subject to an annual check by the Head Teacher.
FG 12.3 FG 12.4
In addition, you should bear in mind the following: 1. Direct debit agreements with the suppliers or leasing companies should not be entered into, as this is contrary to the Council's Financial Regulations. All payments must be made by cheque. 2. Careful consideration should be given before committing future years' budget provision. 3. It cannot be stressed strongly enough that you should check the agreement that you are being asked to sign and commit to, including that all verbal arrangements are confirmed in writing, as you will be agreeing to commit the school to make payments for many years into the future. 4. You can contact an independent leasing advisor, at no cost to you with any questions you may have about leasing or offers made by leasing companies. This has been arranged by Essex County Council and you are able to use this service. Contact UniLink helpdesk on 0844 887 5544
Schools’ Finance Manual – Children’s Centres
Schools’ Finance Manual – Children’s Centres
This guidance is intended to provide information that will enable schools to understand the financial requirements for the management of children’s centres. The financial regulations and financial guidance sections earlier in this manual apply equally to children’s centres and it is essential they are followed when setting up the system and procedures relating to children’s centres. Provision of Service In deciding which services they wish to undertake a school governing body must be satisfied that the sources of funding required to make these activities sustainable are available, that regular monitoring of the financial position is reported to them and that there is a process in place for review and evaluation of the activities. As many of the services schools wish to provide are dependent on external grant funding that is not confirmed in the longer-term, then services that rely on such funding can only be agreed for the length of time that such funding is certain. The governing body can provide the services itself or in collaboration with external providers or other schools. There are advantages and disadvantages to each model, which will not be described here other than to point out the school needs to be satisfied that the chosen option offers best value for money. Whichever model of delivery the schools adopts, they must ensure: 1. The children’s centre’s activities do not over-stretch the school’s financial resources. 2. That the financial arrangements set out in this Finance Manual are applied equally to all the children’s centre activities. 3. That the financial arrangements set out in this Finance Manual are applied equally to all the children’s centre activities. 4. Existing systems are reviewed and changed to ensure the processes and controls are robust enough to support the service. These should be assessed and updated regularly. 5. A governance framework is in place to make decisions about the children’s centers regarding services provided, implementation, monitoring, accountability, quality, and financial viability.
. CC 1.2
Children’s centre services are commissioned centrally by the Authority, with the exception of childcare that is arranged by the schools themselves. If however, childcare management is poor then the LA may decide to arrange the childcare too.
Schools’ Finance Manual – Children’s Centres
Developing Children’s Centres Activities
Children’s Centres The Local Authority has responsibility for ensuring children’s centres operate efficiently and that robust financial management systems are in place at both centre and Authority level. Additionally, unlike school budgets, the responsibility for the financial management of children’s centres remains with the Authority, including ensuring that each children’s centre provides value for money for the services offered to the local community. Liaison between schools and the Authority has identified those schools that will have children’s centres. The development of a children’s centre requires the preparation of a three-year business plan in consultation with the Child Care Business Development Coordinator and the approval of the Authority, which aims to ensure that the centre will be financially viable. This three-year plan will need to be reviewed annually and an updated plan submitted to the Authority for approval, in the same way as schools do for their existing school budget. Surpluses Surpluses at the year-end on children’s centres can mainly be derived from two sources, additional income from fees and charges, or a reduced level of expenditure on providing services. Where the surplus is attributable to either of these, it is fair and reasonable that this is retained in the children’s centre account in the school’s balance, and carried forward. It is feasible that a surplus is due to grant being paid, but there being insufficient expenditure to match the level of income from grant, resulting in the account showing a surplus. In this situation, the grant will be recovered by the Authority, so that the level of grant is equal to or lower than the expenditure. Deficits Deficits on children’s centres must be avoided by regular, robust financial monitoring and action taken to avoid this occurring. See section CC 5 on monitoring. Where there is a deficit, the Authority will require an explanation of how this occurred together with the production of an action plan to demonstrate how future deficits will be avoided. The funding of a deficit may be agreed by the Authority in the short-term however if it can not be clearly demonstrated that the centre is financially viable, then it may be necessary for the centre to close unless the cause of the deficit can be identified and corrective procedures implemented. Charges cannot be subsidised for individual users of services who might be unable to pay or staff that work at the school and have children attending the children’s centre. Separate Bank Accounts It is not recommended that separate bank accounts are set up for children’s centre activities that use public funds. If a school does decide to set up a separate bank accounts for these activities, they will need to issue invoices and pay by cheque for services supplied, maintain separate accounting records that reconcile to the bank account and merge the accounts into the year-end CFR return. This is not considered to be necessary. Where the services are run by the governing body as distinct from the school, a separate account must be set up as the governing body is a separate legal entity.
Budgeting for Expenditure
Sections FR 2 and FG 2 of this Manual will also apply when planning expenditure for the children’s centres. A small contingency should be built into the plans to be made available for unexpected items of expenditure. Direct costs External Providers Where external providers are used, expenditure will be the amount of the tender submitted in accordance with the specification issued by the school. Allowance needs to be made for any variation orders that are issued, or where the tender price varies due to other factors, e.g. pupil attendances etc. Staffing As with all schools activities, expenditure on staff accounts for the largest amount of money spent. Where existing staff are used for the activities, any additional salaries that they will receive as a consequence of taking on additional work will need to be calculated and charged as an expense to the children’s centre. This will need to include the cost of split duties where staff are employed on activities before the start of the school day and after school. Any grade differential for taking on the additional work will need to be charged to the children’s centre. Staff working on childcare services in children’s centres will need to be appointed on terms which reflect the opening times of children’s centres which are open between 8.00am and 6.00pm, 48 weeks of the year. Appointments should be made on the basis of rotating shift patterns in order to avoid the need to pay overtime, which attracts a premium and is therefore more expensive. Materials and equipment Estimates need to be made of the cost of any materials and equipment that need to be purchased. This will include both those required for the initial setting up of the children's centres and the ongoing replenishment of them as they are used up. Where larger items of equipment are needed consideration needs to be given to whether or not they could be shared with another children's centres to reduce the financial cost. Advertising and marketing The success of the children's centres will be dependent on the number of users of the service, and so there needs to be some financial investment in publicity to attract pupils, parents and community users. Clearly the school’s usual communication channels will provide much of this publicity, but for the wider community other methods will need to be used and budgeted for accordingly. Indirect costs Site staff Consideration will need to be given to the extent to which site staff will be required to work longer hours and therefore will be entitled to additional salary. Cleaning costs The timing of the activity may result in the programme for cleaning the school needing to be changed as well as the children's centres itself, resulting in additional costs. This will need to be negotiated with the cleaning contractor, and any additional cost included in the costs for the children's centres.
Energy costs Extending the use of the school to include children's centres will mean that the energy use of the school will increase. It will be extremely difficult to quantify this, but it should be acknowledged that will be an additional cost to the school overall. Apportionment of costs Where the children's centres and schools share resources funded from the school’s budget, there should be a reasonable apportionment of the costs so that the school governing body and the Authority can be provided with meaningful information about the true costs of providing children’s centre services. It is not necessary for these apportionments to be too detailed as this will lead to spurious accuracy that is unnecessary. These cost apportionments need to be done on a regular basis and for children’s centres, included in the monthly monitoring returns, rather than being left to the year-end.
Budgeting for Income
Charging for Childcare Charges for childcare will be the highest of all the services that are provided within the school. The fee level will be determined in the preparation of the initial threeyear business plan and will be set at a level that is consistent with similar provision in the local area and with a view to the centre being viable on a long-term basis. The approval of the Authority will be required before any changes can be made in the level of the fees. Children’s Centres charging The level of the charge will be a key factor which determines the level of usage and it will be essential to try to achieve the optimum balance between the amount charged and the cost of providing the activity. The income from the fees and charges should fully cover the costs. Any shortfall cannot be subsidised from the school’s resources. Assistance towards the cost of childcare There are a number of ways in which families can receive assistance with meeting the cost of paying for childcare. Parents should be advised of these in order that parents’ income is maximised in order to help them to pay the fees. Early Intervention Grant This grant is currently distributed to designated schools on the basis of an assessment of need to maintain them on a sustainable basis. This grant includes funds to support children’s centres. This grant is only payable on the basis of actual spending. Where the grant has been advanced to children’s centres, but not spent before the end of the financial year, the Authority will recover the grant. There is no provision within the conditions for payment of the grant for an under-spend to be carried forward from one financial year to the next. If the grant is overpaid, it will be recovered by the Authority, as this will need to be repaid to the DFE. The grant will be advanced to children's centres following submission of a claim. It is essential that the children's centres retains all documentary evidence e.g. suppliers invoices, payroll records etc. to support the claim, as these may be required by external auditors when the Authority’s claim on the DFE is audited. Where the children's centres makes and is paid a claim for grant, but this is subsequently disallowed by the auditors for whatever reason, then the Authority will recover the sum involved from the children's centres. Payment of Grant Income The grant income will be paid to the children's centres by the Council on a monthly basis on the submission of the Children’s Centres monthly monitoring returns.
CC 5Financial Monitoring
CC 5.1 It is essential that once a children’s centre activity has been started, financial monitoring is undertaken to ensure that the financial objectives that were originally approved by the governing body and Authority are being achieved. Close monitoring must be undertaken in the initial stages to ensure that there are sufficient users to justify the activity or achieve the income target. Regular robust monitoring will identify those activities that are not meeting their financial objectives, in which case prompt action must be taken to ensure that financial losses do not accumulate, which will be a drain on the school’s or the Authority’s resources. In the case of children’s centres, once the annual budget has been set by the Authority (after consultation with the Children’s Centre), no variation to the budget will be made without the written agreement of the Head of Service for Community Access, Childcare and Early Years (CACEY). Any requests to vary the agreed budget must be made using the ‘Projected to 31/3/20xx’ column of the ‘Children’s Centres Monthly Return’ (See monitoring return - Appendix 36). The financial monitor should make a projection of what the net cost of the service will be by the end of the financial year. Monitoring of expenditure Staffing costs are likely to be the highest element of cost and so this needs to be monitored most closely. It is necessary to ensure that staff are being paid in accordance with the arrangements agreed at the start of the activity and that no additional payments e.g. overtime have been made without prior agreement. Close monitoring of the hours paid will help to achieve this. Where there is a decline in the activity, it will be necessary to undertake a review to see if it is still viable to continue. Staff working in children’s centres must not be employed on terms and conditions at a higher level than allowed for in the business plan, as this will almost certainly jeopardise the financial viability of the centre, and could result in its closure. Where a contractor is engaged to provide the services, financial monitoring will usually be more straightforward as it will largely consist of estimating the cost of delivering the agreed outcomes over the duration of the contract. Other running costs should be monitored to ensure that no unexpected or abnormal charges are made. Monitoring of income Where activities are charged for, monitoring must identify whether or not the income targets in the original business plan are being achieved. If they are not, then an immediate review must be undertaken to determine whether or not the activity should continue. This review must be undertaken with the CACEY team within the Local authority.
CC 5.6 CC 5.7
Returns to the Authority The level of financial risk is much higher for children's centres and as the Authority is financially accountable for children’s centres a higher degree of financial monitoring is required. It is essential that accurate financial returns are submitted to the Children’s Centre team on the 15th of each month (or the nearest working day). All children’s centres will be issued with a timetable of the dates that returns are due. The template that is to be used for the monitoring return for completion is shown in Appendix 36. Should a return not be received, the children’s centre will not receive the income for that month. Persistent failure to provide financial returns may result in the initiation of a special internal audit review to identify why the Children’s Centre are not able to submit returns on time.
CC 5.9 CC 5.10
Introduction The responsibility for ensuring that there is adequate insurance against risks arising from the exercise of community facility powers lies with each school’s governing body. Under the fair funding legislation, schools have the option to “buy in” to the Council’s insurance and risk management package. This provides an indemnity to employees, governors and volunteers of the school whilst they are acting in good faith in the course of their duties. The Council is able to offer this cover to children’s centres on the basis that it has the statutory duty to provide education and/or because the school is undertaking activities that would be deemed to be part of the normal services of a Local Authority and therefore an insurable interest is established. Where activities are supported by the children’s centre (either explicitly or by implication) but are not actually run by them, the Authority would only deem an activity to be performed by the children’s centre if they had control over it and performed the relevant risk assessments, including ensuring police checks for those involved. Details of the insurances provided by the Council can be found in the Insurance Services Service Level Agreement. Activities undertaken at a children's centres by individuals it employs and over which the children's centre has direct day to day management which are of an Educational Nature; and critically that are not any more hazardous than it’s own school activities, will fall within the cover provided by the Council’s current insurance arrangements, subject to the terms and conditions of the policy. Any proposed activities run by the school which involve additional hazards above those normally associated with a school, would need to be advised to the Authority’s insurance department or the school’s insurer so that proper cover can be arranged. Any additional premium will be charged to the school and must be shown under the correct CFR code. Insurance coverage for activities of a medical nature is limited to the provision of first aid only (inclusive of administering medicines etc.), subject to any first aid being administered by a person who is fully trained. Thus where children’s centre activities involve working with for example, a health trust, it is important to ensure that responsibility for medical provision beyond first aid, remains with the health trust. In summary: If the children’s centre activity is provided directly by the school, consider the issue of additional hazards. If a third party runs the activity ensure they take the legal risk of doing so, that they have adequate insurance cover in place, and that these are all specified in a written and signed agreement. A top up cover (Balance of Perils) provides cover for losses as a result of flood, burst pipes, storm, impact, vandalism, theft and accidental damage.
CC 6.4 CC 6.5
Children’s Centre Activities Run Through External Providers, Private Limited Companies, Independent Management Committees, Charities or Separate Legal Entities Generally, in the case of projects managed by third parties and run on the children's centres site, the governing body should assess and be satisfied that the insurance provision is adequate for the activities undertaken and that there is no exposure to any risks that may result in claims. The Importance of Agreements In the same way that a formal agreement should be drawn up in instances where the school buildings may be let to outside organisations, it would be prudent to ensure that a similar form of words is agreed for all use by external organisations associated with children’s centres activities. This should specify exactly what is expected of the “extended school” body, and cover such issues as clarifying which of the parties is responsible for cleaning/tidying the rooms before and after use, security arrangements (locking up, visitor/access control), fire evacuation procedures, safety checks and reporting of defects etc. A person sustaining injury or damage is entitled to pursue a claim for compensation against any person or body that they so wish. It would be up to a court of law to determine where, if anywhere, negligence actually lies. An indemnity clause is used to provide certainty between the parties by guaranteeing who will ultimately pay in the event of a claim by a third party. In recognition of this point, it is important that all agreements should contain an indemnity between both parties. Insurance and Indemnity wording The following is an example of insurance and indemnity wording to be adopted: `“The <name of extended use> shall indemnify <name of school> against all actions, claims, costs, expenses and liabilities arising under statute or common law from injury to or death of any person and / or loss of or damage to any property insofar as they arise from matters pertaining to this agreement (other than where such actions, claims, costs, expenses and liabilities arise solely out of the act, default or negligence of <name of school>, it’s employees or agents). Without prejudice to the <name of extended use>’s liability under the above indemnity, the <name of extended use> shall effect and maintain appropriate insurance cover after seeking independent professional advice, to a level deemed adequate by the <name of extended use> (but with a minimum limit of indemnity of £5 Million* for any one occurrence or series of occurrences arising from any one event). Signed: ……………………………………on behalf of <name of extended use>. Date: ………………………………………. For alternative levels of indemnity, a letter from the service provider’s Broker / Insurer confirming that the level provided is adequate in relation to activity/service provided.
Further Insurance Advice If you require clarification on any of the insurance issues outlined above, please do not hesitate to contact the Insurance Manager: Vivien Uzeochi Tel. 0208 379 4615 firstname.lastname@example.org
Schools Finance Manual – VAT
General VAT Principles
Introduction This manual provides general guidance on Value Added Tax (VAT). It will cover the basics of VAT and provide an insight into some of the areas affecting Local Authority School. The manual sets out the information, which will enable schools to comply with relevant legislation and is required to enable the Council to fulfil its obligations to HM Revenue & Customs (HMRC). London Borough of Enfield (LBE) is VAT registered and the registration applies to all schools under its control. The Council’s VAT registration number is: 220 6708 90. Schools under the Council’s control operate within the Council’s VAT framework and are bound by the same VAT conditions and regulations whilst acting as agents of the Council. However, the framework does not cover the activities of Parent Teacher Associations or similar independent committees, nor does it cover activities that the governing body enter into in their own right. The general VAT rules apply to the Council and its schools in the same way as to other organisations. However, the Council benefits from a more generous treatment which allows it to reclaim most of the VAT paid out on expenditure. Expenditure in schools’ Council delegated funds are charged net of VAT, and the VAT element charged to the VAT account and reclaimed every month from HMRC. It is important that schools take care to identify the recoverable VAT element of any expenditure, and charge VAT on income, where applicable. VAT is a complex area and is subject to constant changes in legislation and case law. The advice contained in this manual reflects current practice and there will be the need to issue updates and additional guidance in the form of briefing notes as circumstance change. It is vital that staff who deal with income and/or expenditure are aware of the VAT rules and are able to recognise where VAT implications may arise across school activities. The correct treatment of VAT is important, as penalties can be incurred when errors are made. Where this has been caused by the actions of a school, the penalties will be met from the school’s own resources. Schools are advised to contact the Council’s VAT Accountant at the earliest opportunity to obtain the necessary information or clarification where there is some doubt or concern with VAT. VAT is a tax on consumer expenditure and is chargeable on most supplies of goods and services within the UK except those specifically exempted. It is administered by Her Majesty’s Revenue & Customs, whose officers may carry out visits to all VAT registered persons. During these visits they examine business and accounting records to ensure compliance with all VAT regulations. VAT was introduced in 1973 as one of the conditions to the UK’s entry into the Common Market. UK VAT laws are based on the principles laid out in European legislation and the current version is the VAT Act 1994. There are secondary legislation (Statutory Instruments) which clarify or adapt certain parts of the VAT Act. HMRC also publish a number of guides and leaflets relating to VAT. These provide a summary of their interpretation of VAT law and provide tertiary legislation.
Schools Finance Manual – VAT
VAT is charged on any taxable supply of goods or service made in the UK by a taxable person in the course or furtherance of any business activity. A transaction is within the scope of UK VAT if the following are satisfied. 1. A supply has been made: For VAT purposes, a supply is a consensual arrangement where one party provides another with something in return for a consideration. Supplies within the scope of UK VAT are either exempt or taxable. 2. It takes place in the UK: The VAT Act 1994 is a UK legislation and applies to transactions in the UK. 3. It is made by a taxable person: A taxable person is a ‘person’ who is liable to be registered for VAT. Registration is mandatory when supplies exceed a certain limit within a specified time period, or Suppliers are entitled to register voluntarily when their supplies are below this limit so long as they are in business and are making supplies that would be taxable in the UK. Each supplier has a unique VAT registration number which can be verified at http://ec.europa.eu/taxation_customs/vies/lang.do?fromWhichPage=vieshome& selectedLanguage=EN . 4. It is in the course of a business activity: These are transactions by a person in a trade, profession, vocation or any activity that satisfies the ‘business test’. It involves activities by any person who is concerned with making taxable supplies to customers for a consideration
Business and Non-Business Activity The VAT system makes a distinction in the purposes for which income is generated and expenditure incurred. Business activities are those transactions which satisfy the ‘business test’. These activities are usually carried out with reasonable continuity, have a measure of substance and are carried out in competition with others who are acting on a commercial basis. Transactions which are not carried out in the course or furtherance of a business activity are non-business or outside the scope of VAT. In principle, any VAT incurred which relates to such activities is irrecoverable. As a general rule of thumb, a nonbusiness activity for the Council is one where the Council has a statutory monopoly over the supply or the Council has a statutory obligation, through UK legislation, to undertake the transaction. A business activity, conversely, is one in which the supply is comparable with or potentially in competition with a supply made by a private sector body. Typical examples of these are: Business School Lettings Car Parking Sale of Clothing Sale of meals to Staff & Visitors Non-Business Primary & Secondary Education Educational School Trips Careers Service Meals Supplied to Own Pupils
Many of the activities undertaken by the Council are non business because they are part of its statutory functions and are funded from taxation and central government grants. Under normal VAT regulations the VAT incurred in providing these services would be irrecoverable; however, under S33 of VAT Act 1994, the Council is able to reclaim the VAT incurred in non-business activities.
Schools Finance Manual – VAT
Categories of VAT As a VAT registered body the Council must charge the appropriate rate of VAT on its supplies of goods and services, and pay the appropriate rate of VAT on the goods and services purchased. The category that a particular supply falls into determines the VAT liability. Supplies are either business, non-business or outside the scope of VAT. Business supplies fall to be VATable (at the Standard Rate, Lower/reduced rate or Zero Rate) or Exempt. Standard Rate The standard rate applies to taxable business supplies which do not fall into any other categories of VAT. There is no list of Standard Rated supplies as more supplies qualify for this rate than any other supplies. Generally, if the supply is Outside the scope, Non-business, Exempt, Zero rated or Lower rated, it is Standard Rated. The Standard Rate has changed a lot in recent years so be sure to use the correct rate for transactions i.e. 20% for supplies from 4th January 2011. Previous rates are 17.5% (01.04.1991 - 30.11.2008 and 01.01.2010 - 03.01.2011) and 15% (01.12.2008 31.12.2009). Reduced rate The reduced rate of VAT is currently 5%. This applies to taxable business supplies such as qualifying domestic fuel and power, children’s car seat and certain hygiene products. Zero-Rated These are taxable business supplies which are VATable at a rate of 0%. Zero rating is not the same as Exempt VAT and an explanation of the differences are listed in V1.17. Zero rating applies to some ‘basic’ food & drink, young children’s clothing and footwear and certain printed matter Exempt These are business supplies of goods and services which are not taxable. Generally, businesses cannot recover VAT incurred towards the making of exempt supplies. However, there is a special concession for the Council whereby it can recover its exempt input VAT, as long as the total exempt input VAT does not exceed 5% of the total input VAT in any given year. The Council’s position under these regulations is monitored corporately and it will be prudent for schools to be able to identify and monitor their exempt income to ensure that the 5% de-minimus limit has not and will not be exceeded. Where the total exempt input tax incurred exceeds the 5% limit, the council must repay all exempt input VAT already recovered. This is usually about £2m per year. Some exempt supplies include lettings, cultural services and services related to sports. Difference between Zero rate and Exempt VAT • Zero rated supplies are business supplies which are taxable at 0%. Exempt supplies are business supplies which are not taxable. • A VAT invoice must be issued and VAT information must be shown for zero rated supplies. A VAT invoice is not required nor VAT information required for Exempt Supplies. • The value of Zero rated supplies is included in the VAT return, but exempt VAT is recorded on the partial exemption calculation. VAT incurred in making zero rated supplies are generally recoverable but VAT incurred in making exempt supplies are only recoverable subject to the 5% de minimus limit
Non- Business These are supplies made under a special legal regime and which are not carried out in competition with private persons making similar supplies (see V1.10). Examples include statutory primary and secondary education (and any goods or services which are closely related to these), statutory fees such as congestion charges and tolls for bridges, tunnels and roads operated by public authorities. Although the term is often used synonymously with ‘outside the scope’, not all non-business supplies are outside the scope of VAT and not all supplies which are outside the scope will also be nonbusiness. Outside the Scope of VAT These are supplies which are not covered by the UK VAT law so VAT cannot be charged. Examples include: supplies made by the Council to its schools, by schools to the Council, and between Council maintained schools in the Council. Other supplies in this category include purchases from a business that is not registered, donations freely given and without receipt of any benefit in return, and goods bought from outside the EU. Input and Output Tax When a VAT registered supplier makes a taxable supply, the VAT charged to the customer on this income is known as output tax. That is, VAT charged on sales or outputs is Output VAT/ Output tax. When a registered supplier receives a taxable supply in the course of their business, the VAT incurred on this purchase is known as input tax. That is, VAT paid on purchases or inputs is Input VAT/ Input tax. For the Council and its schools, input tax paid is normally greater than output tax received. The net position at each VAT return is a reclaim from HMRC which forms the basis for the oft quoted (but erroneous) opinion that the Council ‘does not pay VAT’ Penalties and Interest The council is legally required to administer VAT in compliance with UK VAT law. If it fails to do this, HMRC is empowered to charge penalties and interest for misstatement, evasion, and contravention of VAT rules and obstruction of HMRC officers. The general compliance requirements are • The council charges VAT as and when due. The council must charge VAT when there is a liability to do so and must ensure that the correct VAT category is used. • The council pays VAT as and when due. The council cannot recover VAT that has been incorrectly charged either because it is not due or is charged at the wrong rate or amount. • The council recovers VAT only where recoverable and in accordance with VAT rules. Schools must ensure that only recoverable VAT is processed through the council’s VAT recovery facility and that the appropriate documentation is held. • Submission of accurate VAT returns as and when due. Care must be exercised to ensure that output tax is declared in the same tax period in which it is earned and that input VAT is not recovered until all the conditions for recovery have been satisfied.
