The Early Years

Single Funding Formula

(EYSFF)

CONTENTS

1BACKGROUND

2CORE PRINCIPALS

3APPROACH

4BASIC STRUCTURE OF THE FORMULA

5BASE RATE

6FUNDING SUPPLEMENTS

7FINANCIAL IMPACT

8TRANSITIONAL FUNDING

9INDICATIVE BUDGETS

10HEADCOUNT

11REVIEW

APPENDICES

1EYSFF RATES

2FUNDING ARRANGEMENTS

1BACKGROUND

1.1In June 2007 the Government announced proposals to extend the free entitlement to early education for eligible three and four year olds. As from September 2010 the free entitlement increased from 12.5 hours per week to 15 hours per week for 38 weeks a year.

1.2To support the extension of the free entitlement the Government also announced proposals requiring Local Authorities to design and implement a local single funding formula. The Governments initial deadline for implementation of 1 April 2010 has since been delayed to 1 April 2011.

1.3As well as supporting the extension to the free entitlement the government also wanted to address the inconsistencies that exist in funding providers of early year’s education by improving fairness and transparency in the way that funding is allocated.

1.4The EYSFF on the Isle of Wight has been developed in line with the legislation and guidance issued by the Government. The practice guidance document issued in July 2009 titled “Implementing the Early Years Single Funding Formula”is available for review and can be downloaded via the Department for Education website.

2CORE PRINCIPALS

2.1The EYSFF Government guidance sets out a number of underpinning core principals that local authorities must observe in the development and implementation of a local formula.The following table details how the main core principals, set out in the guidance, have been applied in the development of the formula:

Principles / Application
Clear and Transparent / The design of the formula is clear, with the structure based on a core unit of funding per hour per child and additional supplements. The calculation of the core base rate and the addition of supplements, etc are explained in this document.
Support the narrowing of achievement gaps and recognise additional costs associated with children from deprived backgrounds / The design of the formula includes a deprivation supplement as required, by which incremental funding will be allocated to settings with children from deprived backgrounds. The rationale being that increased funding is required in order to improve the attainment / outcomes for such children.
Incentivise improvements in the quality of provision and recognise the ongoing costs associated with quality / Providers agreed that the formula should contain a supplement to support & promote quality. However, it has not been possible to devise a fair and acceptable means for assessing quality within the time available so it was decided to postpone the implementation of a quality supplement.
Preserve diversity and choice in the market / The formula has been devised to allocate funding in a consistent way to all settings, thereby preserving an existing diverse range of providers. Also, the transitional arrangements proposed should ensure that there is diversity and choice in the market place.
Facilitate greater flexibility of provision so that parents have greater choice in how they use the free entitlement / In order to incentivise the implementation of the Flexible Free Entitlement in line with the Local Code of Practice the formula has been designed to include a flexibility supplement.
Settings should be funded on the basis of participation, not places or similar factors. Participation must be counted on a termly basis. / Core funding will be allocated to settings on the basis of participation based on a termly count.

3APPROACH

3.1The local approach to developing and implementing the EYSFF is in line with the Governments guidance as follows:

  • Analyse cost data from providers – completed Nov/Dec 2009.
  • Design formula – completed Jun 2010 after consultation with providers.
  • Formula modelling – completed Jul/Aug 2010.
  • Put forward formula proposals – Completed Oct – Dec 2010.
  • Implement EYSFF and issue indicative budgets – Apr 2011

3.2At a meeting of early year’s providers in May 2010 it was agreed that providers would be part of the continued consultation process as an Island wide group rather than set up a smaller representative group. The review and consultation has also been conducted through the Schools Forum, as advised in the Governments practice guidance.

