POOLE SCHOOLS FORUM

15DECEMBER 2010

JOINT REPORT OF THE HEAD OF CHILDREN & YOUNG PEOPLE INTEGRATED SERVICES AND THE FINANCE MANAGER – EDUCATION, FINANCIAL SERVICES

EARLY YEARS SINGLE FUNDING FORMULA (EYSFF) 2011-12 - CONSULTATION

1.Purpose of the Report

To consult Schools Forum on the final proposals for the Early Years Single Funding formula (EYSFF) and make recommendations to the Council’s Children’s Services Overview and Scrutiny Committee.

2.Decisions

Schools Forum Members to:

2.1Agree the final proposals in paragraph 5.4 for the EYSFF and recommend these for consideration at the Council’s Children’s Services Overview and Scrutiny Committee in January 2011.

3.Background

3.1Funding Framework

3.1.1The Council receives funding for direct early years provision through two sources currently:

  • The ring-fenced Dedicated Schools Grant (DSG) is to provide for the 12.5 hours of universal provision. This grant is to provide for all nursery provision – in maintained schools, through central expenditure (for such items as special education needs) as well as payments to the Private Voluntary and Independent (PVI) sector.
  • A specific Standards Fund was allocated for 2009-10 to provide for our more deprived children to receive an additional 2.5 hours per week from September 2009. This was allocated to cover 25% of children. In 2010-11, this funding has been increased to provide all children with 2.5 additional hours from September 2010.

3.1.2Until September 2010, Authorities have been at different stages of implementation of the additional universal provision of 2.5 hours. Now this transition is complete, all funding for the free entitlement is expected to be through the Dedicated School Grant from 2011-12 onwards. Notification of fundinglevels for2011-12 are outstanding at the time of writing this report but further details may be available at the Schools Forum meeting. There have been no indications that government funding for the free entitlement will reduce.

3.2The Early Years Single Funding Formula

3.2.1Implementation of the EYSFF has been delayed in Poole for 1 year to enable us to work further with providers in the development of a formula that has broad support within the sector. We must from 1 April 2011 provide differentiated funding to providers to reflect both national and local policy objectives as well as to cover costs. The funding is to be allocated to all providers according to an Early Years Single Funding Formula.

3.2.2The regulations specifically require as a minimum:

  • Funding for the free entitlement to be based on participation not places and we must count pupils across all providers each term as a minimum.
  • A deprivation supplement is to be included within the formula.

3.2.3The first requirement will not represent a major change for any provider, as in Poole we have not funded nursery classes in schools on the basis of places, but it has always been on pupil numbers. Many Authorities nationally have funded the maintained sector based on places and the government is concerned to see this does not continue as it takes funding away from actual provision.

3.2.4The second requirement has been addressed as part of the overall formula development.

4.Formula Development in 2010-11

4.1The government issued formula development guidance in July 09. Appendix 1 provides a reminder of the summary formula development principles contained in the guidance and presented to Schools Forum in October last year in consideration of our initial EYSFF. We have adhered to these principles again this year in our further work with providers.

4.2Published by the DfE in September 2010 and considered at the last Schools Forum meeting was initial summary information provided by the Pilot Authorities that have implemented from April 2010. The disappointing aspect of this information was that a typical pathfinder Authority has not followed the June 2009 DfE guidance in their formula development and has provided little incentive element in the funding formulae being implemented.

4.3In October 2010 the DfE published a further set of information from 5 specific pathfinders. These Authorities had followed the guidance. A summary is provided in Appendix 2.

5.Final EYSFF Proposals for Consideration

5.1The Poole EYSFF has been refined in the light of the pathfinder information and provider concerns.

5.2The table below summarises the formula proposed last year but not implemented.

