Safe Children, Supported Families, Transformed Lives

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1 MEETING: Schools Forum MEETING DATE: 21 January 2015 SUBJECT: Early Years Funding Formula Dedicated School Grant AGENDA ITEM No. 5 LEAD/AUTHOR: Nicola Raines CONTACT FOR FURTHER Nicola Raines INFORMATION: For Information? For Action? For Discussion? For Decision 1. WHAT IS THIS REPORT ABOUT? This report seeks approval for the base rate and supplements of the Early Years Single Funding Formula (EYSFF) for the year 2015/16 and the budget for early education for two, three and four year olds from the early years block of the Dedicated Schools Grant (DSG). The report includes details of the Early Years Pupil Premium (EYPP) allocation and its impact on the budget allocation. As a result of the introduction of EYPP a review of the criteria for the deprivation supplement has been undertaken and proposals are outlined in the report for discussion and agreement. The report updates members on financial projections and take-up to date of funded early education places for two, three and four year olds in the current financial year (2014/15). 2. WHY IS THIS IMPORTANT? 2.1 Two-year old funding Two-year old funding became statutory from 1 September 2013 (396 places) for children eligible for free school meals (FSM) and where a child is looked after by the Local Authority. Since September 2014, two-year olds became eligible for a maximum of 15 hours funded early learning and care where: family circumstances meet the FSM criteria a child is looked after by the LA the family are in receipt of Working Tax Credits and earn no more than 16,190 a year the child has a current statement of special education needs or an education, health and care plan the child is in receipt of Disability Living Allowance the child has left care through special guardianship or an adoption or child placement order 1

2 Funding allocated in 2014/15 to North Lincolnshire was to meet the cost of early education places for 864 children meeting the above criteria. In 2015/16 funding is allocated based on children s participation with a count in the January and October 2015 censuses. North Lincolnshire Council receives a DSG allocation of 4.85 per hour per child. The initial funding allocation will be notified in June 2015, it is estimated that this will be 1,669,758. The final adjusted allocation in January 2016 is estimated to be 1,879, Three and four-year old funding All three and four year olds are entitled to a maximum of 15 hours funded early education each week in the maintained, private or voluntary sector. Local Authorities (LA) are legally required to design and implement a local EYSFF to fund the Early Education Funding (EEF) entitlement for three and four year olds. The EYSFF applies to all sectors (maintained, academy, voluntary and private sector childcare providers). North Lincolnshire Council receives an allocation of 4,169 per full time equivalent (FTE) three and four year old accessing EEF in the DSG, funding is initially based on the Census in 2014, with two further adjustments based on the January 2015, 2016 census. The provisional funding allocated for is 5,920,576, of this 347,000 is centrally retained. 3. WHAT DO WE NEED TO DO NEXT? Members should note the expenditure for the current financial year and take up in the autumn term. Place spend is on target and projected to be within the allocated budget for the financial year. 3.1 Two-year old funding Total Budget Allocation is 2,549,000, of which place funding is 2,028,000 Term (2014/15 financial year) Projected Spend Total Actual Spend ( ) Summer Term (actual spend) 349, ,780 Autumn Term (actual spend) 639, ,908 Spring Term 600, ,187 Total Expenditure 1,589,005 1,453,875 Spend in the summer and autumn term is actual, the spring term is an estimate of expenditure. In the autumn term 715 children were approved for two-year old funding, 74 children did not take up their allocated place (families have not registered their child with a childcare setting). Take-up in the autumn term was 74 per cent. For the spring term (as at 15/1/15), 684 children currently have a place allocated of which 80 are not yet registered with a childcare setting. The families of children for whom we are not aware of their chosen childcare provider have been sent a reminder and this will be followed up with a visit from a Children s Centre worker. In addition to the place funding, LAs were allocated capacity building funding, a proportion of this has been allocated to support the set-up of new provision with initial revenue costs. This included Little 2

3 Cygnets, Little Owls Scunthorpe South and Little Saplings. Further provision has been identified in the Riddings area and this project has moved forward slower than anticipated. In addition funding has been allocated ( 180,000) for existing and new posts to maximise funding and take-up by two-year olds. Members are asked to agree to the place and capacity building funding being carried forward in the Early Years DSG to the next financial year to enable to places to be generated and take-up maximised as planned within the funding allocation agreed, the amount is provisionally estimated at 280, & 4 year old funding Total Budget Allocation is 5,898,000 Term (2014/15 financial year) Summer Term (actual spend) Maintained & Academy Sector Private & Voluntary Sector Transitional Protection Total Percentage of funding maintained/ academies 867,990 1,255, ,126 2,410,201 41% 59% Autumn Term 866, ,793 N/A 1,708,310 51% 49% Spring Term 828, ,255 N/A 1,810,186 46% 54% Total Expenditure 2,563,438 3,078, ,126 5,928,697 45% 55% Percentage of funding PVI Spend in the summer and autumn term is actual funding paid. As such, the figure presented for the spring term is an estimate. The final budget spend will be presented in April Take up of funded early education Term Number of children (%) Take Up* Autumn (98%) Spring (95%) Summer (93%) Autumn (98%) *Population data supplied by North Lincolnshire Clinical Commissioning Group (doctor registrations in North Lincolnshire March 2013/March 2014 Take-up figure determined using total 3 & 4 year old population, as such includes 4 year olds in reception classes (these children are eligible for early education funding if they defer their school place) 4. RESOURCE IMPLICATIONS YES NO Members should consider the proposals presented and agree the funding formula for the 2015/16 financial year for two, three and four year olds. 4.1 Two-year old funding The funding allocation for 2015/16 is based on participation at a rate of 4.85 per hour per child. It is proposed to continue to fund childcare settings at the hourly rate of A higher rate than three and four year olds recognising the additional staffing costs of working at a 1:4 staff to child ratio. The funding allocation will be calculated based on the Census in January 2015 and adjusted based on a further Census return in the autumn

