City of Westminster

Committee: / Date: / Title of Report:
Westminster Schools Forum / 3rdDec 2012 / Revision of Early Years Single Funding Formula (EYSFF)
Classification:
/ Information paper of:

For General Release

/

Interim Business Partner - Schools

Wards involved /
All
Policy context / Proposals for the Revision of the EYSFF to comply with The School Finance (England) Regulation 2013
Financial Summary / Schools Forum is asked to note the recommendations currently proposed for the revision to the 2013/14 Early Years Single Funding Formula
  1. Background:

1.1Westminster City Council introduced a single funding formula across the Private, Voluntary and Independent (PVI) and maintained sectors to support delivery of the free entitlementfor three and four year olds in April 2011. This was based on DfE regulations and includes factors for participation funding, deprivation, quality and flexibility.

1.2At the time of the implementation of the formula,a commitment was given that the formula would be reviewed annually. Ongoing recommendations have been made to the Schools Forum to address any anomalies which have arisen. Consideration has been given to how the formulashould be adjusted to address any sustainability issues and to profile any unallocated spend whilst maintaining parity and a buoyant and sustainable Early Years childcare market.

1.3A report was submitted to the both the Director of Children’s Services and the Schools Forum in March 2012 detailing the impact of the new funding arrangements across both the PVI and maintained sectors and setting out the key findings.

1.4The 2013 Finance Regulation 11 requires the LA to have budgets determined by 31st March.

  1. Update:
  1. Proposed School Finance (England) Regulations 2013

2.1 In July 2012, DfE consulted on the proposed School Finance (England) Regulations 2013. The DfE issued draft regulations for 2013 to make the changes arising from the recent school funding consultations.

2.2The DfE are not proposing major changes to the main elements of the Early Years Single Funding Formula (EYSFF). The DfE will continue to allow different base rates for different types of provision and will continue to allow specific early years factors for quality, flexibility and sufficiency. There will continue to be a mandatory deprivation supplement in the EYSFF and the DfE will continue to allow flexibility in the indicators used.An exception is thatthe DfE will require that itmust be based on child level definitions of eligibility rather than operating a supplement based on the characteristics at setting level.

2.3 In line with the main formula, the DfE will be constraining other factors, such as those relating to premises. The factors allowed in the main formula are also allowed in the early years formula but without prescribing the datasets that should be used. All local authorities therefore should review their early years formula and remove factors which are no longer allowed although the DFE will consider requests to retain other factors for the early years formula only if their removal causes significant problems.

2.4 The new regulations will allow the Minimum Funding Guarantee (MFG) to be applied to the early years formula for all providers for the first time but only for the base rates. Local authorities therefore should ensure that their proposed base rates per hour for 2013-14 do not fall by more than 1.5% compared to 2012-13. Where local authorities need to dis-apply the early years MFG, particularly in order to improve parity of funding across different provider types, they may apply to the DfE to do so. For primary schools with nursery classes, the MFG for their over 5s budget will be calculated entirely separately from their early years allocation and waiting for the early years count in January must not hold up the calculation of the over 5s budget. Academies with nursery provision will receive their main formula budget from the EFA and their early years allocation from the local authoritywith the MFG applied separately to each.

2.5 The DfE also announced in March 2011 that local authorities would be responsible for funding all Academies for their early years provision except for those established prior to September 2010. This is now extended to these Academies as well so that there is complete consistency across all early years providers. The change will take place from September 2013as 22 of these Academies nationally will already have received their budgets for the 2012/13 academic year. Local authorities which have pre-September 2010 Academies with early years provision need, therefore, to establish relationships and administrative procedures with them.

2.6 The DfE also announced in March 2012 that funding for early education for two year olds will transfer to the DSG from 2013-14. This will enable effective local integration of free early education for two, three and four year olds. It will also give providers greater certainty to make the necessary expansion in high quality provision.

2.7 The free entitlement to early education will be extended to 20% of two year olds from September 2013, and to 40% of two year olds from September 2014.

