Cab O1 3/7 BARNSLEY METROPOLITAN BOROUGH COUNCIL. This matter is a Key Decision within the Council s definition and has not
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1 Services Finance Property & Information and Assistant Chief Executive, Executive, Legal & Governance Report of the Assistant Chief been included in the relevant Forward Plan This matter is a Key Decision within the Council s definition and has not BARNSLEY METROPOLITAN BOROUGH COUNCIL the various transactional documents with regard to the non-pfi schools have not required Cabinet approval as the Authority is required to facilitate 1.5 A number of non-pfi Schools have already converted to Academies and transactional documents. transaction there is a need to make certain amendments to the the Schools as this takes effect through the decision of the Secretary of provisions. However given the relevant Schools are subject to a PFI State to issue a formal Academy Order under the relevant legislative 1.4 Cabinet is not being asked to approve the principle of the conversion of would be the case if the schools did not convert; amending the various conversion documents and PFI documents than 1.3 The Authority will not face any additional exposure by entering into and Appendix B) should they decide to proceed with Academy conversion. of the remaining Barnsley PFI Primary Schools (all of which are listed in delegated powers to enable the Authority to proceed with the conversion to facilitate these additional PFI conversions by the granting general conversion. Cabinet is being asked to grant a number of formal resolutions 2013 and Darton Primary has recently come forward also seeking Academies. Darfield Primary is currently due to convert on 1st September 1.2 Since that report two further PFI Primary Schools have sought to become convert in accordance with the Academies Act PFI Primary Schools seeking to convert, or which may be required to further report would be prepared for Cabinet in the event of any additional Hoyland Common Primary). As part of this report it was resolved that a PFI Primary Schools (Littleworth Primary, Pipers Grove Primary and formal resolutions to facilitate the proposed conversions of three Barnsley 1.1 Previously in report Cab /8.1 Cabinet granted a number of Purpose of Report Private Finance Initiative (PFI) Schools Barnsley Primary School Academy Conversions Cab O1 3/7
2 establish themselves as Academy Trust Schools. authorised nominated officers be approved to vary the PFI Project documents relating to the conversion of any school listed in facilitate the conversion of any school listed in Appendix B to the officers be able to negotiate, agree and execute the contractual Executive, Legal & Governance and or his authorised nominated Project Agreement and all documents ancillary thereto in order to converting Academy Trusts for a term of 125 years; and 2.4 That Cabinet resolves and approves that the Assistant Chief thereby maintained and operated by the Academy Trust. Strategic Property & Procurement to agree terms for a lease to Project Agreement that have already or that may seek in the future to Agreement to facilitate the conversion of any school listed in converting Academy Trust for a term of 125 years. include a School Agreement being an agreement between the 2.2 That the Assistant Chief Executive, Legal & Governance and/or his 2.3 To approve that NPS Barnsley Ltd is instructed by the Head of Appendix B) which are subject to the conditions of the Primary PFI Appendix B to a school which has an Academy Trust status and 2.1 That Cabinet notes the Authority maintained schools (listed in standard form lease of 125 years. an Agreement between the Department for Education, The Academy Trust and the Authority, the Commercial Transfer Academy Trust, and to enter into a Department for Education PFI Governance and/or his authorised nominated officers to enter into To grant a resolution for the Assistant Chief Executive, Legal & facilitate the conversion process; To approve that NPS Barnsley Ltd is instructed by the Head of nominated officers be approved to vary the Primary School PFI Strategic Property & Procurement to agree terms for a lease to the Agreement, being an agreement between the Authority and the The Assistant Chief Executive, Legal & Governance and or his effect: - of the report is therefore to obtain such formal resolutions to the following specific Cabinet resolution authorising the Authority to do so. The purpose which are needed to give effect to the conversion without there being a Authority and the Academy Trust, the Principal Agreement which is PFI schools the PR funders will not enter into the necessary documents 2. Recommendation the conversion as a matter of law. Whilst this is also strictly the case with the contractual documents relating to the conversion which shall
3 3. Introduction the Academy Trust, and to complete, agree and enter into a Transfer Agreement, being an agreement between the Authority and years. Department for Education PFI standard form lease for a period of 125 for Education, The Academy Trust and the Authority, the Commercial Principal Agreement which is an Agreement between the Department 3.1 The Academies Act 2010 came into force on the 27 on 15th November These enactments provided a new mechanism for Governing Bodies of Local Authority Maintained Schools to convert from either a community, foundation, trust, voluntary controlled or voluntary aided school to apply for Academy Status. Upon such an application to the Secretary of State the applicant school could be granted an Academy Order by the Secretary of State for Education, if the Academy Trust rather than remain within the control of the Authority as a maintained school. This type of conversion, a conversion by application from an individual school does not require the school to have a sponsor. 