Memorandum submitted by Sheffield City Council
1. The expected impact of new local funding formula on providers of early year's education and childcare service
We have completed an impact assessment using participation data for financial year 2008-09 and the expected impact on providers based on this information is as follows:
1.1 The Private Voluntary and Independent (PVI) Sector and the Maintained Children Centres will receive slightly more funding via the new formula
1.2 Our three stand-alone nursery schools will receive significantly less funding via the new formula. The highest loss for any single nursery school (before transitional funding - see section 1.5 below) is £104k or 30% of its delegated budget
1.3 42% of primary schools with nursery units receive less funding via the new formula (the highest loss of any single primary school - before transitional funding - is £19k or 14% of its nursery delegated budget, equivalent to 2% of the school budget as a whole)
1.4 A safety net has been included in the formula to ensure that no setting receives less than the basic £ per pupil hour overall (even after any scaling back to match available resources)
1.5 Transitional funding will ensure that no provider loses over £5k in the first year only
1.6 A review is to be undertaken by our Learning and Achievement Service of our three stand-alone nursery schools, with a view to identifying means to maintain the longer term viability of these high quality providers.
2. Difficulties which have been encountered in drawing up the new funding formula - and how they are being overcome
2.1 Cost analysis of the Free Entitlement in the PVI Sector
2.1.1 We experienced difficulties in engaging the PVI sector in the cost analysis exercise with only 31.5% of providers taking part. Once the analysis was completed only 18% of the returns could be used for reliable data, and these returns showed a very wide range of costs, with no reliable standard pattern that could be used to determine the new formula allocation
2.1.2 The average £ per pupil hour determined from this cost analysis work was therefore used only as a general reference point when determining our new formula allocations
2.1.3 As part of the communication exercise that has taken place providers have been informed that a further cost analysis needs to be completed once the formula has been introduced to enable the formula to be ratified. It has been emphasised to providers that their input into this exercise is crucial to enable us to determine whether the funding we are allocating covers the cost of delivering the free entitlement, and whether we need to adjust our formula funding level for 2011 (subject to availability of resources). For 2010 the overall level of funding has therefore been calculated as set out at section 2.2 below, rather than being based on the cost analysis exercise.
2.2 Determination of the Early Years Budget
Given the problems with the cost analysis exercise referred to at section 2.1.3 above, the determination of an Early Years Single Funding Budget has been difficult. The funding the Local Authority receives for the early years provision which comes into the LA via the Dedicated Schools Grant is not identified separately. Therefore, the budget has been established by merging together
· The funding that is currently identified for early years
· The additional 2.5 hour funding
· A percentage increase allocated via the DSG for 2010-11
· Adjustments for projected growth in capacity and take-up rates.
2.3 Stand-alone Nursery Schools
The DCSF clarification in July 2009 that even a very small number of stand-alone nursery schools could no longer be funded by places from April 2010, led to all reasonable funding models showing that this provision would become financially unviable. We have sought to ameliorate the funding position for these providers through the inclusion in the new formula of an additional factor - applicable only to them as a distinct type of provider - allocating them a fixed lump sum towards headteacher salary costs. We believe that this will, if combined with staffing efficiencies and other savings, make two of our three stand-alone nursery schools viable in the longer term (all three are protected for one year by transitional arrangements limiting funding reductions to £5k). The single remaining stand-alone nursery school would still not be viable, but we believe that there are specific reasons for this, which should be addressed by 2011-12 through our commissioned review of this provision, referred to at section 1.6 above.