Summary: Miss X complained the Council made errors in her nursery’s Early Years’ funding and clawed back an overpayment, causing distress and financial difficulties. We found fault with the Council for making late and inaccurate payments. We recommended the Council apologise, pay Miss X £150 for uncertainty and act to prevent recurrence.

The complaint

1. Miss X complains the Council has repeatedly been responsible for inaccurate and late payments to her nursery’s Early Years’ funding since December 2020. Miss X also complains about how the Council clawed back her December 2020 payment.
2. Miss X says this has caused her considerable distress and anxiety and meant she has had to borrow money to keep her nursery running when payments have been late. Miss X has said she believes the Council’s actions amount to discrimination.

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What I have investigated

3. I have investigated the overpayment that was made to Miss X in December 2020 and the Council’s decision to recoup this. I have also investigated the timing and accuracy of payments made to Miss X since December 2020.
4. I have not investigated events that took place prior to December 2020. I have explained why at the end of this decision.

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The Ombudsman’s role and powers

5. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
6. We consider whether there was fault in the way an organisation made its decision. If there was no fault in the decision making, we cannot question the outcome. (Local Government Act 1974, section 34(3), as amended)
7. We cannot investigate late complaints unless we decide there are good reasons. Late complaints are when someone takes more than 12 months to complain to us about something a council has done. (Local Government Act 1974, sections 26B and 34D, as amended)
8. If we are satisfied with an organisation’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

9. I spoke to Miss X about her complaint and considered information she provided. I also considered information received from the Council. This included:
• A chronology of events between December 2020 and December 2021
• Information the Council sent Miss X about payment dates
• The Department for Education’s Early Education and Childcare, statutory guidance for local authorities June 2018
• The Council’s response to Miss X’s complaint
• The Council’s funding agreement documents
• A spreadsheet setting out payments and dates for payments for Miss X’s nursery
10. Miss X and the Council had an opportunity to provide comments on a draft decision. I considered any comments received before making this final decision.

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What I found

Relevant law and guidance

11. The law requires councils to secure between 570 and 1,140 hours of free childcare over no fewer than 38 weeks for qualifying children in their area. This is known as the Free Early Education Entitlement.
12. The Council has an agreement with Miss X to deliver the Free Early Education Entitlement for her nursery.
13. In the years 2020-2021 the Council told providers of its scheduled payment dates in advance by posting on its online Early Education and Childcare Provider (EECP) system.
14. From 2021-2022, the Council published payment dates in its EECP Funding Agreement document prior to the start of the academic year.
15. The agreement document commits the Council to two separate payments per term:
• a ‘forecast’ payment, which represents an advance payment of 70% of the predicted funding for the term, usually paid mid-term of the term before the funding term.
• a ‘headcount’ payment, which is the remaining balance for the term’s funding. This payment is made in the funding term and is calculated based on final figures from the provider once the term has started.
16. The EECP Funding Agreement document for 2021/2022 explains education providers must return any overpayment the Council has made within 20 working days of the request. The Council reserves the right to adjust any future payments to recoup overpayments it has made. This was not referenced in the EECP Funding Agreement for 2020.
17. In March 2020, in response to the Covid 19 pandemic, the government issued guidance stating it would continue to pay councils free early education entitlement funding to minimise short-term disruption. This meant early years settings would receive funding based on previous attendance. The guidance was updated in July 2020 to explain councils should return to the normal funding approach from 1 January 2021, meaning funding should revert to being based on actual attendance numbers.

The Equality Act 2010

18. The Equality Act 2010 protects the rights of individuals and supports equality of opportunity for all. It offers protection in employment, the provision of goods and services, housing, transport and the carrying out of public functions.
19. The Equality Act makes it unlawful for organisations carrying out public functions to discriminate on any of the nine protected characteristics listed in the Equality Act.

Direct discrimination

20. Direct discrimination occurs when a person treats another less favourably than they treat or would treat others because of a protected characteristic. Protected characteristics include:
• Age
• Disability
• Gender reassignment
• Marriage and civil partnership
• Pregnancy and maternity
• Race
• Religion or belief
• Sex
• Sexual orientation
21. The Ombudsman cannot find that a body in jurisdiction has breached the Equality Act. However, we can find a body at fault for failing to take account of their duties under the Equality Act.

