Understanding and agreeing the Funding Agreement. Katie Michelon, Solicitor 16 June 2011

Transcription

1 Understanding and agreeing the Funding Agreement Katie Michelon, Solicitor 16 June 2011

2 What is the Funding Agreement? Contractual agreement between Academy Trust ( AT ) and Secretary of State ( SoS ) Provides framework within which academy must operate SoS agrees to make payments to the Academy Trust in SoS agrees to make payments to the Academy Trust in consideration for undertaking to establish and maintain an independent school

3 Academy Trust Company limited by guarantee New legal entity Objects advancement of education Company registered at Companies House Ultimate responsibility for satisfying the obligations and meeting the conditions in the Funding Agreement ( FA ) rests with the Academy Trust AT s governors are therefore responsible for ensuring that the AT satisfies its obligations under the FA

4 Single Funding Agreement Model documents on DfE website Now on version 5 of single Funding Agreement - last updated March pages; 124 clauses (plus annexes) Single conversion one Funding Agreement dated on date of conversion by SoS Academy Trust signs in advance

5 Key clauses - overview Introduction Legal Agreement Characteristics of Academy Opening Date Conditions of Grant Grants to be paid Continued

6 Key clauses overview Financial & Accounting Requirements Termination General Annexes

7 Characteristics As set out in section 1(6) of Academies Act 2010: - balanced and broadly based curriculum - specialism for secondary education (N/A for primary schools) - provision of education for pupils of different abilities (N/A for selective schools) - provision of education for pupils wholly/mainly drawn from area in which academy is situated

8 Key conditions Community cohesion Emphasis on needs of individual pupils, including those with SEN Cannot charge CRB checks bound by Education (Independent School Standards) (England) Regs 2010 Capacity including nursery/sixth form places as applicable

9 Key conditions Obligations to provide free school lunches unless unreasonable Families who receive benefits still receive free school meals (funding towards school lunches should come from GAG) Looked after children - academy must comply with all legal obligations (including guidance and Code of Practice) regarding the designation of a person to manage the teaching programme of such pupils

10 Key conditions - staff Teacher pay and conditions responsibility of AT QTS anyone carrying out specified work must be a qualified teacher although limited circumstances where this requirement does not apply Pensions teachers and other staff must have access to Pensions teachers and other staff must have access to Teachers Pension Scheme and Local Government Pension Scheme respectively

11 Key conditions R.E. All academies must make provision for teaching of religious education and daily act of collective worship R.E. needs to reflect the fact that the religious traditions in GB are largely Christian but also take account of the teaching and practices of other principal religions represented in GB Daily act of worship can be a single act for the whole school or separate acts of worship according to classes or age groups

12 Grants & funding (1) Level of funding to be received not set out in FA All grants are paid each academic year No Implementation Grant for converting academies 3 types of grant: - General Annual Grant ( GAG ) - intended to cover and must be spent on the normal running costs of the academy

13 Grants & funding (2) Capital Grant - paid to cover capital expenditure and will be paid as and when required. Where capital expenditure is to be incurred, the academy will need to seek written agreement from the SoS to receive Capital Grant Earmarked Annual Grant ( EAG ) - can be used for either recurrent or capital expenditure but will be ring fenced to be spent on something specific

14 Termination (1) Clause 11 sets out date on which academy will open Either party can terminate FA with minimum of 7 years written notice Termination must take effect on 31 August On termination, academy ceases to be an academy Possible indemnity

15 Termination (2) SoS has additional powers to terminate: - where AT may be in material breach of FA/fails to meet conditions set out in FA - Special Measures Termination Event - insolvency situations AT has opportunity to respond where SoS provides provisional notice to terminate

16 Additional clauses PFI Church schools Grammar schools Boarding schools Groups

17 Annexes Five annexes dealing with: A.= Articles of Association B.= Admissions C.= SEN D.= Exclusions E.= Grammar schools parental ballot in relation to selection