A new penalty regime came into effect on 1 April 2009 in relation to VAT returns due for submission on or after that date. The penalty changed from this date is based on the behaviour of the tax payer that led to the error; i.e. whether the behaviour was careless, deliberate or concealed and; whether the disclosure of error is prompted or not. Penalties are based on the percentage of the VAT error, and are as follows: Careless error - 30% Deliberate but not concealed - 70% Deliberate but concealed - 100% If the net value of the errors do not exceed £10,000 or do not exceed 1% of the value of net outputs for the current return period during which the errors are discovered, an adjustment can be made in the VAT accounts. If the net value of the errors is greater than £10,000 and exceeds 1% of the value of the net outputs for the current return period during which the error is discovered, or the error was deliberate, you must make a voluntary disclosure to HMRC Note: The limits apply to the council as a whole. Therefore, though an error at an individual school may be below the limit, there might be other errors in other departments that push the council above the limit. You are therefore advised to notify the VAT accountant of any errors as soon as they are discovered.
An adjustment cannot be made on the VAT return, or make an error correction notification, for any errors that arose in accounting periods that are outside the time limits stated below, unless the errors are tax point errors (that is, where you’ve declared an amount of VAT on the return that immediately precedes or follows the return for which the amount was due). The time limit for adjusting returns and correcting errors, including making claims, was increased with effect from 1 April 2009 from three years to four. For delayed VAT, where the VAT due has been declared in a later period than it should have been, the penalty is 5% of the delayed tax. With effect from 1 April 2010, the new penalty regime includes un-authorised issue of tax invoices. Penalties can also be incurred if VAT is not charged when due. Civil Penalties A civil penalty can be imposed for evasion of payment of VAT on imports and exports. Penalties range from £2,500 for significant breaches and £1,000 for other breaches. Penalties and interest charges can be costly, particularly if they are to come from a school’s budget. It is recommended that, where there is any doubt over the VAT treatment of a transaction, advice should be sought from the Council’s VAT Accountant. Liaison with HM Revenue & Customs You should not contact HMRC. If you have a problem with VAT, advice is available from the Council’s VAT Accountant on 020 8379 4746.
RECOVERY OF VAT ON PURCHASES
VAT CAN ONLY BE RECOVERED ON PURCHASES PROCESSED THROUGH THE SCHOOL’S COUNCIL DELEGATED FUNDS. Under normal rules, the council is able to recover input VAT incurred in making taxable supplies. In addition to this, the council receives special dispensations within S33 of the VAT Act 1994. The effect of the dispensations is that the VAT incurred by the Council and its schools in respect of non-business and exempt activities, is predominantly recoverable. Since the recoverable VAT is greater than the VAT due to HMRC, the Council submits monthly returns to claim the net VAT as soon as possible. Although there is no limit on how much non-business VAT is recovered, exempt input VAT is restricted to 5% de minimus limit. It is in the council’s interest to try to minimize the amount of VAT incurred in making exempt supplies and where possible, to avoid or limit its exempt supplies. See V4 – Partial Exemption in this manual.
Not all VAT paid becomes input (recoverable) tax. Certain criteria must be satisfied: • the recipient of the supply must be a taxable person at the time the VAT was incurred (Enfield Council is a taxable person i.e. VAT registered) • the VAT must relate to an actual supply (the supply has already been made) • the amount to be claimed is the VAT properly chargeable and not the VAT actually charged- where VAT actually charged is not chargeable (exempt/outside the scope) or is at the wrong rate or amount to what is legally chargeable • the goods or services on which the VAT is charged must have been supplied to the Council (school) seeking to claim the input tax • the supplies must have been incurred for the purpose of its business (and S33 non-business) activities. E.g. for the supply of statutory education to pupils. The school cannot recover VAT on purchases where the ultimate receiver of the supply is a third party, e.g. The PTA or governing body. • the Council (school) seeking to claim input tax must hold a valid invoice or other satisfactory documentation, addressed to him. These must be kept for at least 6 years. • the supplies received must not be subject to input tax restriction either in the form of a treasury blocking order or otherwise (see V2.1.3) • Payment is made using its own funds i.e. from schools’ Council delegated funds. The Council (schools) cannot recover VAT on purchases made using PTA or governing body funds. However, purchases made using a donation from a third party, which is freely given and has been paid into the schools’ Council delegated funds, can be recovered. Not all the VAT incurred by the council (or its schools) is recoverable. Even where the conditions stated in V2.3 are satisfied, VAT regulations prevent VAT recovery on the following: Business Entertainment Input VAT incurred by the Council in respect of business entertainment is not recoverable unless the entertainment is related to the statutory non-business activities of the Council (school). Interview expenses reimbursed are regarded as business entertainment and associated input VAT is irrecoverable.
VAT incorrectly charged Only input VAT properly incurred can be recovered from Revenue and Customs. Although only the input VAT shown on a VAT invoice can be recovered, where that input VAT is incorrectly charged, it cannot be recovered. An example is where VAT is charged by a supplier who is not VAT registered, or where VAT is charged at the wrong rate or value. Any VAT invoice received where the input VAT is incorrect should be returned to the supplier for correction. You must not amend the invoice as this renders it invalid. Goods bought under the second-hand goods scheme Input VAT incurred by the Council on goods bought second-hand from a dealer who operates the Second-Hand Goods Scheme is not recoverable. Services bought under the tour operators’ margin scheme (TOMS) Input VAT incurred by the Council on services bought from a tour operator who operates the Tour Operators’ Margin Scheme (TOMS), is not recoverable. (see V5.44) VAT unpaid after six months Any VAT invoice that remains unpaid six months after the due date for payment is treated as a bad debt and VAT cannot be reclaimed. School’s accounting arrangements must ensure that the VAT paid on their purchases is correctly identified and that all supplies are accurately accounted for so that the Council reclaims the correct net amount from HMRC. Documentation Required to Recover VAT Schools will only incur VAT on purchases of taxable goods and services which are purchased from a VAT registered supplier. In order to recover VAT incurred on expenditure, the Council (and all maintained schools) must be able to prove that it was the recipient of the supply. It is not sufficient to base recovery on the payment of the amount charged; there must also be evidence that the supply itself was actually made to the Council (school). Schools must also record their transactions in their accounts and hence the Council’s accounts, according to the VAT rating of the supply. Appendix 16 contains a schedule of the items of expenditure most likely to be relevant to schools and their associated VAT liability. Only original or certified copies of VAT invoices can be used to support the VAT claim; faxes or photocopies are not normally acceptable. It should be noted that, if the necessary documentation is not obtained HMRC can disallow the recovery of VAT paid and impose penalties and default interest. Records in respect of VAT must be maintained and the evidence easily retrieved. Hard copies of invoices and other records such as computer records should be retained for six years. HMRC have agreed that after two years, records can be transferred onto medium other than paper originals, for example microfilm, provided that a clear audit trail is available with the appropriate viewing and printing facility.
Requirements of a valid tax invoice
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The requirements of a valid tax invoice are as follows: 1. An identifying number (i.e. an invoice number) 2. Time of supply (tax point) 3. Description, which identifies the goods and services supplied 4. Name, address and VAT registration number of the supplier 5. Total payable including VAT 6. Issue date of the invoice (if different to time of supply) 7. Name and address of the customer to whom the supply is made (i.e. the school name) 8. Type of supply (e.g. sale, rental, and lease) 9. For each description: a. The quantity of goods or extent of the services b. The charge made excluding VAT c. The rate of VAT charged d. The total charge made excluding VAT e. The rate of any cash discount offered f. Each rate of VAT charged and the amount of VAT charged at each rate. g. The total amount of VAT charged If the payment made including VAT is less than £250, only items 2-5 and 9c listed above are required. If the supplier does not provide a VAT invoice, which complies with these requirements, schools should not make the payment and must wait to obtain a correctly prepared invoice from the supplier before reclaiming the VAT.
Where the amount is less than £25 (including VAT) Given the small amount of money involved, HMRC will normally accept an invoice or receipt which clearly demonstrates that the Council has made a VATable purchase from a VAT-registered supplier and has incurred VAT. Thus, a till receipt that gives the supplier’s name and their VAT registration number, together with a description of the items purchased sufficient to determine their VAT liability and the total amount paid, will normally be acceptable. HMRC also allows the council to recover VAT on four transactions without a valid VAT invoice provided that; the supplier is VAT registered, the supply is liable to VAT and the cost, including VAT, does not exceed £25. These transactions are: a. telephone calls made from a pay-phone, b. purchases from a coin operated vending machine, c. off-street car park charges i.e. in another local authority’s car park or in a privately operated car park, and d. road, bridge and tunnel tolls which are not operated by a local authority or similar public body (such as the Highways Agency) Further details can be found in Appendices 17 and 18.
Hybrid or Mixed Rates of VAT
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Some suppliers charge an odd rate of VAT such as 1.5% or 2.8% of the total bill. This is not a recognised rate of VAT but represents a local agreement between the supplier and HMRC whereby suppliers can charge a special VAT rate for a single supply of taxable items which are liable to differing rates of VAT. Each element is independent and not incidental to the supply of the other(s). For example, for a supply of a book and CD in a single transaction, the supplier may charge a single rate of 12% (i.e. 60% of 20% standard rated VAT where standard rated supplies are 60% of the value of the transactions) even although the items supplied are zero rated book and standard rated CD. The taxable element should be separated from the non-taxable items and the correct rate of VAT applied to the relevant elements when entering these invoices onto the finance system. Pro-Forma Invoices A pro-forma invoice does not constitute a valid VAT invoice therefore VAT should not be claimed until a proper invoice is received. If a school attempts to claim VAT on a pro-forma invoice then they run the risk of an assessment and penalty from Revenue Customs. VAT Only Invoices A VAT only invoice is issued where suppliers either forgot to charge VAT, or are now required by HMRC to charge VAT on their supplies. When you receive one of these, ensure that you have written proof from the supplier as to why the VAT is now due and why it was not charged at the time of supply. In order to enter these to financial systems, it is suggested a taxable and non-taxable contra is used as per the example below: Detail of purchase Supply of XYZ £100.00 Supply of XYZ £-100.00 Amount payable Net amount Std Rate Outside Scope VAT Code £20.00 £0.00 £20.00 VAT amount Total £120.00 £-100.00 £20.00
The first line generates a VAT amount as though an invoice for £100 plus VAT had been received, the second line then removes the net value of the invoice but as it is coded as outside of VAT it does not remove the VAT amount, leaving a VAT only amount to be accounted for. V2.19
Deposits Where there is no right to receive a future supply, the payment or receipt of a deposit will not in itself constitute ‘consideration’ or payment for a supply. However, where a supply of goods or services is ultimately made against the deposit, the amount of the deposit is normally deducted from the payment due and must, therefore, be treated as part consideration or payment for the supply. Where the deposit is treated as partpayment for a supply, its receipt triggers a tax point which will determine the VAT applicable. The only exception is where the deposit is being held by an independent third party stakeholder, such as an auctioneer. Therefore,
• • Where the deposit is part payment for a supply, the VAT liability of the supply will apply to the deposit. Where the deposit is surrendered or forfeit and is not part payment for a supply, the deposit is outside the scope of VAT.
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Some businesses offer discounts for early payment. The VAT is always calculated on the net value of the supply after allowing for the maximum discount. If you pay without taking up the discount, you will need to account for VAT as shown on the invoice (You must not just adjust the VAT rate on the invoice or on your accounting entry. For example: You receive an invoice for the purchase of goods at a net value of £700, but have been offered a 5% discount of £35 if payment is made within 30 days. The discounted net payment is £665, with VAT of £133.00 (20% of £665). If the discount is taken, the VAT will be treated in the normal way with one entry: Detail of purchase Supply of XYZ Net amount £665.00 VAT Code Std RateVAT amount 20% £133.00 Total £798.00
However, if payment is not made within 30 days, the figures will be as follows: Detail of purchase Net amount VAT Code Supply of XYZ £665.00 Std Rate-20% Supply of XYZ £ 35.00 Non-Biz Total Payment £700.00 VAT amount £133.00 £ 0.00 £133.00 Total £798.00 £ 35.00 £833.00
This above rules do not mean that suppliers can artificially lower VAT liability; the terms of any discount must be fair, reasonable and based on accepted commercial terms i.e. a 90% discount for payment within 5 minutes, apart from being plain silly, will not be accepted by HMRC and they would still expect VAT on the full value of the supply. V2.21 Compensation Payments These are payments made by the Council to a third party to reimburse that third party for damage or loss. The payments are normally outside the scope of VAT as they are not consideration for a supply. This is because payment is made either as a result of a Court Order or through an agreement between the parties involved to compensate one party for suffering some inconvenience, loss or damage. Tax Point VAT is a transaction based tax and is accounted for at the ‘’time of supply’’ In principle, VAT on expenditure should be recovered and VAT on income declared in the period in which the tax points of the transactions fall. The tax point for a supply is normally the date the supply is made (basic tax point) or, if earlier, the date when the tax invoice is raised or the payment is received (Actual tax point). The time of supply sets the tax point and determines when VAT has to be accounted for. Timing of VAT All taxable transactions in respect of taxable supplies (i.e. zero, reduced and standard rated) have a tax point. Identifying the tax point is very important as it is the date on which we are liable to account for the VAT. Input tax can still be recovered at any time within three years from the date of the invoice, although any cash flow benefit from an early recovery of tax would be lost. Output tax must be declared within sixty days from the date of supply of the goods or performance of services to avoid penalties and interest.
Value of VAT
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Generally, VAT is calculated on the amount of consideration. This includes all monetary payment as well as barter transactions or any action which can be deemed to have beneficial value one or more parties to the transaction. In non-monetary transactions, VAT will be charged on the value that the parties would place upon the transaction. Private Funds (Non-Council Funds) The Council’s VAT registration covers all transactions on Council resources or school’s delegated accounts. However, schools may retain a separate ‘private’ account which it uses to deal with transactions outside of the normal statutory activities. Schools’ Private Funds are not part of the Council’s VAT registration. Other accounts which are not covered by the Council’s VAT registration are: VA schools capital funds • Parent Teacher Associations • Independent After-School Clubs • Governors’ community focused activities • Any other non-council fund/ account Supplies made by the private funds are outside the scope of VAT if the fund is not VAT registered. It will however be liable to VAT charges on its purchases which it will not be able to recover. The private fund will need to be VAT registered if the total annual taxable turnover exceeds the statutory threshold; from the 1 April 2011, the threshold is £73,000. If you believe that the taxable turnover of your Private Fund is near or above the threshold you should seek advice to determine whether or not the fund should register, as there may be penalties for late registration. A Private Fund may voluntarily register for VAT if its turnover is below the threshold, but seek advice before doing so. HMRC Notice 700/1 “Should I be registered for VAT?” gives more information about registering for VAT. HMRC do not allow schools’ Private Funds to be disaggregated in order to keep each individual “fund” or accounts below the transaction threshold. If HMRC believe that the funds are not fundamentally separate entities, they will treat them all as one fund. It is generally accepted that Governors’ funds and PTA funds, for example, are separate and distinct, as each will have its own constitution. If your school maintains other private funds, you should seek advice as to whether they can be treated separately for VAT purposes. Income and expenditure relating to Private Funds must not be accounted for through the Council VAT accounts. However, if the supplies to be ordered are for educational use, 1. The Private Fund can make a donation to the school’s Council delegated funds for the net (the VAT exclusive) amount of the item they wish to purchase for the school. 2. The Council (school) will procure the goods, receive the supply, receive the VAT invoice in its name and make payment using the donated funds. 3. The school or the Council will retain ownership of the supply and use it for its statutory educational activities; and recover the VAT in the normal manner; 4. the Council/school must keep sufficient records to evidence the purchase and ensure that the purpose for which it is made is easily identifiable
The “retention of ownership” and the use for “educational purposes” are some of the
conditions imposed to make sure that purchases are not made on behalf of third parties and that any item purchased is the Council’s property. For example, a minibus purchased through the school’s Council delegated funds with funds donated from its Private Fund would become the Council’s property, and will be used in relation to the provision of education. If the school later sells the minibus, VAT will be charged on the sale because the Council is VAT registered. (The proceeds must be paid into the school’s Council delegated funds and the VAT accounted for in the normal way). V2.30 The concession in V2.25 should not be used to purchase goods for use by governors, the PTA or similar non-council groups (for example, the purchase of a computer to account for Private or PTA funds) or to obtain an unjust tax benefit where the responsibility for purchases is that of a particular group. If you are in any doubt, please seek advice from the Council’s VAT Accountant.
VAT ON INCOME
General VAT is chargeable on the supply of goods or services where such supplies are made in the course or furtherance of business and S33 non-business activities. The first decision to be made is whether the charge relates to a business or non-business activity. If the charge relates to a non-business activity, the transaction could also be outside the scope of VAT. If the income relates to a business activity it is necessary to determine the VAT liability of the supply i.e. standard, reduced, zero or exempt. It is essential that the correct liability is established and the right amount of VAT declared if assessments, penalties and default interest are to be avoided. The determination of the VAT liability for each supply and the charging of output tax is the responsibility of the person making the supply. VAT should not be charged on internal supplies i.e. supplies made to other schools or departments within the Council. Where supplies are to persons other than the council (e.g. Schools in other boroughs, Academies, etc), Schools must ensure that: 1. The correct VAT liability is applied in accordance with VAT rules. Appendix 20 provides examples of the VAT liabilities of business supplies, which might be made by schools. VAT is charged at the correct rate on supplies which are subject to VAT 2. A VAT invoice must be provided and adequate records maintained regarding the receipts of cash income and the related VAT liability. V3.3 provides formula for calculating the VAT due on cash receipts. 3. VAT is correctly recorded in the Council’s accounts.
Calculation of VAT For VAT rate of 20% (from 4 January 2011) 1. Gross (VAT Inclusive) x 1/6 = VAT 2. Net (Before VAT) x 1/5 = VAT 3. Gross x 5/6 = Net (Before VAT) 4. VAT x 5 = Net (Before VAT) 5. VAT x 6 = Gross (VAT Inclusive)
i.e. gross x 20/120 i.e. net x 20/100 i.e. gross x 100/120 i.e. VAT x 100/20 i.e. VAT x 120/20
For VAT rate of 17.5% (from 01/04/1991 to 30/11/2008 and 01/01/2010 to 03/01/2011) 1. Gross (VAT inclusive) x 7/47 = VAT 2. Net (Before VAT) x 7/40 = VAT 3. Gross x 40/47 = Net (Before VAT) 4. VAT x 40/7 = Net (Before VAT) 5. VAT x 47/7 = Gross (VAT Inclusive) i.e. gross x 17.5/117.5 i.e. gross x 17.5/100 i.e. gross x 100/117.5 i.e. VAT x 100/17.5 i.e. VAT x 117.5/17.5
For VAT rate of 15% (from 01/12/2008 to 31/12/2009) 1. Gross (VAT inclusive) x 3/23 = VAT 2. Net (Before VAT) x 3/20 = VAT 3. Gross x 20/23 = Net (Before VAT) 4. VAT x 20/3 = Net (Before VAT) 5. VAT x 23/3 = Gross (VAT Inclusive) i.e. gross x 15/115 i.e. gross x 15/100 i.e. gross x 100/115 i.e. VAT x 100/15 i.e. VAT x 115/15
For VAT rate of 5% 1. Gross (VAT inclusive) x 1/21 = VAT 2. Net (Before VAT) x 1/20 = VAT 3. Gross x 20/21= Net (Before VAT) i.e. gross x 5/105 i.e. gross x 5/100 i.e. gross x 100/105 i.e. VAT x 100/5 i.e. VAT x 105/5
4. VAT x 20 = Net (Before VAT) 5. VAT x 21 = Gross (VAT Inclusive)
Discounts offered by the Council Remember that the VAT rules regarding discounts on purchases apply equally to discounts on supplies by the Council. Therefore, if you offer a prompt payment discount on a taxable supply, the amount of VAT due must be calculated on the discounted value. However, if you offer a ‘contingent discount’ you may agree with the customer not to adjust the VAT as a result of the discount, and account for VAT on the full pre-discount value.
Compensation Payments Compensation payments are usually reimbursement for inconvenience, damage, or loss suffered by the recipient as a result of the action of the payer. As such, compensation payments are generally outside the scope of VAT. Since the Council does not suffer any loss in respect of VAT incurred, being able to fully recover VAT from HMRC, it follows that items such as insurance claims and costs awarded to the Council, e.g. as a result of a court case, should be merely in respect of the net VAT-exclusive loss suffered by the Council and be outside the scope of VAT.
PARTIAL EXEMPTION General
It is important to recognise that exemption is different to zero-rating (exempt not being a rate of VAT but by contrast zero-rating is a rate of VAT, albeit chargeable at 0%). In principle, input tax incurred in connection with VAT-exempt supplies (VAT incurred on expenditure on goods and services which are then used in generating income which is exempt from VAT) is irrecoverable. This is because exempt supplies are not taxable supplies and input tax can only be recovered when making taxable supplies and on non-business supplies (under S33 of VAT Act 1994 as applies to Local authority). However, for local authorities, where the input tax attributable to VAT-exempt supplies is less than 5% of all the authority’s VAT incurred (including the VAT incurred in respect of its non-business activities), all VAT incurred can continue to be recovered, including all exempt-attributable VAT. On the other hand, if the authority’s input tax attributable to VAT-exempt supplies exceeds 5%, all the exempt-attributable VAT becomes irrecoverable, not just the excess over 5%. In the Council’s case, this could be over £2million per year. Such irrecoverable VAT must be repaid to Revenue and Customs no later than six months after the end of the financial year in which the partial exemption limit was breached. Local authorities are required to attribute, as far as possible, the VAT incurred on expenditure that relates to its: (a) VATable supplies (i.e. standard-rated, lower-rated and zero-rated) (b) Non-business activities (c) VAT-exempt supplies. Note: VATable and VAT-exempt supplies together are regarded as business supplies. For local authorities, the input VAT that is directly attributable to VATable supplies and non-business activities is always fully recoverable. However, input VAT directly attributable to VAT-exempt supplies must be measured against the total supplies to ascertain that we have not exceeded the partial exemption limit. Any un-attributable input VAT (residual input tax) must also be apportioned between VAT-exempt and non-exempt supplies. Partial Exemption – Income It is important that VAT-exempt supplies are notified to VAT officer as soon as they are identified. When receiving income on behalf of the Council, you should make every effort to determine whether that income is subject to VAT and account for the VAT in the appropriate manner. If you are unsure as to the correct VAT treatment of any income that you receive, you should contact the School’s finance team or the VAT Officer for guidance. Partial Exemption - Large transactions If you are involved in any transactions of a large value, you should contact the School’s Finance team or VAT officer to ensure that the transaction is treated correctly for VAT purposes. This includes barter or part-barter transactions where payment is not in cash. It is vital that the VAT Officer is consulted in the early stages when considering major developments. This is particularly important where income will be generated, especially if that income is likely to be exempt from VAT such that VAT incurred could impact on the Council’s 5% partial exemption limit. Major developments undertaken in conjunction with other organizations in the public and/ or private sector often have significant VAT implications for the Council. Defining the relationships as ‘partnerships’ does not change this as it is still necessary to determine whether the Council is incurring expenditure (and whether VAT will is recoverable) or receiving (and what the VAT liability of that income will be).