What happened

Payments to Miss X

22. On 27 May 2020, the Council wrote to Miss X with a payment schedule for the following academic year:

23. On 9 December 2020, the Council posted its Spring 2021 payment information for education providers on its EECP system. This explained:
• The Council had already provided extra funding for Autumn 2020 as support during that period and it was still committed to providing support funding while the pandemic continued.
• The Council had decided to pay the Spring 2021 funding, where headcount was lower than Spring 2020, based on the number of children from the Spring 2020 headcount. The Council said it would cap the maximum extra funding at £10,000.
• It would make payments for Spring 2021 during the week beginning 14 December 2020.
24. On 19 December, the Council paid Miss X more than her Spring 2021 forecast entitlement. The Council has said this was down to a human error in compiling the spreadsheet used to generate payments.
25. The Council wrote to Miss X on 23 December to explain it had made a significant error and she would need to repay the overpayment.
26. The Council wrote to Miss X again on 13 January 2021. It explained it needed to recoup the payment to ensure it was working within its means and it was funding all early years’ settings fairly. The Council explained it would treat any overpayment not returned to it as a pre-payment for any future funding entitlement.
27. The Council agreed to carry the debt over to the next financial year to give Miss X further time to pay it. There is no evidence it told Miss X this.
28. In January 2021, Miss X complained to the Council about repeated delays in paying her nursery’s Free Early Education Entitlement. She also complained the Council had agreed to pay an extra £10,000 for the Spring term but decided to claw this back.
29. The Council responded to Miss X in March 2021 to apologise for delays and explain it was changing its processes to ensure this did not happen again. It also apologised for miscalculating her entitlement for Spring 2021 which meant she was overpaid in December 2020.
30. Miss X asked the Council to reconsider her complaint as she said it had resolved nothing.
31. The Council made the full forecast payment for Summer 2021 to Miss X on 14 April. This was earlier than the previously published window. The Council’s records show the full headcount payment for the Summer 2021 was made to Miss X on 4 June. This was in line with the previously published window. However, Miss X has provided a screen shot of her online banking to show this was not received in her account until 10 June, four days later than the Council’s published window.
32. The Council responded to Miss X’s complaint again in April 2021. It explained it would update its funding agreement to make it clear when it would make payments. It said in very exceptional circumstances where payments would miss the deadlines, it would communicate with providers as soon as possible. The Council did not address the overpayment it had made in December 2020. Though I note it addressed this again later in the year.
33. The Council’s EECP Funding Agreement document for 2021/2022 stated it would make payments for the following academic year as follows:
     

34. On 7 June, Miss X emailed the Council to explain she had low attendance for the Summer term. The Council says Miss X asked it to recoup half the overpayment from her Autumn 2021 forecast payment and the other half from her Autumn 2021 headcount payment.
35. The Council paid Miss X the forecast payment for Autumn 2021 on 16 August. As per Miss X’s request, this was reduced to cover part of the overpayment.
36. Miss X then contacted the Council on 24 September to explain her attendance numbers had been lower than expected and asked it not to take the final amount from her Autumn 2021 headcount payment. Miss X asked the Council to deduct this from her Spring 2022 forecast payment instead and the Council agreed to this.
37. The Autumn headcount payment was made on 18 October. This was in line with the published pay schedule.
38. However, the headcount payment wrongly missed one child’s funding entitlement. Miss X contacted the Council to query this. On review, the Council agreed it had made a mistake and paid the extra funding to Miss X on 6 December. This was £1,353.98, paid seven weeks late.
39. The Council initially withheld the forecast payment for Spring 2022 as Miss X had requested. During a meeting with Miss X on 5 January 2022, the Council agreed to release the forecast payment. It did so that day.
40. During that meeting, Miss X also told the Council she believed the forecast amount ought to be considerably higher and the Council agreed to audit her account. Once the audit was complete, the Council identified it had not paid Miss X her full entitlement. This was because some children had been allocated the wrong funding codes and it made a further payment on 12 January. This was £5,673.21, paid one week later.
41. The Council paid the headcount payment for Spring 2022 on 15 February. This was in line with its published pay schedules.
42. As of 22 February 2022, the Council was still owed £4,529.66.

Miss X’s complaint

43. On 21 December, Miss X brought her complaint to the Ombudsman. She explained the Council had agreed to pay nurseries based on their previous year’s intakes but had decided to claw this back as it had overspent. Miss X said the Council agreed to allow her until the end of the financial year 2021/2022 to repay it but had then clawed all the money back at once.
44. As this was different to the complaint the Council had already investigated, it agreed to look into Miss X’s complaint and provide a response.
45. The Council gave its initial response to Miss X’s complaint on 25 January 2022. It explained it had made Spring Headcount payments on 15 December 2021 but had withheld Miss X’s payment because she still owed it money. Once Miss X informed the Council she felt a mistake had been made it agreed to look into this and also released the payment to her in the meantime. The Council then identified Miss X was owed further funding and sent this to her.
46. Miss X responded to the Council on 27 January asking it to reconsider her complaint. Miss X said the Council was wrong to say she owed it money and this was actually the result of a Council overspend. She explained she had agreed to repay the money by 5 April 2022 and the Council should not have taken it back before then. Miss X said she felt the Council was treating her differently to other providers in the borough and repeated late payments over the last five years had caused her real issues. Miss X also said one child had been wrongly removed from the 30 hours section in October 2021 and it took a lot of chasing for the Council to correct this.
47. The Council responded to Miss X on 22 February. It explained it believed it had met all the payment timescales set out in the EECP Funding Agreement but it was sorry queries about Miss X’s debt had resulted in delays. The Council said it does not discriminate against anyone, it had responded to Miss X’s concerns in a timely manner and would continue to do so.
48. The Council reiterated the overpayment in December 2020 was the result of a human error when compiling a spreadsheet, but it had moved quickly to correct this. It said it had given Miss X notice about clawing back the overpayment and had worked with her to recover this. The Council said it did not know why one child was missed from Miss X’s 30 hours section but it had made payment as soon as Miss X pointed this out. The Council explained Miss X would now need to discuss a plan to repay the rest of the overpayment.
49. When I spoke to Miss X, she explained she had borrowed from family and friends when payments were made late, and she incurred daily interest charges on her business overdraft which was eventually revoked due to late payments. Miss X also says she incurred recruitment costs when staff resigned because of late payments.

