Date of Meeting: / 13 April 2016
Confidential: / Yes
Agenda Item No:
Classification: Item For:
Strategy / Monitoring & Review / xOperational / x / Approval
Information / Discussion / x
Title: BCET 2016-17 draft budgets
Author: Sarah Murray
Tel: 01274 773208
E-mail:
Context of Report:
To provide the committee with the draft budgets for 2016-17 and 5 year forecasts for Samuel Lister and Appleton Academy and BCET centre for discussion and comment.
Introduction
BCET has to submit a consolidated budget to the EFA by the 31 July 2016 for the following academic year (2016/17).
As in previous years the academies have prepared their own budgets and the BCET central team have met with the Principals and lead finance officer of each academy to gain a greater understanding of the budgets and challenge where necessary prior to review by F&GP committee.
The numbers once approved by F&GP and the BCET Board will be consolidated onto the EFA pro-forma return when it is released for submission by the deadline.
Assumptions used
· Future Funding Formulas
One of the biggest uncertainties the academies and trust are facing in relation to its financial position is the introduction of the National Funding Formula (NFF) from 2017. This has been announced b the Government but there are minimal details currently available. The first consultation is underway at the moment about the factors which will be included in the new NFF and the second part of the consultation process later in the year will assign weightings to these agreed factors.
This means that until this point in time we don’t know how our funding will be calculated and therefore we have continued to based funding for future years on the current formula which we consider to be the best estimate at the moment.
Where possible standard assumptions have been used across BCET, which mainly affect salaries, to ensure we are consistent in our approach. We have used
· Teachers’ salaries increase - 1% per annum.
· Support staff increase – in line with the proposed NJC awards ( not yet formally agreed) and then 1% after that
· Insurance – currently BCET is in a long term agreement with Zurich until 31 August 2017. This means the EFA continues to fund the difference between £25 per pupil of the costs of the RPA and the balance of our policy. Once this runs out the trust will need to make a decision about whether to join the EFA’s RPA or fund the insurance policy themselves. There are a number of considerations to be given in relation to this which will be addressed over the next 12-18 months.
· Where there are known increases in contract values (such as the PFI charge for SLA) these have been included in the numbers. All other costs have remained at the same monetary level and the academies will be expected to continue to find savings and efficiencies rather than increasing their spending amounts.
Trust Consolidated reserves balances
Overall the trust remains in a revenue surplus position over the next 5 years as demonstrated in the table below.
AA£000's / SLA £000's / BSS £000's / BCET £000's / TRUST £000's
Revenue reserves @ 01/09/15 / 978 / 649 / (65) / 175 / 1,737
Forecast 15/16 / (189) / (150) / (55) / 56 / (338)
Transfer / - / - / 121 / (121) / -
16/17 / (155) / (190) / - / (22) / (367)
17/18 / 35 / (273) / - / 19 / (219)
18/19 / 28 / 2 / - / 36 / 66
19/20 / 81 / 158 / - / 53 / 293
780 / 195 / - / 198 / 1,172
When considering capital reserves and future depreciation charges the forecasts are as shown below:
AA *£000's / SLA £000's / BSS £000's / BCET £000's / TRUST £000's
Total reserves @ 01/09/15 / 1,261 / 774 / (64) / 175 / 2,146
Forecast 15/16 / (377) / (207) / (60) / 56 / (587)
Transfer / - / - / 124 / (124) / -
16/17 / (423) / (219) / - / (22) / (664)
17/18 / (155) / (300) / - / 19 / (436)
18/19 / (166) / (9) / - / 36 / (139)
19/20 / (128) / 156 / - / 53 / 81
12 / 195 / - / 194 / 402
*The above table includes significant capital investment by AA over the next 5 years totalling £567k on ICT up to 2019/20 and £452k on other capital projects which will all be looked at in more detail once plans are submitted to F&GP and Board.
The 2 academies within BCET are facing very different challenges and are looked at individually in detail below.
SLA has falling numbers and shortage of reserves whilst AA has increasing numbers and significant levels of reserves to consider how to utilities for greatest impact on the pupils of both the academy and provide support to the wider trust if and when it is required.
BCET
As we have discussed before BCET does not intend to hold significant reserves valances of its own and will adjust the percentage of School Support charge in future years when appropriate to ensure this does not happen.
At the end of 2015/16 the deficit reserves positon of BSS will be transferred across to BCET which at this moment in time is expected to be in the region of £120k. This will be revised for the next F&GP meeting when Period 8 (April) management accounts are completed.
The proposal for 2016/17 is to keep the percentage a 5.5% of GAG income as in 2015/16, excluding Pupil Premium and SEN funding.
Based on the income generated using this percentage for 2016/17 BCET is forecasting a deficit of £22k for 16/17.
Due to the financial position at SLA BCET has agreed to cover SLA’s 50% share of the ASDI Post 16’s salary for a period of 1 year which impacts on BCET’s budget for the year 2016/17. The value of this is £31k. This is a post that was filled by the Trust from the September 2015 at the academies request for which they agreed to pay 50% each. However BCET has the reserves to support SLA for the year and will review this annually going forward.
Salaries account for 87% of all expenditure in 2015/16 but this reduces to 82% from 2016/17. No staffing changes are expected or planned for in these forecasts but other expenditure is expected to increase - the most significant area of this is new Apprenticeship Levy and the provision of clerking and support to the centre.