3.2 Academy Trusts are publicly funded independent schools which have a The ability to set pay and conditions for all staff The freedom from following the National Curriculum. The ability to change the lengths of terms and school days Greater control over the school budget and freedom to spend the money the LA currently receives on behalf of the schools Responsibility for all capital assets and their management. 3.3 The application provision set out at 3.1 above is in addition to the a school where in accordance with the Education and Inspections Act 2006 a school is a failing school and requires intervention. In this scenario the school converts under a sponsor organisation which also has the flexibilities which are listed at paragraph Once an Academy Order has been issued by the Secretary of State the Authority is required to follow the process set out within the Academies Act 2010 and has to facilitate and enable the implementation of the Academy Order which entails the Authority entering into agreements with the appropriate Academy to provide for the transfer of the school site to the Academy; and carry out any consequential changes that may be Department for Education s ability under the Academy Act 2010 to convert number of freedoms and flexibilities including: charitable company limited by guarantee and take on the status of an thereby permitting that school to establish itself as an Academy Trust, a subsequently amended by the Education Act 2011 which came into force Secretary of State believed that to grant such an Order was appropriate th July 2010, and was agreement between the Authority and the Academy Trust, the Appendix B which shall include a School Agreement being an
4 4. Consideration of Alternative Approaches by statute. 5. Proposal and Justification Academy Trust. The lease provisions are standard form as issued by the Department for Education where the rent payable by the Academy Trust is that of a Peppercorn Rent. contract, which will expire in (Barnsley) Limited for the design, build, finance and operation of the relationship with Modern Schools (Barnsley) Limited for the duration of the obligations under the PEt Agreement directly to the Academy Trust who dealing with any other third party entity whose financial covenant is not as following the conversion. However, given the sensitivity of the funders would then secure the necessary funding from the Secretary of State 3.5 The Authority will be required to enter into a 125 year lease with the 3.6 The Department for Education expects that in relation to the PFI Project primary schools that the Authority should continue its contractual 3.7 It might have been expected that the Authority would simply pass on its provide indemnities so that the Authority is financially protected. As a last 3.8 In order to set out the obligations and liabilities of both the Academy Trust 3.9 The suite of agreements consist of the School Agreement, the Principal will fall on the Secretary of State. the local authority to remain in direct contractual relationship with the PFI contractor. The overall effect of the conversion documentation is to such as the PFI Provider and other like organisations. Agreement which Barnsley entered into in May 2005 with Modern Schools resort the financial risk of the Academy Trust defaulting in payment in and the Authority it is necessary for both parties to enter into a suite of contractual agreements shown at 3.9. Agreement, the Commercial Transfer Agreement and the Lease. A brief explanation of each is given in Appendix C. school and the process which the Authority must then follow is prescribed for any school which has received an Academy Order from the Secretary 4.1 The Authority is required to enable and facilitate the conversion process of State. This Order requires the Authority to cease maintaining the needed including those required because of any third party involvement respect of the funding of the PFI operation and maintenance of the School secure as that of a local authority it is the practice in PFI conversions for
5 schools to Academy Trust schools will impact on the local area in that the 6.1 The proposed conversion of the schools from Authority maintained 6. Delivering Sustainable Community Strategy Ambitions statutory requirements. justification for the recommendations within this report are based on those assessment is available from the Department for Education s website. for Education has evaluated the Act s impact on equality and the the Academies Act 2010 and subsequent amendments. The Department within this report concern implementing national legislation described in 10.1 There are no issues arising from this report. The decisions recommended 10. Promoting Equality and Diversity and Social Inclusion. 9.1 There is no conflict with the European Convention on Human Rights. 9. Compatibility with European Convention on Human Rights Academy Trust is to enable greater autonomy to raise educational Academy Trust. standards within the Borough and within each community served by the 8.1 The purpose of the conversion of an Authority maintained school to an 8. Impact on Local People serve will still have the access to and the community benefits flowing from Authority are protected. The communities which each of the PFI schools expired the 125 year lease ensures that the proprietary interests of the therefore the buildings will be kept in accordance with the Authority the access to the local primary school. with Modern Schools (Barnsley) Limited in 2005 are adhered to and schools requires that the PFI contract and maintenance provisions agreed requirements set out within that contract. Once the PFI Contract has 7.1 The conversion of the Authority maintained schools to Academy Trust 7. Long Term Sustainability of the Proposal agenda and strategy ambitions. communities. This outcome links with the Authority s re-thinking learning educational outcomes and opportunities within each of the Authority s based on raising educational achievements and attainment of better ethos for the conversion from maintained schools to Academy Status is Authority must adhere to in terms of the conversion process and the 5.1 The proposals reflect the statutory position and process which the
