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LSC Funding 2008/09 and 2009/10 including Funding Compliance Advice and

LSC Funding 2008/09 and 2009/10 including Funding Compliance Advice and Funding Claims and Reconciliation 2008/09/10/11 (small print conditions always applies) December 2009 By Funding Policy Implementation Team. Funding Guidance. 01. LSC Funding Guidance 2009/10.

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LSC Funding 2008/09 and 2009/10 including Funding Compliance Advice and

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  1. LSC Funding 2008/09 and 2009/10 including Funding Compliance Advice and Funding Claims and Reconciliation 2008/09/10/11 (small print conditions always applies) December 2009 By Funding Policy Implementation Team

  2. Funding Guidance 01

  3. LSC Funding Guidance 2009/10 LSC Funding Guidance 2008/09 has been published as six separate documents, listed below: • Funding Rates • Funding Formula • Funding Principles, Rules and Regulations • Learner Eligibility Guidance • Funding Compliance Advice and Audit Guidance for Providers • Funding Claims and Audit Returns These also apply for 2009/10 apart from where replaced and/or updated by LSC Funding Guidance 2009/10. Anything in the Addendum for 2008/09 that applies to 2009/10 will appear in the final version of LSC Funding Guidance 2009/10 book.

  4. LSC Funding Guidance 2010/11 Separate YPLA and SFA Guidance Current Plan Common • Learner Eligibility Guidance incorporating main compliance rules (as in 2008/09) • Funding Claims and Audit Returns (possible for all Learner Responsive (as in 2008/09) Separate • YPLA Funding Guidance (joint schools and FE) • SFA Guidance for each Funding Stream (TtG/Apprenticeships/ALR)

  5. The longer funding future • Unpredictable • Public Expenditure Settlements will be challenging for the sector for the years ahead • Providers will need to understand the following: • Their cost base • How their provision generates costs and income (funding) • Which provision contributes to their bottom line • What will meet future government targets • Requirement to negotiate with LA • Probability of further instability in Funding Body arrangements • Reductions in Rates

  6. FG Addendum 2008/09-Claims • Revised operational guidance 2008/09 including • Final tolerance for over and under performance 5% • Cap on growth claims* at 110% (5 %payable) • Cap on clawback at 85% (10% recoverable) • * but growth claims must also meet Regional LSC priority requirements • 2009/10 arrangements now changed and set out in FG 2009/10

  7. Funding Claims Learner-responsive Funding Model 02

  8. Funding Returns 2008/09 Learner Responsive- Involves 3 returns but 2 cash adjustments (supported by ILR data?) Similar to previous returns (see workbook now on web): (and very similar for 2009/10)

  9. Funding Claims & Deadlines • Result of late claims • If final claims are not received by LSC by 23 November 2009 then result is: • No growth payments for over delivery (any mid-year payments recovered) • No tolerance of any kind for underperformance and all underperformance recovered • This is a condition of funding as set out in claim book • (late claims will give LSC additional resources)

  10. Funding Claims & Funding Formula • 16-18 Funding Claim: • Includes all 16-18 learners coded A10=A21 and who are aged under 19 at start of the funding year; • Includes all learners aged 16-18 according to date of birth field at start of funding year and who have been coded A10=22. New DSAT available to identify these learners (90-03-222); • Does NOT include all learners who started programmes as 16-18 learners but who are aged over 19 at start of funding year in the second (or subsequent year of programme)

  11. Funding Claims & Funding Formula • 19 + Adult Learner Funding Claim: • Includes all learners who started programmes in previous years as 16-18 but who are aged over 19 at start of the current teaching year (such learners should be coded A10=21 and whose funding is calculated using 16-18 rates and formula (also shown as an “of which” total in Rows D of adult funding claim report; • Includes all learners aged 19 or over at the start of the teaching year and who have been coded A10=22; • Does NOT include any learners who according to the ILR date of birth field are aged under 19 at start of the funding year (even if A10=22) – see new DSAT.

  12. Funding Claim & Funding Formula • Both Funding Claim Reports (2) • In both cases, for any learner whose total funding cash is calculated from a different funding model than that being reported on the funding claim, the following should be noted: • For these cases, both the Provider Factor (PF) & the National Rate from the other learner-responsive funding model will have been used to generate the cash figure on funding claim.

