Guidance

A guide to new alternative provision free school revenue funding: 2023 to 2024

Updated 15 September 2023

Applies to England

This guidance is for alternative provision (AP) free schools opening in the 2023 to 2024 academic year.

It sets out:

• how we’ll calculate revenue funding for new free schools
• the financial governance and accountability requirements for trusts

Additional guidance on 2023 to 2024 high-needs funding for new AP free schools is available

The financial management and governance self-assessment tool helps trusts to assess a free school’s financial governance and compliance before opening.

This guidance does not cover:

• funding for:
  • mainstream free schools
  • special free schools
  • 16 to 19 free schools
• funding for hospital education
• AP free schools open before September 2023
• any initial funding to help free school proposers develop their projects before opening the school
• capital funding including annual costs of leasing premises
• Value Added Tax (VAT) - when open you can claim back any VAT paid on non-commercial activity, directly from HMRC via the VAT scheme for academies

School resource management

Effective schools make the best use of resources to have the maximum impact for their pupils. Schools that do this well tend to:

• plan their curriculum and finances together (known as integrated curriculum and financial planning)
• have a strategic approach towards financial planning for the longer term (3 to 5 years)
• deploy their staff effectively and efficiently, linked to their long-term plan
• have robust challenge from financially skilled governors and head teachers
• have skilled staff responsible for managing finances and procurement
• have transparent financial systems and processes

Guidance is available to support all schools to manage their resources to improve the education of pupils.

A self-assessment checklist is also available to helps academy trusts check they are managing resources effectively and identify any adjustments they need to make.

You can also find a DfE-approved framework to help save money on regular purchases such as furniture, cleaning services, and ICT. There’s guidance to support you when buying for your school.

School resource management advisers provide tailored advice on using resources to provide the best possible educational outcomes for pupils. Contact the Education and Skills Funding Agency (ESFA) to access this support.

To receive regular updates about school resource management tools, support and guidance, sign up for the school business professional newsletter.

Financial planning

Free schools should plan their expenditure using the most up to date financial template. This will make sure your school is affordable within the funding we provide. Email RevenueFunding.FREESCHOOLS@education.gov.uk for the latest financial template. This template includes the 2023 to 2024 funding rates.

You should update your financial plan as you:

• develop your plan for the school
• appoint staff
• develop site plans
• establish your costs
• get confirmation of your funding arrangements

Review your financial plan regularly to make sure they reflect the:

• likely number of pupils - base this on the number of applications
• funding arrangements for each new academic year

Submitting your financial plans

We ask free schools in the pre-opening stage to submit their current financial plans before entering into a funding agreement. This should include a version modelled around the minimum number of pupils you need to be financially viable.

You’ll need to resubmit your financial plans before your readiness to opening meeting. You should base it on evidence of commissioned places from schools or local authorities.

Submit your plans with evidence to underpin your pupil number assumptions which must be realistic and achievable. Your plans should reflect:

• your income which you base on your estimates of available grants
• your outgoings
• the likely number of pupils

Plans should show that you will not go into deficit at any point.

The financial benchmarking service allows you to compare your spending patterns to schools in similar circumstances.

Funding

In 2023 to 2024, the following funding will be available once open:

• per-place (FTE) funding
• commissioner top-up funding
• national 16 to 19 formula funding
• business rates grant
• teachers’ pay and pension employer contribution funding
• additional high-needs funding
• universal infant free school meals
• PE and sport premium
• post-opening grant

ESFA usually calculate and pay the funding for each free school. ESFA pays schools their funding monthly in equal instalments. This is usually on the first working day of the month. On your first month of opening, ESFA will pay you on the sixth working day of the month.

AP free schools are established in response to demand by local authorities or local schools. Local authorities are responsible for ensuring that adequate AP is available for pupils in their area who are not at a mainstream or special school.

Funding in AP free schools compromises of:

• place funding of £10,000 from ESFA for each full-time equivalent place for pre-16 pupils
• per-pupil top-up funding paid by the commissioner (local authority or other school or academy)
• per-student funding from ESFA for students aged 16 to 19 if the student is studying a 16 to 19 programme
• high-needs place funding, paid at the rate of £6,000 per place by ESFA, from deductions made from local authorities’ high-needs funding allocations, on the basis of places commissioned by local authorities
• any other funding received for commissioned services from the local authority or school commissioning the service

From the third academic year after an AP free school opens, ESFA will start to deduct the pre-16 place funding from the high-needs funding block within the dedicated schools grant (DSG) of the local authority for those pupils sole or main registered as at the October census. This is because some AP free schools accept pupils from local authorities other than the one in whose area they are located, or from schools and academies in other local authority areas. It would be unreasonable to deduct the place funding of £10,000 from a local authority if the pupil is only at the AP school for 2 months.