Summary of Original EYSFF Proposed in November 2009

Supplements
Funding Rates / Base / EYP / Status / Other / Flexi- / Deprivation
Per Hour / Rate / Full / Part / Quality / bility / Low / Med / High
Private & Independent / 3.10 / 0.25 / 0.13 / 0.14 / 0.07 / 0.24 / 0.48 / 1.27
Voluntary / 2.74 / 0.22 / 0.11 / 0.14 / 0.07 / 0.21 / 0.43 / 1.12
Maintained Nursery Class / 3.09 / N/A / N/A / 0.14 / 0.07 / 0.29 / 0.58 / N/A
Childminder / 4.72 / N/A / N/A / N/A / N/A / N/A / N/A / N/A

Note:2010-11 rate protection set at £3.10 (90% of 2009-10 rate of £3.44)

Final proposals amended to:

  • 94% for year 1 – minimum of £3.23
  • 90% for year 2 – minimum of £3.10

5.3The proposed changes for Schools Forum consideration are as follows:

  1. To address the concerns of Group Private Voluntary and Independent (PVI) providersand the cost implications for less than full time opening,we have considered 3typical costs models with different annual hours of delivery (all based on 24 places, staff ratio 1:8).
  1. 52 week - 40 hour b.38 week- 25 hour c. 38 week - 15 hour

As delivery hours reduce, non-contact time proportion increases but hourly salary costs of staff reduce for part time working. These models for the base rate are provided in Appendix 3with comparison with the original formula noted in brackets.

  1. Flexibility is now included in the base ratethrough anallowance for lower occupancy with higher delivery hours to give one PVI base rate for all group settings.
  1. Basic profit has been extracted from the base and provided as a supplement instead at £0.06 as requested by providers.Further profitability should be earned through higher actual occupancy.
  1. One deprivation levelonly to provide for one additional staff member to give a ratio of 1:6 for those settings with greater than 30% of children from post codes in areas of greater deprivation (highest 30%). This replaces the three levels in the original formula.
  1. A new supplement for Extended Openinghas been introduced to reflect the additional costs from offering a stretched entitlement (fewer hours per week but over more than 38weeks per year). Provider eligibility for the supplement is based on opening times of at least 40 weeks per year, for at least 40 hours per week. The rate is set at £0.03 per hour and most day nurseries will be eligible.
  1. Maintained sector has higher base rate at £3.18 (from £3.09) to reflect flexibility now in the base (midway between 80% and 85% occupancy).
  1. Childminder changes- rate per hour reduced from £4.72 to £4.19
  2. Salary no longer linked to PVI Leader Grade but instead to the mid point between PVI Leader & Deputy Leader grade to reflect absence of staff management responsibilities
  3. Premises cost per hour reduced by 50% to £0.21.

The above changes reflect the current fee rates of accredited childminders in Poole and more closely align to pathfinder typical hourly rates

5.4The formula proposal for 2011-12 is summarised in the table below

Summary of Revised EYSFF Proposal for 2011-12

Supplements
Funding Rates
Per Hour / Base
Rate / Profit / EYP Status / Other Quality / Extended Opening / Deprivation
Full / Part
PVI / £3.05 / £0.06 / £0.26 / £0.13 / £0.20 / £0.03 / 0.45
Maintained Nursery Class / £3.18 / N/A / N/A / N/A / £0.20 / N/A / 0.60
Childminder / 4.19 / N/A / N/A / N/A / N/A / N/A / N/A

Transitional protection is to be set at 90% of the existing 2010-11 rate of £3.44. This is to apply for 1 year only to give a minimum rate of £3.10 in 2011-12.

5.5The base rate for the PVI sector has been reduced by £0.06since the October report at the suggestion of our providers.This is to allow greater emphasis on quality in the formula, with the quality supplement being increased by the same amount.

6.Consultation in 2010-11

6.1We have continued throughout the year to meet with providers on a monthly basis through the Early Years Sub Group (EYSG) of Schools Forum and have shared the information published by the DfE to further assist implementation.

6.2Consultation has also continued through the Nursery and Pre schools Network meetings led by members of the EYSG, with officers in attendance as necessary. This has been an effective way of capturing a wider range of views across the sector. Regular feedback has been received of concerns and issues.

6.3Meetings with the Early Years Business Support Officer have taken place with six volunteer providers to test the robustness of the base rate calculation.

6.4Four consultation evenings were planned for late November/early December – one for each PVI group (day nursery, private preschool, voluntary preschool and childminders) to consider the issues of each sector individually.A summary of the questions raised is scheduled in Appendix 4.

6.5At its meeting on 3 December, the EYSG considered the feedback from the first three consultation meetings, the impact assessment of the formulaon individual providers (unnamed) and final issues.

6.6The EYSG members are in support of the formula and feedback from settings from attendance at the consultation evenings is generally positive. Providers are particularly concerned for the formula to incentivise quality as that will provide the best outcomes for children.

