There is a general feeling amongst many Bursars and Financial managers that 1:1 provision is simply not affordable, be assured it is. This section will give you an overview of the different financial management options available to you and help you decide the most appropriate way of financing your programme.
The cost of setting up a programme can seem daunting and full of risk but don’t let this put you off, there are a number of different methods of financing a programme that will help minimise the risk and help establish a financially sustainable programme.
Financial management methods
Here are the primary methods of financing a programme. They are most effective when a number of them are combined together to best suit the circumstances of your school.
The Government introduced a Pupil Premium in 2010 specifically to address the attainment gap i.e. the difference in the academic performance of children on Free School Meals and everyone else.
Schools have a duty to report what this money has been spent on, and Government is monitoring the attainment gap through comparing results of pupils in national league tables.
Where families are unable to contribute towards the cost of a device for a child and Internet connectivity at home then Education Ministers have confirmed that it is perfectly valid to use the Pupil Premium to overcome the digital divide and ensure that disadvantaged children have the same access to digital learning as better off children.
Pupil Premium funding has a specific purpose; to help children from low income families have better opportunities to succeed. The proof it is working is when the attainment gap shrinks. This is therefore an important source of funds for a 1:1 programme, especially when combined with parents who can afford to contribute something.
When considering how much a programme will cost the school you need to balance this against potential cost savings in a number of areas. You may be surprised how these savings can add up and make a very positive contribution to the programme.
Financing a programme is not just about finding new income. The introduction of a 1:1 programme, particularly if it is across the entire school, will create a number of significant savings that can be used to offset some of the costs. Some savings will be immediately felt others will be seen further on when contracts come up for renewal and obsolete equipment will not need replacing.
Six of the savings that schools can make will be revealed under the numbers below, but depending on your individual school's situation there could be other savings available.
Some schools have also been able to add additional revenue streams by selling access to their WiFi to the surrounding community or offering other networkable functionality.
Reducing the number of ICT suites
Traditional ICT suites are often only used for part of the day and, because of their design, are rarely suitable for any other use. Their closure not only removes the maintenance and replacement costs of the technology but releases the rooms for general use – in some cases removing the need to build additional classrooms.
Provision of reference and course books
Once every pupil in a cohort has a device you are able to buy e-books at cheaper rates, sometimes free, and be more responsive to curriculum changes.
Software licensing costs
Depending on the choice of device a school may find that some of their software licences are no longer required. This is particularly relevant when using cloud based services. Devices that use 'Apps' may also be able to provide much lower cost or even free software for every device.
Significant reductions in Photocopying
Once every pupil has their own device, schools can make savings on the number of photocopiers, paper, toner, electricity and replacement machines as many previously printed documents are now available and shared electronically.
ICT suites can consume a considerable amount of power whereas in a 1:1 programme pupils are expected to charge their devices at home overnight. A well selected device will have a battery life that will easily last the school day.
Reduced additional tutoring costs
On-line tutoring that can be accessed at home can be provided at a much cheaper cost than traditional face to face tutoring in school. This can support highly gifted pupils who want to study unusual subjects, and provide vital catch up support to children who have fallen behind.
For many schools facing challenging financial times, 1:1 provision of devices is only possible with financial help from parents. Clearly, the amount it is reasonable and practical to ask from parents will vary depending on the local area i.e. average salaries, employment rates, etc. It should also bear the cost of the device in mind and the period of the time the device is expected to be required for schoolwork.
The most successful programmes are where the school and the parents share the cost and where the programme offers far more than just a device. It could include parental training, improved communications between school and home, educational software, insurance, warranty and a carrying case or cover.
Contribution levels set at a level significantly above the purchase cost of the device could well be regarded with suspicion by parents, even though the programme may well offer other benefits that also incur costs to the school.
The more holistic the programme, the further it gets away from being a "laptop" or "tablet scheme" with inevitable comparisons on how much the same device can be bought on eBay!
How much can you ask for?
When asking for parental contributions you need to be sure that you are asking for a realistic donation. £12 - £15 a month is a common level. Below this figure the cost of collection becomes disproportionate to the value of the donation (in this case we would recommend you ask for quarterly donations rather than monthly). When you go above this you may put it beyond the ability of more and more parents. Some will just say no, others might initially commit but then fall away. Many schools will run the programme over a three year period allowing them to reduce the monthly guide figure.
It is important to remember that where you are planning to benefit from Gift Aid you are asking for a 'donation' and not a 'payment'. Although you set a guide donation price parents are free to say they are only able to pay a lower figure. You must also take into account those for which any donation is not possible and consider how you are going to accommodate the cost of provision within the programme; perhaps by using Pupil Premium funds that are specifically provided to support every child eligible for Free School Meals.
Provided that your school meets the expectations created prior to the programme launch you can reasonably expect parents to honour their commitment regarding their contributions. Usually, their main expectations are in three key areas;
- Effective and regular use in class - in most if not all subjects
- An efficient repair and return service when things go wrong with the device
- A regular flow of information about what the devices are being used for
None of these commitments are unreasonable and should be integral elements of the school's implementation plan, no matter what the source of funding. Experience has shown that if these key elements are not maintained then you will start to receive complaints from parents and soon after that donations will slip away and the programme will become more demanding of school funds.