  13. Funding Claims & Funding Formula • Both Funding Claim Reports (3) • In both cases, because learners may be reported in one funding model but whose funding is calculated using the different model the relationship of claim SLN and funding cash values may not be simply checked by applying standard formula: • SLN x PF x National Rate = Funding Cash

  14. Funding Claim Example

  15. Profiling 2009/10 Allocation (1) • The LSC based mid-year reconciliation in the Adult Learner Model on whole year estimates (similar in nature to 2007/08 FE in-year estimates) which will be sent to the LSC in early February 2010 together with the associated Learner Responsive ILR F02 return. • The next slide suggests how the mid-year actual part of the estimate was validated but it is only the whole year figures that will be used in the reconciliation process. • Similar to 2008/09 mid-year estimates

  16. Profiling 2009/10 Allocation (2) • Profile split for mid-year and final stages Calculate from provider data returns: • In September 2009 SLN profile Mid-Year/End Year • In December 2009 SLN profile Mid-Year/Final • In December 2009 from final F05 (2008/09), SLN profile using ILR data to determine learners started or on programme by 31 January 2009 • These profiles will be an important part of process by which partnership LSC teams agree the validity of the mid-year actual part of the 2009/10 mid-year claim.

  17. Profiling 2009/10 Allocation (3) • Profile split for mid-year and final stages • Use 2008/09 returns for initial profiling • Use 2008/09 new funding returns to establish in 2007/08: • Actual SLN numbers at End of Jan 2009 (Feb return) • Actual SLN numbers at Year End Return (Sept return) • Actual SLN numbers at Year End Return (November return) Calculate from provider data returns: • In September 2009 SLN profile In-Year/End Year • In December 2009 SLN profile In-Year/Final • In December 2009 from final F05 (2008/09), SLN profile using ILR data to determine learners started or on programme by 31 January 2009 • Profiles will be agreed between LSC and Providers and this will inform decisions to improve accuracy – vital for reconciliation

  18. Information needed for ALM reconciliation

  19. Information needed for ALM reconciliation

  20. Reconciliation-”The Rules” • Rules and Aims: • Funding calculated by SLN * National Funding Rate * Provider Factor • But for reconciliation following points: • As allocation has at least 2 groups of learners, fully funded and co-funded then SLN and cash variances will differ • The National Funding Rate will be used for all reconciliation purposes • Tolerance varies according to period and according to outcome • Avoids the “Golden £” effect 2008/09 – Returns in 2009/10 • See LSC FG Addendum as to why formula does not quite apply on Funding Claims Report

  21. Reconciliation-”The Rules” • Rules (2008/09 Only): • ALL RECONCILIATION ADJUSTMENTS ARE IN CASH (£) • Tolerance at mid year is 5% • Tolerance at end year is 5% (and remains at 5% for over performance to meet affordability requirements). • Growth is subject to delivery of provision that meets LSC priorities as agreed by LSC partnership team • Growth adjustments capped at mid year (between 5-8%). • Growth adjustments capped at end-year (between 5-10%).

  22. Reconciliation-”The Rules” • Rules: (cont): • Funding outside tolerance is recovered at the full funding rate for under performance (subject to a cap in 2008/09) but over performance is limited by application of a maximum growth cap • Mid year adjustments are held separately from end year calculations so that no perverse incentive to either overstate or understate mid year review return • All Mid year adjustments are calculated with reference to whole year allocation and claim figures.

  23. Reconciliation for Underperformance-”The Rules” • Clawback (assumes underperformance) = Claim/Estimate (£) - Allocation (£) = Variance (£) If performance outside tolerance range do calculation below) + (Tolerance in reverse sign to variance) (£) = Revised Variance (at Full Rate) (£) = £ Cash recovery adjustment

  24. Reconciliation 2008/09UNDERPERFORMANCE Mid-year Claim 90 Allocation 100 Variance - 10 Deduct mid-year tolerance (5%) + 5 Mid-year Adjustment (Clawback) - 5 Final Claim 90 Allocation 100 Variance - 10 Deduct final tolerance (5%) + 5 Deduct mid-year adjustment - 5 Final Adjustment (Clawback) - 0

  25. Clawback reduction for Negative Transitional Protection B: Programme Allocation (PA) 1,000,000 C: Transitional Protection (TP) - 90,000 D: Percentage TP of PA (-C/B) 9 % E: Clawback (before adjustment) -100,000 F: Clawback relief for negative TP + 9,000 (- E x D) G: Actual cash clawback - 81,000 (E + F) (Note: E is always negative and F always positive)

  26. Final Claim Reconciliation 2008/09OVERPERFORMANCE Growth will also be subject to a cap limit of around 3-5 % above tolerance and agreement by LSC that growth meets LSC priorities. The example shown in these slides shows the mid-year cap of 3% maximum growth funding is raised to 5% for final claims in 2008/09. This decision for 2008/09 only has been formally notified by the LSC in Addendum to LSC Funding Guidance 2008/09.