18 Annex A Mem & Arts Memorandum signed by initial subscribers Articles governing document Clauses of Funding Agreement Academy governed by GB aka the Directors Duty to have regard to guidance published by SoS regarding governance of academies Memorandum and Articles cannot be amended without SoS written consent

19 Annex B admissions (1) AT is its own admissions authority. As such will take control of: Setting its own admissions arrangements, including PAN Determining individual applications Organising its own appeal Organising its own appeal Admissions and Admissions Appeals Codes of Practice and Fair Access Protocols take effect via the Funding Agreement. LA still responsible for co-ordinated admissions arrangements

20 Annex B admissions (2) Requirement to honour offers of places made by predecessor school Individual academies required to make request to SoS to expand pupil numbers or age range Will require local consultation and views of LA will be considered

21 Annex C - SEN Previous model Funding Agreement did not require academies to admit pupils where academy named in Statement. Converting academies Funding Agreement amended to bring position in line with other maintained schools.

22 Annex D behaviour Sets out the exclusion arrangements which must be followed Law on exclusions which applies to maintained schools also applies to academies. The academy must also have regard to relevant guidance on exclusions and the exclusion appeal process AT is able to make its own arrangements to constitute an Independent Appeal Panel for the purpose of exclusions appeals but must adhere to the relevant guidance when doing so No requirement on the AT to seek the LA s advice when contemplating exclusion

23 Annex E selective admission Sets out the procedure for the removal of the academy s selective admission arrangements DfE now issued separate and revised versions of Annex E, depending on whether grammar school is stand alone grammar school, subject to a whole-area parental a ballot or part of a group of grammar schools Each version aims to reflect position under Grammar School Ballots Regulations

24 Negotiation? DfE increasingly reluctant to agree changes to models Any changes need to be justified and agreed by the DfE Raise with your lawyers Any future amendments to Funding Agreement require SoS approval

25 Questions?

26 Katie Michelon, Solicitor Browne Jacobson LLP Tel:

27 Effectively Managing Your Accounting Responsibilities Alan Dunwell, Director mobile:

28 School to Academy Can bring financial advantages Greater freedom over finances School has control over it s own budget More money to spend Academy gains funding (previously retained by LA for provision of centrally delivered services)

29 School to Academy (continued) BUT Academy needs to source and pay for services itself Local Authority services are often integral in a School s systems and processes Prior to conversion, school must evaluate what services it needs how best to obtain them whether LA can / will contract with the Academy to provide the services what will the services cost? e.g. facilities management, catering, financial management, HR, payroll, health and safety, insurances, bank accounts, legal, repairs and building maintenance, utilities management...

30 Financial Management Resources Who are your FM team? What are their current roles? What are their key skills? What resource and skills do you need? What will give you best results in mitigating key risks? Full, in-house FM function? Continue to Outsource all or part of FM to LA (if available) or another provider?

31 Structures - mandated Governing Body Accountable Officer regularity; propriety; 3 E s Scheme of delegation Finance committee Finance Director (recommended to be a qualified accountant) Responsible Officer (should be a Governor) Register of Interests Risk Register Annual Report and Accounts Recurrent Budget Financial Procedures

32 Structures to consider Remuneration committee Audit committee Risk management framework Policy suite and review mechanism Decisions reserved for Governing Body Segregation of duties Governors and SMT Governing Body skill sets; training; availability Internal Audit not mandated

33 Accounting considerations for new Academies Choice of accounting software Additional reporting requirements fund accounting, balance sheet etc Forecasting capacity (cash flows) Local Government pension scheme deficit VAT Banking online systems credit balances

34 Planning - Key academy dates Year end(s) 31 August 31 March (Optional) Accounts to be filed at DfE 31 December Filing of accounts at Companies House 31 May Teachers Pension audit Audited EOYC 30 April OR Audited TR17a 30 September

35 Planning - Timeline (using as example) GAG1 GAG2 February 2011 Indicative recurrent budget for forthcoming year 30 June Final recurrent budget for forthcoming 2011 year GAG forms being replaced by Financial Plan Return Self assessment Return WGA/Clear Line of Sight Reporting Modifications on the way