4 Projected Numbers *Estimated Budget required ( ) Summer term 2015 (691 children, 80% target) 603,243 Autumn term 2015 (734 children, 85% target) 747,579 Spring term 2016 (734, 85% children 864 target) 640,782 TOTAL 1,991,604 *based on assumption that will be 15 hour take up On current budget assumptions, the planned expenditure 112,205 more than estimated funding allocation. As the actual expenditure and funding will be based on participation rates throughout the year, this shortfall can be met from the 2 year old funding surplus from and adjusted during the year. 4.2 Three and four year old funding The early years DSG allocation for 2015/16 is 5,920,576 based on a fte allocation of 4, for 1420 children. A budget of 347,000 is centrally retained, providing a place budget within the Early Years allocation available for place funding of 5,573,576. It is proposed to retain the same EYSFF base rate and supplements as in 2014/15, with the exception of the deprivation element of the formula. Base rates (39 place nursery), 3.90 (all other providers) Flexibility 30p per hour per child (Maintained and academy only) Quality 20p, 35p or 50p dependent upon Ofsted outcome and staff qualifications (Private and voluntary sector only) Sufficiency or 3000 lump sum (dependent upon sufficiency of childcare places in the area) Place funding projections (based on take-up January 2014 December 2014) indicate the formula is affordable, with estimated expenditure for the financial year: Projected Funding Estimated expenditure ( ) Summer term ,157,794 Autumn term ,634,530 Spring term ,767,864 Total expenditure 5,560,188 Early Years Pupil Premium From April 2015, the government are introducing the EYPP; this increases the early year s allocation by an estimated 134,290. This funding is ring fenced and is participation based. The government estimate 466 children will be eligible in North Lincolnshire; the allocation will be adjusted based on actual take-up at the October census Funding is payable at an hourly rate of 53 pence per hour based on the participation of children that: 1 meet the FSM Criteria or where a child o has been looked after by the local authority for at least one day o has been adopted from care 1 Families meet the Free School Meal Criteria if they are in receipt of Income Support, income-based Jobseekers Allowance, income-related Employment and Support Allowance, support under Part VI of the Immigration and Asylum Act 1999, the guaranteed element of State Pension Credit, Child Tax Credit (provided you re not also entitled to Working Tax Credit and have an annual gross income of no more than 16,190), Working Tax Credit run-on - paid for 4 weeks after you stop qualifying for Working Tax Credit, Universal Credit. 4

5 o has left care through special guardianship o is subject to a child arrangement order The process for claiming the additional funding is to be determined and providers will be advised in early March. Deprivation Supplement Funding As a result of this additional funding a review has been undertaken of the deprivation element of the EYSFF. The deprivation element of the formula remains a compulsory supplement to support providers in narrowing the gap; the amount of funding is determined locally. In the current financial year the funding is paid at 60p per hour per child at a total cost of 227,182 (equivalent of additional funding for approximately 700 children). The funding is based on the 30 per cent most income deprived 2 households in North Lincolnshire (IDACI ). It is not proposed to increase the overall budget but to amend the eligibility criteria for the supplement. The scenarios presented are based on discussions with the private, voluntary and school sectors. The IDACI does highlight concentrations of children from income deprived households, however when analysed against the households of two-year olds in receipt of funding based on low family income, the spread of children is much greater than that in receipt of deprivation funding. Only 53% of FSM funded two-year olds live in households eligible for the deprivation supplement. For example in the autumn term of 288 children in receipt of two-year old funding, 59 (20 per cent) of the children in the live in the Isle and Brigg localities where no households are eligible for deprivation funding. The government encourage local authorities to consider using their deprivation supplement to increase the local rate of the EYPP for children, to maximise opportunities to narrow the gap. The children eligible for pupil premium are primarily those that were eligible for a funded place at two-years of age. Scenario 1 - Annual Spend 227,082 (Autumn term estimate - 75,024) In this model children are funded as currently, 60p per hour per child. The difference is in the IDACI data that is used. In the main schools formula the IDACI score is used rather than a percentage of the count (30%). Children would be eligible that live in households with a score of (bands 3-6) of the IDACI score, most economically deprived households only. No funding is payable in the Isle or Brigg localities as none of the households qualify due to small concentrations of income deprivation. In this scenario the EYPP children (approx 50 per cent) would receive 1.13 per hour (deprivation and pupil premium funding). Scenario 2 - Annual Spend 227,708 (Autumn term estimate - 70,157) In this model the IDACI bands 3 6 are funded (as in scenario 1), in addition children of families eligible for FSM are also funded (it is estimated at 200 children, half the 400 FSM children eligible for two year old funding - trends are starting to demonstrate that 50% the children are within the IDACI bands 3-6 as such would already receive the funding when they turn three years.) This model would fund those children that were in receipt of two-year old funding throughout North Lincolnshire; providing an enhancement to the EYPP. It would also include children in the Isle and Brigg localities. In this scenario the EYPP children would receive 95p per hour in total. All other children would receive 42p per hour. This model is the one most closely aligned to the main school funding formula and recommended to the Schools Forum. Scenario 3 - Annual Spend 223,400 (Autumn term estimate - 65,291) This model funds the IDACI bands 3 6 and FSM children. In this scenario the EYPP children 2 IDACI Income Deprivation Affecting Children Index. Families are categorised as income-deprived if they are in receipt of income based benefits, with an equivalent income below 60 per cent of the national median before housing costs. 5