HMRC regard education as meaning a course, class or lesson of instruction or study in any subject, whether or not normally taught in school, colleges or universities and regardless or where and when it takes place. Therefore education includes instruction in art, sports and physical training, music etc and includes lectures, educational seminars, conferences etc. It also includes holiday courses, sporting and recreational courses, and distance learning and associated materials (if subject to assessment by the teaching institution. Broadly speaking any activity involving structured instruction provided or assessed by a teacher, trainer, tutor, lecturer, leader, coach or similar can be treated as education. A supply of education takes place for VAT purposes where it is provided by way of business and in return for a consideration. If there is no payment, the education is not a supply and is a non- business activity outside the scope of VAT. Education is normally funded in one of 3 ways 1. By making a charge: the education is usually a business activity regardless whoever pays the fees or whether charges are sufficient to meet full costs or are subsidised. These include independent fee paying schools. 2. By direct funding from government: these are non-business supplies which are outside the scope. E.g. community schools, foundation schools and voluntary aided schools. Note however, that where these schools charge for additional tuition, this is normally a business activity. 3. By a combination of government grants and charges. The government funding is an outside the scope contribution to a business activity. The schools will make a mixture of non-business (for no charge) and business supplies (for which there is a charge) VAT Exemption for Education Generally, the provision of education is exempt when it is provided by an eligible body (see appendix 22). VAT exemption for education, research and training is largely dependent on whether the body is in business for VAT purposes and if so, whether it is an eligible body. If the supplies are by way of business, • supplies of education and vocational training by an eligible body are exempt • Supplies of research by an eligible body to another eligible body are exempt • Supplies of certain goods and services related to exempt supplies of education, research and training are also exempt Statutory Education Supplies of education can either be: • Statutory full-time primary and secondary education. Under the Education Act 2002, this is a statutory duty of the Council and is therefore a non business supply, and • Non-statutory education- e.g. adult and community education and other supplies where there is ‘structured instruction’. Where this is provided by eligible bodies, the supplies are exempt from VAT. Note that exemption from VAT is not determined by the subject matter or profitability of the course but by the status of the provider. Where the supply is not by an ‘eligible’ body, it is normally VATable at the standard rate. Local authorities are ‘eligible bodies’ and any non-statutory education provided (e.g. feepaying education) will be exempt from VAT. Free ‘VAT-exempt’ education is nonbusiness because there is no consideration, and there is no liability to VAT. Remember that, although no output VAT is charged in either case, it is important to identify whether income relates to non-business or VAT-exempt activities given the impact the latter has on the Council’s partial exemption position
Extended Schools and Children's Centres VAT There is an increasing reliance on schools to provide a range of activities that run at various hours of the day. These extended schools’ services (i.e. extended services in and around schools) are based on the Government’s childcare strategy for delivering care and support to school age children. Some of these are provided by the local authority as part of a child’s statutory education, but sometimes they can be provided by the governing bodies- acting in their own right, or by third parties-acting for profit or charity. Some of these services may also be aimed at a wider community than Council school pupils. Extended schools services include childcare beyond school hours (e.g. breakfast clubs, homework clubs and youth clubs), extra-curricular education, adult and community education, the provision of sports and community facilities, etc. The services may be delivered in many ways, each with its own VAT implications. For VAT purposes, there are two main routes that schools may follow to deliver extended schools and children’s centres activities: • Through the Governing Body or • Through the Council or school See appendix 35 for a flowchart showing VAT and extended schools. Where the Governing Body delivers Extended Schools’ Services Under S27 of the Education Act 2006, the school’s governing bodies are empowered to act in their own right (albeit subject to any guidance or restrictions issued by the Council) in the provision of extended school services. Under this legislation, Governing Bodies will be seen to be acting independently and should therefore allocate associated income and expenditure to an account separate to the school’s council delegated account. For VAT purposes, the Governing Body of a school is a separate legal entity from the Council. Therefore, the Council does not have the right to recover VAT incurred on expenditure which is the responsibility of school governors. Both income and expenditure sit outside the Council’s Accounting systems, with VAT not being chargeable on income and not recoverable on expenditure unless the governing body is VAT registered. Most extended schools activities are likely to be deemed supplies of education or welfare and these are generally exempt from VAT. The school’s governing body is therefore unlikely (under partial exemption rules) to be able to recover much, if any, of the VAT incurred in the delivery of such services. Where the facilities are built, refurbished or equipped by the Governing Body, VAT incurred on associated expenditure may not be recoverable. For example, VAT, in excess of £2,000 which is incurred on capital expenditure, cannot be recovered at voluntary aided schools. If some of the services are taxable and the value of these taxable supplies reaches the specified limit (currently £73,000 per annum) the Governors must register for VAT and must thereafter charge and account for VAT. The governors may voluntarily register for VAT, if the value of their taxable supplies is below the limit for compulsory registration. If the taxable supplies are wholly or mainly zero-rated, they may apply for exemption from registration. Where no charge is levied by the governing body, the activity will be regarded as a non-business, but VAT incurred on associated expenditure will remain irrecoverable.
Where, rather than delivering the services directly, the governing body commissions these from a private provider, the VAT treatment of the services will be determined by the provider’s status and the nature of the services; although in practice, such services are likely to be exempt from VAT as supplies of education and welfare. The Governing Body may also set up a separate company or charitable body to provide its extended schools and children’s centres programme. Any payment made by the provider to the governing body, for their use of the school facilities may need to be treated as a exempt rental or letting fee if the provider is granted genuine rights of occupation. There are cases where these payments may be VATable so you are advised to seek guidance from the VAT Accountant. The Council may have to charge VAT on any supplies that it makes to the governors. For example, supplies of equipment which the extended school requires will be VATable. However, there are cases where there is no VAT charge. Where there is a provision that the school or council recharges the governing body for use of staff, premises etc., HMRC allow such recharges will be treated as outside the scope/nonbusiness. Therefore, where a school raises invoices for necessary recharges to its governing body/private fund, there is no VAT charge. For example, HMRC accept that the secondment of teaching or similar professional staff to the governing body to enable it to deliver ‘extended schools’ activities are a non-business activity by the council (where the council is the only source of the staff in such circumstances though this does not apply in the case of a voluntary aided or foundation school which can employ their own staff directly). Also, the governing body, under education law, have the right to occupy and use the school premises therefore, premises recharges levied by the Council in respect of the governing body’s use of the school premises to deliver ‘extended schools’ services can be treated as non-business and so outside the scope of VAT. Governing bodies should make sufficient insurance arrangements to cover the extended schools activities as they will not be seen to be covered by the council’s insurance cover. The Governing Bodies of foundation and voluntary aided schools are corporate bodies with charitable status. This may entitle them to certain tax exemptions and concessions subject to strict criteria. Where a Governing Body is considering applying for external funding to provide community facilities, any application bid should include any irrecoverable VAT costs. Where the council provides Extended School services Local authorities are able to utilise a wide range of ‘residual’ powers to undertake extended schools activities in their own right. Generally, any extended school activity that is not carried out under the provisions of S27 of Education Act 2006 will normally be seen as provided by the local authority. Therefore, if the Council, as an alternative to governing bodies delivering ‘extended schools’ services under S27 powers, chooses to deliver such services using other ‘residual powers’ available to it, the council will be acting in its own right. It may choose to deliver the services by using its own resources or it may deliver them via a third party (e.g. the school governing body or charitable company) who acts as the Council’s agent. The nature of this body and the services that it will provide will determine its right to recover VAT and its obligation to charge VAT. If either option is being considered it is important that expert VAT advice is taken as early as possible in order that the most advantageous arrangements can be made.
The VAT treatment of extended schools services delivered by the Council is determined by the nature of the services in question. Generally, where the facilities are built and refurbished/equipped by the Council or by the schools- using Council delegated funds, the extended services can be deemed to be part of the school’s provision of supplies closely related to education and these will be non-business when supplied at or below cost. The Council will declare output VAT on taxable income and will reclaim input VAT on taxable expenditure. The Council should normally be able to fully recover all VAT incurred in delivering extended schools activities, though this on the assumption that any VAT-exempt income generated will not be sufficient to breach the partial exemption limit. These different modes of provision will all have a different effect on the school’s treatment of income and expenditure relating to these activities for VAT purposes. Much of the information in this section can be found in other sections of the manual that deal with subjects such as whether a governing body is acting in its own right or as agent of the council when making supplies, or how to treat recharges. In particular note: • • • • Where no charge is levied, the supply will be non-business. Childcare and similar services supplied by the council, as part of the Government’s childcare strategy, at a children’s centre, school or similar facility is specifically regarded as a non-business activity of the Council Fee-paying education delivered by the Council (including extra-curricular education and adult and community education) is usually exempt from VAT (except supplies to Academies or non-educational bodies, which are VATable at the standard rate) Provision of sports and community facilities is liable to VAT at standard-rate (unless the supply satisfies the ‘block-booking’ criteria described in V6.10 to be exempt from VAT). The provision of other (non-sports) community facilities which amount to a room letting are exempt from VAT; any other facilities, which fall short of a letting are likely to be VATable at the standard-rate.
Governing body as the Council’s agent: Where the Council provides the services while acting under residual powers, the rules in V5.14 will apply. For the council to be seen to be providing any of the above services, with the governing body acting as its agent, employees running the club must be council employees, and all income and expenditure must be through the school’s council delegated budget. At VA schools, the governing body is the employer and also owns the premises therefore, the services must be specifically requested by, and any deficit funded by the council, for governing bodies at VA schools to be deemed to be acting as agents of the council in providing the services. Where the services are not instigated by the Council, they will normally be seen to be provided by the governing bodies acting independently of the local authority and under S27 of Education Act 2006.
Other/ third party as the Council’s agent: Where the Council commissions the services from a charitable or private provider, the VAT treatment of the services will be determined by the provider’s status and the nature of the services. Most of the services are likely to be exempt from VAT as supplies of education and welfare. Therefore, a charitable body may not need to charge VAT on the supplies, but its ability to recover VAT will be restricted by the partial exemption limit. In these situations the income will normally be taken by the service provider with the school only receiving income from the letting of school property. The income and expenditure should be through the school’s council delegated budget. - Where third parties utilise school premises for the provision of extended schools activities, they will usually pay commercial rent, rental premium or lettings fee which will be exempt from VAT. The council (school) could charge a peppercorn rent which is seen as non-business and therefore outside the scope of VAT. To be properly seen as a peppercorn rent the rental should not include any charges other than the peppercorn i.e. recharges of costs will normally be seen as additional charge for rental and as such will disqualify the rent from being non-business peppercorn. - If the lease or letting is in connection with the Council’s pursuance of the Government’s childcare strategy (e.g. sure start, every child matters and other programmes) and it is at or below cost, it can be treated as a statutory non-business activity of the Council - If there is a major lease or letting (i.e. a degree of permanence or long-term occupation, together with a degree of exclusive occupation and acceptance of responsibilities as a tenant), the provider might be regarded as being granted merely the right to use the school facilities in delivering their services, in which case any payments made by the provider may be VATable. This is an extremely complex area, however, and guidance should be sought from the VAT Accountant
Play-Schemes Where charges are levied, these are generally exempt from VAT as education or welfare (e.g. day care service). Where no charge is levied, the supply will be nonbusiness. Where the schemes are run as part of the Government’s childcare strategy, i.e. at a children’s centre, under ‘extended schools’ etc, the supply will be nonbusiness. Supplies To Schools And Colleges When the Council makes a supply to a school, it is important to determine the status of the school before issuing an invoice. Supplies within Enfield Council: If the supply is to a Enfield Council school, this is an internal transaction and is not VATable. Supplies to non-Enfield Council educational establishments: These will be subject to the normal VAT rules. • Supplies of education or supplies closely related to education which is made to another eligible body (such as a university, higher or further education college, Sixth Form College or private school-but not an academy), is exempt. For example, secondment of teaching staff to eligible bodies will be exempt from VAT • Supplies of education or supplies closely related to education which is no made to another eligible body or which is made to an Academy (see V4.4.4), will normally be subject to VAT
V5.20 V5.21 V5.22
Supplies not closely related to education will follow normal VAT rules applicable to each type of supply.
Supplies to Academies Academies are not under local authority control. They are independent bodies and so must be regarded as Council run educational establishments. Because academies provide free statutory primary or secondary education, rather than VAT-exempt feepaying private education, they are not entitled to be supplied with VAT exempt supplies or education or goods or services ‘closely related’ to education. Therefore, supplies to academies will follow normal VAT rules. For example, the secondment of teaching staff is liable to VAT at standard-rate. With effect from 1 April 2011, under special dispensations within S33B of the VAT Act 1994, academies can recover any VAT incurred in connection with their non-business provision of free statutory and primary education. They are also able to recover VAT incurred in connection with business activities as per ‘normal’ rules applicable to all taxable persons.
Classroom Items The supply of statutory full-time primary and secondary education by the Council is non-business. Therefore, supplies which are ‘closely related’ to such a supply of education may also be treated as a non-business and so outside the scope of VAT. To qualify as ‘closely related: 1 The supplies must be necessary for and integral to the delivery of statutory education to the pupil, student or trainee 2 The supplies are for the direct and regular use of pupils in the normal school curriculum. 3 The standard, quality and type of supply is appropriate for the subject and level of education being delivered 4. The item is for regular classroom use in the course of the education. This means that the items can be portable and can be occasionally be taken home (e.g. to assist with homework, practise etc). It must be used at school at least once a week. 5. The pupil must either be in receipt of statutory education from a Council school or of closely related extra-curricular education delivered by the school or Council (e.g. as a member of a school orchestra) where the extra-curricular activity constitutes fee-paying education). 6. The Council (School) must retain evidence to show that the pupil provided is in receipt of education from the Council and that the item provided is appropriate and essential to that education. 7. The sales are made ‘in class’ by the school to its own pupils and not by a third party acting in its own name. ‘In class’ supplies include sales made from the secretary’s office or stockroom, but not a ‘dedicated’ shop, such as a school shop, which is separate from the school. In the case of large items, it is possible to arrange for the pupil to collect the item directly from the supplier but only under conditions whereby payment is made directly to the supplier by the Council. What matters most is that the Council legally own the item which it then transfers (by selling it) to the pupil. 8. Payment is made by the pupil, to the Council (School) either centrally or to the school’s Council delegated fund
In general, where the supplies are made at or below cost, they are non-business and outside the scope of VAT; where goods are sold at a profit or with the addition of an administration charge, they are standard rated and where they are closely related to supplies of exempt education, they may be exempt from VAT. Any input VAT incurred in the purchase of closely related supplies to pupils can be recovered by the school, subject to the criteria in V2.1.2. These rules do not apply to supplies which are made by a private trader. Supplies which are usually deemed to be closely related to education include: • School meals provided pupils in receipt of statutory primary or secondary education Equipment: calculators, drawing instruments, etc. • Musical instruments for classroom use • Sports equipment (but not sports clothing or any other clothing) • Anything that is essential and required for normal classroom use. HMRC gives examples of supplies, which are not closely related to the provision of education. These include: 1. Supplies to staff and other non-students 2. Sales of goods from schools shops 3. Sales from vending machines (Non-business if catering) 4. Sales of goods not needed for regular use in class 5. Sales of school uniforms and sports clothing 6. Admission charges (other than for taking part in sports activities) – for example admission to plays, concerts, dances, sporting venues, exhibitions etc 7. Administration and management services 8. Examination services 9. Commission for allowing sales by outside organisations at an educational establishment. 10. Sales by a sole proprietor or partnership in connection with private tuition. Assisted Instrument Purchase If the following criteria are met then the supply of an item can be treated as outside the scope of VAT if • The goods or services must meet the criteria in V5.1.1. Therefore, if a pupil purchases guitar but does not receive guitar lessons, this does not qualify for nonbusiness treatment • The pupil must receive the education from an LBE school, or through the EASS, or council run educational activity. • The goods or services must be purchased originally by the council or the school. The council must receive an invoice addressed to it and should have title to the goods, rather than merely act as agent between the pupil/parent and the supplier. This also precludes the scheme running through any school shops that are funded by the private fund. • Payment for the goods must be paid to the Council or the Schools’ Council delegated budget. Payment should not be made through the private fund. • The price charged to the pupil/parent must be at or below cost (including any necessary overheads). Instruments sold or hired which meet the criteria in V5.1.1 which are in connection with VAT-exempt adult or community education classes or other fee-paying educational classes, may be treated as VAT-exempt; although the at or below cost criteria in V5.1.2 do not apply to such sales or hires.
Alternatively, if the music education is extra-curricular fee-paying, then, provided it is still supplied by the Council, the sale (or hire) of the musical instrument may be treated as a VAT-exempt sale (or hire) closely related to the VAT-exempt music education Laptops In practice, it is unlikely that laptops are deemed to be necessary for the provision of education, except perhaps in a computing class. However, providing the rules in V5.24 are fully met, the sale or hire of laptops to pupils may be treated as closely related to the Council’s supply of statutory primary or secondary education. The sale or hire of the laptops will be non-business. If the laptop is used solely at home to carry out homework, the criteria in V5.24 will not be fully satisfied. The sale or hire of laptops to parents or teachers is always VATable at standard-rate. This is because parents and teachers are not in receipt of statutory primary or secondary education and thus the rules in V5.1.1 cannot apply It is the responsibility of the school to take whatever steps it considers necessary to ensure that warranties etc. can legally be transferred to the pupil. It is recommended that the school obtain written confirmation to this effect from the supplier concerned, and that a copy of this is passed to the pupil. Please note that the school may have to provide the pupil with a receipted invoice (payment received in full) in order to evidence that ownership has been “transferred”. Clothing School uniforms, sports clothing (including plimsoll/swimming bags) and sports equipment are not items deemed to be closely related to the supply of Education. Therefore, sales of these items are specifically excluded from the provisions outlined in V5.2 & V5.3 above. Transactions relating to these items should be made to and from the private fund rather than from the school’s Council delegated funds, unless the Council (school) is to retain ownership. Where the council retains ownership, VAT must be charged on sales to pupils except where the items qualify for zero rating. Where sales are made through the school’s Private Fund. If the volume of sales is below the VAT registration threshold, the fund is not required to be registered. The supplies can be operated on a recovery of cost basis (ie. sold at or below cost). VAT is not chargeable and cannot be recovered. VAT legislation provides that details of clothing or footwear for young children which can be zero-rated. The upper age limit of a “young child” is the eve of the child’s 14th birthday. Generally, garments will be zero-rated if they do not exceed the body sizes of an “average” thirteen-year-old. See appendix 24 for further details. School’s providing exclusively for pupils under the age of 14 may zero-rate supplies if the garments bear a prominent badge or logo which identifies them as part of the school uniform. This excludes any ordered clothing in adult sizes for staff or adult assistants). School Trips When organising a school trip you will need to decide whether the trip is to be accounted for through the school’s Private Fund or through Council delegated funds. You must ensure that all income and expenditure in connection with a particular school trip is accounted for through the applicable fund.
School Trips Accounted for Through the School’s Private Fund 1. Where the school’s Private Fund is not registered for VAT, the school cannot charge VAT on school trips and cannot recover any VAT it has paid in connection with the trip. If the volume of sales is below the VAT registration threshold, which is £73,000 from April 2011, the fund is not required to be registered. 2 Where the Private Fund is VAT registered there may be the need to apply the Tour Operators Margin Scheme (TOMS). If you think that you need to apply TOMS to a school trip, you should seek advice from the Council’s VAT Accountant. School Trips Accounted for Through the Council’s Funds Trips related to Statutory School Curriculum 1. Where a school trip is run through the School’s council delegated budget, VAT is recoverable on costs, but need not be charged on income on the basis that • The trip is being undertaken for the purposes of or is closely related to the non-business supply of statutory education. The Education (National Curriculum) (Attainment Target and Programme of Study in Physical Education) Order 1992 is makes statutory provisions for this • The trip will not make a profit i.e. it will be provided to pupils at or below cost (including overheads but not profit) Note that: There is no longer the requirement that the charges to pupils be subsidised in order for the visit to be regarded as non-business. 2. Written record should be kept by the Head-teacher confirming that the school trip is of educational value and related to the curriculum. A specimen approval form, which Head-teachers may wish to use for this purpose, can be found in Appendix 21. 3. Separate subjective codes have been set up within the Council’s central accounting system that are to be used when accounting for school trips through Council delegated funds. This is to ensure that income and expenditure relating to the school trip can be readily distinguished from other activities within your budget. The accounts used for school trips are: • Expenditure – Learning Resources Heading E19A – Learning Resources Visits • Income – I12 Parental Contributions Educational Visits, Field Trips etc Equivalent codes should be set up within your local accounting system for these transactions.
Trips not related to the Curriculum 1. Any trip arranged by the school, which, is not related to the curriculum, is regarded as a business activity for VAT purposes. Such trips should not normally be accounted for through Council delegated funds. Providing the school’s Private Fund is not registered for VAT, this will not cause any problems. However, if the Private Fund is VAT registered there may be the need to apply the Tour Operators Margin Scheme (TOMS). If you think that you need to apply TOMS to a school trip, you should seek advice from the Council’s VAT Accountant. 2. HMRC has indicated that virtually all school trips will be able to meet the requirement of being related to the school curriculum. It would be unusual to find a school trip treated as a business activity.
Tour Operators’ Margin Scheme (TOMS) 1. TOMS is a European scheme applied to certain supplies of travel, accommodation and certain other services. It applies to businesses that buy-in supplies of travel, accommodation and certain other services from third parties and re-sell them either as a principal or undisclosed agent (acting in their own name). If the tour operator were to act as a disclosed agent in respect of the transport, the supply will be directly from the transport provider to the final customer. 2. The following are always margin scheme supplies: • accommodation, passenger transport, hire of a means of transport, trips or excursions, services of tour guides, • Other supplies such as catering, admission tickets and sports facilities fall within this category, if they are: • bought in and sold on without material alteration, for the direct benefit of a traveler, and • provided as part of a package with one or more of the supplies listed above. 3. Tour operators cannot issue VAT invoices for the designated supplies falling within TOMS and, therefore, the purchaser cannot recover the input VAT costs. Note that there is no entitlement to input VAT recovery for VAT-registered customers of such designated travel services. There will be an element of irrecoverable VAT added on to travel costs (both the margin VAT due under TOMS and the tour operator's consequently irrecoverable input VAT). However, if the school buys in the elements of a trip from separate suppliers, e.g. contracting independently for accommodation, coach hire, admissions, etc, each separate independent supply is subject to its own VAT liability and there's no travel package subject to TOMS. 4. For further details: Contact either School Support Finance Team on 020 379 3248 or the VAT officer on 020 8379 4746. Further reading: HMRC Notice 709/5- Tour Operators’ Margin Scheme Food School Meals Generally, the supply of food is zero-rated. Food is “anything which the average person would consider it so. This includes food of a kind used for human consumption for VAT such as basic foodstuff, confectionary, cakes, snacks, beverages etc. The rules on this area are quite extensive and there are a number of excepted items (which are standard rated) and overriding items (which are zero-rated because they override the excepted items). For example, Yoghurt which is unsuitable for immediate consumption when frozen is zero rated for the following reasons: in general, it is food and so it is zero rated, but it is standard rated as an excepted item (i.e. ice cream and similar frozen products) but this is overridden by the fact that it is ‘consumed at a temperature above the freezing point of water’. Another notable case is the Jaffa Cake case where Jaffa cakes were deemed to be a cake on the basis that 'biscuits go soft/cakes go hard'. So although it looks like a biscuit, is sold like a biscuit and eaten like a biscuit, it is not classed as a biscuit. It is therefore important that care be applied in determining the VAT liability of supplies of food and or catering.
Catering Catering is specifically excluded from zero rating. Catering includes any food sold for consumption on the premises where it is supplied and any supply of hot food for consumption off those premises. Certain items like cold sandwiches to be taken away from the cafeteria may still be zero rated. Catering Invoices All catering invoices must satisfy the requirements for a “proper” VAT invoice. A “VAT only” invoice is not acceptable and can only be accepted after written approval is given by the Council’s VAT Accountant. The invoice must show the net amount to which the VAT is being applied. Catering Provided by Council Catering Services 1. The whole school site is considered to be an “outlet” for the purposes of catering. Therefore all food and drinks sold by the school, within the school premises, will be liable to VAT regardless of where they are located within in the school site. 2. Where a supply of food or catering is deemed to be closely related to a supply of education (seeV5.1), it will take on the liability of that supply. Therefore, where the Council (school) supplies school meals to its pupils, at or below costs, this will be nonbusiness as it is closely related to its supplies of statutory education. “Cost” means the fully overhead inclusive cost of bringing the food and drinks to the pupils and includes the labour costs associated with cooking and serving meals and the revenue costs of running the kitchens. Should school sales exceed costs, it must identify the sales for each outlet, and treat as business standard-rated catering, those outlets where income was greater than cost incurred. 3. Supplies to staff and visitors will be taxable under normal VAT rules. Where sales cannot be separately identified (e.g. sales from a vending machine) a reasonable basis of apportionment must be agreed with HMRC (see V5.6.4)
Catering Not Provided by Council Catering Services These are Sales by catering contractors direct to students and pupils. Where the contractor is acting as principal Contractors acting as Principal Normally the supply of meals by the local authority to its pupils is regarded as incidental to the provision of education. However, where the Council engages a contractor who acts as principal or independent caterer, the supply of meals is not incidental to the provision of education and will follow normal VAT rules. An indication that there is an agency arrangement is where: the principal acts in his own name when it generates the income, the principal keeps the income; incurs and bears the costs, and the council does not pay a management or administrative fee nor receive any share of the income.
Contractors acting as agents of the local authority In this case the contractor is contracted to run the canteen etc. as the agent of the Council. The Council will remain the principal and the supply will follow the VAT rules in V5.46 above. VAT incurred will be recoverable and any VAT charged will be paid over to HMRC in the VAT return. Transactions are processed through the school’s council delegated fund. Note that there are two VAT implications with this arrangement: 1. The supply of school meals and catering by the Council to the pupils. It does not matter that the contractor cooks and serves the meals and collects the income; ultimately, the council is responsible for providing the meals, determines how much to charge, who gets free meals, receives the income and pays a management fee to the contractor (this can be deducted at source when the income is collected) 2. The second supply is of catering services to the council by the contractor. The terms of the contract may require that the contractor cook and serve the meals, collect the income and manage the entire catering system all in return of a management fee or charge. The income is paid over to the council (usually net of the management fees) Catering -Shops and Vending Machines 1. The treatment of sales from vending machines depends on whether the school • hires and operates the machine, keeping income from actual sales. The income is non-business (closely related to education) supplies to pupils, if sales are at or below cost or subject to normal VAT rules on if sales are to staff. Where sales are to both staff and pupils, there must be a suitable apportionment of the income. Transactions should be processed through the council delegated fund. It should charge VAT where applicable and recover the same through the VAT return. • receives a commission from an outside organisation to install and operate a machine on the premises. Commissions by outside organisations which are not acting as the school’s agent are standard rated. 2. Where the Council (school) provides catering to a nursery or playgroup, this is not ‘essential’ to state education and charges follow the normal VAT rules. Charges to pupils of non-Council schools and other independent groups may be taxable according to normal rules. Charges to other external customers will also carry VAT. 3. If the Governors run the school catering and sell to outside bodies or for purely social events, they have a community-focussed activity. If the Governors are not VATregistered, their charges are outside the scope of VAT and they cannot recover any VAT on their costs. If the Council charges the Governors for the use of the kitchen, this is exempt from VAT. Other charges for consumables will be taxable according to normal VAT rules.
