SCHOOLS ASSET LOAN SCHEME

Transcription

1 SCHOOLS ASSET LOAN SCHEME 1. DETAILS OF THE SCHEME 1.1 Purpose of the Schools Asset Loan Scheme The Authority will make a loan for any purpose it agrees is in the interests of the school, provided it is for the enhancement, replacement or provision of an asset, resources or another item of expenditure that will have a useful economic life or provide economic benefits to the school at least as great as the duration of the loan. 1.2 Loan Duration Minimum: 1 year i.e. a 12 month period from the commencement of the loan Maximum: 4 years from the commencement of the loan in keeping with the Local Authority s Medium Term Financial Planning period. 1.3 Amount of Loan Minimum: Under normal circumstances a loan would not be expected to be required for expenditure less than 10k, or in the case of a Nursery school less than 5k In exceptional circumstances where a loan below these thresholds is required additional evidence will need to be provided regarding the unaffordability of the desired expenditure within the school s own budget. Maximum: This will be calculated as 1% of the current school budget share * number of years of the loan i.e. 4% will be the maximum loan subject to the following thresholds Primary/Nursery threshold lower of 4% or 40k Secondary/Special threshold lower of 4% or 100k 1.4 Interest. Interest will be charged for the period of the loan at the current base rate. There will be an additional administration charge of up to 1% of the loan levied at the discretion of the Chief Finance Officer.

2 To safeguard against the impact of high interest rates an additional threshold will be placed on the maximum loan to ensure that annual repayments can be no more than 1.5% of the schools budget share 1.5 Repayment Equal annual installments will be calculated based on the duration of the loan and these will be pro-rated for part-year effects. The minimum loan of 1 year would therefore be repaid over 2 financial periods, a 2 year loan over 3 financial periods etc. A schedule of repayment will be provided to the schools once a loan has been approved. The annual amounts from the schedule will be expected to be included in the school s Medium Term Financial Plan and will be deducted in the relevant financial period as per the following processes: Non Cheque book schools. Annual repayment will be made by deducting the principal and interest from the schools budget via a journal transfer of which the Headteacher will be notified in writing. This process will guarantee payments are made to the Authority and is administratively simple. Cheque book schools Repayment will be made by deducting the principal and interest from the quarterly cash allocation in equal installments. This will guarantee payments are actually made to the Authority and is administratively simple. 1.6 Early Repayment A school may repay the loan and any accrued interest in full at any time. A fee equivalent to 3 months interest would also be charged. A written request to repay the loan must be submitted to the Chief Finance Officer to ask for a quote for final settlement. This quote will also provide detail regarding how the loan will be repaid.

3 After a Final Settlement quote has been provided a formal request will be required from the school in accordance with expenditure authorisation limits detailed within the Local Authorities Fair Funding Scheme in order for the repayment to be actioned. 1.7 Applying for a Loan The Authority will require evidence from the Governing Body that the school is able to meet the repayments, that the scheme is in the interests of the school, and that the loan is actually spent on the purpose intended. Schools will be required to complete a loan application form as detailed in Appendix 1 (i) and (ii). This provides a number of assurances that the school is not overextending itself and that the agreement with the Authority is actually fulfilled. In addition to the above the school must also provide a projected budget for the duration of the loan agreement to ensure that future loan repayments can be met. Unless otherwise advised by the Chief Finance Officer and/or the Chief Education Officer this should be based on a stand still budget adjusted to reflect changes in pupil numbers. 1.8 Approval A request for a loan must be made by resolution of the full Governing Body, and endorsed by the Chief Education Officer and the Chief Finance Officer. Payment of the loan will be made by the Chief Finance Officer provided all the above criteria have been met. Applications are to be submitted in the first instance to the Chief Education Officer. It must also be stressed that when entering into the loan agreement the school will be entering into a fixed contract and will have to meet its loan repayments. It should be noted that if a school does run into financial difficulties the Authority has the right to suspend a school s right to a delegated budget if the provisions of the school financing scheme have been substantially breached, or the budget share has not been managed satisfactorily.