7.Financial Implications for Providers

7.1Approximately equal numbers of providers will see an increase or a decrease in funding. Protection has been applied to ensure no PVI provider rate is lower than 90% of the 2010-11 rate of £3.44. That is, the lowest funding rate proposed for 2011-12 is £3.10. Current data indicates that protection will apply for just two voluntary settings (at the level of ££0.05 per hour).

7.2Private settings will see funding reduce where there is only satisfactory quality,orthere is no employee with a level of EYP status as well as not being eligible for the deprivation supplement. Voluntary providers with the same data will also see funding reduce with an additional reduction of £0.06 per hour as these settings do not qualify for the profit supplement.

7.3Additional central support is available to settings to help improve quality and become eligible for the quality supplement in future.

7.4Settings can take action themselves to engage with the workforce development agenda, for which financial support for training towards EYP status is currently provided through the Sure Start Grant.

7.5Further business support can be provided to settings with reduced funding to enable them to manage the move to a lower funding rate.

7.6Settings with only satisfactory quality or not embracing the workforce development agenda can receive deprivation supplements and see funding rise. They could subsidise other provision or simply improve their profitability. This would be perverse. Central support will be provided to help these settings raise quality and ensure additional funding is spent as intended.

8.DSG Budget Implications

8.1The funding estimate for the number of hours for the free entitlement overall will be finalised in February 2010 along with all other budget allocations using the most up to date information.

8.2Summary of Budget Requirement 2011-12

8.2.1The amounts currently set aside in the DSG Budget and Standards Funds allocations for 2010-11 for nursery provision along with draft budget information for 2011-12 are as follows:

Draft DSG allocations
£000’s / Budget
2010-11 / Draft
2011-12
PVI / 2,604 / 3,620
Maintained Schools (ISB) / 236 / 263
Increased Entitlement & Flexibility* / 592 / 0
Central Spend – PVI support / 459 / 410
Total Support Free Entitlement / 3,891 / 4,293

ISB = Individual School Budget

* Funded through Standards fund in 2010-11

The draft budget is based on the proposed formula, an estimate of hours by providerfor 2011-12and the latest data applicable for individual settings. There is an increase in forecast hours for 2011-12 to take into account the universal entitlement to 15 hours for an extra (the largest) summer term, population growth and the increased take up in places due to increased flexibility in provision.

We are planning to make some reductions to central spend which covers SEN, nursery advisory teacher support and administration for the PVI sector funding. Central adviser support to the sector is to become more focussed on settings that are not currently judged as at least good quality but some level of support will still be available for all settings.

8.3Estimated Budget Growth Requirement in Future Years

Over the next five years, all providers could potentially qualify for all supplements to which they are eligible.Longer term funding growth will be required if the incentives have the desired impact. This equates to approximately 5.5% of the estimated 2011-12 funding requirement and would be attributable to:

  • Improved workforce development across the sector (fully qualified EYP in all settings) accounts for 4.5%. However training for fully qualified EYP status takes in the region of 5 years.
  • Improved Quality across the sector withat least good quality in all settings accounts for 1% funding growthover time.
  1. Recommendation

9.1The Schools Forum to support the final proposals for the EYSFF and recommend these to the Council’s Children’s Services Overview and Scrutiny Committee.

December 2010

Vicky Wales

Head of Children and Young People –

Integrated Services

Tel: 01202 26 2251 E-mail

Nicola Webb

Finance Manager - Education

Financial Services

Tel: 0120263 3296E-mail:

Background Papers:

EYSFF Consultation Paper – November 2009

Schools Forum – Early Years Formula Progress Report October 2010
Appendix 1

Extract from Consultation Paper - November 2009

Section 4 – Formula Principles

A core set of sixteen principles to underpin the EYSFF has been developed nationally and these are as follows:

The development of the EYSFF should:

  1. Support effective and efficient distribution of resources at local level.
  2. Facilitate greater flexibility of provision so that parents have greater choice in how they use the free entitlement.
  3. Preserve diversity and choice in the market.
  4. Incentivise improvements in the quality of provision and recognise the on-going costs associated with quality.
  5. Support the narrowing of achievement gaps and recognise the additional costs associated with children from deprived backgrounds.
  6. Be clear & transparent

With regard to the operation of the formula:

