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LSC Funding 2008

2. LSC Funding Guidance 2008/09 has been published as six separate documents, listed below:Funding Rates Funding FormulaFunding Principles, Rules and RegulationsLearner Eligibility GuidanceFunding Compliance Advice and Audit Guidance for ProvidersFunding Claims and Audit ReturnsThese also

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LSC Funding 2008

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    2. 2 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. LSC Funding Guidance 2009/10

    3. 3 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

    4. 4 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

    5. 5 Funding Returns 2008/09

    6. 6 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)

    7. 7 Funding Claim Example

    8. 8 Reconciliation-”The Rules” Rules: (2008/09): ALL RECONCILIATION ADJUSTMENTS ARE IN CASH (Ł) 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.

    9. 9 Reconciliation-”The Rules” Rules (2008/09 Only): Tolerance for both underperformance and over performance is 5% in 2008/09 Cash adjustments limited by both growth and recovery caps Growth is subject to delivery of provision that meets LSC priorities as agreed by LSC partnership team Growth adjustments capped at : mid year 3%; final 5% Recovery cap at 10% *if delivery below 85%) But providers under performing will need to average 100% delivery in future years to make up tolerances

    10. 10 Reconciliation for Underperformance-”The Rules” Clawback (assumes underperformance) = Claim/Estimate (Ł) - Allocation (Ł) = Variance (Ł) If performance outside tolerance range do calculation below) + (Tolerance in reverse sign to variance) (Ł) = Revised Variance (at Full Rate) (Ł) = Ł Cash recovery adjustment

    11. 11 Reconciliation 2008/09 UNDERPERFORMANCE

    12. 12 Clawback reduction for Negative Transitional Protection

    13. 13 Reconciliation 2008/09 OVERRPERFORMANCE

    14. 14 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%).

    15. 15 Reconciliation-”The Rules” Changes for 2009/10: ALL RECONCILIATION ADJUSTMENTS ARE IN CASH (Ł) 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

    16. 16 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 help by reducing allocation in 2010/11 so provider can more easily deliver the necessary growth in 2010/11 (simple example overleaf)

    17. 17 Persistent Underperformance Allocation 2008/09 and 2009/10 = Ł1,000 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

    18. 18 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”

    19. 19 Occasional Underperformance Allocation 2008/09 = Ł1,000 and in at start 2009/10 = Ł1,000 Delivery in 2008/09 = 900 (tolerance 5%) Delivery in 2009/10 = 901 (* over by Ł1 as allocation reduced by Ł100 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 Ł100 for provider over delivering LSC priority provision in the future

    20. 20 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

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