School Photographs The VAT treatment of school photographs depends on the arrangements for sale. Sale of Photographs by the Photographer Directly to the Pupils/Parents The supply by the photographer to the pupils is usually a VATable supply if the photographer is VAT registered. Where the school collects the money on behalf of the photographer, the school will be acting as the photographer’s agent and any commission or discount received by the school (e.g. the use of the school premises or for agency services) will be consideration for the supply. Since the supply is to the pupils, the council (School) or governing body cannot recover any VAT charged. Therefore, 1. Where the school governing body supplies the facilities to the photographer, the income should be paid into the governing body/ private fund. The school’s Headteacher will usually have full control over the funding received from non-Council sources and acts as agent of the governors. If the governing body is not VAT registered, supply of use of premises or facilities to the photographer will be outside the scope of VAT. The same will apply to agency fees and any other charges. However, where the governing body is VAT registered, the agency fees will be VATable and the supply of facilities might be VATable. This is particularly relevant at Voluntary Aided Schools. 2. Where the Council (school) supplies the facilities to the photographer, the income is due to the Council and should be paid into the school’s Council delegated fund. VAT must be declared on the income received and the school can choose to issue a VAT invoice or the photographer can draw up the VAT invoice, using self-billing arrangements, which he then passes to the school to agree and pay.
Sales of Photographs by the Photographer directly to the Council (School) Where the contractual arrangements is for the photographer to supply photographs to the School or on behalf of the school, for onward sale to pupils, VAT charged by the photographer is recoverable as input VAT according to the rules detailed in V2.1 to V2.15. This is on the basis that the transactions are run by the school and processed through the school delegated fund. Onward sales to pupils will be VATable at the standard rate Where the transactions are run by the school governing body, the income received from letting the facilities or premises should be paid into the governing body/ private fund. VAT cannot be recovered through the council’s VAT account. If the governing body is VAT registered, VAT charged by the photographer will be recoverable and income received from letting the premises will be a business supply. If not registered, the VAT charge on the photographs will not be recoverable and VAT cannot be charged on onward sales to pupils.
How to Decide Whether Arrangement is V5.54 or V5.55 To distinguish between the two scenarios above, you need to consider three questions: 1. Who has title to the Photographs? This is usually the ‘person’ who has the responsibility for faulty goods and who will suffer financially if a pupil/ parent does not pay. If the photographer bears these responsibilities then he has made a direct sale to the pupils and title to the photographs remains with him; otherwise, it could be implied that the school has title to the supplies for an onward sale to pupils. 2. Who sets the price? If the school decides the final selling price to the pupils, and can add a mark up on costs, this will imply that the school is in receipt of the photography services. If however, the photographer sets the price (e.g. by labelling packages of photographs at a pre-arranged price), he will be making a sale direct to the pupils.
Home to school transport Where charges are made for the home to school transport of pupils, which is required as a statutory provision, then these charges are outside the scope of VAT. Examination Fees • Where schools charge examination fees to its pupils or pupils in other Enfield Council Schools, the charges are non-business. • Where the services are not to pupils in Council maintained schools, the supply is usually exempt from VAT • Fees charged by external bodies to a school for examination services are exempt from VAT • Examination fees recharged at cost to adult education pupils are disbursements and are outside the scope of VAT. Telephone Income Normally VAT is only recoverable where there is 100% non-private use. HMRC normally accept that there will be an insignificant volume of private calls made using council landline equipment and do not expect any adjustments to be made. However, where there are recharges to staff for private use of the telephone, this will be VATable at the standard rate. Where the equipment is a mobile phone and there is a genuine business reason for providing it, VAT on equipment and connection costs are fully recoverable. HMRC will accept that where there are policies in place prohibiting private calls then VAT on all mobile costs may be recovered. Where the policy is to allow private calls with no charges made, then the call costs should be apportioned in a fair and reasonable way, possibly by analysing a reasonable sample of bills and applying this proportion across the board. Where a payphone is rented from a supplier and then made available to other users for a charge, VAT will be due on the receipts.
Sales of Stationery and Other Office Supplies Sales of stationery (including book bags) and other items such as water bottles may not be incidental to the supply of education and may be subject to VAT at the standard rate. • If these are sold through the school’s council delegated account then VAT will to be charged on income and recovered on expenditure. • If these are sold through the school’s private fund and the fund is not VAT registered, no VAT will be due on the income and VAT incurred cannot be recovered. If however, the fund is VAT registered, VAT must be charged and VAT recovered on purchases. Advertising Advertising is standard rated, unless it supplied to a charity or other voluntary group, in which case it is zero rated. Compensation and Penalties for damage or loss Compensation payments for damage or loss are usually not consideration for supply and are normally outside the scope of VAT. This is because the payments are usually made as a result of a court order or charged to recoup some or all of the costs of replacing the item and compensate someone for suffering inconvenience, loss or damage. If, for example, a window is broken and the school replaces it and then charges the ‘pupil’, the payment will be compensatory and outside the scope of VAT. If however, the ‘pupil’ asks for it to be done and agrees to repay the costs, there is a ‘consensual’ arrangement between the parties and the payment will be consideration for supply and is VATable at the appropriate rate. Donation and Sponsorships Donations 1. Where a school receives a donation, which is freely given, it is outside the scope of VAT providing the school does not provide anything in return. When there is a condition attached to a donation that gives a donor some kind of benefit, the donation will be deemed to be consideration for a supply and subject to VAT. a A simple acknowledgement of the source of support is an insignificant benefit which is not deemed to be a taxable supply. These include: • Giving a flag or sticker • Naming the donor in a list of supporters in a programme or notice • Naming a building after the donor • Putting the donor’s name on the back of a seat in a theatre etc 2. Where goods or services are purchased with donated money, this is no different to using school delegated funds, and VAT is recoverable according to normal rules. This does not apply to sponsorship or to situation where the supplies purchased with donated funds will be received or used by the donor rather than the school. For example, the PTA cannot ‘donate’ money to the school to purchase equipment which the school then ‘donates’ to the PTA. 3. VAT can also be recovered where funds have being donated for a specific purpose; so long as it is a true donation and normal VAT recovery rules are satisfied.
Sponsorships Sponsorships are different from donations because the recipient of the sponsorship will normally be obliged to provide the sponsor with a significant benefit thereby making a taxable supply. The benefit received could be tangible or intangible- what matters is that there is an agreement or understanding that the recipient will do/ not do something in return. Examples of this are: • Naming an event after the sponsor • Displaying he sponsor’s company logo or trading name • Participating in the sponsor’s promotional or advertising activities • Giving free or reduced price tickets • Allowing access to special events • Providing entertainment or hospitality facilities etc Combined donations and sponsorship. 1. Provided that it is entirely separate from the sponsorship agreement, any donation or gift received from a sponsor, in addition to the sponsorship, will be outside the scope of VAT. It must be clear that any benefits the sponsor receives are not conditional on the making of the donation or gift. If the sponsorship is conditional on the donation being given, then the whole amount is consideration and VAT at the standard rate. 2. Watch out for is the “hidden” sponsorship arrangements. Suppose a school wished to produce a magazine and a company offered to pay the printing costs in return for the company logo being on the back page. There would be a supply by the company to the school of printing (zero-rated) and the supply of advertising by the school to the company (standard rated). The school would have to raise a VAT-only invoice to the sponsoring company based on the open market value of the advertising.
Fund Raising Events There are several scenarios that can be applied and as such, you are advised to contact either the School’s Finance Team or the Council’s VAT Accountant for further clarification. Admission charges 1. It is important not to confuse a charge for admission to a facility with a charge for the use of the facility; the latter being covered by the VAT rules for lettings (see land and property V6). Admission charges give a right of entry to a particular place without withholding right of entry from others. 2. The VAT liability of admission charges depends on the nature of the event and the person promoting it. Subject to some exceptions, admission charges are normally standard rated. However certain admissions charges are exempt under more general provisions applying to fund-raising events by charities and other qualifying bodies. A ‘qualifying body’ could be a club or association (non-profit making organisation) or an ‘eligible body’ for sport and recreation purposes. Also, admission charges by a local authority to a museum, art exhibition or a performance of a cultural nature will be exempt unless this would likely create ‘distortions of competition’ such as to place a commercial enterprise carried at a disadvantage. Donations in lieu of admissions True donations are outside the scope of VAT; this will apply where donations in lieu of admissions are voluntary, are at the donors’ discretion and do not secure any benefit (e.g. entry, prizes etc) in return. It must be clear to the donor that admission can be gained with or without the donation.
Proceeds from Fund Raising Events 1. Subject to some special provisions, sales by charities and other qualifying bodies may be exempt from VAT. Any supply which does not satisfy the conditions will not qualify for exemption and will be VATable under normal VAT rules. The following are not exempted: - Multiple events of the same kind at the same location. There is a limit of 15 events of the same kind in the same ‘location’ in any financial year - Events that are likely to cause distortion of competition - Events where accommodation is also provided 2. Proceeds from the events are usually the income of the body that has promoted it (in whose name the event is held). This is not affected by the use of agents for organising, advertising or managing the event. However, the agent may receive payment and this will be consideration for supply for VAT purposes. 3. If you plan to make any profit then you should run such an event through an unofficial fund. You may then keep all of the income, although you will be unable to recover VAT on costs. 4. If the event raises funds for your educational activities, the profit may be donated to the official fund. It may then purchase equipment or pay for trips and recover all of the VAT charged by the supplier. Type of Events • Events organised by the Council (School) in the council’s name: Admission charges will generally be standard rated, unless specified as donations in lieu of admission, or exempt under specific exemption for events by eligible bodies. Income and expenditure will be processed through the School’s Council delegated fund • Events organised by the School’s governing body: Unless the Governing body is VAT registered, admission charges will be outside the scope of VAT. Governing bodies of voluntary aided schools are usually considered to be charities and so may exempt their charges under the exempt provisions applicable to charities. • Events organised by others (not the Council/governing body): Admission charges will be subject to the VAT rules applicable to the relevant party and any payment to the school may be by way of a donation (outside the scope of VAT) or VATable payment for use of their facilities. Teachers and Other Adults Sales to teachers and other adults cannot qualify as related to the supply of statutory education therefore; these supplies will follow the normal VAT treatment applicable. For example if a school sells a laptop to a teacher, this is a business supply which is VATable at the standard rate. Climate change levy Foundation, VA and VC schools can avoid paying Climate Change Levy on gas and electricity. These schools should send VAT exemption certificates to their suppliers so that VAT is charged at 5% and CCL is not charged at all. A new certificate has to be completed whenever you change your energy supplier.
Online Purchases The VAT treatment will depend on the circumstances in which the purchase was made and for that reason you are advised to contact either the School’s Finance Team or the Council’s VAT Accountant for further clarification.
If you ordered services online, the VAT treatment would depend on your location and the location of the goods and/ or service at the time of purchase. Where goods are dispatched or transported to the customer, the supply takes place where the goods are when the dispatch or transport to the customer begins. Where goods are not dispatched or transported to the customer, the supply takes place where the goods are located when the supply takes place. Since online purchases require dispatch and/ or transportation of goods to the customer, the supplies are treated as supplied in the UK if the goods: • Are imported by the supplier or are already located in the UK • Are sold as ‘already’ located in the UK but which will be imported to the UK under the direction of the supplier. • Are to be installed or assembled in the UK. • The supply of services is made in the UK if the supplier belongs in the UK and in another country if the supplier belongs in that other country. Where supplies are deemed to be in the UK, the UK VAT rules will apply. Where the supplies do not fall in any of the above (subject to some exceptions), they may be supplies from outside the UK and their VAT treatment will have to be confirmed by the Council’s VAT Accountant International Transactions When dealing with transactions outside the UK, the VAT rules and procedure are different. Always contact the Council’s VAT account before engaging in these transactions. Goods purchased from another EU member state: These are acquisitions. Where goods are acquired from a VAT registered supplier in another EU Member State, always inform them of the Council’s VAT registration number. This will ensure that the supply is zero rated at the time of supply. Note however, that the VAT must still be accounted for through the council’s VAT return. In order to do this it is essential that copies of such invoices are sent to the VAT accountant. These copies are purely for VAT accounting purposes and will not have an impact on the school’s finances. Where the supplier is unable to apply zero rating or the supply is one of services, then an appropriate amount of VAT, in accordance with the rates applying in their member state will be charged. The VAT is not recoverable through the normal VAT process. The gross amount should be charged against the school funds as an “outside the scope” transaction. The invoice should then be sent to the Council’s VAt accountant who will apply to the EU member state for a refund of the VAT. This is quite a cumbersome process so schools are advised to notify suppliers of the Council’s VAT registration so that the supply is zero rated instead. Goods purchased from a non-EU member state: These are called imports. VAT will be payable at the point of entry into the UK and this is based on the value of the goods including any import duties and charges applied. The VAT rate will be the same as what the UK rates are for a similar supply and it can be reclaimed as part of the normal accounting procedures. To ensure that VAT is properly recoverable, you must inform the supplier of the Council’s VAT registration number. This will be quoted to HMRC at the point of entry into the UK. HMRC will issue the council a VAT certificate which, in addition to the invoices issued by the supplier, will be used to support VAT recovery. It is important that you notify the Council’s VAT Accountant if and when you import any goods.
VAT charged by foreign traders. If you are charged foreign VAT (e.g. while on a school trip or for any other reason), it should never be entered on the Council’s VAT accounts the same as UK VAT. The VAT must be accounted for by applying to the relevant EU member state for a refund. This is quite a cumbersome process and will only be cost effective where the VAT charges are quite substantial. Otherwise, the gross charged as an outside the scope transaction.
LAND AND BUILDINGS
The majority of land transactions are exempt from VAT. Therefore, VAT on costs incurred in making these transactions (such as construction costs, materials, etc), will form part of the Council’s exempt VAT. Engaging in exempt activities increases the risk of the Council exceeding the 5% de minimus limit which means that no VAT incurred in making these exempt activities will be recoverable. In 2010/11, this is estimated at £2.1m. Lettings: For VAT purposes, a let is the grant of a licence to occupy land if the following apply: • the ‘licensee’ is allowed to occupy land or property, under explicit or implied terms which fall short of a formal tenancy agreement or lease • the ‘licensee’ has the use of a clearly defined area, usually to the exclusion of other people or at least to the extent that any other person’s right to enter the defined area does not impinge upon the licensee’s occupational rights; and • the ‘licence to occupy’ provides for the occupation of the land or property and/or the economic exploitation of that land or property, rather than the right to use any facilities which the land or property may offer. Where the above conditions are satisfied, lettings will be exempt from VAT unless exceptions apply. Therefore the letting of a room within a school is an exempt supply. Note that HMRC distinguish between a licence to occupy and the use of facilities, the latter being a standard rated supply. Under VAT rules, the following are not exempt supplies of land: - parking facilities for vehicles - the provision of pitches for tents or camping facilities - sports facilities (unless certain conditions are met) - a box, seat or other accommodation at a sports ground, theatre, concert hall or other place of entertainment (regardless of whether it is being used as such at the time), - any land or building which has been subject to an option to tax VAT Liability of Lettings The Table below provides information on the VAT rate applicable for lettings of sports and non-sports facilities. Sports Facilities Standard Rate Exempt Non-Sport Facilities Exempt Exempt/ Standard rated
Used for Sport Used for Non-Sport
Hire of Non-Sports Facilities Room Hire is generally exempt from VAT. This includes: • Room and Tables and Chairs. • Room, Tables and chairs with tea and coffee provided. • Room, Tables and chairs and hire of a kitchen where the hirer can prepare their own food and drinks. • Room, Tables and chairs, flipchart and overhead projector. • Room and access to a bar where the bar is operated by the local authority who account for VAT on the takings.
Room Hire with Catering Supplied Where catering is included with the room hire, its supply is standard rated and should be separately identified from the charge for the room hire which is exempt. Where the use of the room is clearly ancillary to the use of the facilities it contains, the charge will be for the use of those facilities and will be taxable at the standard rate. An example is the hire of a computer lab by a computer club- the club being allowed to use the table, chairs and computers. In this case the computer club is looking to use the computers, and it is merely a necessary part of that usage that they have access to the computer lab. The charge would be VATable at the standard rate. Hire of Sports Facilities Sports Lettings The letting of facilities designed or adapted for the playing of sport or physical recreation is normally subject to VAT at the standard rate. Facilities designed for sport can be either land or property of a specific purpose e.g. tennis courts, squash courts, cricket pitches, football pitches; general-purpose halls which have fixed basketball nets, or bars are facilities adapted for sport. General-purpose halls, which merely have floor markings for example for playing badminton, are not classed as sports facilities, and the letting of these for sport is exempt. Conditions Where the Letting of Sports Facilities Let for Sport may be Exempt from VAT Lettings of sports facilities may only be exempt from VAT if certain conditions are met. These include: 24-hour rule These are single lets where the facilities are provided for a continuous period of use exceeding 24 hours, the rental income is exempt. The person to whom the facilities are let must have exclusive control throughout the period of lettings. Series of Lets Also exempt is the letting of such facilities for a series of ten or more periods (whether or not exceeding 24 hours) to a school, club, association or an organization representing affiliated clubs or constituent associations where: • The series consists of 10 or more lets • Each session is for the same sport or activity • Each session is in the same place; this includes different pitches, lanes or courts within the same premises • The interval between each session is at least a day and not more than 14 days (the duration of each session can be varied). Letting for every Monday afternoon would fulfil this condition, however, there is no exception for intervals, which are longer than 14 days due to closure e.g. for public holidays • The series is paid for as a whole and there is written evidence to that effect. This must include evidence that payment is to be made in full for the series whether or not the right to use the facility for any specific session is actually exercised. A formal agreement, exchange of letters, or an invoice issued in advance requiring payment for the sessions specified on the invoice would be sufficient evidence. • Provision for a refund can only be made in the event of the unforeseen nonavailability of the facility, a refund in any other circumstances would breach the exemption conditions and all sessions used would be subject to VAT at the standard rate • The sports facilities are let to a school, club, association or an organisation representing affiliated clubs or constituent associations (such as a local league). This does not include informal groups of people or commercial organisations
• The person to whom the facilities are let has exclusive use of them during the session V6.11 Sport and Recreation Courses All courses with instruction, when provided by a Local Authority in the course of its business qualify as educational courses and are exempt from VAT. Qualifying courses include only those courses where there is a measure of instruction in the provision of the facilities. Typical courses include, Badminton lessons, Swimming lessons, Taekwondo lessons etc. Definition of Club or Association Clubs and associations have a constitution and collect subscriptions from their members, but may be incorporated or unincorporated.
VOLUNTARY AIDED EXPENDITURE
The Governors of Voluntary Aided schools have the responsibility for their school premises. Their responsibilities are laid out in the Blue Book by DfE and these include buildings, built-in equipment, alterations to buildings and repairs to the exterior of buildings. Where the expenditure exceeds £2,000, they are usually of a capital nature and are deemed to be supplied to the Governing bodies rather than the Council. VAT incurred by the Governors on these types of expenditure will only be recoverable if they are registered for VAT or subject to specific conditions regarding VAT recovery at VA schools. Further more, governing bodies are deemed to make exempt supplies of education, therefore, input VAT relating to this are subject to partial exemption rules. For this, reason grant funding received from DfE, for 90% of buildings work, will be VAT-inclusive in order to ensure that VAT is not an additional cost to the Governors. The governors should not recover the VAT on the 90% VAT inclusive DFE contribution but can recover VAT incurred on their own 10% contribution, if the governors are VAT registered and the partial exemption limit is not exceeded. These transactions should be processed through the governor’s funds and not the council delegated fund. Should payment be made from the schools’ council delegated fund, VAT cannot be recovered because the supply is to the governing body rather than the council. The Council can make a grant to the governing body to cover the 10% governor contribution towards Capital works. This could be paid from the Council’s centrally owned funds or from the school’s Council delegated funds. However, the works funded remain the responsibility of the governing body and not the Council so the Council has no entitlement to recover input VAT. The Council is also not able to recover VAT when it pays for capital expenditure, using monies donated by the Governors of that school, for works that are the governing body’s responsibility; this payment will be regarded as consideration for a supply (of the requisite works by the Council to the governing body) for VAT purposes and so subject to VAT at the appropriate rate At voluntary aided schools, the Council is responsible for: • maintaining playing fields or any building or other structure connected with their use; • school premises to the extent that the local authority has directed they be used for purposes other than those of the school, eg for corporate or community use; • the provision of any new site which the local authority provides to the governing body to become a VA (or foundation) school; or • premises works under £2,000 (excluding VAT). • The council is also responsible for revenue maintenance and other running costs. Where funding comes from the schools’ Council delegated funds or other Council owned funds, VAT can be recovered The only instance of the Council being able to recover input VAT incurred in respect of capital expenditure at a voluntary aided school is if the Council undertakes to carry out the works, funding these from its own resources, and then gifts them to the school’s governing body. For example, the Council undertakes to carry out a corporate renovation or refurbishment programme which includes voluntary aided schools. It places the order, receives the invoice and pays using centrally owned funds. HMRC have agreed that where the Council “donate” these goods to VA schools’ capital projects, the council may recover any VAT incurred to the extent of its donation.
Therefore, paragraph 15.5 of Notice 701/30 still applies: where an LEA decides to fund work for which the governors are responsible, they can recover the VAT. V7.6 The school’s governing body is deemed to be a charitable body and could qualify for zero rating on certain building works. This also applies to funds provided by fund raising bodies established for the benefit of the school to pay for capital purposes for which the governing body is responsible. Any queries should be directed to your diocesan representative or the Council’s VAT Accountant.
Schools Finance Manual – Appendices
Schools’ Finance Manual - Appendices
Retention of Document Policy
Title of Document (Local Name) FINANCE Bank Statements List of Authorised signatories Retention Period (After financial year unless otherwise stated) Current Format
Scheme of Delegation Correspondence files Information files Service level agreements School Improvement plans Annual budget Budget files Headteacher’s budget reports Annual statement of accounts Requisitions for goods or services Official Orders and Delivery documentation Petty Cash vouchers, cheques, cheque stubs, bank reconciliations Debtors’ records Register of Tender and Quotations Contract documentation (including advert details, list of interested parties, list of names who were sent tender documents) -Under seal -Not under seal Unsuccessful tenders and quotations Successful tenders and quotations Budget monitoring working papers and estimates Outturn statements (including transactions reports) Student Grant Applications School Meals: Dinner Registers Tickets Till Rolls School Meals Summary Sheets F.S.M. Authorisations
CY+6 6 Years after person ceases to be signatory or the list is superseded Until superseded CY+6 Until superseded Until superseded CY+3 CY+6 CY+6 CY+1 CY+6 CY+6 CY+6 CY+6 CY+6 CY+6
Paper/electronic Paper/electronic Paper/electronic Paper/electronic Paper Paper/electronic Paper/electronic Paper/electronic Paper/electronic Paper Paper Paper Paper/electronic
12 Years 6 Years 2 Years Life of Contract CY+6 CY+6 CY+3 CY+3 1 term CY+3 CY+3 CY+2
Paper/electronic Paper/electronic Paper/electronic Paper/electronic Paper/electronic Paper/electronic Paper/electronic Paper Paper Paper Paper Paper
Schools’ Finance Manual - Appendices
Title of Document [Local Name] School Funds:Cheque Book stubs Completed Bank Paying in Books Ledger Invoices Receipts Bank Statements School Journey Books (if separate bank a/c, as for school fund) Governor training manual Records relating to endowments and trusts Parent-Teacher Associations Account books Annual statement of accounts Supporting financial papers Property Orders for repairs, maintenance and supplies Records of lettings of school premises Records of insurance (policies and schedules) Burglary, theft and vandalism report forms Title Deeds Maintenance log books Contractors’ reports Inventory Registers of loans Capital grant and loan sanction files Plans Payroll Timesheets Overtime, Flexitime and Absence Returns Sickness Records
Retention Period (After Current Format financial year unless otherwise stated) CY+6 CY+6 CY+6 CY+6 CY+6 CY+6 CY+3 Until superseded 6 years after cessation CY+6 CY+6 CY+6 CY+6 CY+6 Until superseded CY+6 Current Deeds only 10 Years after last entry CY+6 Until superseded CY+12 CY+12 Until superseded Paper Paper Paper Paper Paper Paper Paper Paper Paper/electronic Paper Paper/electronic Paper Paper/electronic Paper/electronic Paper Paper/electronic Paper Paper Paper Paper/electronic Paper/electronic Paper/electronic Paper Paper Paper Paper Paper Paper Paper Paper
CY+2 CY+2 CY+2 CY+2 Income Tax form P60 Tax Form P6, P45, P48, P11, P11D and P35 CY+6 Payroll Reports CY+6 National Insurance Schedule of Payments CY+6
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
Working Budget Return
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
January 2012 198
Schools’ Finance Manual - Appendices
January 2012 199
Schools’ Finance Manual - Appendices
Schools’ Annual Financial Cycle
March • School receives budget share from the Council including grants. • Following consultation Council issues revised Scheme for Financing Schools • School updates 3 year financial plans January/February • Finance Committee meet to consider 3rd quarter monitoring position. • Planning for new financial year. rd • 3 quarterly monitoring return sent to Council • Prepare for closedown May • 3 year financial plan approved by Governing Body; • 3 year financial plan submitted to the Council • ‘Use of Balances’ return submitted to the Council (where balances exceed 5% Secondary and 8% Prim & Spec, of delegated budget)
April • Old financial year closed; • CFR returns submitted to the Council • Exceptional needs pupils count and Early Years pupils count Data • Statement of Internal Controls • Annual tax questionnaire to be completed for previous year and submitted to Payroll.
