CAPITAL FUNDING
LOCALLY CONTROLLED VOLUNTARY AIDED FUNDING
Commonly referred to as LCVAP, this is one of only two sources of capital funding currently available to voluntary aided (VA) schools. It is principally to enable schools to fund capital projects which are beyond the scope of the Devolved Formula Capital Grant (DFCG).
The LCVAP funding is allocated to each Local Authorityand they are responsible for coordinating the programme of allocations against local needs and priorities.
Consultation takes place at Diocesan Liaison (Anglican and Catholic) meetings or via email with the relevant Local Authorities throughout the year and specifically to discuss the new financial year’s LCVAP bids during February/March.
In recent years the funding has been nominal in relation to demand. It is therefore important that schools have an up to date asset management plan.
The Asset Management Plan (AMP) covers issues of the state of condition of the building, the ability to accommodate the numbers of pupils on roll and projected figures, and the suitability of the teaching and other facilities to deliver the curriculum.
The priorities in the AMP in these areas should be reflected in the Building Development Plan and/or Business (School) Development Plan which should also reflect the vision of the Governing Body for the school.
If the AMP identifies any priority 1 (i.e. year one) and Grade D condition (urgent work i.e. imminent failure), or the suitability survey, fire safety audit, or access plans identify needs, the Diocese should be notified to enable these to be considered for LCVAP funding.
DEVOLVED FORMULA CAPITAL GRANT
Voluntary aided schools are allocated DFCG on a per pupil formula. Under the Education and Inspections Act 2006, VA schools have two options on how they receive their capital grant allocation. This can be paid directly to them, or paid to the Diocese who hold these funds in a separate account.
DFCG can only be used for capital expenditure (refer CIPFA Code of Practice on Local Authority accounting in the UK 2011/12 (The Code)). What is and is not classed as capital or revenue in accordance with the CIPFA will require some interpretation and the Local Authority will be able to help.
Broadly, DFCG can be used for:
- Long term improvements to the school estate;
- Structural improvements to the buildings;
- The purchase if capital equipment, including ICT e.g. desk top computers, laptops, interactive whiteboards, printers etc.;
- Fixtures and fittings.
DFCG cannot be used for:
- Routine repairs, redecoration or maintenance included in delegated schools budgets;
- Purchase of small-value books, and training materials and services;
- Hire of accommodation (unless this can be legitimately capitalised as part of building costs);
- Service contracts, and any Private Finance Initiative (or similar) charges, which are revenue costs;
- Operating leases where risk stays with the leasing company e.g. a photocopier maintained by the lessor. Rental costs associated with this is an expense and cannot be treated as a capital purchase under DFCG;
- Expenditure on small value capital items where the amount falls below the Local Authority minimum capital spend threshold (De Minimis) which is generally set at £2,000 as per EFA capital funding guidance. Any expenditure of this type counts as recurrent expenditure. However, if a number of items of the same classification can be procured at the same time and the total value exceeds to threshold, this would be counted as capital.
The decision about how much DFCG is used for either buildings, external areas, or ICT, should be based on the schools’ own priorities and circumstances.
DFCG allocation can be rolled forward to enable a large project to be funded. A school can roll forward a year’s allocation for a maximum of 3 years. In exceptional circumstances and by written agreement of the Education Funding Agency if a large and specific project is being funded, the roll forward period may be extended to four years, although approval is not guaranteed.
If the allocation is not expended within three years, and permission from the EFA has not been sought to roll it forward to a fourth year, the school will lose any remaining allocation from year one.
VALUE ADDED TAX
VAT is payable on all capital works in Voluntary Aided School unless zero rated under HM Revenue Tax rules for designated types of work.
Formula capital allocations for VA schools are enhanced to account for VAT.
The Governing body is not able to reclaim VAT on capital items purchased through their delegated budget, neither can they claim reimbursement from DFC or LCVAP for items purchased through their delegated budget on which they have claimed back VAT through the Local Authority. The latter would be committing a fraudulent act.
GOVERNORS’ 10% LIABILITY FOR CAPITAL FUNDING
Governors must be able to meet their financial obligations beforethey commit to undertake a capital project. Please note that Ely Diocesan Board of Education does not provide loans to schools.
The governing body of a VA school has a statutory liability to pay 10% on any capital works using LCVAP or DFCG funding and will be invoiced for the full amount of its liability based on the gross grant aided project cost.
When LCVAP funding for a project is agreed by the Local Authority, Ely Diocese Department of Education will send the school a statement of the project, the costs, and the 10% liability. This statement is signed by the Head Teacher and the Chair of Governors to confirm that they accept liability for the 10% and that funds are available.
Without the signed form, a project will not proceed and the funding will be reallocated to address another priority in another school. Ely Diocesan Board of Education will not be able to subsidise schools who cannot afford to pay the 10%.
Please note that 5% will become due at contract commencement/start of works on site, and the remaining 5% will be payable at issue of Practical Completion Certificate (notification that works are completed), and will be adjusted to reflect the agreed final project costs (including professional and other fees).