36 Accounts preparation Academies Financial Handbook Issued September 2006 Updated by Bulletin from August 2009 To be updated by August 2011(for use in 2011/12 ) Academy Model Accounts Darlingbridge Accounts (Academies Finance Handbook) Comply with Companies House Charities Act (SORP) Coke Town on the way Format more like Charity accounts than company accounts

37 Accounts are made up of: Report of Governors Structure, Governance & Management Strategic Direction Performance Against Objectives Finance Review inc Principal Risks Public Benefit SOFA (Statement of Financial Activities) Unrestricted fund Restricted fund Fixed asset restricted fund

38 Accounts are made up of (continued): Income and Expenditure account Balance Sheet Cash flow Notes to financial statements

39 Accounting disclosures relevant to Academies GAG Current Position - Restrictions over carry forward Max 12% of total GAG income in year» 2% max expenditure on revenue» 10% remainder must be capital expenditure Future All Change FRS 17 Pension Disclosure Actuarial Valuation to be obtained from Pension Fund Changes in valuation basis last year from RPI to CPI. Accounting treatment options 1) negative service costs through p&l (* our preferred option) 2) change in actuarial assumptions through STRGL

40 VAT Non Business Income Delivery of Free Education Business Income E.g. Vending machine sales, catering income (staff), sale of uniform Compulsory to register for VAT - 73k+ Timing of Registration Accounting Implications Structure Property

41 Audit Internal Audit Responsible Officer External Audit Statutory audit required by DfE Companies Act 2006 Engagement Letters Regularity Audit on the Way

42 Teachers Pension An audited certificate of contributions made must be submitted to the Teachers Pension for the year 1 April to 31 March You can either submit : EOYC End of Year Certificate Complete by 30 April TR17a Complete by 30 September Useful link:

43 The financial planning timeline June/July Audit planning meeting Interim audit work. Teachers Pension audit Oct/Nov Audit fieldwork December Attend Finance meeting and/or AGM 31 December Accounts to be filed at DfE. 31 May Accounts to be filed at Companies House

44 Audit approach Controls and risk based approach Documentation of systems and controls in place Use of Responsible Officer / Internal Audit reports to identify areas of concern Controls testing over high risk areas Reliance on analytical review on low risk areas

45 Audit issues Key Fraud Risks Procurement Payroll Controls over banking Laws and regulations Safeguarding Employment Law

46 Audit issues Going concern Forecasts of fund balances (Use of Software ) and reserves in 12 months from date of audit report Falling student numbers (possible claw backs of income) Falling standards (Exam success / Ofsted reports) Risk register

47 High risk areas INCOME Classification and Cut off Is it restricted or unrestricted? Is it recognised in the correct period? Are there time restrictions over use of grant? Completeness GAG carry forward breach of 12% rule Income claw back

48 Income claw backs GAG (Current Position) Funding based on student numbers which may give rise to possible claw backs of income Academy s Funding Agreement & Annual funding letter will provide necessary information Pupil numbers Basis of funding Possible adjustments? < 90% of planned capacity (relevant in first year & future years when <90% ) > 90% planned capacity (only possible after 2 nd year) Governing Body s estimated numbers for the forthcoming September Pupil Level Annual School Censes from preceding January 2.5% additional or claw back adjustment to following year s funding None although can make a claim for additional funding if demonstrate significant impact on costs

49 High risk areas PAYROLL Use of local authority payroll providers Controls over authorisation of payroll payment Set up of new employees and amendments to standing data EXPENDITURE Classification Authorisation of expenditure Allocation of expenditure against relevant grants (Restricted / unrestricted)

50 Audit experience Management letters 2010: points raised: Lack of fund accounting Responsible officer reporting lack of Fixed asset register not updated for disposals of ITC Lack of security over laptops Online banking arrangements

51 Questions