All schools -VAT Return due every month. VA schools - to submit Capital Expenditure Report each month too
June • Ratification of 3yr plan if not completed earlier
January • Submit PLASC returns to DFE and the Council. Information on pupil numbers used to calculate school budget share • Exceptional needs pupil count and
Children’s Centre monitoring return due every month
July/ August • Finance Committee meets to consider previous year’s outturn; st • 1 quarter monitoring returned to Council.
Early Years pupils count data
October • Finance Committee meet to consider 2nd quarter monitoring position. • Review pupil number estimates for use in next 3 year financial plan • Review the school’s charging policy and the debt management policy • 2nd quarterly monitoring return sent to the Council • Exceptional needs pupils count and Early Years pupils count Data • Updates for Finance Manual issued and put on
December • Respond to consultation on reviewing the school funding arrangements for the forthcoming year.
September • The Council’s benchmarking document produced. Also available on Fronter • SIP • Planning for next 3 year financial plan begins
Schools’ Finance Manual - Appendices
Template for Scheme of Delegation
SCHEME OF DELEGATION FOR ….…… ………SCHOOL
SCHEME OF DELEGATION
PAGES: 197 – 202
BUDGET HOLDERS GUIDELINES:
Schools’ Finance Manual - Appendices
THE FULL GOVERNING BODY:
The governing body has a statutory responsibility for the oversight of the financial management of the school. It is also collectively responsible for the overall direction of the school and its strategic management. This involves determining the guiding principles within which the school operates. The governing body has a responsibility for setting educational and financial priorities and for ensuring, the budget is managed effectively. It is also responsible for ensuring the school meets all its statutory obligations and, through the Headteacher complies with the LA’s Financial Regulations and Contract Procedure Rules and ensuring policies and procedures are adhered to. The whole governing body will on an annual basis:• • • • • Complete and update a Register of Business Interest for each of its members. Review & ratify the school’s working budget, unless this function has been delegated to a sub-committee. Consider the school plan. Ratify the Terms of Reference for each of its committees or complete the Governing Body Organisational Arrangement Document. Review the lettings charges, to ensure they cover all the costs incurred by the school.
In order to ensure that adequate systems of financial controls are in place and that it receives the information it needs to carry out its role. The governing body delegates a number of its financial authority to its Committees and the Headteacher.
INDIVIDUAL COMMITTEES AND WORKING PARTIES
The delegated responsibilities of the: Finance & Premises Committee, Staffing Committee, Curriculum Committee and any designated working parties are determined in the Governing Body Organisational Arrangement Document.
The delegated responsibilities of the Headteacher are determined in the Governing Body Organisational Arrangement Document.
Schools’ Finance Manual - Appendices
FINANCE ISSUES • Formulation of initial proposals and recommendations for the School’s financial plan and the allocation of resources, including the level and use of any Contingency Fund or balances, in the light of both the indicative budget and actual delegated budget each year. The Headteacher has Day-to-day control of the financial management and administration of the School, in accordance with the financial plan and priorities agreed by the Governing Body. Authority to incur and to authorise expenditure, in accordance with the financial plan and priorities of the Governing Body, subject to the approval of any changes or any virement between budget headings in excess of £……… being approved by the Finance Committee or the Governing Body. Provision of formal reports, information and professional advice to the Committee, concerning expenditure on all budget headings and on the general financial situation affecting the School on a regular basis at least once each school term and maintenance of regular contact with the Chair of the Committee particularly over any matter of significance or potential controversy.
PREMISES ISSUES • Formulation of initial proposals and recommendations for the use and development of the School’s premises and grounds. • Day-to-day responsibility for the care and control of the School premises and grounds, in accordance with the policies and priorities of the Governing Body.
• Authority to arrange minor items of repair and maintenance, where these are of an emergency nature or are up to a value of £…….in accordance with the overall plan and priorities of the Governing Body, providing that such expenditure can be met from the agreed budget for repairs and maintenance. • Authority to purchase items of furniture and equipment or associated services up to a value of £…….. In accordance with the overall plan and priorities of the Governing Body, providing that such expenditure can be met from the agreed budget for such purposes. • • Publication of the Governing Body’s policy for the control and use of the premises and oversight of the arrangements made for lettings. Provision of formal reports, information, and professional advice to the Committee concerning the development or maintenance of the premises and grounds, on a regular basis at least once each school term, and
Schools’ Finance Manual - Appendices
maintenance of regular contact with the Chair of the Committee, particularly over any matter of significance or potential controversy. • Provide Budget Holders with written guidelines on their roles and responsibilities for budget management. Attached at Appendix B.
DELEGATION OF RESPONSIBILITIES FOR SCHOOL STAFF The Headteacher has overall responsibility for the internal organisation, management and control of the school. She/He may delegate responsibilities to members of staff throughout the school. The School follows the processes and financial procedures of the LBE Schools’ Finance Manual.
The following matrix defines some of these responsibilities: -
ACTION Preparation of initial budget plans. Preparation of final budget for approval. Approval of final budget. Delegation of Budgets to Budget holders. Preparation of Budget Holders Guidelines. Monitoring of individual budgets. Monitoring of budget.
RESPONSIBILITY Headteacher & Bursar. Headteacher & Finance & Premises Committee. Full Governing Body. Headteacher. Headteacher & Finance Committee. Budget Holder & Headteacher. Headteacher, Bursar & Governing Body.
FREQUENCY Annually. Annually. Annually. Annually. Annually. Monthly. Weekly. Termly.
Limits of Authorisation
Schools’ Finance Manual - Appendices
ACTION Monitoring of monthly Payroll reports. Authorisation of day-to-day expenditure. Authorisation of virements between budget headings. Preparation of budget reports to Governors. Preparation of budget monitoring reports for LA. Completion of Monthly VAT returns. Preparation & Authorisation of projected year end balances. Ordering of goods & services. Authorisation of Orders. Commitment of orders onto the School’ Finance system. Confirmation of receipt of goods. Checking of invoices for accuracy & VAT. Certifies invoice for payment. Cheque, Direct Debit or Standing Order authorisation signatory
RESPONSIBILITY Headteacher & Bursar.
FREQUENCY Weekly / Monthly. Daily.
Limits of Authorisation
Up to £……, Over £…….., after referral to the Governors. Up to £…….., Over £…….., after referral to the Governors.
Headteacher. Headteacher & Bursar.
At least Termly. Quarterly.
Headteacher & Bursar. Headteacher & Bursar.
Headteacher, Deputy Headteacher, & Budget Holders. Headteacher. Finance Officer or Bursar. Admin Officer. Finance Officer or Bursar. Deputy Headteacher, or a member of the Senior Management Team.
Any two of: Headteacher, Deputy Headteacher, Designated member of the Senior management Team or the Admin Officer.
Ad-hoc. Ad-hoc. As soon as order is placed. Ad-hoc. Ad-hoc. Ad-hoc. Ad-hoc.
As per individual delegated authority. Up to £…….
Schools’ Finance Manual - Appendices
ACTION Planning & implementation of major works, including Capital Schemes. Authorisation of Petty Cash reimbursements to Staff. Monitoring of Petty Cash reconciliation. Maintenance of educational Visit records. Preparation of School Journey Income & Expenditure statement. Maintenance of school meals registers. Maintenance of Free school meals records. Preparation of School meals income for banking. Recording other school income. Preparation of school income for banking. Preparation of Private School Fund records. Preparation of private Fund Income. Signatories on Private Fund Account.
RESPONSIBILITY Governing Body & Headteacher.
Limits of Authorisation
Up to £… cash. Over £…. reimbursement by Cheque.
Finance Officer & Bursar. Finance Officer Finance Officer
Weekly. Annually. Annually.
Finance Officer. Finance officer. Finance Officer.
Daily. Ad-hoc. Weekly.
Finance Officer & Bursar. Finance Officer. Finance Officer. Finance Officer.
Any two of: Headteacher, Deputy Headteacher, or a designated member of the Senior Management Team and Admin Officer.
Ad-hoc. Weekly. Weekly. Weekly. Ad-hoc.
Schools’ Finance Manual - Appendices
ACTION Audit of Private School Fund Account. Approval of private school fund Account. Authorisation of Agency/Supply staff Timesheets. Authorisation of Agency/Supply staff invoices. Authorisation of Videpay forms for Newly Employed Staff. Authorisation of Videpay forms for changes in staff circumstances. Appointment of Staff. Maintenance of Inventory records. Disposal of inventory items Annual Inventory Check. Back-up of Computerised records. Write-off Debts
RESPONSIBILITY As determined by the Governors. Full Governing Body. Headteacher or Designated member of the Senior management team. Headteacher or Designated member of the Senior management team. Headteacher & Chair of Governors. Headteacher & Chair of Governors.
FREQUENCY Annually. Annually. Ad-hoc.
Limits of Authorisation
The Governing Body. Finance Officer Headteacher Finance Officer Integris R M Finance Bursar and Admin Officer Headteacher
Ad-hoc. Ad-hoc. Ad-hoc Annually. Twice Weekly Up to £…. Above this after referral to the Governors
Up to £…. Above this after referral to the Governors
In the Head teacher’s absence, authority is delegated to the Deputy Head.
Schools’ Finance Manual - Appendices
GUIDELINES FOR BUDGET HOLDERS
• Budget Holders are responsible for monitoring their own budgets. • Overspends on budgets are not permitted unless prior authorisation of the Headteacher is obtained.
• When ordering goods, the principles of “Best Value” must be applied. • All orders MUST be accompanied with an official school order form. • All orders must be authorised by the Headteacher before being placed. • • • Goods must not be sent for “on approval” unless previously agreed with the Headteacher. Discrepancies in goods received must be notified to the Finance Officer as soon as possible. If possible, budgets should be spent by the spring half term. Unspent budgets are not carried over into the next financial year.
• Remember it is your responsibility to monitor your budget throughout the year. Up to date budget reports can be requested from the Finance Officer as and when required.
Schools’ Finance Manual - Appendices
REGISTER OF BUSINESS INTERESTS
SCHOOL:_______________________________ NAME OF GOVERNOR / HEADTEACHER___________________________________________________
NAME OF BUSINESS NATURE OF BUSINESS NATURE OF INTEREST DATE OF APPOINTMENT OR ACQUISITION DATE OF CESSATION OF INTEREST DATE OF ENTRY IN REGISTER
I certify that I have declared all beneficial interests, which I or any person in my immediate family have with businesses or other organisations which may have dealings with the school.
Schools’ Finance Manual - Appendices
MONTHLY ELECTRONIC RETURN TO DIRECTOR OF FINANCE FOR VAT
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
Expenditure Cell C4 should show the period the return relates to. Cell D4 should show the month the return relates to. Cell D8 should show the date the return is made. The date must be entered by the school staff. Cell E8 should show the total standard rate expenditure for the month. Cell F8 should show the VAT at standard rate on the total expenditure in cell E8. Cell G8 should show the total expenditure charged at 15% VAT for the month. Cell H8 should show the VAT at 15% on the total expenditure in cell G8. Cell I8 should show the total expenditure charged at 5% VAT for the month. Cell J8 should show the VAT at 5% on the total expenditure in cell I8. Cell K8 should show the total exempt expenditure for the month. Cell L8 should show the total zero rate expenditure for the month. Cell M8 should show the total VAT paid on any other codes. Cell N8 should show the total expenditure for the month. Cell P8 should show the total VAT on expenditure for the month.
Schools’ Finance Manual -Appendices
LONDON BOROUGH OF ENFIELD SCHOOLS’ PURCHASE ORDER STANDARD TERMS AND CONDITIONS (“Order”) 1 A contract is deemed to be formed upon acceptance by the Contractor of the Order or upon the placing of the Order where pursuant to a quotation or tender. 2 All goods and services supplied in respect of this Order must satisfy any appropriate British Standard specification, Approved Codes of Practice or equivalent European Union Standard in terms of safety, quality and fit for purpose. All services must be carried out with due skill, care and diligence which a competent and suitably qualified person performing such services could reasonably be expected to exercise in accordance with the appropriate industry best practice/statutory requirements. 3 The Contractor shall deliver/supply the goods, services or materials at the Contractor's risk and expense at such time and to such a place as specified in this Order, except where otherwise indicated on this Order. Title to the goods, services or materials shall pass on payment by the School unless otherwise agreed between the parties. 4 The School shall not be deemed to have accepted any part of the goods until after the School’s employees have inspected the goods and made payment. The School may reject the whole or part of the goods, services or materials if it considers that they are of an unsatisfactory quality or not in accordance with the Purchase Order, (until 28 days after delivery). Failure to remove the goods/services/materials within seven days of request may result in removal by the School at the Contractor's expense. The Contractor warrants to the School that the goods will, from time of delivery, be free from defects or failures in design material and workmanship for such period as is reasonable for that type of goods. 5 The prices for the goods, services or materials shall remain fixed unless otherwise agreed by the parties, and shall be exclusive of Value Added Tax (“VAT”). VAT shall be due at the rate applicable at the tax point date of the Contractors invoice. The Contractor shall submit an invoice within 28 days of supplying any goods or services. The Order number must be quoted on all invoices and delivery notes. Save where an invoice is in dispute the School shall pay the Contractor within 30 days and if not paid when due the Contractor may claim interest in accordance with the Late Payment of Commercial Debts Regulations. 6 Time is of the essence unless otherwise agreed in writing at the time of the Order. 7 The School shall be entitled to deduct any monies due to the School from sums payable to the Contractor under this Order or any other contract the Contractor has with the School.
Schools’ Finance Manual -Appendices
8 The Contractor shall not assign, transfer or sub-let this contract or any parts thereof without the prior consent in writing of the School. 9 The Contractor shall effect adequate insurance for the purposes of this contract to the satisfaction of the School. 10 The Contractor shall indemnify the School against all claims, liabilities, damage and loss howsoever arising from this contract. 11 In accordance with current statutory requirements the Contractor shall not in its employment of staff discriminate against any person on the grounds of colour, race, nationality, ethnic or national origin, religion, age, sex or disability. 12 Maintenance and repair services provided with goods supplied shall continue for a period of no less than 12 months unless otherwise stated herein and shall cease upon one month's written notice prior to the end of the 12 month period or thereafter upon one month's written notice. 13 Unless set out in the Conditions of Contract to the contrary, the School shall be entitled to terminate the contract forthwith by written notice to the Contractor in the event of a breach of any of these conditions or if the Contractor failed to provide satisfactory performance of the requirements of the Order or if a receiver is appointed or if the Contractor becomes bankrupt or insolvent or goes into liquidation (either voluntarily or compulsorily) or if the Contractor's interest becomes vested in another person or body without the School’s consent. 14 The School may terminate the contract if the Contractor or any of its employees or agents shall have committed any offence under the Prevention of Corruption Act 1889 to 1916 or shall have given any fee or reward the receipt of which is an offence under S.117(2) of the Local Government Act 1972. 15 Any information obtained by either party under this contract shall be kept confidential and shall at no time be divulged to a third party without the prior written consent of the other party, unless such information is already in the public domain. Such consent shall not be unreasonably withheld. The School reserves the right to disclose information about this Order in accordance with the Freedom Of Information Act 2000 and related statutory provisions pursuant to a valid request for such information. 16 Notwithstanding any other provision of this contract nothing in this contract confers or purports to confer any right to enforce any of its terms on any person who is not a party to it. For the avoidance of doubt The Contracts (Rights of Third Parties) Act 1999 are hereby excluded.
Schools’ Finance Manual -Appendices
17 The Contractor shall comply with all Acts of Parliament, statutory instruments and by-laws applicable to the contract, in particular all legislation in force from time to time relating to the protection and safeguarding of the health and safety of School’s employees, the School’s servants and the School’s premises in which the goods or services are to be used. 18 This contract and all its provisions shall be construed in accordance with English law. 19 No delay or failure in performance by either party shall constitute default or give rise to any claim for damages or loss of anticipated profits if such delay or failure is caused by force majeure. 20 The Contractor shall comply with all its obligations under the Human Rights Act 1998 and Data Protection Act 1998 as amended and re-enacted 21 The Order may only be varied if agreed in writing by both parties. 22 The Contractor and School shall use their best endeavours to negotiate in good faith and settle any dispute or difference that may arise out of or relate to the contract. In addition, before resorting to litigation, the dispute should be referred to mediation in accordance with the Centre for Effective Dispute Resolution Model Mediation Procedure. The Contractor shall continue to provide the goods/services in accordance with the contract and without delay or disruption while a dispute or disagreement is being resolved, unless the School requests in writing that the Contractor does not do so. 23 The Contractor shall comply in all material respects with applicable laws and regulations in regards to environmental considerations (including but not limited to packaging) in force from time to time. 24 The failure of either party to insist upon strict performance of any provision of the Order or the failure or delay of either party to exercise any right or remedy to which it is entitled under the Order does not constitute a waiver of such right or remedy and shall not cause a diminution of the obligations established by the Order. 25 If any provision of the Order is held invalid, illegal or unenforceable by any court of competent jurisdiction such provision shall be severed from the Order and the remaining provisions shall continue in full force and effect as if the Order had been executed without the invalid, illegal or unenforceable provision. 26 The Contractor warrants to the School that none of the goods/services constitutes
or involves any infringement of any existing intellectual property right and the Contractor hereby agrees to indemnify the School against all charges, expenses, costs and damages arising from any claim that the use or sale of any goods/services so supplied constitutes or involves any such infringements.
Schools’ Finance Manual - Appendices
INVOICE CERTIFICATION FORM Invoice Number:_______________________ ORDER NUMBER GOODS RECEIVED PRICES CHECKED TO ORDER ARITHMETIC CHECKED VAT INVOICE CHECKED ENTERED ONTO RM FINANCE BUDGET CHARGED DATE _______________________ ___ QUANTITY CHECKED QUALITY CHECKED NOT PREVIOUSLY PAID Please complete in full. All boxes must be initialled.
NET TOTAL: £ __________________ VAT: £ _______________ GROSS TOTAL: £ ___________ CHEQUE NUMBER
AUTHORISED FOR PAYMENT _______________________________
DATE ____________ _
Schools’ Finance Manual - Appendices
Employee or Self-Employed?
The key question to ask is whether there is a contract of service or a contract for services. A contract of service is where the individual is an employee of the school. Contracts of service normally exist where the employee has a job description, a place of work and is entitled to holiday and sick pay. A contract for services is where the individual is self-employed and is responsible for their own deductions. Contracts for services normally occur where there are no supervisions or controls by the school, and the person is responsible for the means by which the service is performed. Where a person claims to be self-employed, it is necessary to determine their status by examining the nature and the terms of their appointment. A Tax Status Questionnaire MUST be completed in order for the Payroll Service to assess the tax status of the individual. The school can contact the Payroll Compliance Team for a copy of the questionnaire and for additional guidance. This can only be done on an individual basis and is subject to a decision by the Tax Office. The fact that a person has a Schedule D number does not automatically mean that a contract for services exists.
Schools’ Finance Manual – Appendices
HM Revenue & Customs Dispensations
Fares Reimbursement of actual fares incurred (e.g. train, bus, taxi) whilst travelling on Council business. Costs incurred on travelling between home and the normal place of work are excluded. Travel Cards Reimbursement of the cost of daily or weekly travel cards where these are required for travelling on Council business. Any employee provided with or reimbursed for a weekly travel card must demonstrate a requirement to be travelling on Council business on at least 5 of the days covered by the card. Travel cards covering a period of longer than one week are excluded from this dispensation.
Car Loans The facility to have a car loan no longer exists. Season Ticket Loans The provision of loans provided the maximum amount outstanding at any point in the year does not exceed £5,000. Subsistence 4.1 Reimbursements Payments to employees at standard NJC subsistence rates (maximum), or reimbursement of actual amounts incurred on meals, car parking etc., when working away from their normal place of employment. 4.2 Meals Provided 4.2.1 Free school meals provided to employees on lunchtime duty. 4.2.2 The reimbursement or provision of free meals to Social Services Employees with clients. 4.2.3 Free buffet style lunches (of a modest nature) provided to staff attending internal training courses at their normal place of employment where the demands of the course justify the provision of lunch and it is available to all staff attending that particular course. 4.2.4 Entertainment The attendance of members and officers of the Council to meetings/events where hospitality is provided by the London Borough of Enfield or a third party. This is provided that there are also other outside clients/customers present, the occasions are infrequent and details are entered on the Council’s hospitality register. Relocation expenses Reimbursement of qualifying expenses (as defined in the regulations) up to the amount of the exemption limit in force at the time of relocation.
Schools’ Finance Manual – Appendices
Living accommodation The provision of rent-free accommodation to the following class of employee: 6.1 School or other caretakers with accommodation either on or immediately adjacent to or immediately opposite the school etc., site and the caretaker is responsible for the site outside the normal working hours. 6.2 Resident sheltered housing wardens or caretakers with accommodation within the relevant complex. This dispensation also covers the provision of free council tax and water rates to the relevant employees. The provision of other benefits associated with accommodation (e.g. free heating, lighting etc., whether from individual bills or from a central source) however is excluded from the dispensation and details of such amounts (unless fully reimbursed by the employee) are to be declared on forms P11D.
Telephones 7.1 Land Lines Reimbursement of the actual cost of the calls relating to business. 7.2 Mobile Phones In all cases a declaration should be signed by the employee at the beginning of each tax year, stating that should the school owned mobile phone be used for private calls, the employee will reimburse the school with the cost of the call. The school should contact The Payroll Compliance Team for the appropriate documentation if this is relevant to the school. Declaration forms will need to be held by the school for at least seven years. The provision of a mobile phone to an employee for business purposes and any of the following conditions apply: 7.2.1 There is no private use of the phone, or 7.2.2 Any private use is limited to a period when free call charges apply, or 7.2.3 The employee is both required to and subsequently does reimburse to the council the cost of the private calls made (call charges only). There is no need to complete a Use of Asset Form (Videpay 62) for employees who have the use of a mobile telephone. However, the employee must reimburse the Council the cost of all private calls made. Clothing The employee must sign a declaration when issued with clothing. The declaration states that upon leaving the school’s employment they will return all protective clothing or uniforms that have been issued to them. The school should contact The Payroll Compliance Team for the appropriate documentation if this is relevant to the school. Declaration forms will need to be held by the school for at least seven years. 8.1 Protective Clothing The provision of those items of protective clothing that is required by nature of the employment.
Schools’ Finance Manual – Appendices
Provision of Uniforms The provision of uniforms to staff provided all of the following apply: 8.2.1 The uniform is readily recognisable as such, and 8.2.2 Badges and/or logos cannot easily be removed, and 8.2.3. The uniform remains the property of the Council and must be returned when the employment ceases. 8.2.4 All uniforms provided for employees must have a distinctive logo. 8.3 Cleaning of uniforms Reimbursement of the actual costs of cleaning uniforms provided by the Council when supported by a receipt.
Use of Assets (Loans) The provision on loan of computer etc. (e.g. laptops) equipment to employees who have a business need to use them away from their normal place of employment. The equipment must not be used for private purposes. This dispensation applies only to an employee’s temporary use of a Council asset. The employee must sign a declaration that there will be no private use, and that if, exceptionally, there is any private use it will be paid for at full cost.
Vans No benefit will arise on employees taking a van home at night provided all the following circumstances apply: 10.1 The van contains equipment necessary for the employee to properly carry out his duties 10.2 The van is only taken home on those occasions when the employee is on nighttime or weekend call out duty 10.3 There is no other private use of the van. If any of the above circumstances do not apply then the Van scale charge benefit will apply and this is to be declared on the form P11D.
Staff Welfare 10.1 The provision of an internal welfare service, available to all employees. 10.2 The provision of free health checks, available to all employees. 10.3 The provision of free eye tests to employees involved with VDU work and if appropriate, the reimbursement of some or all the cost of glasses specifically required for VDU work. School Sports Facilities Free use of these by employees at times when they are not required for school use. Home workers The provision of computer etc. equipment for all employees to use at home for business purposes. This equipment must not be used for private purposes.
