In recent years, Academy schools have become a key part of the educational landscape.
In May 2010, when the coalition government came to power, there were just 203 Academies in England, but the expansion and acceleration of the Academies programme caused this number to increase to 1970 Academies in June 2012, and the sector is continuing to grow.
In his introduction to the Academies Annual Report 2010/11, Michael Gove highlighted the shifting dynamic saying: “Over 50% of secondary schools in England are either Academies or en route to becoming Academies and there are a growing number of primary schools. The Academies initiative has changed the face of schooling in England.”
He added: “I am determined to expand the Academies programme further to ensure many more schools are able to reap the benefits of Academy status.”
The changing face of the educational system means that increasing numbers of Headteachers and school governors have newfound freedom over their budgets, but also that they must take responsibility for their own accounts away the security of the Local Authority’s structure.
For many schools, this means that school governors find themselves to be directors of a company responsible for managing million pound budgets and with direct liability for the feasibility of the school business.
And although schools are drawn to conversion on account of the new freedom and independence that it affords, many are unprepared for the new responsibilities that Academy status incurs.
Helen Blundell from Bloomer Heaven explained: “Sometimes there’s a lack of appreciation by governors as to how their responsibilities have changed. They’re directors of a company, they’re employers of staff and they bear the responsibility for the ongoing financial viability of the organisation. Many do not fully appreciate this or do not fully understand the implications of it.”
She added: “Business managers face an enormously steep learning curve upon converting to Academy status and it can be a huge challenge for them. They have to deal with things like statutory accounts and supplementary reports as well as VAT and returns, and the comfort blanket of the Local Authority is not there to provide support for them.”
Understandably, this can cause a great deal of anxiety amongst school leaders and governors, and many seek expert help from outside sources to enable them to navigate this transition.
Thankfully, there are various avenues through which help is available. Many Local Authorities now offer to sell their services back to schools for a price, and numerous law and accountancy firms are offering their professional services to schools too.
What’s more, the grant that Academies receive from the Department for Education means that accessing these professional services will not leave them with a budget deficit.
“Schools get a conversion grant of £25,000 to ensure that the conversion process doesn’t disadvantage the school, and this can pay for professional advisors,” said Dan Slocombe from Moore Stephens, a network of accountancy firms that deal with some one hundred Academies.
“Academy status can be a culture shock for schools, which are unused to running like commercial businesses, and in the early days of conversion we get called on a lot to offer advice on accounting and value for money services. But once the individual responsible for accounts is happy with the budget they are able to benefit from their new freedom; planning ahead better, managing their own cash flow and even making savings on maintenance, HR and payroll.”
Certainly Academy status does offer schools a great deal of managerial freedom. In converting to an Academy, schools extricate themselves from their ties to their Local Education Authority and gain the freedom to set their own pay and conditions for staff, manage their own budget, change the length of school terms and school days and even choose how to deliver the national curriculum.
And, as they receive their funding directly from the Department for Education, they also retain the ‘top slice’ that was previously paid to their Local Authority, which they can use as they see fit.
Andrew Morris from Bramwell Morris Chartered Accountants explained: “Some funds normally go straight to the Local Authority for the services that they provide to schools but Academy schools get to keep that money and choose how they spend it. They can still buy Local Authority services if they choose, but they also have the option of buying services elsewhere.”
However, Academy status also means that schools have to follow the rules that govern other limited companies and produce audited accounts to be filed with the Department for Education and Companies House.
“Upon conversion Academy schools become an independent company limited by guarantee, and as such they need an external audit,” explained Andrew Morris. “Where schools once got their internal accounts done by the Local Authority, they now need their audits to comply with the Companies Act 2006, and many schools need to outsource in order to do this.”
In addition, Academy schools need to appoint a Responsible Officer whose function is to provide an independent overview of the schools finances and report back to governors on a regular basis. The Responsible Officer can be a governor or another individual who is not employed by the Academy, but many Academies choose to outsource this role to the company responsible for the school’s audits and accounts.
Helen Blundell commented: “It is possible for schools to appoint someone from the board of governors, but in reality any person with the necessary skills is unlikely to have the time to commit to this role.
“At Bloomer Heaven we’ve undertaken auditing as well as the Responsible Officer role for schools and offered them ad hoc support and advice. Schools are inundated with advice whilst undergoing the conversion process but what they really want is practical down to earth support on the end of a phone.”
Undoubtedly, many schools find navigating their way through the Academy conversion process to be challenging, and involving accountants at the early stages of the conversion process can offer schools invaluable peace of mind as well as much needed guidance from professionals experienced in this field.
What’s more, it can allow them to set up the necessary systems and financial records to function as a successful business in the future.
As Robert Green from Green and Peter Accountants concluded: “This is a new venture for many Academies, so they may need help in managing their accounts in the best way possible.
“An Academy is a business in its own right and needs to be treated as such. Working with a professional company that has many years of experience will help them to successfully manage their finances and prevent them from spending their money unwisely.”
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