Some parents will be opposed to their child having a device from the school. This could be due to religious reasons; the fact that they feel their child has extensive access to a computer at home; or because they remain wedded to traditional education values and practices. In this case they can choose to opt out, but need to be made aware that this does mean their child may have to share a device when they are in use in the classroom.
Some schools are prepared to let pupils bring their own device into school where that device is consistent with what is being provided to the other pupils (this has happened in recent large implementations of iPad schemes).
In all cases, offering parents the opportunity to 'opt out' of a 1:1 programme is an important policy to have in place, and is required by HMRC where Gift Aid is to be claimed.
If you are a registered charity, or use a charity like the Learning Foundation to manage the regular collection of parental donations, AND your scheme complies with HMRC rules on charitable giving, then you will be able to benefit from the additional Gift Aid income towards the total costs of the programme.
It is often used to cover the cost of administering the scheme and the donation collection process. The current rate is 25% of any donation made by a tax-payer who has signed a valid Gift Aid declaration.
Gift Aid is the government scheme which allows charities to reclaim the basic rate tax that has already been paid by tax paying donors to a programme.
In order to be able to claim the Gift Aid, donors must complete and sign a valid Gift Aid declaration confirming that they are a UK tax payer and they have paid enough tax to cover the amount that the charity will reclaim.
HM Revenue & Customs will then refund 25p for every £1 donated, at no extra cost to the donor. This additional revenue can make a valuable contribution to running a programme. Gift Aid can only be collected by a registered charity.
Even if your school is a registered charity, there are strict rules governing Gift Aid, from how you explain it to the donor, to how you record the donations made. Failure to comply with the rules can result in very substantial fines. If the prospect of the administration seems a little daunting then an alternative is to use the Donation Management Service from the e-Learning Foundation.
Gift Aid Rules
There are some basic rules that will dictate if a programme qualifies for Gift Aid collection, the main one being that every pupil in the cohort must have the same opportunity to take part in the programme, including being able to take the device home, regardless of their parents willingness or ability to financially contribute. Others relate to the value of the benefit of the programme in relation to the value of the donations made.
It is important to remember that Gift Aid is only collectable on donations made by UK tax paying donors who have signed the donation form confirming this. If you have a high quota of Free School Meal pupils you may find that many come from non-tax paying families and therefore cannot be included in the Gift Aid claim, even if they are donating to the programme.
In order to simplify the claims process, the e-Learning Foundation has agreed a special set of guidelines with the Inland Revenue for those who use their Donation Management System. (more information can be found in the 'Administration' module). Provided a school adheres to these guidelines then their programme will be eligible to benefit from Gift Aid.
Provided a school adheres to the following guidelines then their programme will be eligible to benefit from Gift Aid.
A Learning resource programme
The scheme should be presented to donors as the means for the school to provide their children with access to learning resources when and where they need them, especially when the pupils are not at school.
Learning not technology
The programme should be focused on the learning and not the laptop. You must avoid presenting the programme as a "laptop" or "tablet scheme".
Donating not purchasing
It is important that any donations made to the school's programme should not be presented to parents as a means of purchasing a laptop. The school (or the leasing company), and not the parent or the pupil, will remain the owner and manager of the equipment until such time as the school or the leasing company chooses to dispose of it.
Support for the programme
It is very important that the school makes the nature of the donation clear. Gift Aid is a tax relief for gifts and not payments for goods or services. It is important that donors are clear about the nature of their donation i.e. their donation is not 'buying' a computer but is a contribution to the school's programme ( through the Foundation) to help it achieve its objectives.
Only one recommended donation
You should avoid setting up a programme that asks for different donation levels for different devices, or for odd amounts (e.g. £11.87 rather than £12), or for different periods of time, as these can easily be misconstrued as different 'purchase' prices rather than genuine donations to the programme.
Provision despite ability to contribute
You should be able to demonstrate that use of the device by pupils is not related to their parents' willingness or ability to contribute to the programme. The school should buy or lease the computers and make them available for use by all relevant pupils, whether or not their parents or guardians have contributed.
You should take care to make this clear to parents when presenting the programme to them. There should be no suggestion that participation in the programme is only open to those willing or able to contribute financially.
Re-confirm tax status
It is important that, at least once a year, you re-confirm the tax status of all donors. If a donor is no longer paying sufficient tax on their income and/or capital gains to quality as a Gift Aid donor you must notify HMRC, or the Learning Foundation or you are using our collection service.
This is a good way to help schools who lack the required capital funds to launch their 1:1 programme. It allows them to spreads the costs over the life of the resources in line with donations from parents, and/or Pupil Premium funding. As long as you have the right kind of lease, and understand how it works, this can be an important aspect of your financing approach.