Analysis

The December 2020 overpayment

50. In her complaint correspondence, Miss X has said the payment she received in December 2020 was inflated as the Council had agreed to pay early years providers an extra £10,000 as assistance. She said the Council decided to claw this back as it had overspent. This is not the case.
51. The figures for December 2020 payments (the forecast payments for Spring term 2021), were based on the headcount for Spring 2020. The Council did this to help nurseries that had lower numbers that year due to the pandemic.
52. This meant some nurseries would be paid for more than the actual number of children they had, and the Council decided to cap the additional payments at £10,000.
53. The Council has explained a human error in compiling its payment spreadsheet meant some nurseries received less than they were forecast and some nurseries, like Miss X’s, received more. The Council contacted all affected parties to explain this immediately and explain it would need the overpayments back.
54. The Council was at fault for the error that meant Miss X was overpaid. This has caused Miss X an injustice as it created uncertainty for her about what payments she should receive.

Recovering the December 2020 overpayment

55. We would expect the Council to have a policy on recovering overpayments. It did not have one in place at the time. This is poor practice and amounts to fault. However, I am satisfied the Council has already remedied this as it has now put a policy in place.
56. In any event, the Council explained to Miss X it had overpaid, why it needed to recover this, and was flexible in seeking an agreement with her for repayment. This was good practice and I find no fault in the Council’s actions here.

Timeliness and accuracy of payments since December 2020

57. Since December 2020, aside from the overpayment, there have been two late and inaccurate payments from the Council to Miss X:
• The Autumn 2021 headcount payment was missing a child’s funding and the Council has been unable to explain why this was, meaning part of Miss X’s entitlement was received late.
• The Spring 2021 forecast was incorrect, meaning over 50% of Miss X’s entitlement was received a week later than it would have been, if not for the mistake.
58. This is fault and caused Miss X an injustice as she had to chase the Council on each occasion to establish exactly what was owed before it was paid. Being without large sums of money would have caused further uncertainty for Miss X.
59. While Miss X has evidenced she received the Summer headcount 2021 payment four days late, the Council has evidenced it sent it inside the published payment window. I cannot say Miss X received the payment late because of fault on the Council’s side. It may, for instance, be down to the time taken by Miss X’s bank to process payment.
60. Miss X has said these late payments also meant she relied on her overdraft and incurred daily interest charges. However, Miss X still had the benefit of the December 2020 overpayment during these periods. This reduced the impact of any late payment. Therefore, I do not find the Council responsible for additional daily interest charges.
61. I also could not say Miss X’s staff resigned or her overdraft was withdrawn specifically because of the two late payments identified above. While these may have been a contributing factor, there are too many variables for me to say this is an injustice caused directly by the identified fault.

Direct discrimination

62. There were instances where the Council has made mistakes in relation to Miss X’s EECP funding. However, there is no evidence this was a result of the Council taking account of irrelevant factors, such as her protected characteristics. And there is no evidence to suggest the Council treated Miss X less favourably than others due to any protected characteristics. I therefore find no fault in the Council’s decision making in this regard.

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Agreed action

63. To remedy the fault identified above, I recommend the Council:
64. Within one month of the date of our final decision:
• Apologise to Miss X for the errors in calculating her entitlement since December 2020 and the resulting late payments.
• Pay Miss X £150 to recognise the uncertainty she has been caused by the errors identified above and the time she has had to spend chasing a resolution.
65. Within three months of the date of our final decision:
• The Council should identify the reason for the error in its funding codes on Miss X’s Autumn 2021 headcount report and consider action to prevent recurrence. The Council should then inform the Ombudsman of the action taken or explain why it considered no action was necessary.

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Final decision

66. I have found the Council at fault and make the recommendations set out above.
67. The Council accepted my recommendations and I have completed my investigation.

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Parts of the complaint that I did not investigate

68. I have not investigated whether the Council was at fault for the timings of any payments made to Miss X prior to December 2020. This is because Miss X brought her complaint to us in December 2021 so any complaint about matters arising before December 2020 is late. Miss X could have complained to us sooner but did not and there is no good reason to exercise discretion.

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Investigator's decision on behalf of the Ombudsman