/ Schools Forum / Item No 7 /
/ 13 July 2010 /
/ Academies and funding – update /
/ Report of the Director of Children’s Services and the County Treasurer /
Contact: John Clarke Tel 01962 846464 email ; Sarah Pook Tel 01962 847045 ; Thomas Whiffen , 01962 846287
7
1 Summary
1.1 This paper deals with changes to Academy status and funding since the election of the coalition government and the introduction of the Academies bill on 26 May 2010. It acts as an update to the paper “ Financial Implications arising from the implementation of Academy Schools” Item 5 at the 20 October 2010 meeting of Schools Forum. It is for Schools Forum to note.
2 Legislative context
2.1 The Academies Bill was introduced in the House of Lords on 26 May , in time for some schools to become ‘new academies’ by September 2010. The stated purpose is to enable more schools to have the freedoms and flexibilities to allow them to continue to drive up standards. The central aim of policy is to raise standards for all children while narrowing the gap between the most and the least advantaged.
2.2 Academies as currently reflected in the policy declarations and the Academy Bill are publicly funded independent schools that are:
· Able to set pay and conditions for staff
· Free from following the National Curriculum
· Able to set the length of terms and the school day
· Likely to have ‘further freedoms in the way they engage in local partnerships and deliver 14-19 education’
· Funded as other publicly funded schools but with their ‘share’ of local authority central budgets for education.
2.3 Primary, secondary and special schools can apply to the Secretary of State to become a new academy. Our understanding is that primary and secondary schools that were judged as outstanding at their last Ofsted inspection will be pre-approved and will be able to become academies by September 2010, if they can get all the necessary changes in place by then, or more straight forwardedly by January or April 2011. It is expected that special schools will be able to become academies from September 2011.
2.4 Schools that are not outstanding will not be able to become academies as early as September 2010, they can register an interest and will be able to apply later in the year. .
· Schools wishing to become academies will have to establish an academy trust. This can be some members of its governing body; it does not have to be an external organisation. The trust signs the funding agreement with the Department for Education (DfE) – for 7 years, unless things go wrong
· Although academies are independent schools, they are at the centre of their communities and are expected to work with other schools and local partners
· All new academies have to abide, at all times, by the Admissions Code: this prohibits selection
· Outstanding schools that become academies are expected, in principle, to state that they are prepared to work with a weaker school
· Schools intending to become academies have to inform their local authorities, but not consult them
· No statutory consultation with students or parents is required
· A TUPE consultation will need to be conducted with staff: by the current employer
· All new academies will become exempt charities ( which avoids the regulatory burden of submitting accounts to the Charities Commission).
2.5 The letter about Academy status sent to all headteachers by John Coughlan on 15 June 2010 is being circulated with this paper.
3 Some differences from the earlier model of Academy
3.1 New academies are not the same as academies established by the previous government. The latter were sited in disadvantaged areas where educational standards were low and social problems numerous. A key feature of these old academies was the selection of an organisation or organisations to sponsor the academy. In many of the first academies, capital resources were made available to improve the site and buildings.
3.2 The new academies, often referred to as converters, are more like the grant-maintained schools of the 1990s. There are no sponsors and there is no additional capital. The existing headteacher and governing body remain and are able to convert the school’s status whereas the earlier model required a change of school leadership. The converters are not in disadvantaged areas. Some outstanding schools are but most of them are in more advantaged areas.
3.3 There are differences in the start up and transfer financial arrangements as well as an evolving picture on continuing funding and its impact on both academies and local authorities. The rest of this paper gives the position as it is understood at the start of July 2010.
4 Start up and financial management issues
4.1 Academies formed to deal with issues around failing schools received substantial start up funding to recognise the major changes affecting them. For instance the Havant Academy will receive start up grants in the 2010/11 academic year in excess of £500k. However converters will receive £25k. The DfE guidance and related material , see http://www.education.gov.uk/academies , states “ that it is fair that schools which intend to acquire academy status should devote some of their own resources to the process. This gives them an incentive to keep costs to the necessary minimum over and above the DfE support and also minimises the impact on the education budget for all schools”.The main costs are expected to be legal ones, in respect of property, staff and liabilities, and those involved in setting up new financial systems.
4.2 Currently all the funds allocated to schools, even those with local chequebook status, are in law the property of the local authority. The funds of an Academy are its own responsibility and have to be managed through a new separate bank account. Equally arrangements have to be made for the local authority to close the bank accounts of any chequebook school once it has begun as an Academy and pay over the balance. With the change of bank accounts a converter academy will have to ensure that all its regular receipts and payments are put to the correct account.
4.3 The financial system needed by converter academies is one appropriate to their status as companies limited by guarantee and exempt charities. It is unlikely that SAP could be offered to them as a buy-back service. Accounts are normally made up to 31 August each year and have to be audited externally each year with the costs of audit being borne by the Academy.
4.4 Where a converter is currently part of the County Council’s insurance arrangements it will have to have tendered and agreed alternative arrangements by the date of conversion.
4.5 In the case of converter academies balances – both surplus and deficits at the date of conversion will transfer. In the case of deficits the Academy will have to agree a repayment schedule from its recurrent funding with the Young People’s Learning Agency (YPLA) which is responsible for Academy, FE and Sixth Form College funding. The local authority will receive a sum equivalent to the deficit from the DfE.
4.6 The financial management regime for Academies is more restrictive than that for maintained schools. Allowable balances are restricted to 2% of general annual grant (GAG - see definition below) for general purposes and up to 10% to “ be used on the upkeep and improvement of premises, including the costs of equipment and routine repairs and maintenance of the Academy, and on capital expenditure relating to the Academy”.This compares with the current Hampshire approach of up to 4% for secondary and 5% for primary and special and no percentage limit on accepted commitments which can be used for a wider range of purposes.