4 1.9 Funding of the Loan Scheme The Schools Loan Scheme is funded through use of the total aggregated earmarked schools balances. The maximum that will be set against these balances is 15% or 300k whichever is the lower. This scheme is linked to the Licensed Deficit scheme also financed by the earmarked schools balances and the combined total loans made available for these schemes is to be no more than 1/3 i.e % In the case of urgent action being required these thresholds can be revised at the direction of the Chief Finance Officer Additional Loans A school may wish to undertake more than one project at a time that requires access to a loan under this scheme. In this case a single loan application can be made for the relevant projects and one total loan amount will cover both projects. See Application Form Appendix 1 Further a separate loan may be required during the repayment period of tan existing loan. This will be allowed subject to the loan application meeting the requirements of this scheme and the total amount loaned across each of an individual school s loan schemes not exceeding the maximum outlined in 1.2 i.e. 4% of the current school s budget share 1.11 Monitoring and Evaluation A report be presented annually to Members and the Schools Scrutiny Committee detailing the number, level and purpose of loans granted, together with the perceived benefits.

5 2. GUIDANCE NOTES FOR HEADTEACHERS AND GOVERNORS 2.1 What is the Schools Asset Loan Scheme? A facility offering schools the opportunity to spend on capital assets or other items of significant expense whilst spreading the payments over the next few years. Until now schools have had to be able to afford such items as one-off items or to earmark funding in their surplus balances which are now subject to greater local authority scrutiny. The risk element is that you would be committing approximately 1% of your budget for between 1 to 4 years. 2.2 What type of Schemes are suitable? A capital asset is any equipment, new building work, or substantial improvement to existing buildings that costs in excess of 10k The scheme is suited for IT purposes, the smaller scale projects such as office or classroom improvements or extensions, and fencing and playground resurfacing etc. The scheme may also be valuable to have additional work or enhance a LA landlord programme. You may wish to use this scheme for partnership funding with the LA on the smaller scale minor works type schemes. However schools may also wish to spend a considerable sum on updating curriculum resources in order to secure school improvement or they could be required to finance redundancy costs for a significant staff restructuring exercise. A key rule of thumb for consideration is that the economic benefit of the loan must be at least equal to the period of the loan 2.3 What types of Scheme may not be acceptable? It is unlikely that approval will be given in the following circumstances: Schemes where the expected useful economic life / economic benefit of the loan purchase is less than the life of the agreement with the LA Schemes designed to assist the school to balance its budget or to support unsustainable annual expenditure such as staff costs or other on-going costs

6 If the LA has significant reservations about a school s ability to be able to afford the repayments. For income generation schemes (because they carry a much larger element of risk) Where schemes impact on the LA s statutory responsibilities regarding the planning and supply of school places, e.g. schemes to significantly expand a school or change the character of its admissions (because there are likely to be significant implications for the LA and other schools) 2.4 How do I get the money? Money will be credited to the school as soon as possible after copy application forms with all the required appendices and Governing Body Minutes have been sent to the LA. The LA will also require, in due course, copies of the invoices so that we can confirm that the expenditure has been properly incurred on the agreed project. 2.5 What is in the small print? Although the scheme is available for just about any project that is within the legal powers of governors, the LA cannot be seen to be endorsing any improper behavior. If it transpires that any of the detailed provisions have been breached, for example money has been spent on something else, or if a school has not followed its purchasing policies or normal financial regulations, the Schools Loan Scheme agreement will be terminated and the school will be charged in full any money owed to the LA. Appendix 1 APPLICATION FORM TO ACCESS THE SCHOOL S ASSET LOAN SCHEME FOR LA SCHOOLS

7 School Name Amount of Loan No.of Yrs Projected Start Date Completion Date Please note: The maximum period is 4 years Brief Description of Proposal Summary of Benefits to the School (inc assessment of useful economic life/economic benefits where appropriate) Please attach the relevant extract from the School Development Plan & other appropriate documents Date and Minute of Resolution of Full Governing Body Appendix 1 continued Please complete the following financial estimates of the project(s) EXPENDITURE Project 1 Project 2 Project 3 TOTAL

8 Approved: Gross Exp FUNDING School s Budget Local Authority* WG Grants* Other External Sources* Other Sources* Gross Funding Surplus / (Deficit) LOAN Required *please provide further details in support of any funding other than use of the School s budget as appendices I certify that all contracts and expenditure will be in accordance with the school s and/or the LA s purchasing policy, and that I have read and understood the terms and conditions of the School s Asset Loan Scheme and agree to make payments according to those terms and conditions. Head Teacher Date. Chair of Governors...Date. Chief Education Officer. Chief Finance Officer. Date... Date...