6 14.3 There are, however, considerable costs involved in the actual conversion funders legal costs incurred to date on the first PFI primary school with varying the PFI contract with the funders and PFI contractor. The taking charge of converting the schools without any input from the 14.4 In addition to internal costs, there are also external legal costs associated Academy Trust and ultimately from the Secretary of State. available to cover these costs. absorbed within existing budgets as no separate funding from DfE is (CYPF, Finance, HR, and Property & Procurement etc.) is currently being of the schools. Officer time in supporting the academy conversion process arising from any changes will be recoverable by the Authority from the make the monthly Unitary Charge payments to Modern Schools (Barnsley) Academy Trust. Future contributions will be determined on an annual Agreement. The School s Agreement sets out that any increases in costs as a result of either inflation or changes made to the school or service basis in accordance with the PFI Project Agreement and the School s Academies remains unchanged as the commercial terms of the PFI 14.2 The financial consequences of PFI primary schools transferring to 14.1 The financial implications associated with the proposals outlined in this 14. Financial Implications Authority. Education can result in the Department for Education stepping in and report are summarised in Appendix A. Project Agreement remain unchanged. The Authority will continue to 12.1 There are no issues arising from this report 13.1 Delays in the conversion process create reputational risk for the Authority. 12. Conservation of Biodiversity Any undue or unreasonable delay in the opinion of the Department for Limited and the Authority will recover the school s contribution from the under Section 17 of the Crime and Disorder Act have been considered. Agreement which shall be revised to reflect appropriate increases in costs requirements in accordance with the mechanics of the PFI Project 11.1 In investigating the options set out in this report, the Authority s duties 11. Reduction of Crime and Disorder 13. Risk Management Considerations
7 Primary PFI conversions will incur legal costs in the region of k per 14.5 Any conversions which will take place will have the benefit of any the funders costs relating to the first conversion (Littleworth Primary). overall costs. The Authority has already been reimbursed by the DfE for of funding these costs, however this is subject to agreeing a cap level on PFI School, resulting in an estimated total of 82k in 2013/14 (based on 5 PFI schools). Specific agreement has been reached with the DfE in terms 17.3 Appendix C- Legal Documents Explained 17.2 Appendix B List of Schools which may convert Appendix A Financial Implications. 17. List of Appendices 16.1 PFI Private Finance Initiative 16. Glossary term. and their respective employment contracts until the end of the contractual Schools (Barnsley) Limited in accordance with the terms of that contract employed through the PFI Project Agreement will be retained by Modern new Academy Trust as part of the conversion process. The staff currently (Protection of Employment) Regulations 2006 as amended (TUPE) to the 15.1 Staff will be transferred pursuant to the Transfer of Undertaking 15. Employee Implications Authority s own legal team, which will be based on the length of officer 14.6 The above legal costs exclude internal costs from the use of the time to follow the process to its conclusion. there is no formal confirmation of the level of contribution (still the subject is agreement in principle by the DfE to contribute towards these costs, of ongoing discussion with the DfE). already incurred on the Littleworth Primary PEt conversion. Although there The total cost for all 5 PFI Schools is estimated as 78k inclusive of fees quotes provided and the underlying assumptions) is 12k per PFI School. protected. The anticipated cost of undertaking this work (based on the against the PEt agreement to ensure that the Authority is adequately perform due diligence checks on the Academy conversion documents as has engaged external legal advisors (Nabarros) to provide advice and modifications agreed from the first Primary PFI conversions. The Authority favorably to the original estimate of 25k. It is estimated that further conversion (Littleworth Primary) are 22k inclusive of VAT. This compares
8 Office Contact: Andrew Frosdick Telephone No: Date: 14th August 2013 Conversions contains exempt information Correspondence regarding this matter Es held on the files in Children Young People and Families Directorate available for inspection, Common Primary - Finance Initiative (PFI) Schools Private Littleworth not Primary, Pipers Grove Primary and Hoyland 18.1 Cabinet Report 16th January Barnsley Primary School Academy 18. Background Papers
9 I) Capital Expenditure 2013/ / /16 Total Private Finance Initiative (PR) Schools Barnsley Primary School Academy ConversIons FINANCIAL IMPLICATIONS for addressing the Council s 3 year MTFS: 2015/ m 2016/ m 2014/ m to be met by the Council from its reserves. This will impact on the level of funds available To the extent that there is no conthbution from the DIE the estimated costs of 78k will have iii) Impact on Medium Term Financial Strategy: Discussion ongoing with DfE regarding financial contribution to the above costs To be financed from Net Expenditure 78, Contribution / funding from DIE (82,000) 160, External legal advice (Nabarros) - SPV (PFI funders) costs External Legal costs: 78,000 82,000 ii) Revenue Effects (f) () () (f) 2013/ / /16 Later To be financed from: 0 Prepared on Behalf of the Assistant Chief Executive - Finance, Property & Information services