4.7 It should be noted whilst the normal date of conversion would be the start of a term there is no requirement to that effect and so conversion could be any time from 1 September 2010 onwards.
5 Budgets and services
5.1 The fundamental structure of an Academy’s funding remains as previously reported and that is :
§ budget share equivalent plus
§ share of local authority central spending (see below) plus
§ share of grants such as Schools Standards Grant plus
§ Academy only grants chiefly for VAT and insurance costs above the level of delegated funds for insurance
5.2 The main recurrent annual grant is known as “General Annual Grant” (GAG) and that based on the share of local authority central spending is known as “Local Authority Central Spending Equivalent Grant” (LACSEG). It is the latter on which more information has become available over the last year and which features prominently in any discussions of funding equivalence. It should be noted that there is not an equivalence between the amounts recouped from the local authority and the money paid to academies. Currently there is no information on LACSEG in respect of Special Schools. The figures currently in the public domain are based on 2009/10 Section 52 figures with some DfE adjustments to a 2010/11 price base. This means they differ slightly from the figures included in the 29 June email to all Hampshire Schools. They apply for the academic year 2010/11 and Academy funding is on that basis.
5.3 LACSEG does fluctuate from year to year and there is no protection mechanism for such changes. The timescales for these notifications can be quite short. It should be noted that with the funding changes following from the Spending Review which will be announced in autumn 2010 the figures for 2011/12 onwards could be noticeably less.
5.4 The LACSEG calculation is very much tied to those services for which Academies get the money in order to buy their own or do something different and there is another group of services which the authority still provides to Academies. The analysis distinguishes between Schools Budget- funded from dedicated schools grant and some other specific grants, and Local Authority Budget funded from Council Tax and some specific grants. Currently it is only the Schools Budget amounts which are recouped but the DfE have stated that they are investigating ways of changing that.
5.5 Schools Budget
5.5.1 Those services which are part of Schools Budget central spending and which Academies are now responsible for arranging and funding are:
§ Specialist Teacher Advisory Service (SEN)
§ Behaviour Support team
§ 14 to 19 practical learning
§ Teacher unions and public duties
§ Licences and subscriptions
§ Miscellaneous which includes – school leadership succession, minibus driver training, Olympics Legacy coordinator, additional balance challenge work
§ Any matched funding for Standards Funds
5.5.2 The first of these is based on an Academy’s number of pupils on school action and school action plus and amounts to £59 for a primary pupil and £64 for a secondary pupil in that category.
5.5.3 The others listed above amount to £30 per primary pupil and £54 per secondary pupil.
5.5.4 However the DfE figures for Schools Budget LACSEG of £289 per primary pupil and £310 per secondary pupil also include a share of a number of specific grants including:
§ National Challenge
§ 1 to 1 Tuition
§ Specialist school funding
§ Ethnic Minority Achievement Grant
§ Some Extended Schools funding
§ Harnessing Technology
5.5.5 These grants had not been allocated to schools at the date of completion of the 2009/10 Section 52 and so the DfE are counting them as held centrally even though schools have had the full benefit of them. Indeed any schools converting to Academy status during 2010/11 will still receive their share of the 2010/11 values ( which in some cases have experienced sizeable reductions) as well as these LACSEG figures. This is an example of double counting.
5.5.6 Those Schools Budget services which are still provided to academies include the statemented pupil funding and the inclusion service and in 2010/11 threshold payments.
5.6 Local Authority Budget
5.6.1 The funding which Academies receive as Local Authority Central Expenditure Grant also includes funding which is not currently recouped from local authorities, because it is part of the local authority budget, but this may change as the legislation develops. It covers :
§ Service Strategy and Regulation
§ Education Welfare Service
§ Pupil support
§ School Improvement
§ Asset Management
§ Monitoring National Curriculum Assessment
§ Premature Retirement costs
§ Music Service central items – bands and orchestras etc.
5.6.2 These taken together amount to £207 per primary pupil and £209 per secondary pupil. However these values use the whole of these services to calculate the per pupil values even though they include costs relating to services which are continuing responsibilities for all schools. Discussions are being held nationally about how to recognise the amounts which relate to universal responsibilities.
5.6.3 As with the Schools Budget there are some grant related figures included in the LACSEG calculations, mainly some of the extended schools funds and local authority managed special educational needs items, and these amount to £58 per primary and secondary pupil.
5.6.4 The authority still remains responsible for:
§ home to school transport,
§ educational psychology service,
§ assessment of statements,
§ supply of school places,
§ early years,
§ continuing pension and retirement payments
§ all of children’s social care.
5.7 This table summarises the LACSEG information that applies in 2010/11 academic year.
Narrative
/Primary £ per pupil
/Secondary £ per pupil
DfE headline figure
/554
/ /577
/Schools Budget part
/289
/ /310
/Analysed as Main
/ /30
/ /54
Analysed as Grant related
/ /259
/ /256
Local Authority Budget
/265
/ /267
/Analysed as Main
/ /207
/ /209
Analysed as Grant related
/ /58
/ /58
6 The potential financial impact on Hampshire
6.1 Hampshire has 92 schools that were judged as outstanding in their last inspection : 73 primary (including infant and junior) schools,12 secondary, 4 special, 2 nursery and one education centre. It is clear that only the primary and secondary schools could become academies during the 2010/11 academic year . At this stage 10 of the outstanding primary schools and 8 of the outstanding secondary schools are known to have expressed an interest so that they can receive further information from the DfE.