Apprenticeship levy – new cost £32.5k
From 2017 there will be an apprenticeship levy set at a rate of 0.5% of an employer’s paybill if the paybill is in excess of £3m. As a MAT we are considered one employer therefore fall into this category. The £32.5k included in the forecast is based upon last years total salaries costs of BCET ( £9.424m x 0.5% less £15k allowance = £32.5k) The trust will also be expected to have 2.3% of its headcount on apprenticeships which equates to 6 or 7 apprentices across the trust.
The BCET HR sub committee which meets every 6 weeks is looking at how BCET can fulfil this legal requirement when it comes into force with minimal financial impact on the trust and academies.
Clerking and support – increase in costs to £8k pa
BCET currently does not have a clerk to the Board or any administrative support. This is something that we consider necessary but as yet a solution has not been found. Over the last couple of years we have used different options with varying costs and therefore feel it is appropriate to expect an increase in expenditure in this area over the next 12 months and beyond.
Other costs for BCET – such as internal and external auditors and legal fees are all anticipated to remain relatively static unless the trust grows – when there will be increased contributions to the centre to cover an increase in costs.
SAMUEL LISTER ACADEMY
SLA is in an increasingly difficult financial position because it has been going through a period of falling pupil numbers.
Pupil numbers are expected to be as follows:
Oct-14 / Oct-15 / Oct-16 / Oct-17 / Oct-18YEAR 7 / 138 / 117 / 135 / 140 / 140
YEAR 8 / 85 / 154 / 117 / 135 / 140
YEAR 9 / 92 / 102 / 152 / 117 / 135
YEAR 10 / 139 / 90 / 99 / 152 / 117
YEAR 11 / 140 / 130 / 97 / 99 / 152
YEAR 12 / 60 / 46 / 43 / 50 / 50
YEAR 13 / 56 / 44 / 47 / 50 / 50
TOTAL / 710 / 683 / 690 / 743 / 784
FTE teachers / 40.2 / 43.6 / 46.2 / 44.2 / 44.2
The decrease in pupil numbers is having a significant impact on funding and there are concerns to be addressed. (For info Oct 13 total pupil numbers was 719)
Based on the above numbers the forecasted deficit for 2016/17 is £190k before depreciation and £219k after depreciation. SLA is forecasted to have total reserves brought forward of £538k at the end of 2015/16 so comfortably support the deficit that is predicted for the 2016/17 year but there are concerns over stability and sustainability issues going forward which must be addressed sooner rather than later.
The pupil number predictions for October 2016 are relatively conservative and it is hoped that year 7 intake will be greater on the census day in October 2016 than is shown which will drive the following years funding. Because of the large year group leaving on Year 11 the Year 7 numbers this year need to be as great or more than current Year 11 to ensure income remains at the same level as this 2016/17 and does not fall further.
SLA has benefited from the fact that it does not have a clawback clause in its supplemental funding agreement which means whilst numbers have been falling they have benefited from being funded on greater numbers than actual. However once the trend of falling numbers reverses and numbers start to increase it does mean that SLA won’t be eligible for top up funding so will have to carry the costs of additional teachers, resources for students etc until pupil numbers stabilise. This will put additional pressures on the finances of the academy during this time.
Another factor that is impacting on the costs in the budget in 2016/17 is because of small cohorts in the current year 9 and 10 these year groups are merged but from 2016/17 these year groups will have to be taught separately as the syllabuses are different, thus increasing demands on teaching costs. Smaller year 10 and 11s also leads to increased pressures to keep Post 16 numbers stable. The projections assume Post 16 numbers remain the same over the next 5 years so any reduction in these will also have an impact on future funding.
Future year forecasts indicate that in year deficits are predicted until 2019/20 when taking depreciation into account, and this is without any future capital investment taking place.
The academy does not move into an overall deficit revenue position in the 5 years forecasted but reserves are reduced to less than £10k by the end of 2018/19 which is extremely low.
Staff salaries are 73% of total expenditure (excl Indirect staffing costs) and account for 76% of the total income and therefore any attempt to reduce expenditure is most effectively focused here and it is likely that reductions in staffing will likely have to take place.
The academy has already taken this into consideration and these projections presented to the committee already include a small but significant restructure from 1 September 2017 which is estimated to save in the region of £150k each year from 2017/18. This has not been discussed with the LGB of SLA yet so is still to go through an approval process for it to take place.
Without this taking place the academy would be in a much worse financial deficit position.
Sensitivity analysis
For every Y7-11 student we estimate income of the region of £5.5k.
The income for 2016/17 is already determined so the next census is key to determining future funding. This will take place in October 2016 and will drive income for the 2017/18 academic year, which is currently showing a deficit of £300k after taking into account the restructure mentioned above.
Using 2016/17 indicative numbers showing just a small number of increase or decrease in student numbers:
Year end deficit position for 2017/18 based on Oct 16 numbersFrom budget workings 2017/18 / £(300)k
10 less students in October 2016 / £(355)k / £55k worse off
20 less students in October 2016 / £(410)k / £110k worse off
10 more students in October 2016 / £(245)k / £55k better off
20 more students in October 2016 / £(190)k / £110k better off
There are a lot of unknowns for SLA as it moves to its new building in March 2017 which make it difficult to predict its financial stability.
The site will be much smaller to manage, maintain and clean and the PFI unitary charge will cover a some of these costs. However costs such as utilities are an unknown. It is expected that the building such be more energy efficient and therefore we expect costs will decrease.
However there is now the additional cost of the PFI unitary charge to cover which is calculated to be £49k for the partial year in 2016/17 and £99k for the following full 12 months in 2017/18. This increase with RPI each year going forward.
Currently catering is managed by an external consultant. Appleton are in the process of OJEU advertising to outsource their catering provision and some further investigation will take place about whether this would also be beneficial to SLA moving forwards.