A SECOND attempt to secure £125,000 in extra funding for the  county’s only PFI school scheme will be made next week.

The Whitecross High School and Specialist Sports College scheme is struggling to cover its contractual costs.

As reported by the Hereford Times in July, Herefordshire Council is already paying more for the scheme than expected as contractual charges rise higher than inflation.

Next Friday,  the county’s schools forum will be asked to approve further financial contributions to the contract totalling £125,000 between 2015/16-2017/18,with the money coming directly from the council or through the county’s direct schools grant – the sum the council gets to run schools.

That decision was due to have been made in July but was not because the forum met as inquorate.

In July 2001, the council backed a business case that put its annual contribution to the scheme at between £603,000 and £731,000.

The council is currently contributing £760,811 and has to address the shortfall in payments.

Any move otherwise would not be permitted by the council’s auditors and could not be approved by the chief finance officer.

Around £1 million from the sale of the school’s former site was to have offset costs, but the site is yet to be sold.

The present financial pressure on the scheme is due to increases in the unitary charge - or revenue payments – being higher than planned inflation of 2.5 per cent.

Since 2006 inflation has been an average 3.6 per cent a year, increasing the PFI payments by an extra £95,000 in 2013/14.

Investment in the school’s intervention centre added capital costs of £298,000.

 If inflation continues at 3.6 per cent rate the unitary charge would be £590,000 higher. An increase as low as 1.1 per cent a year would cost an extra £7.4m over the PFI contract period.

The contract has since been reviewed with the original financial advisors Ernst and Young to identify some £45,000 in savings in IT, maintenance, insurance costs and after hours use of the school.

The contract is acknowledged as providing a “first class” secondary school rated “Good” by Ofsted.

BACKGROUND – THE WHITECROSS CONTRACT

PRIVATE Finance Initiative (PFI) contracts fund public infrastructure projects with private capital.

The 25-year contract for Whitecross has an overall value of £75 million.

At the end of the contract the school will transfer to council ownership.

In July 2001, the council’s cabinet backed the school’s outline PFI business case assuming PFI credits from the Department for Education (DfE) of £19.5 million and annual contributions from the council of between £603,000 and £731,000.

Stepnell Ltd was selected as the contractor in March 2004, but, following the tender clarification process, the bid was found to be outside the parameters of the approved outline business case and the DfE imposed new rules on the education revenue budget, making it difficult to fund the annual payment from the centrally held education budget.

The cabinet then backed a plan allowing for the DfE to be asked for an uplift to the PFI credit by making the contract operational after April 2006, reducing average annual payment by around £50,000 per year.