  27. Reconciliation 2008/09OVERRPERFORMANCE Mid-year Claim 108 Allocation 100 Variance + 8 Deduct mid-year tolerance (5%) - 5 Mid-year Adjustment (Growth) + 3 Final Claim 110 Allocation 100 Variance + 10 Deduct final tolerance (5%) - 5 Deduct mid-year adjustment (growth) - 3 Final Adjustment (Growth) ** + 2

  28. Reconciliation-”Impacts” • Growth payments will be restricted to LSC main priorities and extra funding limited to between 5 and 10 per cent of allocation with first 5% additional activity unfunded. • Growth payments will require confirmation first from LSC partnership team that growth meets LSC priorities. • Clawback calculations will only be calculated from the overall figures (total ALR funding figures). The protection against under performance is the tolerance first 5% and all underperformance below 95% is recovered (subject to a cap on clawback at 10%).

  29. Reconciliation-”The Rules” • Changes for 2009/10: • ALL RECONCILIATION ADJUSTMENTS ARE IN CASH (£) • It is not expected that budgetary resources will be available to pay any growth in 2009/10 • Tolerance for underperformance limited to 3% AND only given to providers delivering above 97% • Re-basing opportunity limited to 15 February 2010 to access tolerance relief • Persistent underperformance to be rewarded in 2010/11 by making over delivery easier through reduced allocations

  30. Funding 2008/09-2010/11 • Persistent underperformance defined as providers benefiting from tolerance arrangements for two consecutive years • In third year provider will be required to make up the full value of tolerance benefits from two previous years • But Providers over delivering in 2009/10 wipe out their 2008/09 tolerance benefits for purposes of future year allocations • LSC/SFA will reduce allocation in 2010/11 so provider can more easily deliver the necessary growth in 2010/11 (simple example overleaf)

  31. Persistent Underperformance • Allocation 2008/09 and 2009/10 = £1,000 • Delivery in 2008/09 = 800 (tolerance 10%) • Delivery in 2009/10 = 800 (but provider rebases so delivery = 97%) • Tolerance Benefit = 13% (10% + 3%) • 2010/11 Allocation • Start at delivery = 800 • Deduct Tolerance given in 2008/09 and 2009/10 (13%) • Allocation (2010/11) = 708 (over delivery of 13% needed) • Provider needs to deliver at least 800 to clear tolerance slate • This is expected to release resources for persistent over performance of LSC priority provision for future years

  32. Funding Guidance-2010/11 • Persistent underperformance defined as providers benefiting from under performance tolerance arrangements for two consecutive years. • All 2010/11 allocations for all persistent underperforming providers will be subject to re-basing during 2010/11 to ensure that final delivery in 2010/11 meets the requirement to (will be written into Funding Guidance 2010/11): • “providers are expected to average at least 100 per cent of their funding agreements in every funding year” • The following slide shows an example of a provider re-basing in 2009/10 to achieve status and benefits of being an “ occasional underperformer”

  33. Occasional Underperformance • Allocation 2008/09 = £1,000 and in at start 2009/10 = £1,000 • Delivery in 2008/09 = 900 (tolerance 5%) • Delivery in 2009/10 = 901 (* over by £1 as allocation reduced by £100 in January 2010) • Tolerance Benefit = 5% (5%) (2008/09) • 2010/11 Allocation • Start at delivery = 901 • Deduct Tolerance given = - 0 (over delivered in 09/10) • Allocation (2010/11) = 901 (delivery of 97% needed to avoid clawback) • This has releases resources of £100 for provider over delivering LSC priority provision in the future

  34. Reconciliation 2009/10 • Opportunities for re-basing allocations to secure a 3% tolerance or so provider can over deliver in 2009/10 so under performance “occasional” and not “persistent” limited to 15 February 2010 • Clawback profiled for 100% in March 2010 (providers cash flow suffer more from clawback than by agreeing to re-base and the clawback reflects the cash flow advantage secured by colleges with under performance between August 2009 and February 2010) • Mid-year estimates will be properly validated in February so clawback is applied where necessary in March 2010 • Underperformance properly reflected in 2010/11 allocations

  35. SLN and Learner’s - Starts & Withdrawals 03

  36. Start • Annual SLN will be counted when a learner is deemed to have started. • A learner is deemed to have started a learning aim once they have remained on that learning aim for the period of time defined in the table below: • For learning aims that span more than one academic year, starts are determined separately for each year, in line with the approach of calculating an Annual SLN value separately for each year.

  37. Start and WithdrawalLearner Responsive Model • A learner is considered to have withdrawn from a programme of study • if they: • are known to have withdrawn or • have not attended class for 4 continuous weeks. The withdrawal date is the last date of actual attendance recorded in the ILR. • If a learner has withdrawn from a programme before the start • qualification period they do not generate any Annual SLN in that year. • For more information, see Funding Formula 2008/09.