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11 Appendix B LIST OF PFI PRIMARY SCHOOLS (i) Schools seeking conversion Darfield Valley Primary Snapehill Road Darfield Barnsley S73 9LT Darton Primary Station Road Darton S75 5AD (ii) Schools which may seek to convert in the future High View PLC Newsome Avenue Wombwell Barnsley S73 8QS Kings Oak PLC Bondfield Close Wombwell Barnsley S73 8TL Park Street Primary Park Street Wombwell Barnsley S73 OHS Lacewood Primary Carr Head Lane Bolton on Dearne Rotherham S63 8DA Springvale Primary Sheffield Road Pen istone Sheffield S36 6HJ
12 Cherry Dale Primary Royston Road Cudworth Barnsley S72 8AA Joseph Locke Primary Shaw St Barnsley S70 6JL Sandhill Primary Dearne St Great Houghton Barnsley S72 OEQ
13 Appendix C LEGAL DOCUMENTS EXPLAINED The School Agreement The School Agreement is a contract between the Authority and the Academy Trust which sets out within the background that the Academy Trust is aware that the Authority has entered into the PFI Project Agreement and that Modern Schools (Barnsley) Limited are entitled to have access to the School after conversion in order to carry on performing the duties they should under the PFI Agreement. In addition to the information given within the background the Agreement confirms that the Academy Trust will not do anything which will put the Authority in breach of the PFI Project Agreement. It also sets out that the Academy Trust, which on conversion will receive the school grant funding directly from the Department for Education (which would normally have been sent to the Authority), and the Agreement obliges the Academy Trust to make payment to the Authority of the school contribution. In the event of the Academy Trust failing to make those payments the School Agreement refers the Authority to the Principal Agreement (explained below) in which the Department for Education confirms that it will, subject to an appropriate application being made to the Department for Education by the Authority, make the payment of the school contribution on behalf of the Academy Trust. This gives the Authority a certain level of comfort that it is not going to be left in a default scenario under the PFI Project Agreement as a result of non-payment by the Academy Trust. The School Agreement also deals with events of default or the insolvency of the Academy Trust in which case the DfE can step in and resolve the situation. It is not expected that this will be an outcome and that it is a low risk for the Authority but one for which the Department for Education have set out this risk management strategy. The School Agreement for the period of the PFI Project Agreement also requires the Academy Trust to ensure that it has the appropriate insurances in place and where it is the responsibility of the Authority to pay for insurance cover under the terms of the PFI Project Agreement the Academy Trust shall reimburse the Authority for the insurance in accordance with the payment terms which will be agreed and set out by the Authority within the Agreement. The principal statement which the Department for Education maintains is that the Academy conversion should not put either the Authority or the school in any worse or better position than it was prior to the conversion and the commercial agreement between the Academy Trust and the
14 Authority to be contained within the School Agreement will achieve that aim. The Principal Agreement The Principal Agreement is an agreement between the Authority, the Secretary of State for Education and the Academy Trust. Significantly for the Authority it provides the protections out-lined above in that if there is a default in payment of any of the agreed amounts as set out within the School Agreement, the Department for Education will upon application by the Authority, where that application is a correct application, make payment to the Authority in default of the Academy Trust. The Authority within this agreement is obliged to keep the Department for Education informed by virtue of periodic reports as to whether there have been or will be any changes made to the PFI Project Agreement and seek the Department for Education permission to progress with any changes which would cause the adjustment of the monthly payment to increase or increase any liabilities under the PFI Project Agreement which in the event of a default by the Academy Trust the Department for Education may become liable to pay to the Authority and or Modern Schools (Barnsley) Limited. The Principal Agreement also describes and imposes the right for the Department to carry out what it has defined as Flooding Rights, as outlined above. The Commercial Transfer Agreement This Agreement provides for the Transfer of non-land assets which belong to the school such as existing contracts which the school has entered into, the current Authority employees and information. These non-land assets are transferred from the Authority to the Academy Trust as a going concern. The Commercial Transfer Agreement also covers issues relating to warranties and indemnities in relation to the transferring assets. The Lease The lease is the legal mechanism by which the land assets are transferred to the Academy. The lease is always based on the DfE model which is a 125 year long leasehold term. The Council retains the freehold interest. By lease covenants, the Academy becomes responsible for repair, maintenance and insurance but only after the contract period under the PFI expires. The lease covers other issues such as restrictions on assignment and underletting, and alterations.
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