/ Schools Forum / Item 5 /
/ 20 October 2009 /
/ Financial Implications arising from the implementation of Academy Schools /
/ Report of the Director of Children’s Services and the County Treasurer /
Contact: Phil Andrews, 02392 441494;
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1 Summary
1.1 This report outlines the general financial implications to the Local Authority (LA) of opening an Academy, with specific reference to the proposal to close Staunton Community Sports College and open an Academy in its place in September 2010 The Academy is to be sponsored by South Downs College and Hampshire County Council.
1.2 Academies entail a mixture of funding arrangements, especially in the cross-over years of closing a school and opening an Academy. The implications need to be fully understood prior to finalising the funding agreement, as they affect the LA and Schools Budgets as well as the Academy.
1.3 This report sets out a number of areas that are being addressed.
2 Background
2.1 Academies are all-ability, state-funded schools established and managed by sponsors from a wide range of backgrounds, including high performing schools and colleges, universities, individual philanthropists, businesses, the voluntary sector, and the faith communities.
2.2 Academies are not maintained by the LA but retain close links with it, and with other schools in the area. It is a DCSF principle that Academies are state funded at levels comparable to schools in the local area. Academies are set up with the backing of the LA, which has a seat on the Academy’s Governing Body, in cases where the LA is one of the sponsors they will hold two seats on the Governing Body.
2.3 The current proposal is to close Staunton Community Sports College and open an Academy in its place . The lead sponsor for the Academy is Southdowns College and Hampshire County Council is a co-sponsor.
2.4 At the Cabinet meeting on 27 April 2009, approval was given to the publication of notices to discontinue Staunton Community Sports College, Havant, from 31 August 2010, conditional upon approval being given by the Secretary of State for Children, Schools and Families to the establishment of an Academy on the Staunton Community Sports College site.
2.5 The authority's Expression of Interest has been approved by the Secretary of State for Children, Schools and Families, signalling the start of the feasibility and implementation stages, the timely completion of which will lead to establishing the academy with effect from 1 September 2010.
2.6 At his Decision Day on 2 October 2009, the Executive Lead Member for Children’s Services approved the closure of Staunton Community Sports College, Havant, on 31 August 2010 to facilitate the establishment of an Academy in its premises.
2.7 The Academy’s admissions policy and arrangements will be in accordance with admissions law, the School Admissions Code of Practice and the School Admission Appeals Code of Practice. It will also comply with SEN code of practice and exclusions guidance as state funded schools. The Academy will follow the national curriculum and will have specialisms in English and Sport.
2.8 Academies are required to have Financial Regulations and Standing Orders, as well as a ‘responsible officer’ regime. As a company limited by guarantee with charitable status they are required to submit externally audited full accounts to Companies House, the Charity Commission and the DCSF.
3 Funding for Academies and Closing Schools
3.1 In accordance with the School Standards and Framework (SSAF) Act 1998, the balances of the closing school will revert back to the LA (Schools Budget), even where the school is a successor to the closing school. The school does not currently have a deficit budget on its main accounts and the LA will work with the school to ensure that this does not happen.
3.2 The allocation regulations made under s.47 of the SSAF Act 1998 make provision for LAs, if they wish, to make allocations to new schools which have the effect of giving them the benefit of additional sums which are equal to or less than the balances of relevant closing schools. The regulations also provide for the amount of extra funding for new schools to recognise the deficit of a preceding school by being reduced; but they do not allow a sum equal to the deficit to be set against any 'normal' funding of the new school - that is, the elements of funding it would receive anyway if it was not new.
3.3 The balance on the schools community budget will be treated in the same way, although any deficit would have to be met from the local authority’s education (non-schools) budget.
3.4 The DCSF will agree a budget for opening costs with the Academy and will fund this through an implementation grant. The agreed budget will normally include the costs of a Project management Company (approved by the DCSF) that will work with sponsors to ensure that all requirements of the funding agreement are met, and that all necessary polices for staffing, admissions, curriculum, admissions and finance are in place. It will also include funding for the early appointment of key senior staff (including Principal, Vice Principals and Director of Finance or similar title), usually two terms prior to opening.
3.5 The LA will continue to provide capital funding to the Academy from the annual allocation of Devolved Formula Capital for that financial year, the DCSF will then fund them for capital expenditure from the following April. Capital funding allocation to the closing school should be agreed on a needs basis between the LA and the school, with the balance of the allocation then being paid to the Academy. There would, however, be an expectation that the Academy would receive at least 7/12ths of the 2009/10 allocation, and a proposal to pay them less (and more than 5/12ths to the closing school) would need to be agreed with the Academy. In 2009/10 schools received a 40% advance of their 2010/11 capital funding.
3.6 Additional capital funding may be available to the Academy through the Earmarked Annual Grant (EAG) for any specific proposals agreed between the Academy and the DCSF.
