Liverpool City Council, which was awarded £1.7m each year from 2009 to 2011 in Early Years Capital Grant funding, has been told by the Department for Education that this year it cannot carry over unspent budgets from previous allocations into current projects.
The council said that 18 settings that were due to receive a total of £546,000 for improvements to their facilities will not receive the funding. A further £500,000 which had not yet been allocated will also be clawed back by the DfE.
The local authority has signed contracts with a further 28 private, voluntary and independent settings which could result in a potential deficit of up to £552,000 if the projects go ahead as agreed.
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