Briefing Note on Leasing/Rental in Schools
Can I enter into a leaseor rental agreement?If you are not purchasing an item outright you may be entering into a financing arrangement.This must be agreed with the Council’s Chief Financial Officer (in legal terms the S151 Officer) in advance as there are rules governing the type of lease or rental agreement a school can enter into.
Does this apply to a Foundation school?
Yes, the rules apply to all maintained schools in Milton Keynes; community, VA, VC and foundation schools. These rules are not applicable to academies.
Where do I find the rules?
Scheme for Financing Schools:
Further more detailed guidance is available in Section 7 of the Local Guidance on the Scheme for Financing Schools:
What are the principles behind the rules?
The rules are to ensure that the school does not enterinto a finance lease which can constitute external borrowing and therefore cannot be legally entered into without the approval of the Secretary of State.
Schools form part of the Council’s accounts, so these processes have been put in place to ensure that the Council has all the relevant information to include in the Statement of Accounts.
Are the rules mandatory?
Yes the rules are mandatory.
If the Council identifies that schools have entered into finance leases, the Council may instruct the school to take appropriate action, at the school’s own cost, in respect of these leases e.g. if a lease has to be renegotiated. If a school has not followed the correct approval process, the Council may regard this as evidence of weak financial management, justifying further action such as issuing a Notice of Concern.
The LA may suspend a school’s right to a delegated budget if the provisions within the Scheme for Financing Schools are substantially or persistently breached.
What are the key points?
A summary of the key points are as follows. Please see the actual guidance for the full detail.
Are you planning on procuring any of the following types of items?
IT equipment such as computers, laptops, white boards, projectors, servers, photocopiers
Vehicles such as minibuses, ride on lawnmowers or any other large or expensive specialised equipment.
If you are not purchasing these items outright you may be entering into a credit arrangement.
To ensure compliance with the Government’s controls it is necessary that before an agreement is entered into the Councilmust be satisfied that schools are not entering into a finance lease. All credit arrangements must be approved in advance by the Chief Financial Officer.
The following details should be provided on the lease/rental agreement templatetitled New Lease Assessment sheet which can be found on the LMS websiteon the attached link:
and emailed to the Schools Finance inboxbefore you enter into the agreement to obtain the appropriate approval:
- Name of lessor/rental company and contact details
- Nature of lease/rental agreement – what goods and services are provided
- Length of lease/rental agreement – start and end date
- Frequency and value of payments (excluding any maintenance charges)
- Capital cost of equipment
- Residual Value of equipment
To gain approval for entering such an agreement you should forward a completed assessment sheet to the Schools Finance Team as soon as possible. The Schools Finance team will forward the scheme to the Capital team (to ensure that the agreement can properly be classified as capital expenditure and financed through the arrangement. Once both teams are satisfied with the agreement it will be forwarded to the Chief Financial Officer or his representative within Strategic Finance for approval.
The approval process should be completed within 10 working days. However, should an agreement turn out to be a finance lease Secretary of State approval will take longer than 10 working days.
If you are entering into an arrangement through the School Buyers Network, you will not be required to forward the information to seek approval as this will be carried out as part of the School Buyers Network process.
The Council is required to include in its annual statement of accounts the value of all its operating leases, including those entered into by schools.
Schools will be asked to confirm the details (as set out above) of any credit agreements they have entered into.
Lease flow diagram: The link to the diagram is titled New Lease Decision Tree which can be found on the LMS website on the attached link.
Where can I get more information and guidance?
Please contact the Schools Finance Team in the first instance on 01908 253620.
Schools that are part of the Schools Buyers’ Network should contact the Brokerage team on 01908 254516 or by e-mail: .