  38. Start and Withdrawal (1)Employer Responsive Model • A learner is considered to have started a programme if they meet the minimum qualifying period – 6 weeks for courses of 24 weeks or more. • In order to claim funding, the learner must still be ‘in learning’ on the last day of the calendar month. Funding is claimed monthly in arrears in the ILR.

  39. Start and Withdrawal (2)Employer Responsive Model • A learner is considered to have withdrawn from a programme of study if they: - are known to have withdrawn or - no evidence of participation for 12 weeks. • If a learner has withdrawn from a programme before the start qualification period they do not generate any SLN instalments in that year. The withdrawal date is the last date in the ILR of actual attendance.

  40. Achievement Employer Responsive Model • Evidence on achievement for employer-based delivery is summarised in Annex B paragraphs 25 and 26 • These paragraphs recognise both paper and electronic records as equally valid audit evidence of funding claims for achievement for both NVQs and Apprenticeships • (either electronic or paper)

  41. Annual SLN • Annual SLN is the measure used directly in the funding calculations for the purposes of calculating actuals at learning aim level for the 16-18 and Adult Learner Responsive Models (LRM). • Annual SLN is derived from the SLN Value by application of the SLN section of the funding calculations. • Annual SLN can also be described as the process that distributes the SLN Value across funding years in order to derive the amount of activity in each year.

  42. Example • A learner starts a 1 year AS level on the 10th January 2009 and finishes on • the 18th December 2009. How much SLN is paid in each year? • On the LAD, find the SLN Value. For 2008/09, this can be found on the Shared tab and for 2008/09 the tab for the relevant model. • For this course SLN Value = 150 GLH. • 2.To calculate the SLN Value for a qualification: GLH 1 SLN Total SLN Value = 150 450 = 0.333 (3 dp) Total SLN Value = Therefore, 1 AS level learning aim is worth 0.333 SLN

  43. Example Funding Year: 1st Aug – 31st July • For each qualification: • 3. Does the programme cross a funding year? • Yes – then split the programme by funding year so: • For 2008/09: 10th Jan – 31st July • For 2009/10: 1st Aug – 18th Dec • 4. Then count the days in each funding year: • For 2008/09: 10th Jan – 31st July) = 203 days (29 weeks) • For 2008/09: 1st Aug – 18th Dec = 140 days (20 weeks) • Total days = 203 + 140 = 343

  44. Example SLN per funding year = Year z day count Total day count Where z is a different year for each calculation X SLN Value X SLN Value • 5. Now calculate the SLN for each funding year: • For 2008/09: Annual SLN = 2008/09 day count • total day count • So Annual SLN = 203 • 343 • For 2008/09: Annual SLN = 2009/10 day count • total day count • So Annual SLN = 140 • 343 X 0.333 = 0.197 (3dp) X SLN Value X 0.333 = 0.136 (3 dp)

  45. Example • 6. How much SLN is paid in each year? • In 2008 = 0.197 In 2009 = 0.136 • If the learner had taken 3 AS levels in the 1 year instead of one, then: • All AS Levels have the same SLN glh on the LAD – 150 • Therefore the SLN paid each year is multiplied by 3: • In 2008 (0.197*3) = 0.592 • In 2009 (0.136*3) = 0.408 • = 1.000 • * Assumes the dates of each AS level are the same.

  46. Monthly Payments • Profile Payments (based on ILR start and end dates) • A learner starts on a 9 month programme. • In terms of programme payment (75%), the rule is: • So for this example (n+1) = (9+1) = 10 instalments over 9 months. The first payment includes 2 instalments and subsequent payments are equal –so 2/10 followed by 1/10 for 9 months, (that is 100% of the 75%). (n+1) where n is the planned months on programme. 25% of total funding is then paid on achievement

  47. Audit & Compliance Advice 04

  48. Funding Compliance Advice - Overview • Six sections in document: 1Format and Background 2 Evidence of Learner Existence & Eligibility 3 Partner Provider Provision 4 Additional Learner Support 5 Withdrawals 6 Additional advice on Individual Qualifications and Delivery Guidance very similar since 2004, but includes new summary guidance in Annex B in respect of the Employer Responsive Funding Model.

  49. Section 2: Learner Existence & Eligibility Compliance evidence of learner existence and eligibility – for all providers • Records of learner existence and eligibility • Learning agreements • Enrolment forms • Registers • Withdrawal/transfer forms • Achievement • Documentation – originals held by colleges not partner providers • This section is repeated in LSC Learner Eligibility Guidance

  50. LSC Funding & Compliance Guidance • Evidence of eligibility & existence (1) • Paragraph 41 • The enrolment form and learning agreement may be combined to form one document, which should contain all relevant information • But for each learner a provider should have as a minimum a signed combined form – Paragraph 38 • See additional guidance on Data Protection Statement that must be signed by all learners (2008/09 and 2009/10)

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