Since publishing our blog last week, the Department for Education (DfE) has updated its website on Academies education to provide further information on the funding of Academies.
However, despite this there are as yet few details which might actually assist schools in their deliberations as to whether to apply for Academy status. So far, what is apparent is that:
- The DfE has no plans to provide start-up funding for the new Academies.
- However, in relation to the costs that schools may incur in obtaining legal advice on the necessary documents for setting up an Academy, on the process for transferring staff, new signage and stationery a flat grant of £25,000 will be paid by the Secretary of State using powers under section 14 of the Education Act 2002. A claim form for making a claim, which must be supported by reasons as to why the support funding is being applied for, will be provided once the DfE receives notification of a school’s intention to convert. Any unspent balance can be retained by the academy as part of its overall income.
- It will not be possible to calculate the precise funding for every school at the registration stage, although work is underway to give schools some idea of the local authority “top-slice” (that is the level of extra funding that normally goes to the local authority based on the level of local authority funding already calculated for the school plus additional funding for central services provided by the local authority) that they would receive.
- Even though local authorities have already allocated budgets to schools and top-sliced the budgets for the full financial year, schools converting to Academy status in September will get a pro-rata top-slice allocation for the remainder of the financial year from September to March 2011.
- Despite concern that a school converting to Academy status may be worse off, the DfE has no evidence to suggest that schools suffer financially if they convert to Academies, since Academies are funded on a like-for-like basis with local authority maintained schools and receive the additional funding for services which the local authority usually provides and an additional grant to cover their liability to pay VAT on supplies and services attracting VAT. (Currently the VAT grant is based on historic spend information and reflects the 17.5% VAT rate.)
- There is no insurance top-up grant since insurance is paid for as a reimbursement item rather than as a formulaic grant. According to the DfE, a typical insurance premium is between £60,000 to £100,000.
- Academies are not permitted to run a deficit without some form of remedial action; those that open with a transferred deficit will need to agree repayment of the deficit with the Young People’s Learning Agency (YPLA) from instalments of the General Annual Grant (GAG) and those academies that develop a deficit after opening will have to agree a restructuring plan with the YPLA.
- It is not possible for the government to commit to funding levels in advance since future funding levels for schools will be dependent on the (as yet unknown) autumn Spending Review (although the suggestion in the emergency budget is that departmental spending will be reduced by 25% in the next four years) and the government proposes to consult on changes to the school funding system – which will include the introduction of a pupil premium. Therefore, Academies will only be told about their funding level for the first year, rather than having their funding levels agreed for three-year periods.
- The Local Authority Central Spending Equivalent Grant is given for all Academy pupils, although there are separate rates for primary and secondary pupils.
- The accounts which Academy schools have to produce are completely different from the consistent financial reporting (CFR) returns and have to follow charities and company law requirements. Someone with the necessary expertise may need to be instructed rather than using the school’s bursar. In addition, Academies accounts have to be audited by an external auditor appointed and paid for by the academy.
- Schools converting to Academy status will have to set up a new bank account to receive YPLA grant payments as, even though there will be provision to pay over any surplus monies, the funds in its existing bank account belong to the local authority.
- In relation to capital funding, it appears that Academy status does not automatically mean capital investment. In view of the full comprehensive spending review planned in the autumn, the DfE has not taken any decisions yet on future capital programmes. Capital funding for recurrent capital costs or major refurbishment programmes beyond the initial construction for those schools converting in 2010 are still under review, except like maintained schools, Academies receive Devolved Formula Capital. Until the end of March 2011, existing capital programmes will remain unaffected by any switch to Academy status but it is clear that no decisions about capital programmes from April 2011 have been taken.
What do the funding arrangements for Academies mean for local authorities?
Although the DfE states that it is right for funding to be taken from local authorities to reflect the fact that Academies are taking on local authority responsibilities, the fact that the department is proposing talks with the DCLG and local authorities about how to manage the financial impact to ensure that they are equipped to carry out their functions suggests that the full implications for local authorities have not been thought through.
For background information to the funding arrangements for Academy Schools, see Practice note, Academies: overview: Funding Agreement between the Academy Trust and the Secretary of State.
Next week we will consider legal issues for schools and governing bodies considering converting to Academies.