4.BASIC STRUCTURE OF THE FORMULA

4.1After consultation with providers the formula was designed, as below, which is in line with the Governments guidance and follows that adopted by most other local authorities. It is based on one base rate for all sectors with relatively few additional supplements:

Basic hourly rate + hourly supplements x number of hours of participation

5BASE RATE

5.1The core funding base rate is based on a typical cost model, with a rationale that takes account of the following types of expenditure:

  • Staffing
  • Premises Costs
  • Other (eg: equipment & insurance etc)

5.2 The majority of providers indicated a preference to incorporate one common core base rate into the formula to be applied across all sectors. However, separate base rate models were calculated for each sector by utilising the cost data gathered through the cost survey. In order to ensure that providers do not receive a lower level of funding compared to their present funding, it is proposed that the base rate remain the same as the current rate (£3.54). This would, in effect, result in the majority of providers receiving a higher level of overall funding once any supplementary increments have been added. The maintained sector predominately incurs higher salary costs hence the increased calculated base rate (see 7.1 & 8.1 for relevant implications). The table below illustrates the base rates calculated using providers cost data:

Sector / Calculated Model Base Rate (£ per hr)
(For info and ARE NOT rates to be paid)
Maintained Nursery / £4.33
Private / £3.12
Voluntary / £3.39

*Note: A rate has not been calculated for the Independent sector due to only one provision operating and returning exceptionally high operating costs on the conducted cost survey.

6 FUNDING SUPPLEMENTS

6.1In addition to the base rate each setting will be eligible for additional funding reflecting the differences between settings and to incentivise improving practice. These funding supplements are calculated at an hourly rate and generate additional funding on top of the base rate.

6.2Following initial consultation early year’s providers agreed the inclusion of two funding supplements for:

  • Deprivation
  • Flexibility

6.3As mentioned at 2.1, providers did acknowledge that the funding formula should contain a supplement to support and promote the quality of provision provided. Providers also agreed that implementation of a quality supplement be delayed until a fair and robust means of judging quality be established.

Deprivation

6.4The governments practice guidance state that the EYSFF must include a mandatory supplement for deprivation. Four incremental bands have been established to measure the level of deprivation associated with children on roll at each individual setting. The post code of each child attending at the annual census date will be used and measured against current data held at County Hall. A combination of IMD and IDACI data will be used to identify children living in the top 40% most deprived super output areas (SOAs). Band one will reflect no or a very minimal amount of deprivation and there will not be any incremental payment awarded. The next three bands will represent a percentage proportion amount of children deemed to be from a deprived area who are attending the setting. Initial formula study and current deprivation data provisionally indicates that all ofthe provisions operating on the Isle of Wight will be eligible for payment of a deprivation supplement. The following table details the deprivation bands:

Band / Criteria
One (None) / Less than 5% of children in bottom 3 SOA groupings
Two (Low) / 5% - 24% of children in bottom 3 SOA groupings
Three (Medium) / 25% - 49% of children in bottom 3 SOA groupings
Four (High) / Over 49% of children in bottom 3 SOA groupings

Flexibility

6.5The Free Flexible Entitlement (FFE) was introduced in September 2010 with an increase to 15 hours per week of nursery education for all eligible three and four year olds.The introduction of the FFE means that the free entitlement must be offered to parents in a way that meets their needs and gives them real choice about how they access the provision. It was therefore agreed that the implementation and delivery of the FFE would be a fair way of measuring and incentivising flexibility.

6.6The inclusion of a flexibility supplement is also designed to support and incentivise settings with their approach and ability in being able to offer more flexible patterns of delivery of the extended free entitlement to parents.Four bandings have been established to reflect the way in which individual provisions are offering parents access to the free entitlement. The following table details the flexibility banding and the relevant criteria:

Banding / Criteria
Band One / The provision is offering the minimal amount of flexibility within the national framework for delivery. The provision does not offer any of the guaranteed models of delivery as defined in the Code of Practice.
Band Two / Parents are offered one of the guaranteed models of delivery eg 3x5hrs or 5x3hrs over a week plus at least one other set pattern of delivery as per parental demand.
Band Three / Parents are offered both guaranteed models of delivery ie 3x5hrs & 5x3hrs plus other patterns of delivery to meet parental demand.
Band Four / Three or more flexible models of delivery are available within operating times. Both 3x5hrs and 5x3hrs models are offered. Parents may choose to spread their entitlement over more than 38 weeks of the year up to a maximum of 50 weeks (either independently at the setting or in partnership with another provision).

6.7The LA will carry out regular checks to verify that individual settings are delivering the free entitlement in line with the LA’s Code of Practice.

