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To be or not to be... an academy

How to handle the financial responsibilities when considering a move to an academy, from Su Johal

Posted by Charley Rogers | May 21, 2017 | Law, finance, HR

The benefits for schools moving to an academy are widely recognised. Not only will you receive funding directly from the government, rather than filtered through a local authority (LA), you’ll be able to change your curriculum to suit the career choices of your pupils.

However, there are some key considerations, especially when it comes to your school’s finances.

Su Johal, director and co-founder of SAAF Education, a provider of financial management and business support services to schools, academies and multi-academy trusts, discusses what “financial freedom” means, and gives advice on how to make the transition successful.

Preparation

As the old saying goes, “by failing to prepare, you are preparing to fail”.

Before making a decision about whether converting to an academy will benefit your employees and pupils, it is useful to undertake a due diligence review and assess the financial, governance and funding implications you’re likely to face.  

New academies receive an initial grant of £25,000 towards conversion costs, and this can be used for any costs that transpire relating to the conversion, such as legal fees and software procurement. Consideration must be given to arrangements for new contracts, service level agreements, licences and insurance, and in some instances, to setting up a bank account.  

Academies can be flexible when it comes to term times, as long as they fulfil the statutory minimum teaching hours that apply to state schools.

Funding system

Academies will receive revenue and capital funding, mainly from the Education Funding Agency (EFA).

This includes:

·      The General Annual Grant (GAG) (School Budget Share)

·      Additional GAG (Rates / Appeals)

·      Pupil Premium

·      Universal Infant Free School Meals Funding (KS1)

·      Named special needs funding – from the LA

·      Early Years Funding – from the LA

·      Sports Grant (Primaries only)

·      Devolved Formula Capital (DFC)

·      Condition Improvement Funding (CIF)

·      School Condition Allocation (SCA)

In addition to this, academies can apply for other grants and raise funds through activities such as catering, renting out sports halls after school hours, and consultancy.

Rules and regulations 

Academies are subject to a seven-year Funding Agreement, signed with the Department of Education (DfE), outlining the terms on which the funding is granted.

Requirements include:

·      Submitting an annual budget and budget forecast to the secretary of state.

·      Not entering into financial agreements that can have an impact on future spend.

·      Appointing internal and external auditors.

·      Filing accounts such as an annual return, financial statements and the trustees report to the EFA and Companies House.

·      Setting in place accounting policies.

·      Abiding to the Academies Financial Handbook, which is published by the DfE and updated annually. It describes the financial management and control requirements for academy trusts, and outlines the financial relationship between the trust and the EFA.

Both single academy trusts and multi-academy trusts will have trustees that perform the governance.

If an academy is part of a multi-academy trust, it will have a Local Governing Body for each academy, and if it has an annual turnover of more than £50m, it will also be required to have an audit committee.

Before making a decision about whether converting to an academy will benefit your employees and pupils, it is useful to undertake a due diligence review and assess the financial, governance and funding implications you’re likely to face.  

Operational changes

To meet the requirements of the funding agreement and the Academies Handbook, school business managers and headteachers must change their operations.

We’d advise:

·      Updating the ledger / nominal coding structure so that it supports the financial statements.

·      Reviewing the month end process so it suits that of an independent company. This includes bank reconciliations, payroll checks and reconciliations, balance sheet reconciliations, monthly management of accounts, monthly prepayments and accruals, and monthly cash flow.

·      Considering payroll responsibilities including the management of employee contracts and pension schemes.

·      Having a fit for purpose year-end closedown process in place.

Financial freedom

In addition to the “daunting” side of converting, there are things that academies can use to their advantage.

Academies don’t have to adhere to the School Teachers’ Pay and Conditions Document (STPCD), so can adjust the amount they pay staff (with Board approval).

This gives those in charge the ability to make salaries attractive when recruiting and retaining teachers, especially for teachers who are experts in their fields.

Academies can also teach what they want, when they want. They don’t have to adhere to the National Curriculum, and can introduce varied subjects that are tailored to their pupils. For example, if pupils are performing better in STEM subjects, academies can choose to introduce complementing classes.

Similarly, academies can be flexible when it comes to term times, as long as they fulfil the statutory minimum teaching hours that apply to state schools.

To find out more about how to make the conversion process easy, visit our website: www.saafeducation.org/consultancy-page.   

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