AP free schools’ continuing financial viability depends on local authorities committing to commission placements and services, and their willingness to provide associated funding.

We base the number of places we fund for the first 2 years on the evidence you provided in pre-opening of the estimated number of FTE places required for the number of pupils attending the free school. ESFA will review actual pupil numbers against planned places (occupancy). Under-occupancy in year one may impact upon the number of places we fund for year 2. We will base the per-place funding beyond year 2 will be based on evidence of occupancy and commissioning of places.

More information about high-needs funding and AP commissioned services is available in the high-needs funding 2023 to 2024 operational guide.

Pupil premium

The pupil premium provides schools with extra funding to improve education outcomes for disadvantaged pupils. It is not a personal budget for pupils and carries no individual entitlements.

In 2023 to 2024 schools receive the following funding for each pupil registered as eligible for free school meals at any point in the last 6 years:

• £1,455 for pupils in reception to year 6
• £1,035 for pupils in year 7 to year 11

Schools also receive £2,530 for each pupil who has left local authority care through:

• adoption

• a special guardianship order

• a child arrangements order

• a residence order

If a pupil has registered as eligible for free school meals at any point in the last 6 years and has also left local authority care for one of these reasons, they will attract the £2,530 rate.

ESFA makes pupil premium payments in quarterly instalments. We calculate a school’s pupil premium allocation from the information it submits in the October school census. We apply allocations from the start of the next financial year (April), paid in arrears so you’ll receive the first payment in June.

Local authorities receive £2,530 for each looked-after child in their care. They should spend this on their personal education plan in consultation with the child’s school.

Children from service families attract a separate grant – the service pupil premium. This is currently £335 per head. This grant is to support of children whose parents are or were in the armed forces.

National 16 to 19 formula funding

We use a national funding formula to calculate an allocation of funding for 16 to 19 institutions, each academic year.

[Student number x funding rate per student (dependent on band) x retention factor x programme cost weighting + level 3 maths and English payment + disadvantage funding + large programme funding] x area cost = core programme funding

minus

Condition of funding + advance maths premium payment + high-value courses premium + T levels industry placement funding = total programme funding

plus

Core standards funding + capacity and delivery fund + high-needs student funding + student support funding = total funding

We base the funding formula elements on historic data from the latest full year of data. For new free schools, we’ll use the national or local authority level averages for school and academy sixth forms for the first 2 years.

New free schools planning to offer 16 to 19 provision in their first 2 years of opening will be able to submit a business case before they open. Your delivery officer will contact you if you’re in scope to check if you want to submit a business case.

If we approve your business case, we’ll use that data instead of using averages. We’ll use actual historic data from year 3.

2023 to 2024 funding rates

We place students into funding bands based on the number of planned hours in their study programme. We assign each funding band a national funding rate.

Band	Annual planned hours	Students included	National funding rate per student
5	580+ hours	16 and 17-year-olds, students aged 18 and over with high needs	£4,753
4a	485+ hours	Students aged 18 and over who are not high needs	£3,932
4b	485 to 579 hours	16 and 17-year-olds, students aged 18 and over with high needs	£3,932
3	385 to 484 hours	All students	£3,198
2	300 to 384 hours	All students	£2,528
1	Up to 299 hours	All students	£4,753 per full time equivalent (the proportion of 600 hours)

For new free schools, we’ll assume that all students are full-time and under 18 unless you tell us otherwise. Students will attract the national funding rate of £4,753 per student.

The retention factor recognises the number of students who are continuing their programme. Each student who remains in learning to the planned end date of their study programme, or who you record as completed or continuing, gets full funding. Each student who is not retained attracts 50% of the full funding rate. For new free schools, we’ll use the national average (0.98185 in 2023 to 2024).

The programme cost weighting recognises that some programmes are more costly to deliver than others. We weight most academic and some vocational programmes at the base rate of 1. For new free schools, we’ll use the national average (1.04139 in 2023 to 2024).

Level 3 programme maths and English payment

The level 3 programme maths and English payment supports teaching maths and English to students who have not yet attained a grade 9 to 4 (legacy grade C) in either or both of these subjects.

Qualifying students on eligible 1-year programmes attract a single payment per subject of £375. Qualifying students on eligible 2-year programmes attract a single payment of £750.

For new free schools, we’ll use the national average instances per student (0.02135 for 1-year programmes and 0.02639 for 2-year programmes in 2023 to 2023).

Disadvantage funding

Disadvantage funding supports students from areas of economic deprivation based on the indices of multiple depravation (IMD). For the 2023 to 2024 allocations, we’ll be using IMD 2019. For new free schools, we’ll use the local authority average.