Governors must also raise 10% of their DFCG allocation each year e.g. £1,000 for a £10,000 allocation.
The Governors’ are also liable for 100% of any non-grant expenditure.
Table 1 below illustrates how DFCG/LCVAP project funding is applied when the grant funding covers the project costs:
% / Income in cash terms£ / Expenditure
£
Actual project cost (including fees & VAT) £100,000 / 100,000
Source of funding (DFCG/LCVAP) / 90 / 90,000
Governors’ liability (balance of grant aided costs) / 10 / 10,000
£100,000 / £100,000
Table 2 below illustrates that where grant funding does not fully cover the project costs the Governors’ are liable for the balance
% / Income in cash terms£ / Expenditure
£
Actual project cost (including fees & VAT) £120,000 / 120,000
Source of funding (DFCG/LCVAP) / 90 / 90,000
Governors’ liability (balance of grant aided costs) / 10 / 10,000
Governors’ liability for non-grant aided costs / 20,000
£120,000 / £120,000
The VA Governing body are responsible for ensuring that all statutory and other requirements are complied with regarding the servicing, testing, and maintenance of equipment within the school, and fire risk assessments, asbestos plan, and access audits remain current and any recommendations therein are addressed.
Most schools have contracts with independent property management companies who manage these on their behalf. The success and thoroughness of any such service is dependent on schools notifying their provider of their needs and providing them with a comprehensive list of all contracts etc., that need to be managed.
The Diocesan Education Department has a central record of schools testing and inspection reports. The purpose of this is to provide landlord assurance that schools are managing the property well and for the landlord to consider any risk implications.
It remains the responsibility of the governing body to ensure that the service provided complies with statutory and other requirements. The property advisor and/or caretaker for the school should identify when capital replacement works are required in good time, to enable the Governors to generate and/or submit bids for capital funding.
Capital Project Process
The flow diagram below illustrates the capital project process from identification of a need through to bid application:
Definitions used in the flow diagram
Condition– The most recent condition survey data of the school which should be based on the Department for Education (DfE) Asset Management Section 3: Condition Assessment guidelines published in 2000. The guidelines recommend that the condition is split into 4 condition grades and 4 priority gradings:
Grade A – Good. Performing as intended and operating efficiently.
Grade B – Satisfactory. Performing as intended but exhibiting minor deterioration.
Grade C – Poor. Exhibiting major defects and/or not operating as intended.
Grade D – Bad. Life expired and/or serious risk of imminent failure.
Priority 1 – Urgent work (in first year) that will prevent immediate closure of premises and/or address an immediate high risk to health and safety of occupants and/or remedy a serious breach of legislation.
Priority 2 – Essential work required within two years that will prevent serious deterioration of the fabric or services and/or address a medium risk to the health and safety of occupants and/or remedy a less serious breach of legislation.
Priority 3 – Desirable work required within three to five years that will prevent deterioration of the fabric or services and/or address a low risk to the health and safety of occupants and/or remedy a minor breach of legislation.
Priority 4 – Long term work required outside the five year planning period that will prevent deterioration of the fabric or services.
A building element e.g. windows, doors, drains, roof etc., may be graded as condition D, but it does not necessarily require it to be addressed in year one and vice versa. The survey should identify both condition grade and the priority year recommendation for remediation.
Suitability – The most recent suitability survey data of the school which should be based on the DfEAsset Management Section 4: Suitability Assessments guidelines published 2000. This relates to the fitness for purpose when compared to the design guides (Building Bulletins).
Access – The most recent access audit for the school to identify the adaptations required to ensure compliance with the Equalities, Diversity, and Inclusion Act and DfE design guidelines.
Fire Risk Assessment – The most recent fire risk assessment for the school to identify actions needed to comply with the Regulatory Reform (Fire Safety) Order and DfE design guidelines.
Asbestos Plan – The most recent asbestos plan (note asbestos may be present in schools built 2000 or before) to manage any asbestos in compliance with the Asbestos Act 2012 and DfE design guidelines.
Diagram 1 (simplified)
- Preparation Stage (the ideas stageknown as Milestone 1)
Continued on next page
The guidance above should be read in conjunction with the Capital Funding Blue Book Guidance published by the Department for Education.
The DfE capital funding guidance section 6 ‘Building Approval’ notes that approval of the ‘Department’ will be required to carry out the work. The Department in this instance refers to the Education Funding Agency.
Contrary to this, you will note from our guidance above and in the Service Level Agreements, that the Diocesan Education Team will manage this process including liaison with the other partners (Catholic and other Dioceses and Local Authority) to agree prioritisation of projects and send all necessary notifications to the EFA as required on your behalf, if your project is approved for capital funding.
Voluntary Controlled Schools
Arrangements for Capital funding for Voluntary Controlled Schools is through the Local Authority.
Devolved Formula Capital Grant is calculated in the same way for all schools (VA, VC, Academies etc.).
Academies
Academies receive DFCG directly from the Education Funding Agency (EFA).
Academies can bid for capital funding (refer separate guidance). Academies do not have a 10% liability even if the Academy was a former VA school.
Education Department/PropHB/capital 1 | Page