7FINANCIAL IMPACT

7.1Whilst the introduction of the new formula is likely to lead to an increased hourly rate for most PVI settings compared with previous rates, the move from place-led funding to participation based funding will have an adverse impact for the maintained nursery sector, particularly where occupancy levels have been low. Implementation of the new EYSFF will therefore inevitably result in financial losses or gains for individual settings.

7.2A minimum funding rate has beenincorporated into the EYSFF budget to be paid to the settings that qualify for little or no supplementary payments.

8TRANSITIONAL FUNDING

8.1The practice guidance states that it is entirely appropriate for LA’s to build into their local formulas a level of funding protection as a means of easing the transition of those individual provisions that might experience a reduction in their new funding levels. It has therefore been necessary to incorporate an appropriate transitional funding element for the maintained sector.

9INDICATIVE BUDGETS

9.1Each individual setting will receive an indicative budget statement before the commencement of each financial year. The statement will indicate the proposed level of funding to be allocated to each provision for that financial year, further broken down into funding periods. The statement will confirm the funding bands for each setting which will further determine the rate per hour the Local Authority will pay the provision for providing the free entitlement to parents. Further details can be found at Appendix 2.

10HEADCOUNT

10.1In line with government guidance, EYSFF indicative budgets have to be re-determined in year to reflect actual participation. Providers will receive a payment at the start of each funding period reflective of the correspondingfunding period amount as detailed on the annual indicative budget statement. Actual head count data based on participation will then be collected once each funding period and used to adjust budgets to reflect actual attended hours per funding period. Further details can be found at Appendix 2.

11REVIEW

11.1The EYSFF will be reviewed on an annual basis with full consultation from providers. A further cost survey analysis will also be undertaken in order to review and assess relevant provider costs and ensure the structure of the EYSFF remains in line with current market cost trends. The EYSFF will further be reviewed to ensure that the formula itself reflects and meets the needs of current demands within the early year’s arena.

APPENDIX 1 - EYSFF RATES

Base Rate (All providers) - £3.54

Deprivation Supplement: (Please refer to para 6.4 for criteria for each band)

Band / One / Two / Three / Four
Rate (£per hr) / 0.00 / 0.08 / 0.12 / 0.16

Flexibility Supplement: (Please refer to para 6.6 for criteria for each band)

Band / One / Two / Three / Four
Rate (£per hr) / 0.00 / 0.07 / 0.12 / 0.18

Minimum Funding Rate - £3.70

APPENDIX 2 – FUNDING ARRANGEMENTS

  1. As stated in para 9.1 each individual setting will receive an indicative budget statement before the commencement of each financial year. This statement will provide a detailed break-down of the EYSFF hourly rate to be paid to that provision for the duration of the financial year. The statement will also include an estimate of hours, per funding period, and subsequently an estimated budget to be paid for each funding period to that provision.
  1. The first payment to be received by each setting at the start of the financial year will be for the funding period 1 April – 31 August (Summer) and will be for the amount as stated on the Indicative Budget Statement.
  1. Head count claim forms will be sent out to each provider at the start of each funding period. Providers will have the duration of the first half term of that funding period (except during the funding period 1 Jan – 31 Mar) to complete and return the forms to County Hall (Deadline dates for each funding period will be communicated to providers at the start of the Financial Year).
  1. The head count claim forms will be processed for each provision and the number of claimed eligible hours for each setting will be compared with the number of estimated hours, for that funding period, as stated on the Indicative Budget Statement. Any budget balance due (+ or -) will be included with the payment for the next funding period (except for the Spring funding period).
  1. Payments to providers at the start of the Autumn funding period (1 Sep – 31 Dec) and the Spring funding period (1 Jan – 31 Mar) will be made up of the amount as stated on the Indicative Budget Statement and any balance due from the previous funding period (as stated above). Providers will be issued with separate Budget Statements for these two funding periods reflecting any necessary adjustments.
  1. Headcount Claim forms for the Spring funding period will be required to be completed and returned to County Hall earlier than allowed for the other two funding periods (date to be confirmed). This is necessary in order to process the claim forms and ensure any budget balance payments to providers are completed before the end of the Financial Year.