6 would receive 90p per hour in total. All other children would receive 37p per hour. In addition a small allocation is paid for two-year olds that meet the FSM criteria. The funding will be paid at 10p per hour per child and equates to 8400 per annum. Two-year olds are paid an enhanced rate of 4.85 per hour, however the higher staffing costs of a 1:4 ratio mean there is little additional funding to enhance the learning environment and support any developmental needs identified. Each scenario is affordable within the budget allocated. It should be noted that the estimated spend is based on FSM and EYPP eligibility data from the autumn term 2013, this cohort of children became eligible for three year old funding in the autumn The autumn term 2013 was the first term for the statutory two-year old entitlement and of a potential 396 children; 288 met the FSM criteria as such the estimates are in part based on assumptions of the numbers of children and their take-up. 5. HOW DOES THIS PROVIDE VALUE FOR MONEY? It is recommended that the deprivation funding supplement is aligned to the IDACI score and FSM element as in the main school funding formula (funding bands 3 6), with a fixed hourly rate of 42p per hour per child. The government are encouraging local authorities to use their deprivation funding to increase the rate of the EYPP (funding FSM children) as such these children will receive the same hourly rate of deprivation funding enabling the providers to maximise the opportunity to narrow the gap for income deprived children. The funding is participation based to maximum of 15 hours per week (570 hours per annum); as such providers receive funding based on registered children s hours. Supplements recognise and tailor the funding to the differentiated cost of delivery in all sectors. This includes supporting the viability of small rural provision, meeting the additional cost of providing flexible places (in the maintained sector) and the cost of a graduate workforce (in the PVI sector). A model based on children s hours for the period January December 2014, using the existing formula is affordable within the estimated budget allocation. The fte cost per child is 3915 with the council receiving an allocation of 3925 (after the deduction of the centrally retained funding). 6. DIVERSITY AND EQUALITY YES NO It is a statutory duty of the LA to provide up to a maximum of 15 hours funded early education for all three and four year olds in North Lincolnshire. It is also a duty of the LA to ensure that there is sufficient childcare to meet the needs of working parents and those with two, three and four year olds eligible for funded early education. The statutory guidance states that all Ofsted registered childcare is eligible to deliver funded early education places, including schools, academies, private and voluntary day nurseries and pre-school, as well as childminders. Each provider is subject to an agreement that includes diversity and equality. Early Years funding is paid using an open and transparent funding methodology that meets the costs of delivery and is fair for all. Settings receive funding based only on actual take-up of places. 7. OTHER IMPLICATIONS YES NO 6

7 8. WHO HAVE WE CONSULTED? All providers were given information concerning the EYPP, either in meetings or via the post. At this time providers were advised that a review of the deprivation supplement would be undertaken. Providers in all sectors were invited to give their views and ideas as well as attend a meeting to discuss suggestions and proposals. A small sub group with representation from the maintained, private and voluntary sector met in December and their views formed the basis of the scenarios that have been modelled. The models were circulated amongst the members for their comments and preference. 9. RECOMMENDATIONS That members agree 4.85 per hour per child for all funded two-year olds. That members agree to carry forward the under spend of place and capacity building funding for two-year olds from the 2014/15 financial year to the 2015/16 financial year, to create the budget required to meet planned place take up and to ensure place creation projects are completed to meet demand and staff contracts are honoured. That members agree to continue to fund early education for three and four year olds at the same rates as in 2014/15 with the exception of the deprivation funding. That members agree a revised criteria for the deprivation supplement as per the recommendations. That members note the financial position for the current financial year. 7