Schools’ Finance Manual – Appendices
Volunteers Individuals can only be classed a volunteers provided they are not paid for their time. The following expenses are covered by this dispensation: 14.1 Mileage allowances for travel on their voluntary activities (and including travel to and form their home) at or below the HM Revenue & Customs approved mileage rates, which do not attract Tax or NI. 14.2 Subsistence allowances at or below NJC rates. Work Experience Students Expenses payments to individuals within this scheme. Expense payments should be of a modest nature, e.g. £1.50 per day. Payments to Individuals See notes attached. A form Videpay 42a, Tax Status Questionnaire can be obtained from The Payroll Compliance Team.
Schools’ Finance Manual - Appendices
School Fund Records
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
______________________________________________________________ Profit Statement
Schools’ Finance Manual - Appendices
Typical Items of Expenditure and their VAT Liability
Typical Items of Expenditure VAT Liability Accountancy Services Bottled Water Cars and Vans Catering Services (when not provided by the DSO) Chocolate Biscuits Cleaning Materials Computers, Photocopiers, Printers etc. Contract Cleaning Crisps, Chocolate, Soft Drinks, Ice Cream Educational Equipment (Purchase and Rental) Exercise Books Fixtures and Fittings Fuel and Power to Commercial Buildings Furniture and Equipment General Consumable Items General Repairs (Structural and Equipment) Standard-Rated Grounds Maintenance Laundry 20% Lease of Photocopiers Medical Supplies (not Prescriptions) Orange Juice/Fruit Juice Pest Control Postage and Packing (when not provided by Post Office) Printing Refuse Collection Sports Equipment Stationery – Pens, Paper, Invoice Pads, etc Taxi Hire (if registered) Telephone Rental and Calls Uniforms and other Adult Clothing Videos, CDs, CD ROMS, Cassette Tapes Window Cleaning Fuel and Power to Domestic and Charity Buildings for a Qualifying Purpose. 5% Women’s Sanitary Products
Schools’ Finance Manual - Appendices
___________________________________________________________________________ Typical Items of Expenditure and their VAT Liability Typical Items of Expenditure VAT Liability Books, Text Books, Library Books, Children’s Picture Books, Painting Books Children’s Clothing (Including Cycle Helmets) Domestic Water and Sewerage Journal, Newspapers, Maps, Charts Zero-Rated Milk, Tea, Coffee Most Basic Food Music Books Passenger Transport (10 or more passengers) Public Transport Bank Charges and Monetary Transactions Examination Entry Fees Examination Services Insurance by an Insurance Broker Exempt Lotteries, Raffles, Tombolas Most Land Transactions (Lettings, Leases, Sales) Postal Services by the Post Office Vocational Training Charitable Donations Grants Outside the Scope Rates/Water Rates Salaries and Wages Please note that items purchased from a business, which is not VAT registered, will not show VAT even if the item is listed as liable to VAT. Such purchases are outside the scope.
Schools’ Finance Manual - Appendices
_________________________________________________________________________ EXAMPLES OF VAT INVOICES Detail Required for Tax Invoices for Purchases Over £250 Name and Address of Invoice Number
Date of Supply
VAT Registration Number
Issue Date (if different to Date of Supply)
Name and Address of Council/School
Description of goods and services including quantity of goods or extent of services
Net Amount Payable
Rate of Value Added Tax
Amount of VAT Total Amount Payable Including
Schools’ Finance Manual - Appendices
_________________________________________________________________________ EXAMPLES OF VAT INVOICES
Detail Required for Tax Invoices for Purchases Less Than £250
Name and Address of
Date of Supply
VAT Registration Number
Description of Goods or Services Supplied
Description of goods and services including quantity of goods or extent of services
Total Amount Payable Including VAT
Rate of Value Added Tax
Schools’ Finance Manual - Appendices
EXAMPLE OF A VAT INVOICE Details Required for Tax Invoices Issued by Schools for Standard-Rated Supply of Goods or Services
Name and Address of School Invoice Number
Date of Supply VAT Registration Number 220 6708 90 Name and Address of Customer
Description of Goods or Services Supplied Description of goods or services supplied including quantity of goods or extent of services Rate of Value Added Tax
Total Amount Net Amount Payable
Amount of VAT Total Amount Payable
Terms of Payment
Schools’ Finance Manual - Appendices
Examples of Business Supplies which might be made by Schools
Typical Items Supplied Private Telephone Calls to Staff or External Organisations Private Photocopying to Staff or External Organisations Sale of Second-Hand Goods/Commercial Vehicles and Scrap Sponsorship when a Benefit is Supplied to the Sponsor Sales to Staff, e.g. Stationery Secondment of Staff Catering Services Supplied to an External Organisation Accountancy Services Supplied to an External Organisation Consultant Services Supplied to an External Organisation Hire of Cassettes, Videos and CDs Including Charges for Late Returns Sales of Videos The Testing and Repair of Equipment Admission to Parks, Entertainments, Museums and art Galleries Car Parking Commission on Sales, e.g. at Artists’ Exhibitions Cleaning and Laundry Services The Sale of Refuse Non-Food Vending Machines Hire of Equipment and Vehicles Conference Income Reinstatement Work to Highways (if requested to do so) Provision of Parking Facilities Private Street Works The Sale of Petrol Advertising Services Gas, Electricity and Fuel Oil Supplied to Commercial Buildings VAT Liability
Standard-Rated 17.5% until 3 Jan 2011 20% from 4 Jan 2011
Standard-Rated 17.5% until 3 Jan 2011 20% from 4 Jan 2011
Schools’ Finance Manual - Appendices
_________________________________________________________________________ Examples of Business Supplies which might be made by Schools Typical Items Supplied Sales of Books, Leaflets and Pamphlets Sales of School Publications, Newspapers, Journals, Periodicals, Brochures, Booklets. Design and Printing Work where the Final Product is a Book, Leaflet or Pamphlet Passenger Transport Fares (Bus and Coach) Gas, Electricity and Fuel Oil Supplied to Domestic or Charitable Non-Business Buildings Sale of Women’s Sanitary Products Vocational Training Supplied to External Organisations Supply of Education for which a Fee is Charged to External Organisations Car Boot Sales (Charges to Stall Holders) Lease/Lettings of Council Property on a Commercial Basis NB Lettings of Playing Fields, or Sports Halls, where the hirer will use the facilities, are standardrated. There are special rules relating to the long-term hire of sporting facilities, which allow exemption of the hire. Exempt VAT Liability
Mostly Exempt with an Option to Tax
Schools’ Finance Manual - Appendices
_________________________________________________________________________ BUSINESS AND NON-BUSINESS SUPPLIES (EDUCATION)
This Appendix gives more details of business and non-business supplies of education BUSINESS ACTIVITIES The following are regarded as business activities and are generally liable to VAT at standard-rate unless specified otherwise: • Administration of admissions policy for non-local authority maintained schools. • Adult education and training, retraining or research not provided under a statutory obligation. Note though that such education or training is usually exempt from VAT • Government funded training schemes now withdrawn. Note that these are usually exempt from VAT. • Provision of examination services to non-local authority maintained schools. Note that these are usually exempt from VAT. • Sales of clothing or sports equipment of a size worn by young children under the age of 14 can be zero-rated; all other larger sizes are liable to VAT at standard-rate. The sale of clothing is not regarded as ‘closely related’ to the supply of education and is, therefore, VATable at the appropriate rate. • Sales of meals etc to staff and visitors is generally VATable • School inspections are usually exempt from VAT except when supplied to OFSTED, when they are standard-rated. • Supplies of goods or services, e.g. catering, to private schools including academies. Such supplies may be exempt from VAT in some circumstances and VATable in others. • Supplies of goods or services in connection with non-statutory education. Where the goods or services are ‘closely related’ to the supply of education, i.e. for the direct use of the pupil, student or trainee, they may be non-business to Council pupils and exempt from VAT if otherwise. • Supply or secondment of teachers; this is business (unless supplied under a statutory obligation or separately identified in this Appendix) though usually exempt from VAT.
NON-BUSINESS ACTIVITIES The following are regarded as non-business activities when undertaken by a local authority and so are outside the scope of VAT: • Transport provided for a charge as part of non-business education, etc providing it can be seen to be ‘closely related’ to that education, transport to and from school, residential educational trips or visits. To be treated as ‘closely related’ and so nonbusiness, such transport must be supplied by the Council at or below cost. • Meals supplied to own pupils in schools, provided they are supplied by the Council at or below cost. • Sales of food and drink supplied to own pupils, e.g. from vending machines, tuck shops, etc, provided supplied by the Council at or below cost. • Preparation of statements for special needs pupils.
Schools’ Finance Manual - Appendices
• Provision of pre- and post-school education without charge. If a charge is made, preand post-school education is a VAT-exempt business activity unless delivered as part of the Government’s childcare strategy (see below). • Breakfast clubs, homework clubs, etc for own pupils. • Childcare and similar welfare services supplied by a local authority in pursuance of the Government’s childcare strategy, ie at a children’s centre, school or similar facility • The lease or letting of a children’s centre, school or similar facility to a private sector provider of childcare or similar welfare services in pursuance of the Government’s childcare strategy providing rental is set so as to merely cover the Council’s costs of making the facility available (including depreciation or a premises sinking fund where appropriate) • Careers services provided under the Employment Rights Act 1993. This is nonbusiness where provided under a direction from the Secretary of State, otherwise business. • Provision of information, e.g. the assessment and administration of complaints relating to the National Curriculum. • Provision of information on schools, e.g. to parents under the Education Act 1944. • Release of teachers to examination boards. • Sales of class work to pupils as part of statutory education where this is at or below cost. Note though that in all other circumstances such sales are business and liable to VAT in accordance with the normal VAT rules • Sales of goods closely related to the provision of education forming part of the curriculum, other than clothing. These are non-business where sold to own pupils at or below cost and for regular classroom use but otherwise business and VATable at the appropriate rate. • School trips and visits supplied to own pupils as part of the curriculum • Student awards, scholarships, bursaries, etc. • The supply of primary and secondary education including the recovery of costs from other local authorities for the education of their pupils. • The supply or secondment of teachers under a mentorship scheme.
Schools’ Finance Manual - Appendices
_________________________________________________________________________ ELIGIBLE BODIES (EDUCATION)
An eligible body for the purposes of providing exempt education comprises: 1 Schools. Many schools such as community, foundation and voluntary schools do not generally make a charge for the education they provide and this education is, for the most part, non-business and outside the scope of VAT. However, under limited circumstances, they may make a charge (e.g. music or sport tuition or mature students filling sixth form places) and because they are eligible bodies, such charges are exempt 2 Further and Higher Education These are further education colleges or organisations defined or designated as such under the various Education Acts, together with higher educational institutions defined in the Education Acts 3 Universities These are Universities in the UK and any colleges, institutions, schools or halls of such university but not their subsidiary companies set up to pursue commercial business. 4. Public Bodies A government department, local authority or a body which acts for public purposes and not for its own profit and performs functions similar to those of a government department or local authority. This includes executive agencies and Health Authorities. 5 Charities A body which is precluded from distributing and does not distribute any profit it makes; and applies any profits made from exempt supplies of education, research or vocational training to the continuance or improvement of such supplies. 6 Teaching English as a foreign language This is an organisation which does not fall within 1-5 above, which provides the teaching of English as a foreign language. These are not tutorial colleges, secretarial schools and correspondence colleges which operate with a view to making and distributing profit.
Schools’ Finance Manual - Appendices
Does the letting relate to sports facilities? ------------ ------------------ --------|---------- --------------------
| Is the letting for the purpose of: |----------- --------parking a | vehicle(s)? | | | YES NO | | | | | | pitches for tents | or caravans? | |----------- ---------| YES NO | | Holiday | accommodation? | |----------- ---------| YES NO | | game or fishing | rights? | |----------- ---------| YES NO | | hotel type | accommodation? | |----------- ---------| YES NO | | Exempt From VAT* VAT chargeable at standard rate
| Is the facility to be used for sports purposes? ---------- --------------------|
| | | | |
| | Is the let of more than 24 hours or one of 10 or more (a ‘block booking’)?
| | | | | | | | | | | | | | | | | | | | | Exempt from VAT*
| | | | | | | | | | | | | | | | | | | May be exempt from VAT if all the conditions are met.
| | | | | | | | | | | | | | | | | | | VAT chargeable at standard rate
Schools’ Finance Manual - Appendices
MAXIMUM SIZES WHICH MAY BE ELIGIBLE FOR ZERO-RATING
height chest waist hips arm (shoulder to wrist) inside leg
Garments designed for body sizes boys girls 163cm 161cm 84cm 85cm 70cm 69cm 85cm 90cm 59cm 57cm 77cm 76cm Boys’ and girls’ garments boys girls chest waist chest waist 84cm 70cm 85cm 69cm 104cm n/a 105cm n/a 104cm n/a 105cm n/a 109cm n/a 110cm n/a 114cm n/a 115cm n/a n/a n/a n/a 88cm 105cm n/a n/a 72cm 72cm 73cm 98cm n/a n/a 89cm 106cm n/a 71cm 71cm 71cm 72cm
body dimension shirts knitwear jackets, waistcoats, etc top coats, outerwear, etc dresses skirts trousers, shorts, etc underwear and swimwear nightwear
Other garments • lifejackets - maximum body weight 52kg • leotards, body stockings, swimsuits - shoulder to crotch 70cm • garments sized by height, eg judo and karate suits - boys 163cm, girls 161cm • saris and lungis - saris 422cm x 104cm, lungis 156cm x 94cm • gloves, scarves, neck-ties, belts, braces - no limit • socks by shoe-size - boys 6½, girls or unisex 5½, • tights by waist-crotch-waist measurement - lightweight 51cm, heavyweight 56cm • teen bras - 34B Girls’ footwear Up to and including size 3. Sizes 3½ to 5½ other than: i. court shoes, and ii. other footwear where the heel thickness exceeds the sole thickness by 4cm. Ballet shoes irrespective of their size markings are zero-rated provided they are made on lasts no longer than 24cm.
Schools’ Finance Manual - Appendices
Where a girl has one abnormally large foot or one foot requiring an abnormally high heel, the pair of shoes can be zero-rated provided the smaller shoe meets the conditions laid down above. Boys’ footwear Up to and including size 6½. Where a boy has one abnormally large foot the pair of shoes can be zero-rated provided the smaller shoe meets the conditions laid down above. Unisex footwear Slippers, wellington boots, plimsolls and trainers Ice skating and roller skating boots (including roller-blade boots) with or without blades or rollers attached Other unisex footwear including moccasins, open-toed sandals and ‘flip-flops’ up to size 5½. up to size 5½. as for girls footwear
Schools’ Finance Manual - Appendices
SPECIMEN APPROVAL FORM PROPOSED SCHOOL TRIP: ……………………………………………………………………………….. ………………………………………………………………………………. SECTION ONE -TO BE COMPLETED BY THE TEACHER PLANNING THE PROPOSED TRIP Date(s) of Proposed Trip ……………………………………………………… Details of the proposed trip, including all activities to be undertaken……………….. ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… …………………..
SECTION TWO – TO BE COMPLETED BY THE HEAD TEACHER It is of my opinion that the proposed trip relates to the agreed curriculum in the following ways: ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… ………………………………………………………………………………………………………… …………………………………………………………………… NAME: (Block Capitals)……………………………………………………………………… Signed:……………………………………………………… Date:………….……………
WAIVER OF CONTRACT PROCEDURE RULES FOR SCHOOLS
DETAILS OF PROJECT:
VALUE OF PROJECT:
REASON FOR WAIVER OF CONTRACT PROCEDURE RULES
Authorised Signature for Waiver: …………………………………………………… Chair of Governors. Date…………………… Authorised Signature for Waiver: …………………………………………………… Headteacher. Date of the Governing Body meeting, at which the Waiver was presented to Governors:…………………………………………………. Date……………………
Appendix 27 Schools’ Finance Manual - Appendices
COMMON AUDIT FINDINGS
This a list of the most common findings that have arisen from school audits recently undertaken. For the most part, compliance with best practice in these areas ensures compliance with “Keeping Your Balance”, the Guide to the Law for School Governors, and the LA’s School’s Finance Manual.
1 Scheme of Delegation The School does not have an approved, complete or appropriate Scheme of Financial Delegation – a document that details the areas of responsibility for the Governing Body, Head Teacher and members of staff at the School, with financial responsibilities. KEEPING YOUR BALANCE – Standard A1 2 Register of Business Interests Register of Business Interests incomplete – Annual returns are outstanding or out of date. KEEPING YOUR BALANCE – Standard A6 3
RECOMMENDED COURSE OF ACTION
Every School should have a Scheme of Financial Delegation, which records the delegated responsibilities of the Governing Body, Headteacher and staff at the School. The document requires an annual review by the Governing Body. Any amendments to the scheme should be clearly documented in the corresponding minutes of the Governor Body meeting.
FINANCE MANUAL REFERENCE
Appendix 7 A Register of Business Interest must be completed for each member of the Governing Body and Staff at the School with Financial responsibilities. The return should be completed on at least an annual basis and updated as and when changes in membership or circumstances occur. The minutes of the Governing Body or its committee meetings should fully reflect the discussions of, and decisions taken by, Governors at the meetings. This should incorporate all decisions to approve or terminate contracts between contractors and the school and the discussion and approval of all expenditure over the Headteacher’s delegated limit.
Governing Body Minutes The Governing Body minutes do not reflect the key decisions taken at the meetings. KEEPING YOUR BALANCE – Standard A5
Appendix 27 Schools’ Finance Manual - Appendices 4 Procurement The School had not obtained the required number of quotations or tenders for purchases valued in excess of £10,000. Furthermore, where quotations/tenders had been obtained, the documentation supporting the quotations/tenders had not been retained by the school. LBE SCHOOLS’ FINANCE MANUAL - FG 4 In accordance with the LA’s Contract Procedure Rules the appropriate number of written quotations should be obtained for contracts worth between £1,000 and £50,000. Formal tenders must be obtained for contracts over £50,000. Where annual contracts are continually renewed with the same supplier, and therefore the value of the contract is uncertain (it is not just the annual cost), the value of the contract should be established by multiplying the monthly payment by 48. Furthermore, the School should ensure that the documentation relating to quotations/tenders is retained in accordance with the “Retention of Documents Policy” (appendix 1 of the Schools' Finance Manual). FR4.30 Orders must be entered onto R M Finance or equivalent School accounting system and committed against the corresponding budget as soon as they are placed. This will enable the School to provide accurate up to date budget information at any given time. FR 4 and FG 4
Committing Orders Orders are not committed against the relevant budget on RM Finance or equivalent School accounting system. Consequently it is not easy to establish the true position of the budget spent/remaining at any given time. By not using the commitment facility on RM Finance, the school is not providing a clear and precise report of the School's financial position when they submit their quarterly CFR returns to the Local Authority. KEEPING YOUR BALANCE – Standard D12
Charging Policy School does not have an up to date charging policy. KEEPING YOUR BALANCE – Standard F1 The Governing Body may not charge for anything unless it has drawn up a statement of general policy on charging. The policy must be reviewed and ratified by the Governing Body on an annual basis. Confirmation of this must be recorded in the corresponding minutes of the meeting.
Appendix 27 Schools’ Finance Manual - Appendices 7 Private Fund Private Fund accounts not audited / not presented to Governing Body. KEEPING YOUR BALANCE – Standards L4 / L7
FR 9 and FG 9 Schools must ensure that an independent auditor audits the private fund account on an annual basis. The audited accounts should be presented to the Governing Body and confirmation of this should be recorded in the corresponding Governing Body minutes.
Letters to parents must make it clear that contributions for trips are voluntary, with the exception of residential trips, where a charge may be made for board and lodging. Children of parents who do not contribute will not be treated any differently. The School can emphasise that without substantial voluntary contributions the trip/journey may have to be cancelled. Proper records should be kept of all income, with regular reconciliations undertaken and independently checked. Receipting, recording and banking of income should be distributed between at least two members of staff to ensure a separation of duty exists within the process.
School Trips – Voluntary Contributions The letters to parents regarding school trips, do not state that certain contributions are voluntary.GUIDE TO THE LAW FOR SCHOOL GOVERNORS : Chapter 23 SCHOOL ADMISSIONS CODE : Section 1.95 – 1.97
FR 11 and FG 11
Processing Income Appropriate records are not kept of all income, e.g. breakfast/after school clubs, uniform sales etc, and reconciliations not carried out on a weekly basis or independently checked. Furthermore, the transfer of cash between members of staff is not recorded or signed and dated. KEEPING YOUR BALANCE – F2/F12/F13
FR 5 and FG 5
Asset/Inventory records Asset registers are not comprehensive, complete or up to date and annual checks are not evidenced with a signature or date. Furthermore, not all assets are security marked. KEEPING YOUR BALANCE – M2/M3 The Schools inventory records should be updated when new assets are purchased or the location of existing assets are changed. An independent check must be carried out annually, which should be evidenced with a signature and date. All inventory items should be security marked with a mark, which identifies the School, is visible and permanent.
FR 6 and FG 6
Appendix 28 Schools’ Finance Manual - Appendices
What is it? All of us at one time or another have concerns about what is happening at work. Usually these concerns are easily resolved. However, when they are about unlawful conduct, financial malpractice, misconduct, bad practice, Health and Safety issues or dangers to the pupils, parents and others, or to the environment, it can be difficult to know what to do. You may be worried about raising such issues or may want to keep the concerns to yourself, perhaps feeling it’s none of your business or that it’s only a suspicion. You may feel that raising the matter would be disloyal to colleagues, managers governors or to the school. You may decide to say something but find that you have spoken to the wrong person or raised the issue in the wrong way and are not sure what to do next. The London Borough of Enfield has introduced this policy to enable staff to raise their concerns about such malpractice at an early stage and in the right way. They prefer that staff raised the matter when it is just a concern rather than wait for proof. If something is troubling you that you think we should know about or look into, please use this policy. If, however, you are aggrieved about your personal position, or have a complaint that is already covered by a core policy such as the Grievance Procedure or Anti-Harassment Policy, please use it - you can get a copy from the school or from the Schools’ Personnel Service, 1st Floor, Civic Centre, Silver Street, Enfield, EN1 3XQ. This Whistleblowing Policy is primarily for concerns where the interests of others or of the organisation itself are at risk. If in doubt - raise it!
OUR ASSURANCES TO YOU Your safety The Chief Executive and Members are committed to the Whistleblowing Policy, as are the governors. If you raise a genuine concern under this policy, you will not be at risk of losing your job or suffering any form of retribution as a result. Provided you are acting in good faith, it does not matter if you are mistaken. Of course we do not extend this assurance to someone who maliciously raises a matter they know is untrue.
Appendix 28 Schools’ Finance Manual - Appendices
Your confidence We will not tolerate the harassment or victimisation of anyone raising a genuine concern. However, we recognise that you may nonetheless want to raise a concern in confidence under this policy. If you ask us to protect your identity by keeping your confidence, we will not disclose it without your consent. If the situation arises where we are not able to resolve the concern without revealing your identity (for instance because your evidence is needed in court), we will discuss with you whether and how we can proceed. Remember that if you do not tell us who you are and raise your concern anonymously, it will be much more difficult for us to look into the matter or to protect your position or to give you feedback. Accordingly, while we will consider anonymous reports, this policy is not well suited to concerns raised in this way. If you do raise a concern we will maintain your confidence and will not disclose your identity without your prior consent. By doing so, we can protect your position, gain further information if required and give you feedback on what has happened. HOW WE WILL HANDLE THE MATTER Once you have told us of your concern, we will look into it to assess initially what action should be taken. This may involve an internal inquiry or a more formal investigation. We will tell you who is handling the matter, how you can contact them and whether your further assistance may be needed. If you request it, we will write to you summarising your concern and setting out how we propose to handle it. When you raise the concern you may be asked how you think the matter might best be resolved. If you do have any personal interest in the matter, we do ask that you tell us at the outset. If your concern falls more properly within the Grievance Procedure or other Core Policy we will tell you. While the purpose of this policy is to enable us to investigate possible malpractice and take appropriate steps to deal with it, we will give you as much feedback as we properly can. If requested, we will confirm our response to you in writing. Please note, however, that we may not be able to tell you the precise action we take where this would infringe a duty of confidence owed by us to someone else. HOW TO RAISE A CONCERN INTERNALLY Step one If you have a concern about malpractice, we hope you will feel able to raise it first with your manager. This may be done orally or in writing.