Disadvantage funding also provides additional funding to support young people who have not yet achieved a GCSE grade 4 (legacy grade C) in maths or English by the end of year 11. For new free schools, we’ll use the national average (0.1316 instances per student in 2023 to 2024).

Area cost uplift

The cost of education in London and parts of the south-east is higher than in the rest of England. This is due to the cost of premises and maintenance, staff and other costs. We give institutions in these parts of England extra funding through the area cost uplift.

The area cost uplift varies from 20% to 1%.

We do not apply the area cost uplift outside London and the south-east.

High value course premium

The high value course premium supports the sector to grow the number of students studying level 3 study programmes in selected subjects that lead to higher wage returns. Qualifying programmes attract an additional £600 for each year of the programme.

For new free schools, we’ll use the national average (0.31096).

Discretionary bursary funding

Discretionary bursary funding consists of:

• financial disadvantage funding
• travel costs

We use the student’s home postcode to calculate financial disadvantage funding. Those in the top 27% most deprived areas of the country (based on IMD 2019) attract funding.

Travel costs takes account of rurality and the distance travelled by each student to your location. For new free schools, we’ll use the local authority average to take account of local variances.

Other elements of the national 16 to 19 formula funding

We may allocate high-needs funding. You’ll get £6,000 per student for each place identified by local authority commissioning plans and decisions.

Other elements of the funding formula are not applicable to new free schools. This includes:

• the large programme uplift
• advanced maths premium
• T levels
• capacity and delivery funding

More information is available on 16 to 19 free school revenue funding.

Pupil number adjustment

We need robust and realistic estimates of pupil numbers to ensure that we fund the school accurately. In the first year of opening, an early pupil number adjustments exercise will happen. If the October census shows that the school has not admitted the predicted number of pupils, we’ll recover any excess funding in the following academic year.

If a school has recruited more pupils than they got funding for, ESFA will carry out an in-year reconciliation. They will pay any additional funding in February of the current academic year. ESFA will initially base allocations on an estimated number of pupils and local authority average pupil characteristic data. Any positive or negative adjustment will use the actual pupil characteristics returned in the October census. They will replace the averages initially used if it produces a more favourable outcome for the school.

From the second year of opening, ESFA carries out the in-year reconciliation for the number of pupils. They will pay any additional funding in July of the current academic year. Any recoveries will start in the following academic year.

If academies have a positive pupil number adjustment and an outstanding pupil number adjustment, ESFA will:

• reduce the pupil number adjustment by the amount of the outstanding debt
• if there is a net negative adjustment, use the positive amount to offset the debt and confirm any agreed deferrals or repayment plans against the lower amount

More information is available in the guidance for academies funded on estimated pupil numbers.

Where local authorities have already funded for growth in pre-16 pupil numbers to meet basic need, ESFA will deduct the amount they have paid from any positive pupil number adjustments. This will ensure that academies are only funded for the growth once.

Teachers’ pay and pension employer contribution funding

We’ll continue to provide support to schools for the 2018 and 2019 teachers’ pay awards in the 2023 to 2024 financial year. Since 2021 to 2022, we have paid most of this funding through the high-needs national funding formula (NFF) to local authorities.

In the 2023 to 2024 financial year, local authorities will remain responsible for paying this funding as an amount of high-needs funding per place to all AP free schools in their area. It is equivalent to the previous teachers’ pay grant and teachers’ pensions employer contribution grant.

Additional high-needs funding

We have allocated local authorities extra funding for 2023 to 2024. They must pass a proportion of that funding on to special free schools as an additional amount of funding per high-needs place.

Guidance for local authorities on the calculation of this funding is set out in annex 2 of the high-needs funding operational guide for 2023 to 2024.

Business rates grant

Mainstream free schools pay business rates at the 80% discounted charitable rate. They get a grant to cover the actual costs paid.

You can claim for national non-domestic rates. Your billing authority may submit a claim on your behalf.

Universal infant free school meals

State-funded schools in England must provide free lunches to infant pupils who are not otherwise entitled to benefits-related free school meals.

Schools currently receive £457.90 for each of the eligible pupils. This is the equivalent of £2.41 per day for a school year for each of the eligible pupils.

Schools will receive an initial provisional payment in October based on:

• the pupil numbers estimate we use to issue your indicative funding letter

• the average universal infant free school meals take up rate in your local authority.

We’ll adjust it to reflect actual pupil numbers in July. We’ll base this on meal take-up to date from the October and January school census. The July payment will also include an additional allocation for the first 2 terms of the next academic year.