2.8Local authorities will be required to fund free early education for two year olds through the EYSFF, as they do for three and four year olds. This requirement will start when these regulations commence on 1 April 2013, and in advance of the commencement of the regulations which extend the free entitlement in September 2013. Extending the EYSFF to two year olds has a number of advantages:

  • It recognises the two year old entitlement as an extension of the three and four year old entitlement and may be delivered by many of the same providers. Thus it is only sensible it is funded in the same way.
  • The EYSFF requires authorities to work with providers to determine the cost of delivery and calculate fair funding rates accordingly. As part of this, providers and local authorities have to work together and engage afresh in an open and honest way.
  • The EYSFF enables the DfE to collect data more easily on funding rates (base rates and supplements) paid to providers. This data is then more easily comparable across areas. Not using the EYSFF would make collecting comparable data more difficult.

2.9The DfE are however proposing adjustments to how the EYSFF operates for two year olds. These are:

  • To relax the requirement to have a mandatory deprivation supplement (regulation 15(6)). Local authorities would still be able to use a deprivation supplement if they wish, but making it mandatory in an already targeted entitlement does not seem necessary.
  • To relax the rules on place based funding to support capacity building. Currently, authorities must fund on the basis of participation except for children with SEN or children in need, where they can continue to fund on a place basis. The DfE will extend this place-based approach for two year olds, to support LAs working with providers to increase capacity in advance of delivering the 20% and 40% entitlements (regulation 16(7)). DfE anticipates this as a time-limited approach to support preparation for the entitlement, and not a permanent approach for funding two year old early education.

2.10The availability of high quality early education places is also critical to the success of the two year old entitlement. DfE expect LAs and providers to work together to improve the quality of provision on offer. As with provision for three and four year olds, carefully targeted funding can have a powerful role to play supporting increases in quality. The quality supplement in the EYSFF gives LAs a simple means to target funding at incentivising increases in quality in provision for two year olds. It would be possible through these regulations to require LAs to operate a mandatory quality supplement in their EYSFF for two year olds. Alternatively, all decisions about the design of the EYSFF for two year olds, including supplements, could remain a matter for local discretion.

  1. Present Early Years Single Funding Formula Arrangements in 2012-13 in City of Westminster

2.11At present the Early Years Single Funding Formula in City of Westminster is

based on participation and hourly rates (Appendix A) incorporating the following factors:

  1. Basic hourly rate: £3.09
  1. Income Deprivation Affecting Children Index (IDACI) hourly rate: This is based on banded rates (annex A). An average IDACI score is worked out for each setting using pupil postcodes from January census data. A three year rolling average is used to determine the average IDACI %. For newly opened settings the an IDACI average is built up from the first three headcounts
  1. Index of Multiple Deprivation (IMD) hourly rate: This is based on banded rates (Annex A). The IMD for each setting post code is used.
  1. Quality hourly rate: The Ofsted rating for each setting is used to determine their quality supplement (Outstanding = 20p/hour, Good = 15p/hour, Satisfactory = 10p/hour).
  1. Flexibility hourly rate: 35p/hour for part-time provision only. This is determined by whether the setting is offering provision flexibly as agreed with the EY program manager.
  1. Flexibility supplement: £0.65p/hour only paid to 20 voluntary sector settings as identified by the EY programme manager (and approved by schools forum) to allow/encourage small settings to provide 15 hour free entitlement without wrap-around charges for full-time
  1. Flexibility lump sum: £1250 per term for part-time provision only. This is determined by whether the setting is offering provision flexibly as agreed with the EY program manager.
  1. Maintained Nursery School Sustainability/MFG budget protection: The four maintained nursery schools have a budget worked out through the formula factors, then get a top-up for sustainability (and to meet statutory MFG requirements) to their historic budget levels. A set of criteria, to justify on-going receipt of sustainability funding, is being drawn up by the EY program manager.
  1. Participation data – PVIs: termly headcount data is collected on a headcount date. Mid-term starters/leavers receive a payment pro rata to their time on roll. Settings notify the Council of any post-headcount starters or leavers and this generates an adjustment to the next term payment.
  1. Participation data – nursery classes: termly headcount data is collected on a headcount data. Schools are allowed to operate a staggered in-take system up to half term so any pupils with start dates before half-term are assumed to be part of staggered in-take arrangements and are funded for the whole term. Settings notify the Council of any post half-term starters or leavers and this generates an adjustment to the next term budget adjustment.
  1. Minimum Funding Guarantee: Schools’ nursery class funding is included in their Minimum Funding Guarantee calculation. The January headcount data (for all school pupils) is used to calculate the schools minimum funding for the year. If in-year participation data (and a nursery budget adjustment) takes a school below their minimum budget then they will receive a top-up to keep them at their minimum budget.
  1. What is wrong with the current City of Westminster Early Years Single Funding Formula

2.12Whilst the DfE will continue to allow different base rates for different types of provision and will continue to allow specific early years factors for quality, flexibility and sufficiency, theDfE will require that itmust be based on child level definitions of eligibility, rather than operating a supplement based on the characteristics at setting level as a mandatory deprivation factor in the EYSFF.