Appendix 28 Schools’ Finance Manual - Appendices
Step two If you feel unable to raise the matter with your manager, for whatever reason, please raise the matter with: The Headteacher or the Chair of Governors Please say if you want to raise the matter in confidence so that they can make appropriate arrangements. Step three If these channels have been followed and you still have concerns, or if you feel that the matter is so serious that you cannot discuss it with any of the above, please contact Andrew Fraser Director 020 8379 3350 SCS (School Effectiveness and Inclusion)
Step four If you are not confident in approaching any of the named persons in steps one-three, you can at any stage contact the Council’s Investigations Team for advice or to raise your concern. John Austin London Borough of Enfield Monitoring Officer Or Stuart Brown London Borough of Enfield 020 8379 4641 Head of Finance, Investigations INDEPENDENT ADVICE 020 8379 4094
If you are unsure whether to use this policy or you want independent advice at any stage, you may contact • The independent charity Public Concern at Work on 020 7404 6609 or www.pcaw.co.uk . Their lawyers can give you free confidential advice at any stage about how to raise a concern about serious malpractice at work.
Appendix 28 Schools’ Finance Manual - Appendices
EXTERNAL CONTACTS While we hope this policy gives you the reassurance you need to raise such matters internally, we would rather you raised a matter with the appropriate regulator than not at all. Provided you are acting in good faith and you have evidence to back up your concern, you can also contact Health and Safety Executive Environment Agency HM Revenue & Customs Audit Commission Data Protection Registrar The Standards Board for England The Office of the Information Commissioner - health and safety risks - environmental issues - financial irregularities - public sector finance - data protection issues - Member activity - freedom of information
IF YOU ARE DISSATISFIED
If you are unhappy with our response, remember you can go to the other levels and bodies detailed in this Policy. While we cannot guarantee that we will respond to all matters in the way that you might wish, we will try to handle the matter fairly and properly. By using this policy, you will help us to achieve this.
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Specimen Charging Policy
This Charging Policy informs staff and parents about charging for School activities. It conforms to the requirements of the guidance detailed in ‘ A Guide to the Law for School Governors – Chapter 23, January 2010.In accordance with these guidelines The School: • Will not charge for books, materials, equipment and transport provided during school hours by the Local Authority (LA) or by the school to carry pupils between the school and an activity. Will not charge for any activities which take place in School time, apart from instrumental tuition for individual pupils or pupils in groups of up to four. May charge for School-Time activities by inviting parents and others to make voluntary contributions to enable School funds go further. Children of parents who do not contribute will not be treated differently from those who do make contributions Will have the right to cancel an activity if there are insufficient voluntary contributions to make the activity possible. May charge for board and lodgings on residential courses, except for pupils whose parents are receiving: Income Support; Income-based Jobseeker’s Allowance; Support under Part V1 of the Immigration and Asylum Act 1999; Child Tax Credit (providing that they are not entitled to Working Tax credits and have an annual income, assessed by HM Revenue & Customs, that does not exceed £16,190 for the year 2010-11); Guarantee element of State Pension Credit. The Headteacher will inform parents of the right to claim free activities if they are receiving these benefits. May permit organisations to charge parents when such an organisation is acting independently of the School or the LEA, to arrange an activity to take place during school hours and parents want their children to join in the activity. May charge for activities (optional extras), which happen outside School hours when these activities are not necessary part of the National Curriculum. Parents are asked to make a contribution towards replacing damaged or lost school property caused wilfully or negligently by their children. The Governors will review the lettings charges levied by the school on an annual basis. This policy should be reviewed annually by the Governors.
• • • •
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GUIDANCE FOR SCHOOLS ON THE LETTING OF SCHOOL PREMISES 1. INTRODUCTION 1.1 This guidance has been produced for all LA maintained schools to consider when developing their policy on the letting of their premises (buildings and grounds) and facilities to public, voluntary and community, and commercial organisations. Many schools already have such a policy in place. However we would like to encourage the adoption of this practice among all schools. A letting is defined as the use of school premises during school hours, evenings, weekends, and school holidays by parties other than the school. A letting must not interfere with the primary purpose of the school to provide a high quality education for all its pupils. 1.2 Where schools do not have their own ‘Conditions’ for the letting of their premises the London Borough of Enfield ’s ‘Conditions for the Letting of School Premises to External Organisations using the Council’s Lettings Agency’ (henceforth referred to as ‘Conditions’) may be applied and this will complement the lettings policy we would encourage all schools to have in place. 1.3 This forms part of Council’s promotion of the extended school services agenda which, is acknowledged, can make an important contribution to improving educational attainment. Extended schools are increasingly being recognised as hubs for community services, including children’s services. The wider use of school premises is key to implementing this agenda. We are, therefore, inviting schools to respond positively to the third sector’s interest in delivering extended services 1.4 The Council is also working to promote community cohesion and regards this as an area where it can support schools. Most schools already consider this a fundamental part of their role and already work in ways to do this. One of the key ways in which schools can promote community cohesion is through: Engagement and extended services – to provide reasonable means for children, young people, their friends and families to interact with people from different backgrounds and build positive relations, including: links with different schools and communities; the provision of extended services; and opportunities for pupils, families and the wider community to take part in activities and receive services which build positive interaction and achievement for all groups. 1.5 Schools can set their own policies in relation to school lettings but have to consider any explicit direction and priority use of their premises by the local authority. A model policy, for schools using or considering using the Council’s Lettings Agency, is appended for consideration.
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2. RECOMMENDATIONS 2.1 Governing Bodies are encouraged to develop a lettings policy which will establish the following: • • • a system enabling all providers of community services reasonable opportunity to hire school premises priority for established providers of services for children and young people a transparent and fair charging system with concessionary rates for non-commercial organisations providing services or activities for children and young people
3. THE COUNCIL’S LETTINGS AGENCY 3.1 The Council operates a chargeable Lettings Agency (part of Schools and Children’s Services Department) for educational premises which schools can apply to use. It is the first point of contact for current and prospective hirers and deals with both one-off and regular lettings. 3.2 Organisations that wish to hire school premises should initially contact the Lettings Agency. Subject to the school’s agreement the Agency will issue an Application Form and the ‘Conditions for the Use of Educational Premises Outside Normal Teaching Hours’ (where the school does not have its own). The form will need to be completed by the hirer and returned at least 6 weeks before the date of the hire period or otherwise they will be charged a late booking fee. 3.3 On receipt of the Application Form the Lettings Agency will confirm the booking and issue an invoice to be paid before the date of the hire period. The invoice specifies the premises being hired; the nature of the activity or activities taking place; the time and duration of hire; and the cost of the hire. The income from lettings is paid on a monthly basis to the schools concerned.
4. LEGAL MATTERS 4.1 The Children’s Act (2004) established a duty on local authorities to make arrangements to promote co-operation between agencies and other appropriate bodies (including voluntary and community organisations) in order to improve children’s well-being and a duty on key partners to take part in co-operation arrangements. The promotion of the extended school services agenda is intended to facilitate this process. 4.2 Under Section 27 (1) of the Education Act 2002 governors have control over the use of school premises, subject to the local authority’s general policy that all educational premises should be available whenever possible to provide for the wider educational and recreational needs of children, young people and adults.
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This is in accordance with Sections 27 and 28 of the Education Act 2002, for governing bodies of maintained schools to provide community facilities. Use of this power, however, requires prior consultation with the local authority in accordance with Section 28 of the Education Act 2002. 4.3 The Education and Inspection Act (2006) placed schools, since September 2007, with a duty to promote community cohesion. However these powers are limited and are not to interfere with the general provision of education or the promotion of high standards of achievement. Therefore, the local authority by virtue of its directions under Section 28 (1) (b) of the Education Act 2002 and reference to Section 40 of the Schools Standards and Framework Act (No3), requires Governors to give priority to the use of school premises outside school hours for Adult Education, Authority Youth Provision, Mother Tongue teaching and Authority Music Provision.
5. CHARGING 5.1 The governing body is responsible for setting the charges for the hiring of the school premises and should consider reviewing charges annually and increase them as necessary to reflect cost increases. 5.2 In determining the charges to apply it is necessary to take account of all costs associated with letting the school premises. The costs may include, where appropriate, the cost of staff time and training, insurance, equipment and material, cleaning, heating, lighting, water, etc. 5.3 A scale of charges should be produced with the rates for evenings, weekends, and holidays set out for each type of facility available for hire e.g. hall, classroom, playing field, small hall etc. The Lettings Agency is able to advise on appropriate prices. 5.4 Any income from lettings will need to comply with VAT regulations.
6. LETTINGS POLICY 6.1 The governing body is responsible for the management of lettings, in accordance with the school’s policy, but may delegate all or part of this responsibility to the Headteacher. 6.2 Where the Headteacher has any concern about a particular request for a letting the matter should be raised with the Chair of Governors. The governing body has the right to refuse an application and no letting is to be regarded as ‘booked’ until the potential hirer receives written confirmation in the form of an invoice.
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6.3 For schools which use the Council’s Lettings Agency we would recommend that a ‘lettings policy’ should specify: - what parts of the school premises are available; times of hire; the charges and concessionary rates; and priority of use. Where the school is not using the Council’s Lettings Agency it will need to specify, in addition, the period of notice for booking, whether a deposit is required; the notice period for cancellation; and the conditions under where refunds apply. Concessionary rates would be appropriate to apply to any non-commercial organisation engaged in activities which meet any of the priorities of the Enfield Children & Young People’s Plan 2011-15. 6.4 Governors may also wish to consider whether a system of priority use, according to groups, should apply. These may include, for example, minority ethnic community groups providing supplementary education, organisations offering educational and recreational activities for school pupils and their parents/carers, parent support groups, children and youth groups etc.
Appendix 31 Schools’ Finance Manual - Appendices
MODEL SCHOOL POLICY ON THE LETTING OF SCHOOL PREMISES The Governing Body of ……………………..School believes that schools are a valuable community resource. It is, therefore, committed to making every reasonable effort to ensure that the school premises (buildings and grounds) are available for the benefit of the local community. In keeping with the extended schools services agenda we will give priority to the use of premises for educational objectives. This hiring of school premises at all times outside normal school hours is under the control of the Governing Body. This policy sets out the facilities available and the charges. Some of the responsibilities of the Governors and the users when the school premises are let are included but are set out in more detail in the Council’s ‘Conditions for the Letting of School Premises’.
LETTINGS POLICY A letting is defined as the use of school premises during school hours, evenings, weekends, and school holidays by parties other than the school. Our lettings policy will aim to: • ensure that the use of school premises and facilities is effectively coordinated and managed • promote the use of school premises by the wider community • give priority for established community providers of services for children and young people • provide a clear statement of charges • ensure a range of activities for children and young people
SCALE OF CHARGES Our charging policy will: • charge statutory and voluntary and community sector organisations at no more than cost i.e. a ‘Community Rate’ • charge commercial private organisations at cost plus an income margin for the school i.e. a ‘Commercial Rate’
APPLICATION PROCESS An organisation wishing to hire school premises should, in the first instance, contact the Lettings Agency in the Council’s Schools and Children’s Services Department. The Agency will issue an Application form which needs to be completed at least 6 weeks before the date of hire. Consideration can be given to bookings made with less than 6 weeks notice but if accepted will be subject to a late booking fee.
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Where a hirer has any particular complaints about the service or hire they should, in the first instance approach the Agency which will advise them on the procedure to be followed.
THE HIRE AGREEMENT The approval of a hire will be confirmed by the Lettings Agency in the invoice which will specify the premises being hired; the nature of the activity or activities taking place; the time and duration of hire; and the cost of the hire. The permission for the letting to take place is subject to the payment of the invoice before the actual hire takes place. The payment will be made to the London Borough of Enfield. The Headteacher or the Chair of Governors has the power to terminate any hire agreement relating to the hire of the school premises.
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EXAMPLE SCALE OF CHARGES FOR LETTINGS OF SCHOOL PREMISES Daytime (9am-6pm)
FACILITY AREA SIZE/SEATING CAPACITY Community Rate Commercial Rate
Community Rate Commercial Rate
Community Rate Commercial Rate
Community Rate Commercial Rate
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LONDON BOROUGH OF ENFIELD CONDITIONS FOR THE LETTING OF SCHOOL PREMISES TO EXTERNAL ORGANISATIONS USING THE COUNCIL’S LETTINGS AGENCY INTRODUCTION Under the Education Act 2002 and the Children Act 2004 local authorities and all bodies working with children have a duty to safeguard and promote the welfare of children. The following ‘Conditions’ for the letting of school premises (buildings and grounds) to third parties have been produced for the benefit of governing bodies, local authority employees, and external organisations. The purpose of these ‘Conditions’ is to make all parties aware of:• the arrangements in place for hiring school premises and the responsibilities that are binding on all parties and consequences if these are not observed • the important issues that need to be considered when making school premises available for hire • the arrangements to ensure that school premises are used beneficially for all the community with as little risk to health and safety as possible These ‘Conditions’ should be read in conjunction with the school’s Letting Policy and Scale of Charges and are intended to complement these two documents. The school’s Letting Policy and Scale of Charges should specify the premises and facilities available to let, the particular times available for letting, and the charges applicable. Activities that fall within the corporate life of the school and take place on school premises are not considered lettings. These include governing body meetings and PTA meetings and activities. These ‘Conditions’ have been developed to ensure best practice in the arrangements for the letting of school premises and are applicable to both one-off and regular lettings. Schools may adopt these ‘Conditions’ in their entirety or adapt them to suit their own circumstances. The governing body has the right to vary these ‘Conditions’ at any time with consultation from any relevant officers from the Council. Any complaints about a letting should, in the first instance, be raised with the Lettings Agency who will be able to provide appropriate advice on the procedures to be followed by the complainant.
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CONDITIONS FOR THE LETTING OF SCHOOL PREMISES TO EXTERNAL ORGANISATIONS USING THE COUNCIL’S LETTINGS AGENCY The letting of school premises (buildings and grounds) is permitted by the Governing Body on the understanding that the following ‘Conditions’ apply at all times. THE CONDITIONS 1. THE HIRER The expression “the hirer” in these ‘Conditions’ refers both to the individual authorised to book in the name of the organisation proposing to use the accommodation and the organisation (if incorporated) or its members (if unincorporated). The hirer must be at least 18 years of age. The hirer of the premises may be from a voluntary or community organisation, a private commercial organisation, or a statutory public organisation. 2. THE HIRE AGREEMENT The expression “Hire Agreement” in these ‘Conditions’ refers to the confirmation, by the Lettings Agency, of the booking referred to below in para. 4 vii). 3. THE LETTING The expression “letting” is defined as the use of school premises (building and grounds) and facilities by parties other than the school. School premises may be available before, during, and after the school day as well as during weekends and school holidays subject to the school’s particular circumstances. 4. ARRANGEMENTS FOR THE LETTING OF SCHOOL PREMISES i) An organisation wishing to hire school premises should, in the first instance, contact the Lettings Agency (PO Box 56, Civic Centre, Enfield, EN1 3XQ; tel: 020 8379 3389). The Agency will either re-direct the Hirer directly to the school (if that school has not bought into the Lettings Agency Service Level Agreement) or check with the school if the premises required are available for the specified period. If they are the Agency will issue these ‘Conditions’ and an application form which should be returned at least six weeks in advance of the proposed date of use. It is important that the school which has purchased the Service Level Agreement from the Council does not hire out any facilities directly to any community or commercial organisation without the Lettings Agency issuing a permit to that organisation. The delivery of the application form must not be considered as a firm booking unless and until the booking is confirmed by the Lettings Agency. Any application forms received later than six weeks in advance will be subject to a late processing fee. This fee is subject to increase annually. ii) Applications must be signed by such person or persons who are able and willing to accept personal responsibility for the observance of the conditions of hire and not by any agent or intermediary excepting only the duly authorised officer of any organisation proposing to use the accommodation. iii) Hirers who block book throughout the year will take priority over any ad-hoc bookings. Vacant spaces where hirers wish to take a break will not be held. All bookings are taken on a first come first served basis.
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iv) Cheques and postal orders must be made payable to the London Borough of Enfield and will not be effective as payment until cleared or cashed. The Lettings Agency will confirm booking and issue a permit. The charges must be paid in advance of the first day of use, remittances to be sent to the Lettings Agency at the address specified overleaf. If payment is not made on time, the booking will be terminated and access denied to the premises. v) The hirer shall not make any public announcement of any activity or event, dependent on the hiring, unless the booking has been confirmed by the Lettings Agency. vi) All publicity for any activity or event for which the hiring is made and all admission tickets and other documents issued in connection must have the name and address of the hirer or the hiring organisation. vii) The confirmation of booking will be in the form of an invoice which will be issued by the Lettings Agency. The invoice will specify the premises hired, the nature of the activity or activities taking place, the times and duration of the letting, and the charge to the hirer. 5. CHARGES The school – whose premises are being hired – has the right to amend the relevant scale of charges at any time with, at least, one month’s notice in writing being given to the hirer. The amount of any increase resulting from any such change will become payable as though it were part of the original charge. The hirer, after receiving a notification of an increase, may cancel in writing to the Lettings Agency. This should be within 14 days from the date of written notification of the increase upon which the Lettings Agency will refund all sums paid for the cancelled letting. We recommend that, if there are any exceptions applied to the charging policy by the Lettings Agency formal approval should be sought from the school and held on file. It should also be clearer on the permit as to how the calculation of the let is made. 6. CANCELLATIONS i) Neither the governing body nor the Council is responsible for any loss or other expenses incurred by the hirer in the event of a cancellation by the governing body as a result of circumstances beyond its control. The decision of the governing body and the Council as to whether a letting is cancelled is binding on the hirer. ii) The hirer is responsible for notifying people of any changes in dates or venues, as a result of a cancellation, in advance of the letting. iii) The Council or the school may refuse to accept a booking or cancel any permission granted to use premises if:a) the premises booked or part of it is required for public or official purposes by the Council, governing body, or other statutory body b) any damage has been caused to the premises or property of the Council or school by any previous use of the premises by the hirer or the organisation represented by the hirer c) breaches of licensing conditions by the hiring organisation have previously occurred d) the Council or governing body deem it necessary or expedient to cancel the booking
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iv) The school is not liable to pay any compensation to the hirer or any other person by where there is a cancellation. Any fees paid to the Council will be refunded unless the reason for the cancellation is because of damage having been caused or if cancellation is within less than 21 days. At least 21 days notice must be given by the hirer to the Lettings Agency that it does not wish to use the accommodation which has been reserved. If this condition is complied with consideration will be given to the return of the hiring fee less a cancellation fee of 10% with a minimum of £1. Any cancellation made less than 21 days of the hire date is subject to 100% cancellation fee. v) Deposit payments for social functions are non-refundable following cancellation by the hirer. Deposits will only be refunded, after the booking has taken place with the permission of the school, and after the deduction for any damages etc (if applicable). 7. CONDUCT ON SCHOOL PREMISES i) The hirer shall ensure that, where permission has been granted to enable the premises to be used for the purposes of a youth organisation • no member of the organisation shall enter the premises unless the hirer or his representative (whose name has previously been notified to the Lettings Agency) is also present on the premises • Members of the organisation shall remain on the premises only so long as the hirer or his representative is present. ii) The premises must not, either wholly or in part, be used at any time during the hiring as a place of assembly, departure, resort or destination for persons engaged, or intending to be engaged, or having just been engaged, in any public demonstration, march, parade or other like event other than one of which the Council will have given its prior approval in writing and then only subject to such conditions (if any) as the Council may attach to that approval. iii) Any authorised officer of the Council may deny access to the premises to any person seeking to gain such access in contravention of the previous paragraph. iv) The hirer shall ensure appropriate supervision of the activity or activities it undertakes on the school premises. The hirer shall ensure appropriate adult to children ratios for the activity or activities it undertakes on school premises and be responsible for providing adequate supervision to maintain order and good conduct. v) The hirer shall ensure that the school premises are left in a tidy condition after any period of use and on termination of this agreement, all equipment being returned to the correct place of storage. The hirer will be charged a reasonable fee where the school has to clean up/dispose any rubbish after any period of use by the hirer or on termination of the agreement. vi) All furniture apparatus or equipment brought into school premises for the purposes of or as a result of the hiring must be removed within such time as allowed by the school. vii) The hirer must not remove or interfere with the furniture, fixtures, fittings, or structure of the school nor install any fixtures, fittings or decoration of its own. viii) The hirer shall ensure that the school premises are vacated promptly at the end of any period of use and on termination of the Hire Agreement
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ix) The right of access to all parts of the school premises, whether or not included in the permission for use, is reserved to the school and to any person acting on its behalf and the hirer must not obstruct or interfere with this right. x) Use of school facilities and equipment The equipment of the school can only be used by the hirer with prior written approval from the governing body or the Headteacher of the school. School dining halls, kitchens and serveries may only be used with the written consent of the Council. Handicraft, domestic science, science laboratories, workshops, gymnasia and other rooms containing models, apparatus, diagrams, etc. are not normally available for use by the general public and any such use will be granted only in exceptional circumstances with the written consent of the school. The use of any preparation or material for the purpose of preparing a floor for dancing is not allowed. Chairs must not be removed from the school buildings for use either on the school playing fields or in any other building outside the school premises. xi) Public and Private Meetings The following conditions will apply if there is a meeting, assembly or other function at the premises during the hiring to which the public are invited or admitted, whether or not on payment:a) no invitation, advertisement or public notice relating to any meeting, assembly or other function which is the subject of the hiring shall contain any wording or matter which in the opinion of the Council is likely to constitute an offence under the Equality Act 2010 or any subsequent amendments thereto or which may breach any other legislation, or is likely to be otherwise offensive, or to encourage the attendance of persons likely to infringe any of the requirements of these conditions. b) no person present shall use words which amount to an incitement to a crime; are calculated to lead to a Breach of the Peace; or are threatening, abusive or insulting in a case where, having regard to all the circumstances, hatred is likely to be stirred up against any Protected Characteristics* under the Equality Act 2010 by the words in question c) no written matter which is either an incitement to crime; calculated to lead to a Breach of the Peace; or an incitement which amounts to an infringement of a right or amounts to an offence under the Equality Act 2010 must be published or distributed at the premises during the hiring * “Protected Characteristics” in b) above means a group of persons defined by reference to their age, colour, race, nationality, religion or belief, ethnic or national origin, disability, sex, sexual orientation, gender reassignment, pregnancy and maternity, marriage and civil partnership d) the hirer shall adopt a policy to comply with its statutory obligations under the Equality Act 2010 and, accordingly, will not treat one group of people less favourably than another for any lawful reason
Schools’ Finance Manual – Appendices
If the hiring is for a meeting or other function which will be open to the public, this must be disclosed on the application form. For this purpose, any meeting or function of which advance publicity is given to persons not in membership of the organisation for which the booking is made, or to which invitations are not limited to a predetermined group or list of persons shall be deemed open to the public. If such a meeting or function is incorrectly described as “private”, the letting may be cancelled” 8. INSURANCE AND LIABILITY i) Where the Council considers, at the time of application or subsequently at any time before the hiring takes place, that the hiring is for such a purpose or of such a nature that there is a special risk of damage to the premises during or as a result of the hiring, it may, by written notice to the hirer, require the hirer to effect insurance. This insurance may be of such minimum amount as the Council may specify, in an insurance office of repute, against the liability of the hirer under these conditions to indemnify the Council in respect of any such damage. ii) The serving of such a notice means that the hiring shall not be permitted unless and until the hirer has produced documentary evidence to the Council of the said insurance having been effected. iii) The hirer, and any guarantor required, shall indemnify and keep indemnified the school from and against any loss or damage which the school may sustain or incur by reason of the permission to use the premises or otherwise arising out of or in connection with such user, including cost of replacement and reinstatement of loss or damage and any claim arising out of bodily injury or death of any person or persons. iv) The hirer shall be liable for all damages and costs incurred by the school or Council for any theft, malicious or accidental damage to the property during the period of hire. v) The school or Council shall not be liable for any injury loss or damage caused to the hirer or to any other person as a result of:a) any failure of or defect or want of repair in any of the fixtures, fittings, furniture, equipment or appliances belonging to the school at the accommodation; or b) any failure of or interruption in the supply of water, gas or electricity to the accommodation; or c) any defect or want of repair in the building of which the accommodation forms part or is the means of access thereof; or d) any theft or malicious or accidental damage to or loss of any property of any person taken or left at the accommodation, the means of access of that or any car park annexed to that. vi) Licences and Permissions The hirer will be required to obtain and pay for all relevant licences which have not already been obtained by the school. The hirer will provide evidence of this if required. Licences are required for: • alcohol (including any alcohol provided 'free' with the purchase of an entrance ticket) • regulated entertainment (including plays, opera, ballet, films, indoor sports, boxing & wrestling, music and dancing, performances and participation) • gambling (including raffles & lotteries, poker, bingo, betting and 'casino' games) • special treatments (including massage, manicures and acupuncture)
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The London Borough of Enfield administers the licensing regime in respect of each of the licensable activities listed above. Failure to strictly comply with the Licensing Law is a criminal offence attracting, on conviction, a fine and possible prison term. The Licensing Team at the Council can be contacted at email@example.com and on 020 8379 3578. It is a condition of the hiring that the premises must not be used for any unlawful purpose or in any manner contrary to Licensing Law or any other statute or regulations in force or for any purpose other than that for which the application has been granted. The hirer will indemnify the school against any legal liability which may be incurred as a result of breach of Licensing Law or any other statute or regulations by the hirer and by any other unlawful act by the hirer, or by any person attending in consequence of the hiring. The hirer must secure the preservation of order, and take all reasonable steps to prevent injury, loss or damage to any person or property, on all occasions on which the premises are being used by virtue of such permission. The hirer must arrange for an adequate number of responsible stewards to be present throughout the period of hire to assist in the preservation of order. At no time during the hiring may the number of persons present exceed the maximum stated in the application form. It is the responsibility of the hirer to ensure that before any copyright material is delivered or performed, that the consent of the owner of the copyright or his agent is obtained and the necessary fees paid. Particular attention is drawn to the Performing Right Society and the Phonographic Performance Limited. 9. SAFEGUARDING AND CHILD PROTECTION i) It is an obligation of the hirer to confirm that: a) Criminal Records Bureau (CRB) checks have been carried out on all adults working with children on the activity or activities it undertakes on the school premises and that these checks demonstrate that all adults working with children on the activity or activities it undertakes are safe to do so. The Hirer is responsible for ensuring compliance with the CRB Code of Practice and any relevant Safeguarding Children Board requirements b) there are policies and procedures in place to address any concerns raised in respect to the welfare or safety of children and young people (e.g. signs of potential abuse are exhibited). Staff and volunteers will act upon any concerns without delay, and refer to appropriate services. ii) The hirer shall be required to provide evidence of its policies and procedures regarding vulnerable adults, safeguarding children and child protection at the request of the governing body of the school, the Headteacher, or the Council. iii) The DfE document ‘Safeguarding Children and Safer Recruitment in Education issued in 2010’ (para. 2.33) states, “Where a third party is offering services or activities, that provider would be responsible for ensuring they meet the safeguarding requirements that apply to them. Where third parties manage or deliver services on school sites, written agreements should clarify accountability for undertaking safer recruitment checks and storing records. Normally this will require the third party provider to be responsible for checking their own staff and keeping records, and confirming with the school governing body that this has been done. Further advice can be found in Chapter 4 of the DfE guidelines.