PE and sport premium

Free schools with primary age pupils receive PE and sport premium funding from ESFA. ESFA base this on the number of pupils in years 1 to 6. This grant is to make improvements to the quality of physical education (PE), physical activity and sport schools offer. ESFA pay this separately to general annual grant funding.

We base school allocations on the January school census. For example, January 2022 census for the 2022 to 2023 academic year. For free schools that open in September 2023, we’ll base the funding will on the data from the October 2023 census. ESFA will make payments in the following March.

The free school will receive PE and sport premium funding for a new academic year from the ESFA in 2 separate payments. These are:

• 7/12 of the funding allocation in November 2023 (or in March 2023 for new schools)
• 5/12 of the funding allocation in May 2024

Post-opening grant - central route projects only

We provide AP free schools with a post-opening grant. Free schools set up through the local authority presumption route are not eligible for the post-opening grant.

The post-opening grant covers additional costs in establishing a new publicly funded school which are not covered by the general annual grant. It provides funding in 2 elements as the free school grows:

• non-staffing resources, paid on a per-pupil basis
• a leadership grant

We pay the resources element each year that the school builds up to capacity for each new pupil expected to be on roll. We do not revise it after opening to reflect actual pupil numbers. We take these numbers from the final finance plan you submit before opening. We pay it at the following rates:

• £250 for each new pupil in the primary phase (reception to year 6)

• £500 for each new pupil in the secondary and 16 to 19 phases (years 7 to 13)

To initially calculate the post-opening grant, we use a maximum of 4 years for the non-staffing resources element and 3 years for the leadership element. Delivery officers will talk to trusts about this. We pay it over the first 3 months of the academic year. 50% paid in month 1, 25% in month 2 and 25% in month 3.

We pay the leadership element on a case-by-case basis following negotiation based on the needs of the new school. We pay it in equal monthly instalments.

Risk protection arrangement

Risk protection arrangement (RPA) is an alternative to commercial insurance, whereby government funds cover any losses that arise. The RPA will cover losses that are in scope of the RPA membership rules.

The RPA membership year runs from 1 September to the following 31 August. You can join at any time. Free schools can join the RPA scheme and receive cover before opening. There is no cost or premium to join the RPA in pre-opening. Free schools in the pre-opening stage, should discuss joining the RPA scheme with their delivery officer.

Once a school is open, ESFA will deduct the per-pupil cost at source from the free school’s general annual grant. The cost of RPA for the academic year (1 September 2023 to 31 August 2024) will be £23 per pupil.

Free schools do have to join the RPA scheme and can make alternative insurance arrangements.

Financial governance and accountability

Trusts will need to ensure that spending decisions are transparent, and in the school’s best interests. Free schools will need:

• sound financial procedures
• the capacity to handle public money
• good governance arrangements

On opening, you will need to:

• have a robust framework to manage your funding
• make sure you maintain proper accountability and procedures

Academy Trust Handbook

You must comply with the Academy Trust Handbook throughout the pre-opening period and once open. It sets out the financial management and governance requirements for academy trusts.

Non-compliance with the handbook is a breach of contract.

The handbook includes requirements on:

• financial oversight
• financial planning
• internal control
• financial monitoring and management
• the proper and regular use of public funds
• auditing

The handbook sets out that the accounting officer is personally responsible to Parliament, and to the accounting officer of ESFA, for the resources under their control. This personal responsibility extends to ensuring regularity, propriety and value for money. The accounting officer also has responsibilities for:

• keeping proper financial records and accounts
• the management of opportunities and risks

Financial statements

All academy trusts with a funding agreement must submit an audited annual report and financial statements to ESFA by 31 December. This includes trusts with free schools.

The academies accounts direction explains the requirements for preparing and auditing academy trusts’ annual financial statements. Before signing your funding agreement, prepare your financial statements following company law.

Trusts must set their accounting reference date to 31 August at Companies House. This is the date you will use to produce your financial statements.

Trusts must file their accounts by 31 May with Companies House.

Other financial returns

Once open, trusts must also submit the following financial returns to ESFA:

• budget forecast return 3-year in August
• audited financial statements for the year ending 31 August, by the following December
• academies accounts return for the year ending 31 August, by the following January
• the land and buildings collection tool as at 31 August, by the following November
• a financial management and governance self-assessment within 3 months of opening

You are responsible for keeping up to date with the latest deadlines and requirements. More information about academies financial returns is available.

Document exchange

Document exchange is a secure, online service accessible via DfE sign-in. It enables academies to receive and exchange documents with ESFA.

As soon as you open, it will add you to the document exchange. It will use your information from get information about schools.

Contact ESFA via their online enquiry form if you have any queries.