2.13The current City of Westminster Early Years Single Funding Formula in its present form do not comply with the proposed 2013 Finance Regulation 15 and 18 as the current deprivation factor used is based on the average IDACI score worked out for each setting using pupil postcodes from January census data based on a three year rolling average of January census as well as The IMD for each setting post code.

2.14There is also the need to introduce MFG on the base rate across all early years providers and not just on nursery schools and primary schools with nursery classes as well as building in funding for Academies established prior September 2010 and for the 20% most deprived two year olds by September 2013.

  1. Timeline for review and revision to the City of Westminster 2013-14 Early Years Single Funding Formula

REVISION OF CITY OF WESTMINSTER EARLY YEARS SINGLE FUNDING FORMULA
PROJECT PLAN
TASKS / TIMELINE
Review of changes to guidance and Regulations(The School and Early Years Finance (England) Regulations 2013) / 01/11/2012
Review existing EYSFF factors and determine how compliant it is with the new regulations and arrangements. / 01/11/2012
Document comparison / 02/11/2012
Meet with Lead Commissioner for Children and Early Years to discuss the EYSFF funding factors, policy issues to be aware of in designing the Early Years Single Funding Formula, introduction of 2 year old funding into EYSFF and other factors to consider / Early November 2012
Draft report for Schools Forum / Mid November 2012
Draft consultation paper / End November 2012
Set up a EYSFF working group. Include Schools Forum members if possible. Discuss potential factors. / End November 2012
Agree a basic framework to model the proposed EYSFF / End November 2012
Model in allocations under the new options / Mid / End November 2012
Compare current EYSFFmodel with the proposed models / Mid / End November 2013
Meet with working group to discuss proposed models and consultation paper / End November 2012
Inform Schools Forum on developments on Early Years / 3rd December 2012
Consult and hold consultation meeting with PVIs and schools / Early December 2012
Upload consultation on website / Mid December 2012
Collate responses from consultation / End December 2012
Draft report on EYSFF responses for Schools Forum / Early January 2013
Draft report of recommendations for Schools Forum approval / Early January 2013
Model in Jan count in the allocations under the new option / Mid January 2013
Inform Schools Forum on final proposed Early Years Single Funding Formula and seek approval / 28th January 2013
Run new EYSFF for 01/04/2013 budgets / Mid February 2013

Recommendations:

3.1 The School Forum is asked to note the work that is currently being done on the revision of the Early Years Single Funding Formula. It is hoped that a revised proposed formula will be brought to the next Schools Forum for approval and implementation.

3.2 The schools forum is asked to consider whether it wishes to nominate any members to be on the working group;

3.3 Members are asked to note any comments that they may have on the report or on the existing formula.

Yoke O’Brien

December 2012

APPENDIX A

City of Westminster
2012-13 EYSFF Hourly Rates and Lump Sums
BASIC RATE / Hourly / Flexibility / Flexibility
Rate / Rate (F) / Lump Sum
PVI / 3.09 / 0.35 / 3,750.00
Maintained Nursery / 3.09 / 0.35 / 3,750.00
Nursery Class / 3.09 / 0.35 / 3,750.00
IDACI SCORE BASED ON PUPIL POSTCODE / Hourly
Rate
From / 86% / To / 100% / 2.25
From / 76% / To / 85% / 2.00
From / 66% / To / 75% / 1.75
From / 56% / To / 65% / 1.50
From / 46% / To / 55% / 1.25
From / 36% / To / 45% / 1.00
From / 26% / To / 35% / 0.75
From / 21% / To / 25% / 0.60
From / 16% / To / 20% / 0.40
From / 0% / To / 15% / 0.00
IMD SCORE BASED ON SETTING POSTCODE / Hourly
Rate
From / 40 / To / 60 / 0.25
From / 20 / To / 40 / 0.10
From / 0 / To / 20 / 0.00
OFSTED GRADE BAND / Hourly
Rate
1 / 0.20
2 / 0.15
3 / 0.10
4 / 0.00

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