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Academy sector developments in November

This update covers the latest academy and MAT news on funding and finance, policy, financial reporting and how this could affect you

Posted by Joe Lawson-West | November 09, 2017 | Law, finance, HR

Whether you are in a single academy trust (SAT) or a multi academy trust (MAT), you work in a complex statutory framework. This update, our second of the year, covers some of the latest news on what is happening in the academy sector and how this could affect you, looking at funding and finance, policy, financial reporting, and other key sector developments.

Funding and finance

ESFA update

The ESFA has announced the appointment of its new Chief Executive, Eileen Milner, who will take up the post from November, replacing Peter Lauener who announced his intention to retire earlier in the year.

Ms Milner will join the ESFA from her current role as Executive Director of Customer and Corporate Services at the Care Quality Commission, having previously worked in the private sector at Northgate Information Solutions.

National Funding Formula

Details of the new national funding formula were published in September. A ‘soft’ formula, which allows local authorities to retain some control over individual school budgets is due to be introduced in 2018-19, with local authority involvement being withdrawn by 2020-21.

The formula will set a minimum per pupil funding of £3,300 for primary school pupils (rising to £3,500 in 2019-20) and £4,600 for secondary school pupils (rising to £4,800 in 2019-20). All schools are promised a 1% increase in funding per pupil by 2020 as a result of these changes, with funding for the poorest schools set to increase by up to 6% over the same period. These increases are funded through a £1.3 billion increase in the schools budget, achieved largely through cuts in the free schools budget and capital budget.

Funding plans beyond 2019-20 have not yet been confirmed, but are expected to be set in a future spending review.

MAT Development and Improvement Fund

The DfE has announced a new £53m fund to assist successful MATs which take on underperforming schools. Grants of between £50,000 and £100,000 will be awarded by Regional Schools Commissioners, with priority given to certain geographical areas. The grants are intended to cover the initial costs of taking on new schools, rather than ongoing running costs.

The deadline for applications is 26 November 2017, further details of how to apply including the regions that will be prioritised is available on 

Condition Improvement Fund 2018-19

The bidding process for 2018-19 Condition Improvement Fund (CIF) grants opened in October. The deadline for applications is 14 December 2017, although Academy Trusts which haven’t previously applied will need to register by 30 November.

The ESFA has updated their guidance on the bidding process. 

16 to 19 funding: Maths and English condition of funding

The ESFA confirmed in October that the 5% tolerance on its controversial Maths and English condition of funding, which was introduced in 2016/17 will continue until further notice.

Policy and governance

Academies Financial Handbook

The new Academies Financial Handbook was published in July 2017, and took effect in September. Some of the key changes this year were:

·         The ESFA have placed further emphasis on the distinction between “members” and “trustees”. In particular, they have made it clear that in their view the best practice is for there to be a significant separation between these roles.

·         Further guidance has been given to academy trusts on assessing their own effectiveness, and particular emphasis has been given to the importance of identifying skills gaps in the governing body, particularly during times of transition or rapid growth.

·         The ESFA have confirmed that their annual “Dear Accounting Officer” letters must be shared with and discussed by senior management and the board, with appropriate action taken to strengthen systems and controls if necessary.

·         The ESFA have emphasised that decisions about executive pay must follow a robust evidence-based approach, perhaps through benchmarking against pay levels at similar schools.

ESFA investigation reports

The ESFA have encouraged academies to review its reports on investigations into other academy trusts. A link to the published investigation reports on the ESFA website is included in the Academies Financial Handbook and trusts are encouraged to review these reports when monitoring their own risks.

Sixth form college conversion to academies

The process of sixth form colleges converting to academies has begun, following the initial announcement in the 2015 Spending Review. Four sixth form colleges have already converted, with approximately 20 more currently in the process of converting. The Sixth Form Colleges Association currently anticipates that at least a third of sixth-form colleges will take the opportunity to convert, principally to benefit from a more favourable VAT regime allowing a higher proportion of VAT recovery.

The ESFA issued a clarification in August confirming that sixth-form colleges which convert to 16-19 academies will not be subject to the restriction which prevents other academy schools from delivering provision to high needs students aged 19 to 25.

The majority of colleges which convert are expected to set up either as single-academy trusts or as the lead school in a new multi-academy trust. However, colleges rated by Ofsted as ‘inadequate’ or ‘requires improvement’ will not be allowed to set up as new academy trusts, and would be required to join existing multi-academy trusts.

Financial reporting

Key reporting deadlines

As with previous years, the audited financial statements for academies must be submitted to the EFA by 31 December 2017. In addition, academies must submit their accounts return for the year ended 31 August 2017 in the required format to the EFA by 19 January 2018.

For those Academy trusts which are required to submit an audited Annex G return for School Direct funding, the deadline for these returns will be 12 January 2018.

For 2017-18 the budget forecast return outturn is due to be submitted by 18 May 2018, with the final budget forecast return due by 27 July 2018.

The ESFA are currently reviewing the format of the Budget Forecast returns for future years, and are considering asking academy trusts to extend their forecast returns to cover a three year period. A consultation on these changes is expected soon.

Land and buildings collection tool

The land and buildings collection tool is a new return introduced in 2017 which had a submission deadline of 31 October. The return is relatively straightforward, and asks academies to provide details of the land and buildings they own, with additional supporting documents required in certain cases.

The reason for the return is to address a long-standing qualification in the DfE’s overall accounts regarding the land and buildings held within the academy sector.

Changes to charity financial reporting

The SORP Committee had tentatively committed to producing a new revised Charities SORP in 2019, incorporating the results of the SORP Research Exercise and updates to FRS 102.

 The Committee has confirmed that there will not be a new SORP until 2022, having reviewed the results of the Research Exercise and the Financial Reporting Council’s proposed updates to FRS 102. Instead, there will be a new SORP Update Bulletin which will make minor changes to the SORP. The key change which is likely is the removal of support costs as a separate category of expenditure, because the Research Exercise found “limited enthusiasm” for this category.


General Data Protection Regulation

The General Data Protection Regulation (GDPR) coming into force on 25 May 2018 introduces additional compliance requirements for all organisations, including charities. GDPR relates to the protection of “personal data” by entities that control or process such data. Personal data is any information related to a natural person that can be used to identify them. Charities will be required to implement certain new requirements, such as a right to be forgotten, data portability, and to facilitate a right of access to the data for the person whose data is being stored.

It is important that charities start planning for GDPR compliance now so that they can ensure key people and decision makers understand the requirements and the impact GDPR may have on the organisation, its policies and procedures and its training requirements.

Donations by trading subsidiaries

HM Revenue and Customs (HMRC) and the Charity Commission issued updated guidance in February 2016 which concur with a legal opinion previously taken by the Institute for Chartered Accountants in England and Wales (ICAEW) that a charity trading subsidiary cannot lawfully make a donation to its parent charity in excess of its distributable reserves. HMRC have confirmed that no tax relief will be available to the trading subsidiary for any such unlawful donations.

Where unlawful donations have been made in the past, charities are now required to take steps to rectify the position and repay the excess back to the subsidiary. HMRC have confirmed, however, that such repayments will not be taxable income in the hands of the subsidiary.

How we can help

Ask academies why they value us, and they will say it is our empathy with their work and understanding of the legal and accounting framework within which they must now operate.

For further guidance and advice tailored to your situation, please get in touch with your usual buzzacott contact or the Buzzacott academy team:

T | +44 (0)20 7556 1200

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