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iv) The hirer is responsible for supervising any children participating in the activity or activities it undertakes on the school premises until they are collected by a responsible adult from the school premises v) The hirer must make clear in any advertisement for the service/activity offered on school premises that the school does not endorse, have involvement or responsibility for the service/activity other than those stated in paragraph (iii) overleaf. vi) The hirer shall ensure that it complies with all Laws, Regulations and Guidance of the relevant Government department on safeguarding of children and vulnerable adults including but not limited to the Children Act 1989, Education Act 2002, Children Act 2004, Childcare Act 2006, Safeguarding Vulnerable Groups Act 2006, Education and Skills Act 2008 and all subsequent amendments thereof and relevant legislation thereto. 10. HEALTH & SAFETY REQUIREMENTS Under Health and Safety Regulations an employer is responsible for the health and safety of employees and others who are on the school premises. In schools this responsibility is usually delegated to the Headteacher. The hirer shall be expected to undertake a risk assessment for the activity or activities being undertaken. This should be done in accordance with the ‘5 Steps’ approach set out in the Health & Safety Executive’s website (www.hse.gov.uk/risk/fivesteps.htm). Any actions required from this should be followed and a copy of it given to the school. i) Accident reporting The hirer must report all accidents occurring before, during or after the activity or activities it undertakes on the school premises to the appointed person at the school using a standard report form. ii) First Aid Facilities There is no legal requirement for the school to provide first aid facilities. It is the responsibility of the hirer to make their own first aid arrangements, such as the provision of a first aid kit, and the provision of first aid training for supervising staff. iii) Emergencies including fire safety The school’s fire risk assessment should be reviewed and fire safety procedures followed by all providers of services. Any arrangements (e.g. alarms, maximum numbers) that arise from the assessment should be communicated to all users of the premises as appropriate. There must be clear procedure for the hirer to summon emergency services when required with access to either an open telephone landline or fully charged mobile phone. All participants engaged in the organisation’s activities must be aware of the procedure for vacating the premises in the case of an emergency such as a fire and the nearest assembly point. Any arrangements (e.g. alarms, maximum numbers) arising from the assessment should be communicated to all users of the premises as appropriate. A register of all those attending the activities, for which the hirer is responsible, should be kept particularly in the case of an emergency. The hirer must understand the school’s evacuation procedures in the event of an emergency and be aware of fire exits and the assembly point.
Schools’ Finance Manual – Appendices
iv) Stage and recording equipment No additional staging, scenery, piano or similar heavy article and no equipment for the reproduction of music or other sound shall be erected or brought onto the school premises without the previous consent in writing of the Lettings Agency. Any such alterations or additions as may be authorised shall be carried out in accordance with the directions and to the satisfaction of the Council and shall be reinstated forthwith at the expense of the hirer to the like satisfaction. Any such equipment brought onto the school premises shall be, or shall be rendered, non-flammable. Stage scenery and other effects must neither be brought onto the school premises nor taken away while the school is in session except with the express permission of the Lettings Agency. In all cases, except where express permission in writing has been granted by the school, the use or movement of school pianos is strictly prohibited. v) Traffic management Cars must not be parked so as to cause an obstruction at the entrance to or exits from the school. The hirer must ensure that access to the school by emergency and service vehicles is not obstructed or delayed. The hirer is liable to pay for any costs incurred in the removal of any obstruction. vi) Cleaning up and waste disposal The hirer shall be responsible for ensuring the cleaning up and safe disposal of any rubbish, unused or waste food, broken glass etc. as a result of the letting. vii) Smoking, drinking, and consumption of illegal drugs The school has a ‘No Smoking Policy’ and this must be adhered to at all times. Breach of the law in relation to no smoking in an enclosed public space is a criminal offence and will be reported for prosecution. No alcohol must be brought or consumed on the school premises without the written consent of the Council. The hirer should note that school premises are not licensed premises and therefore the licensing laws preclude the supply of alcohol at a charge without a Justices’ licence. The supply of alcohol at a charge does not mean just the payment of money over a bar but also applies to the use of tokens or tickets purchased previously and then given in exchange for alcohol. Even the sale of tickets with a notation that the supply of alcohol is part of an inclusive price of admission to a function, such as cheese and wine parties, is a contravention of the law in its strictest interpretation. Illegal drugs must not to be brought onto or consumed on the school premises. viii) Noise The hirer shall ensure that no annoyance or disturbance is caused to the school’s neighbours or to members of the public as a result of its use of the school premises. Causing a statutory nuisance is a breach of the Environmental Protection Act 1990 for which the hirer may be prosecuted.
Schools’ Finance Manual – Appendices
ix) Animals Except in the case of trained guide-dogs for the blind and hearing dogs for the deaf animals are not permitted on the school premises. Such permitted dogs must be kept on a lead and controlled by the person being assisted. The hirer shall ensure that the permitted dog is not a nuisance or is a danger to others. Any such behaviour will not be tolerated and the hirer may be asked to leave the premises. Should this occur the hirer will still be charged the full amount. x) Electrics and electrical equipment No alterations or additions to the electrical installation at schools may be made, without previous consent in writing from the Lettings Agency and any such alteration and additions as may be authorised shall be carried out in accordance with the directions and to the satisfaction of the Council and shall be reinstated forthwith at the expense of the hirer to the Council’s satisfaction. The hirer is responsible for the safe and appropriate use of any equipment, whether the school’s or otherwise, issued for or in connection with the hirer’s activity or activities on the school premises. The school reserves the right to refuse the hirer use of such equipment that it deems may be unsafe or inappropriate. 11. PUBLICITY The hirer shall obtain the approval of the Headteacher for any advertising or publicity material advertising the hirer’s activity or activities before such material is published. No notice may be displayed in the school by the hirer without the prior approval of the Headteacher. 12. THIRD PARTY RIGHTS The parties hereby declare that no term of the Contract is intended by the parties to confer a benefit on any third party (as defined by the Contracts (Rights of Third Parties) Act 1999) nor is intended to be enforceable by any third party. The provisions of the said Act are hereby excluded.
Appendix 34 Schools’ Finance Manual - Appendices
Sample Leased Asset Register School Name and Address
Asset ID (Serial No.)
Date of Acquisition
Supplier Name & Address
Lease End Date
Monthly Lease Payment £ (Excl. VAT)
Asset Value £
Certified Correct by:
Schools’ Finance Manual - Appendices
VAT and Extended Schools
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
CFR Codes for children’s centres and extended schools
1 From 2006/07, seven new CFR codes were created as follows in order to deal with the reporting of the financial activities of extended schools and children’s centres Income codes I16 – Community focused children's centres funding and/or grants The purpose of this code is to capture funding streams and grants that are provided for community focused extended activities. I17 – Community focused children's centres facilities income The purpose of this code is to capture charges for extended school activities that cannot be funded from the delegated budget. Charges for activities that can be funded from the delegated budget will continue to be included within I08. Expenditure codes E31 – Community focused children's centres staff This will include the costs of all staff employed directly by the school for extended activities that cannot be funded from the delegated budget, including apportionment of associated staff costs where appropriate (i.e. all costs that would otherwise fall in E01 - E07). Schools must charge all staff that work wholly or mainly on community focused extended school activity to this code. Where a member of school staff does work on a community focused activity e.g. an admin officer taking bookings for the sports facility along with school duties, then a judgement needs to be made as to whether this is significant or marginal. If the value is significant, then an estimate of the cost of the time spent will be required for inclusion in the budget and on a regular basis, a recharge will need to be made from the relevant code e.g. E05 – Admin and Clerical staff to ensure that the accounts are correct. E32 – Community focused children's centres costs This will include all running costs associated with extended school activities which cannot be funded from the delegated budget including recruitment costs, resources etc. (i.e. all costs that would otherwise fall into codes E08E30). Schools must charge all directly attributable costs to this code, e.g. all purchases of goods and services for the community focused extended school activities. With regard to occupation costs, schools are not required to apportion whole schools costs e.g. gas, electricity, cleaning, grounds, building maintenance to the extended services where only minor sums would be attributed to services after detailed analysis. However where there are significant costs involved and/or significant usage is made by the extended services, schools should estimate costs and charge to the service accordingly. A reasonable basis of apportionment costs should be used e.g. on time, space occupied, sample meter readings over a typical period
Schools’ Finance Manual - Appendices
etc. For any services setting up community-focused facilities with sports pitches/premises it there should be some apportionment of the utilities and cleaning costs of energy as these are likely to be significant. 4 4.1 Balance codes B06 – Extended School balances The purpose of this code is to separate out the balance carried forward for extended services that cannot be funded from the delegated budget and so to be able to monitor whether any deficits exist in either core or extended services. This would be calculated as any extended schools and children’s centres and children’s centres balance brought forward from the previous financial year + I16 + I17 - E31 - E32. Clearly, there is the risk that in attempting to account for the activities accurately, a lot of detailed analysis of the cost apportionments could be considered necessary. This is not necessary as it would be very time consuming and may not be very meaningful. It is only necessary to identify costs that are at a significant level. Inclusion in the Council’s accounts Whilst the completion of the financial data for the CFR return meets the requirements of the DFE for benchmarking purposes, the CFR coding does not provide the information needed for the correct reporting of the expenditure in the Council’s accounts. In particular, the CFR coding of nonemployee expenditure on children’s centre activities, does not provide the level of analysis that is needed for the Council’s accounts. The information shown on the children’s centre return at the end of the year will be loaded into the accounts separately to the school’s ‘education’ expenditure. However for the purposes of the CFR return to the DFE, and the Section 52 Outturn Statement, the information will be reported in the same way as it is held by the school.
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
VAT – Capital and Revenue expenditure at VA schools
Schools’ Finance Manual - Appendices
Schools’ Finance Manual - Appendices
PARENTPAY GUIDANCE: ENFIELD CATERING SERVICES How to collect cash within a “cashless” environment
OVERVIEW This document sums up what needs to be done if a school decides to collect cash for the school meals service. The process outlined will ensure that all individual account balances within the ParentPay system and corresponding meal recorded on the Till and debited from the individual accounts, are accurate. The cash collected by the school MUST NOT BE PAID INTO THE LBE CATERING ACCOUNT (pink slips). If there are any questions about this guidance please contact NRS, ParentPay or the Enfield catering team.
REASONS FOR CASH COLLECTION Examples: Debt carried forward prior to Cashless/ParentPay Current school meal payment method Visitors to school paying for School Meal SUGGESTED PROCESS • Cash collected, for whatever reason, must be banked into the school bank account • Cash collected must be recorded, as part of the schools audit trail, somewhere in ParentPay (see below) • Cash collected must be recorded, as part of the schools audit trail, somewhere in school records. • Catering management team would get termly reports from ParentPay on the amount of cash collected by the school for the reasons above and invoice the school accordingly. PARENTPAY RECORDING Access Pupil Account Select school meal Enter amount to be credited (for cash received by the school) and select the ParentPay payment method – Cash Collection Other. The account for this pupil has now been credited with the cash payment and ParentPay are able to now track that this money has been collected in cash by the school. REMINDER The debt for the last academic year will appear as a separate service (called Last Years School Meal Debt) on the pupils ParentPay account. The cash collected, if any, on this service, is the schools money as an invoice has already been raised by the Catering Service.
Schools’ Finance Manual - Appendices
PARENTPAY GUIDANCE: ENFIELD CATERING SERVICES Debt collection
OVERVIEW Pupil debt was cleared from all ECS Dinner money accounts in ParentPay on Friday 13 August. Debt now sits in a new ParentPay service called School Meal Debt – as and when parents repay these debts, funds will credit to your school’s own bank account via the ParentPay Collection Service. If you have yet to pass your school bank details to ParentPay, please complete and submit our online application form. Reporting on debt cleared
1. Login to ParentPay 2. Click Reports 3. Click Payments 4. Click Advanced options 5. From date – to be advised 6. To date – to be advised 7. Payment method All 8. Click Search
The first part of this report will show you the transactions performed against ECS Dinner money accounts; pupil debtor accounts were credited with the amount of their debt to bring their balance back to £0.00. The second part of this report will show you the transactions performed against your new service, School Meal Debt 2009/2010; each pupil debtor’s account has been listed with the amount of their debt. Should you have any questions or queries then please don’t hesitate to contact our dedicated support team on firstname.lastname@example.org.
Schools’ Finance Manual - Appendices
PARENTPAY GUIDANCE: ENFIELD CATERING SERVICES Errors made at the till
OVERVIEW This document sums up what needs to be done when meals have been recorded incorrectly at the tills and incorrect information can be seen in ParentPay. The process outlined will ensure that all account balances and meal numbers will be accurate. If there are any doubts please contact NRS, ParentPay or the Enfield catering team.
Pupil FMS corrections ONLY OFFICE STAFF MANAGE PUPIL FSM DATA. CATERING STAFF MUST NOT MAKE ADJUSTMENTS AT THE TILL. In ALL cases pupil FSM entitlement must be managed in the school MIS and this data should be sent to ParentPay. If entitlement is correct in ParentPay meals will be charged or not appropriately. You may see what entitlement ParentPay system holds in FSM icon in Pupils>Pupils. You may edit FSM in ParentPay directly but make sure it is changed in your MIS. Click on the Edit icon and change as required and SAVE. It is very important that FSM data is kept up to date as the tills will only allow One FSM entitlement per day. Pupil or staff meal recorded incorrectly ONLY CATERING MANAGERS MAKE ADJUSTMENTS AT THE TILL WHEN MEALS ARE RECORDED INCORRECTLY. OFFICE STAFF MUST NOT MAKE ADJUSTMENTS Occasionally pupils are identified incorrectly when passing through the tills. A meal needs to be removed from person and allocated to another. A new button will be added to the till so this may be done at any time. To do this - ON THE TILL: • Find the pupil and the meal which was wrongly charged a meal • Cancel the meal • Find the pupil who needs to be charged • Use the missing meal button
Schools’ Finance Manual - Appendices
Staff FREE/PAID meal recorded incorrectly ONLY CATERING MANAGERS MAKE ADJUSTMENTS AT THE TILL WHEN STAFF FREE/PAID MEALS ARE RECORDED INCORRECTLY. OFFICE STAFF MUST NOT MAKE ADJUSTMENTS There will be a new process in which the till will prompt for duty meal, Yes or No. This should eliminate any further issues/confusion at the till end. In the event that staff are incorrectly given or not given a free duty meal when passing through the tills, the incorrect meal needs to be removed and a correction to the balance needs to be done. To do this - ON THE TILL: • Find the meal which was wrongly charged a meal • Cancel the meal • Make an account adjustment of the full cost of a staff meal: 1. debit for a free meal given which should be paid 2. credit for a paid meal which should be free
Schools’ Finance Manual - Appendices
MONEY PAID INTO WRONG ACCOUNT
What do I do if a parent pays against the wrong Service? By Service in ParentPay we are referring to the Item for payment that a parent chooses to make payment for, for example your Dinner money service. PAYMENTS MADE FOR DINNER MONEY These need special attention as the payee for your dinner money is Enfield Catering Services, so you can’t just make a simple transfer in ParentPay – this wouldn’t make the necessary transfer of funds between bank accounts. Here’s what you need to do: 1. PARENT MADE THEIR PAYMENT ONLINE Please make a refund back to the payment card and ask the parent to log back in to ParentPay online and make payment against the correct item for payment. The payment was made against the dinner money service but was meant for something else Please note that you will need to seek permission from Enfield Catering Services prior to making a refund for a payment made against the Dinner money Service. Will I need to complete a form? Yes, you will need to complete a form if the refund is from Enfield Catering Services’ bank account i.e. the refunded payment is for Dinner money. This should be saved to your PC (with the name of the Child). When you have completed it, save and then print a copy for yourself and email the Excel spreadsheet to Enfield.Catering.Services@enfield.gov.uk 2. PARENT MADE THEIR PAYMENT USING PAYPOINT PayPoint payments are a little more complicated to sort; there are 2 things you’ll need to do: STEP 1: Debit the Service (item for payment) in ParentPay; you can do this quickly and easily using Payments>Credit/debit; as this is a Journal style entry, make sure you Choose reason: Other on the Credit/debit screen; this will debit their account for the amount you are refunding. We’ve got some useful guidance on using Payments>Credit/debit IMPORTANT STEP 2: Step 2 is extremely important, as this is the part of the process which physically makes the payment back to the parent – either from Enfield Catering Service’s bank account for dinner money, or the school’s own account for trip, activities etc The payment was made against the dinner money service but was meant for something else You will need to download, complete and submit via email, the Enfield Catering Services Refund form. This should be saved to your PC (with the name of the Child). When you have completed it, save and then print a copy for yourself and email the Excel spreadsheet to Enfield.Catering.Services@enfield.gov.uk The payment was made against another trip or activity but was meant for dinner money Where this payment credits your own school bank account, you can proceed by making a refund in your usual way – perhaps by raising a cheque in school or by issuing cash. Finally, ask the parent to make their payment again, this time using the correct ParentPay barcode at their PayPoint store; this is likely to be a PayPoint card for dinner money, or a bar-coded letter you’ve issued if it’s for a trip or activity. TRANSFERRING BETWEEN PUPIL ACCOUNTS FOR THE SAME PARENTPAY SERVICE (ITEM FOR PAYMENT) If a parent makes a payment for the correct service, but the wrong child i.e. Billy’s dinner money when it was Adele’s account in debt, you can transfer this payment yourself, with their permission, using ParentPay and Payments>Credit/debit (Choose reason: Other).
Schools’ Finance Manual - Appendices
The reason there’s no need to make a refund in this instance is because there is no change of Payee (you are moving funds from one child’s dinner money account to another, or one child’s residential trip account to another – there’s no impact on any bank account).
Schools’ Finance Manual - Appendices
REFUND AUTHORITY FORM
Schools’ Finance Manual - Appendices
Transfer Money to a Sibling
Debit the payment from the child that has left: Go to Payments>Credit/debit Choose the service the payment was made to for the pupil that has left using the drop down menu (I’m assuming it’s dinner money!) Choose method: Debit Choose reason: Other Choose group 1: Pupils Choose group 2: select the year group the child that has left was in Tick the “Include leavers” box Click Search Locate the chid on screen and type in the amount of money to debit from their account in the Amount column Scroll down and click Debit Credit the payment to the sibling still in school: Go to Payments>Credit/debit Choose the service the payment was made to for the pupil that has left using the drop down menu (I’m assuming it’s dinner money!) Choose method: Credit Choose reason: Other Choose group 1: Pupils Choose group 2: select the year group the sibling is in Click Search Locate the chid on screen and type in the amount of money to credit to their account in the Amount column, put a note in the Internal comments and Notes to payer boxes (I.e. credit moved from xxx pupil to xxx pupil) Scroll down and click Credit The accounts will then be adjusted.
Schools’ Finance Manual - Appendices
End of year procedures for Enfield Schools
The purpose of this document is to provide schools with a short guide of suggested tasks to be carried out in order to process all leavers, clear debts and prepare classes to ensure that ParentPay is ready for use in September. The key tasks that need to be carried out include:‐ Managing end of term debt FSM Management & FSM allowance Processing refunds for school leavers Closing off all school leaver accounts Processing credits for pupils staying Adding new pupils Ordering new PayPoint cards
Managing end of term debt
Ideally there should be no pupils in debt when the school closes. Use the debt letters in the ParentPay Communication section to help with this. It is worth noting that as in other authorities, the school is deemed as responsible for any debt at the end of the school year. Once ParentPay has cleared the debt over the summer holidays (Friday 12th August), your debt will show as zero, but you will receive an invoice from your local authority for the amount.
Some debt showing in ParentPay may be due to a child’s FSM entitlement that has missing dates. Check in your MIS system that the dates match your FSM notifications and alter and save accordingly. If you use SIMS, then run MIS: Sync these dates will update. If you use another MIS system, please upload the updated pupil file and notify ParentPay by emailing email@example.com that your pupil data is to be refreshed. If the child’s FSM entitlement has run out then the debt is owed by the parent.
Archiving pupils who are leaving the school
You do not have to do anything. As soon as the new academic year begins and your new pupils are uploaded, your leavers will be archived. Payments are always visible by date focus and archived pupils may be reactivated if a specific query is needed. You can see archived pupils data by ticking the ‘show archived pupils’ tick box on most screens.
Pupils leaving school with credit on their ParentPay accounts
Ideally, pupils who are due to finish at the end of the academic year should be encouraged to only have payments made to their accounts to cover the necessary expenditure (meals, school trips etc). If the pupil has a significant amount remaining, there are a few options to transfer this money: • Have they got a sibling at the same school with a ParentPay account to transfer it to? • If not please follow the usual refund process. Refer to the LA refund process and the ParentPay user guide if necessary.
Schools’ Finance Manual - Appendices
Processing credits for pupils staying on at the school
Pupils showing a positive balance at the end of term will carry this forward to next year as it will be a lot less work for you. You need not action anything. The credit is attached to the individual pupil and moves forward with them.
Adding new pupils
These pupils will need uploading to ParentPay as soon as they become “on roll” at the school – this is likely to be on the first day of term, and is the date at which they are allocated their UPN (unique pupil number), which will be with them throughout their school life. Once in ParentPay you can issue your new parents with activation letters.
Encourage more parents to pay online
It is of great benefit to everyone if parents pay online. Already we are seeing a shift away from cash and cheques as more parents feel more at ease using the internet to make payments. In any information going home to parents about paying for school meals, please stress the advantages of online payments. The Username and Password letter template is in the communication section to allow you to reissue them. It’s certainly worth another try!
If school meal prices have changed, then you will need to update the value of FSM allowances (even if you are a non‐cashless school). To update this information you need to: • Go to settings > FSM allowance
Meal types will need editing for the new academic year
You will need to edit your meal types to ensure you charge the correct amount to both Staff and Pupils from the first day of term. To do this you need to do the following; • Go to System settings > Edit meal types • Click on search • This screen will display all your meal types currently on your system Now filter for the following • Choose time > Lunchtime • Choose type > Pupil lunch/Staff lunch • Click on > Manage periods • Go down to the bottom and enter your new period details (like the ones above) and then save Now do the same for your staff paid lunch type and your staff free lunch type etc if you have these. Don’t forget to alter your wording in the dinner money service to reflect any price changes you have made by going to; Services > Services > Search > Find dinner money service and choose ‘edit service’ icon. Alter any prices to reflect your new dinner charges. You may also need to alter your homepage text in System settings > Site date > Body
Schools’ Finance Manual - Appendices
Calendar, add your Staff Training Days and update your Site Data
We will populate your new academic year calendar over the summer holidays, but do check that you have your new academic year dates in and your term dates are correct when you come back to school in September, alter as necessary. You will need to tell ParentPay about your occasional days too: Go to System settings > Calendar > Manage closing days > 2011‐2012 > New > Choose > Enter date > Save and repeat as necessary. Add these days as and when throughout the year.
Need help or got a question?
The complete user manual may well answer your query – the guide can be accessed from your ParentPay home page (you need to be logged in to access the document). Alternatively, you can email our Support team using the online support request form Check the schools support pages. If the information isn’t displayed there, please ask your Local Authority contact to let us know and we’ll work with them to publish documents, FAQs or policies that are of use to you. We’re here to help make your life easier!
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