3.7 The running costs of the Academy are met by the General Annual Grant (GAG), which it receives directly from the DCSF on an academic year basis and which is effectively an amalgamation of maintained school funding streams. The table below summarises the grant funding arrangements:
Funding of existing Grants (assumes Sep 2010 opening)
/Closing School 2010/11
/Academy 2010/11
/Academy Funding beyond year of opening
/Budget Share
/5/12 Budget Share 2010/11
/7/12ths adjusted 2009/10
/GAG
SSG
/None unless mutually agreed at 5/12ths
/Full amount unless mutually agreed at 7/12ths
/GAG
SSG(P)
/Nil
/Full amount
/GAG
Specialist Schools
/5/12ths
/Full year Equivalent
/GAG
Standards Funds
/5/12ths
/7/12ths from LA
/LA or DCSF
Threshold PRP
/1 term
/2 terms
/GAG
VAT grant
/n/a
/Calculated annual % uplift
/GAG
Rates/insurance
/Within budget share
/Annual grant
/GAG
Local Authority Central Spend Equivalent Grant (LACSEG)
/n/a
/Per pupil amount based on LA figures
/GAG
Devolved Formula Capital
/Agreed between parties
/Balance
/DFC from LA
3.8 The following paragraphs provide more explanation:
3.8.1 School budget share - calculated on the basis of the local funding formula of the LA from the previous financial year with an uplift for inflation. This means in Academic year 2009/10 the Academy funding for this element of the GAG will be based on 08/09 budget share data. Through a process called recoupment the DCSF will recover from the LA the funds relating to the Academy that have been included in the DSG.
3.8.2 SSG and SSG (P) – calculated as per maintained schools. In the year of opening the full amounts go the Academy and no amounts are given to the closing school, this is in line with normal procedure for a closing school. There may however be an agreement between the Academy Trust and the Closing School for a proportion e.g. 5/12ths of the SSG to go the closing school
3.8.3 Specialist Schools funding – calculated on the same basis as maintained schools
3.8.4 Academies will also receive Standards Funds. In the year of opening the LA will retain responsibility for distributing Standards Funds, with 5/12ths going to the closing school and 7/12ths to the Academy. In future years the DCSF will top slice the Standards funding to the LA, taking into account MFG and pupil number changes where appropriate. Some streams of Standards funds such as Harnessing Technology may still be distributed by the LA.
3.8.5 Where teacher threshold grant is not part of the LA calculated budget share the DCSF will fund this grant to the Academy on the basis of the LA formula.
3.8.6 VAT Grant – an additional grant to recognise that Academies cannot recover VAT.
3.8.7 Academies also receive grants for Rates and Insurance from the DCSF, although a consortium arrangement for insurance of Academies is likely in the future.
3.8.8 LA Central Spend Equivalent Grant (LACSEG) – A per pupil figure to fund Academies for functions that the LA provides centrally for its own schools.
3.9 There is effectively a 17 month lag in calculating Academy budgets and, therefore, no direct link between the recoupment amount in any one given year and the funding to the Academy.
3.10 The LA remains responsible for funding elements of SEN and individually assigned pupil amounts as well as providing some services such as Home to School Transport and Education Psychology Service.
3.11 It is planned that in April 2010 the YPLA (Young Persons Learning Agency) will assume responsibilities from the DCSF for Academy functions and funding along with the 16-19 agenda.
4 Potential costs/issues of school closure to Local Authority
4.1 Paragraphs 3.1 to 3.3 set out the rules for closing school balances transfers. The normal policy , which has been used for primary schools, is that closing balances are transferred to successor schools in proportion to the relevant pupil numbers. However, as Staunton Community Sports College is a secondary school that is closing to become an academy (and part of the Building Schools for the Future programme), this brings a new dimension. This is considered in a separate report to Schools Forum.
4.2 The governing body of Staunton Park Community College is party to a community management agreement with the LA through which the LA currently provides the College with an annual community subsidy. This may be continued, subject to the successful negotiation of new terms and conditions in an agreement with the Academy to continue providing community activity.
4.3 In 2006 Staunton School received a lottery grant of £490,000 from Sport England for the construction of a healthy living centre. The conditions of the grant, accepted by the County Council, require continuing use of the facility for at least 20 years. The grant could be reclaimed in full or part if Sport England’s terms are broken. The County Council’s liability can only be transferred to the Academy with the agreement of both the Academy Trust and Sport England.
4.4 The swimming pool at Staunton requires capital expenditure to bring it up to date. A feasibility study is currently being undertaken to identify the cost and timescale for delivery.
4.5 The Expression of Interest document that the LA is required to submit to the DCSF includes an agreement on the part of the LA to indemnify the Academy for any staffing costs arising out of the transfer. This would include costs associated with equal pay claims, TUPE, redundancy and severance pay. It would also cover any costs arising from the predecessor school running at a deficit or being overstaffed.
4.6 The school will be asked to cease holding cluster funds with effect from 31 March. This will help clarify the financial position of the school and ensure that there is no need for mid year transfer of cluster funds.
4.7 Departments within the LA who currently provide services to the school via Service Level Agreements will need to be aware that the school is closing, and that a full years charge is therefore unlikely to be applicable. They will also need to consider whether they are able and willing to provide similar services under an external agreement with the Academy.
4.8 The likely delay in appointment of key staff at the Academy until the summer term of 2010 may have a number of impacts. One notable area of concern is the choice of finance system for the Academy. The LA will need to give consideration to whether the use of the LA SAP system by the Academy would be possible and appropriate. In addition the Academy may wish to consider using the County Council’s payroll.
4.9 The LACSEG calculation will effectively reduce the funding available for some centrally provided services, and may therefore have a knock on effect on those departments concerned.
4.10 In the longer term there may be a financial impact on existing schools in the area, in particular if an increasing number of pupils are attracted to the Academy.
5 Next Steps
5.1 Education Financial Services (EFS) will support the closing school to ensure that realistic budgets are being set so as to minimise the risk of any deficit. This will include making assumptions that no SSG or SSG(P) will be received in 2010/11.