  1. The same factors to be taken into account in deciding the level of funding for each sector
  2. Decisions must be transparent and any differences between the sectors must be justifiable and demonstrable
  3. Levels of funding should be broadly cost reflective and all main cost elements explicitly considered.
  4. There should be no perverse incentives and sufficiency of provision must not be endangered
  5. The formula must be based on common cost information across both the PVI and maintained sectors and all costs and public sources of income considered.
  6. Settings to be funded on the basis of termly participation at least
  7. An additional factor to support sufficiency and sustainability is allowed but this must not be used widely and must have clear criteria.
  8. The formula must take into account the sustainability of all settings, giving sufficient stability to all sectors to plan for the future and improve quality.
  9. Transition from the current funding arrangements to the future formula mechanism must be planned and managed carefully based on a clear impact assessment.
  10. The application of the formula in different settings should be based on common operating principles where possible. All aspects of the formula must be the result of partnership working and widespread consultation

Appendix 2

EYSFF Pathfinder Summary - 18 October 2010

The Pathfinders are analysed in the order of their formula similarity with Poole. Note none of these used additional staff as the basis for the deprivation supplement.

Brent - London Borough so should expect higher costs in the base rate.

(note:2010-11 DSG per pupil funding in Brent is £5,342, compared with Poole - £4,023)

Summarised formula components:

  1. Base Rate - £3.25.
  2. Includes Profit of 10% but same added for “assistance in kind” to voluntary providers in the base. This would give a base without profit of £2.95.
  3. Deprivation Supplement – set aside 10% of funding. Uses IMD to apportion between providers. Noted higher in total than most pathfinders with an average £0.41 per hour.
  4. Quality Supplement
  5. Qualifications – £0.10 but more onerous than Poole. Includes 50% level 3 staff in the contact ratio as wellas EYP status.
  6. Ofsted accreditation being used but working towards own scheme £0.05 for good £0.10 for outstanding
  7. Flexibility Supplement – 2 levels
  8. £0.15 for partial, £0.30 for full,
  9. 4 levels of flexibility criteria to meet to get a full supplement
  10. Transitional Protection – 3 years reducing scale. Protection – only 25% of reduction in 10/11, 50% 11/12 and 75% 12/13
  11. Noted issue of business support and financial planning in PVI sector.
  12. Note Brent’s top tips – particularly - find a simple way to explain the formula and keep communication channels working.

Somerset

100% protection to the funding rate in 2010/11. Previous rate was £3.47. Most providers gain funding (69%).

  1. Those with a lower rate are those not flexible, not deprived, no EYP or QTS or no sustainability supplement given (because of good quality provider nearby).
  2. Base rate £3.41
  3. Quality supplement – staff qualifications criteria only
  4. Qualified teacher supplement but lower assumed staff ratio to offset higher wage - PVI rate of £0.08 per hour
  5. EYPS - £0.26 met from graduate leader fund (based on NQT salary)
  6. Childminders supplement of £0.70 (with the base would give 3.41+0.70)=£4.11 for qualified childminder
  7. Premises supplement – those responsible for repairs and maintenance - £0.05
  8. Flexibility supplement
  9. 30 hours or more - £0.10
  10. 40 hours or more - £0.20
  11. Deprivation - lowest 30% households.
  12. Based on number of actual deprived children as a % of total (by hours claimed) at £0.35 if 100% deprivede.g. 30% of children from deprived postcode * £0.35 per hour = £0.10 per hour in the funding rate.
  13. No supplement for childminders.
  14. Noted amount available for deprivation in subsequent years will depend on quantum of funding available.
  15. Sparsity – not relevant to Poole so not detailed
  16. Sustainability – based on sufficiency
  17. Transitional protection - 50% of loss in year 1 only (“loss” being new rate compared with previous year rate + inflation, as no setting to see actual reduction in funding in 2010/11).

Medway

Summary Components:

  1. Base Rate £3.22 for all
  2. Deprivation Supplement– IDACI score over previous 3 terms. Sliding scale - £0.41 to £0.08 (average noted at £0.34)
  3. Flexibility Supplement – sliding scale from most flexible to least (PVI average £0.03 per hour, maintained £0.01)
  4. Quality Supplement – Ofsted rating (good and above - £0.05)
  5. Leadership Supplement – EYPS
  6. PVI average of £0.00 – presumably means less than half qualify.
  7. Maintained - £0.10

Lancashire