In association with Econocom we have prepared a We have 'quick check guide' to make sure you fully understand the details of a lease BEFORE you sign on the dotted line and we strongly recommend that you use it.
Budget constraints continue to have an impact on schools at all levels. Purchasing the equipment required from school budgets to run a 1:1 scheme in some cases is a real challenge.
What is leasing?
Leasing makes ‘off-balance sheet’ funding possible. It is where a finance company (the Lessor) pays your supplier for the equipment on your authority and rents the equipment to you (the Lessee) over an agreed period of time. You as the lessee enjoy the full use of the equipment as if it was your own but pay for the goods over the useful life rather than as an upfront cost.
Leasing lends itself to 1:1 schemes due to the very nature of the parental donations and the term of the programme. Many schools benefit from spreading the cost of the investment across the term of the programme instead of paying an upfront invoice for the full expense of the goods.
This enables the school to collect the parental contributions and to pay the lease rentals with the help of this money.
Benefits of Leasing
- A lease makes ‘off-balance sheet’ funding possible.
- Retain cash in the school for day to day requirements
- Match term of the investment with the payment of that investment
- Match the timing of the rentals with the timing of the parental contributions
- Where goods are returned at the end, the school actually pays less than the original cash price
- Stable budgeting and avoids spikes in cash outlay
- In certain circumstances, parents can then have the option to buy the device at the end of the programme, subject to the leasing company agreeing and HMRC limits on the value of the benefit that applies at that point. In practice this option can be an important one when parents are deciding whether or not to support the school's programme.
Types of lease
There are two types of lease the 'Finance lease (sometimes called a capital lease)' and the 'Operating lease'. Most schools are only allowed to use an Operating Lease when leasing equipment.
Many schools may have some bad memories of leasing, particularly of photocopiers, were costs spiralled out of control. These were finance leases and although the repayments often seemed attractively low the sting came at the end when there was a very large final payment to close the contract. As a result of enthusiastic sales techniques and lack of financial advice many schools found themselves caught in a very expensive financial mess. Many Local Authorities then made a blanket decision to ban all leasing in schools and as a result made it extremely hard for them to make significant investments in the future of the school.
Operating leases are structured very differently and, although the repayments over the period may seem higher than a finance lease they effectively clear the cost over the period of the lease and the final payment is substantially smaller. This makes them ideal for connecting with a 1:1 programme where the programme period is usually 2 or 3 years.
An operating lease The leasing company will build in a Residual Value (RV) that reduces monthly payments. At the end of the lease period, schools then have the option to continue renting the asset, or to return the asset.
Operating Leases assume a future value of the equipment as at the end of the primary lease which in turn discounts the rentals paid by the school. At the end of the primary term the School will have options in relation to the equipment, all leased equipment can be returned subject to the return conditions as stated on the lease document, or if the school want to continue to use the equipment they can do so by paying the future value of the equipment assumed in the lease which will be fair market value.
It is important to remember that Local Authority controlled Schools and Academies that are funded via the Education Funding Agency are prohibited from borrowing via a 3rd party. This means that the An Operating Lease is the only legal form of lease a school of this type can enter into.
Compliant Leasing Guide
All non-independent schools (i.e. government funded) must only sign an Operating Lease. No other form of lease or third party borrowing is permitted unless authorised by the Secretary of State. Below is the test to ensure that the lease you are entering into is a compliant operating lease:
- The term of the lease should be no more than three years
- The equipment must not be of an over specialised nature
- The ownership of the equipment must remain with the Lessor
- Automatic transfer of title to the goods must not be contracted
- The Lessor must invest a significant residual value
- The present value of the rentals should be at least below 90% of the original capital cost of the goods
All of the points above should be tested before agreeing to sign a lease contract. You will need to know the following:
- What are the rentals? - These will be quoted by the Lessor and will be on your lease schedule. The rentals should be equivalent to 0% finance or even lower.
- What is the term? - The length of the agreement should not exceed the expected ‘useful economic life’ of the device this is typically two to three years The school pays the company (the lessor) a regular rental payment, , this should be stated on your lease schedule.
- What is the residual value? - The Lessor must retain a proportion of the original cost, known as the Residual Value, at the end of the lease this is sometimes referred to as a Balloon Payment, Cost to Retain or Agency to Purchase The Lessor should give you a guide as to the amount that that will be that they will stick to, however the Residual Value cannot be reflected in the lease contract. Be very careful if the Lessor avoids telling you and use excuses such as "it is not compliant if we tell you" or "it is the fair market value of the goods".
- What is the interest rate being used? - Be very careful if they avoid telling you and use excuses such as "it is not compliant if we tell you", "it is market rates". The REAL interest rate is used to test whether this is an operating lease so you need it.
- Watch out - There are some companies that use the FLAT RATE of interest or use a particularly high rate to 'engineer' an operating lease. The interest rate should be in line with general fixed rate funding.
What happens at the end?
You have three options in a 1:1 scheme
- Return the equipment to the Lessor
- Continue to rent the equipment
- Become Agent of the Lessor to sell the goods to the parents