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Governance

Academy conversion: the essentials

Since the introduction of the Academies Act 2010, each passing month has seen more schools start down the path of conversion. The Act significantly increases the scope of the previous academies programme which saw around 200 academies open in the last eight years. Stephanie Day reports

Why convert?
Academies are independent schools funded directly by the Department for Education (DfE) under the terms of the academy funding agreement which the academy enters into with the Secretary of State for Education. This agreement sets out the basis on which the academy will receive its funding and also the contractual obligations which the academy is expected to perform in return.

While the funding agreement will not set out the specific sums that will be received by the school as an academy, it confirms a number of grants that it will receive. The main grant is called the General Annual Grant (GAG). The GAG includes:
•  the standard formula funding received by a maintained schools;
• an additional sum referred to as “the local authority central spend equivalent”; and
• specialism funding.

The local authority central spend equivalent is a sum which is otherwise held back by the local authority for the delivery of specific services, such as. It has been estimated that this means that academies could receive an increase of funding of between 5 and 15 per cent. There is a "ready reckoner" on the DfE's website to enable schools considering conversion to calculate to calculate the level of funding they should receive as an academy, and allow them to compare this with the funding they currently receive.

http://media.education.gov.uk/assets/files/xls/a/academy%20recoupment%20calculator.xls

Academies have to use the additional sum they receive to either "buy back" into certain local authority services or to procure them from elsewhere. This includes insurance, payroll, catering, building maintenance etc, some of which many schools procure independently already. This opportunity may allow academies to make cost savings, particularly if they jointly procure goods and services with other schools. Each school will need to carry out its own business modelling as part of the governors' decision making process as to whether to proceed.

Can my school convert now?
All schools (including primary, special and grammar schools) will be permitted to convert to academies. At present, only schools graded "outstanding" or "good with outstanding features" are eligible to convert. There remain uncertainties about how funding will work for special schools.

There is no longer a requirement for academies to have a sponsor, however current convertors are be required to work with a weaker school.

What is the conversion process?
Schools interested in conversion should first register their interest with the DfE. If the governing body wishes to proceed, they will need to take a formal decision to apply for an Academy Order at a properly convened meeting of the full governing body. For those schools that have a foundation, the foundation will need to consent to the governors' application.

The application must be submitted to your DfE lead contact who will assist you in preparing any of the additional information required for your application (for example, in relation to any deficit you might have or the work you are doing with an underperforming school).

Consultation
All schools are required to carry out a consultation, but it is up to them to decide whom and how to consult. There is no specified length of time for the consultation and schools have flexibility in how it is conducted. Schools should fully consult and engage properly with their stakeholders (for example, parents, pupils, staff and the local authority as an absolute minimum). Examples of consultation requirements in other areas of school reorganisation can be helpful in guiding schools on this point.

Employees and trade unions
Where there are recognised trade unions, consultation will need to take place with regional representatives of those unions as well as with staff. The obligation is to inform and consult with employee representatives (ie the trade unions) of any employee who will be affected by the transfer. For the majority of schools, it is envisaged that terms and conditions of employment will remain unchanged. Nonetheless, such consultation must be in advance of (and in good time before) the transfer takes place. A failure to inform and consult staff can lead to considerable awards in the event of claims being presented to a Tribunal.

Schools need to be prepared for opposition and challenge from trade unions and recent experience suggests that converting schools may, at the very least, be faced with Freedom of Information Act requests.

New governance arrangements
This will involve the establishment of a new charitable company, known as “the Academy Trust”. The Academy Trust operates the academy and, importantly, is the legal entity that signs the funding agreement.

There are two specific roles within the Academy Trust:
• the directors (who are more commonly referred to as “governors”); and
• the members (who “own” the Academy Trust and who are responsible for appointing some of the governors).

Each school will need to consider its proposed governance arrangements in detail.
The Academy Trust has Articles of Association that form its constitution which will be based on the DfE model. Aspects of the model can be tailored for your circumstances, including the composition of the new governing body.

Funding agreement
The funding agreement is the document that governs the relationship between the Academy Trust and the DfE. It sets out the basis on which the Academy Trust receives its funding and the obligations which are imposed on it in terms of the running of the academy and the administration of the company.

The funding agreement is based on a DfE model. It is not intended to be a negotiated document, but there may be opportunity for agree a small number of changes to make the agreement more favourable for the Academy Trust.

Depending on the type of school and the proposed land arrangements, it may be necessary to insert additional clauses into the agreement, for example:
• grammar schools;
• state boarding schools; and
• church schools.

Land arrangements
The land arrangements for the new academy depend on the starting circumstances and histories of individual schools.

Academies are usually granted a 125-year lease of their site by the local authority. If the land is held by the governing body or a trust (if a trust school), however, the land arrangements can vary (and may range from a lease of the land to the transfer of the freehold to the new academy). If an external body owns the land, such as a diocese or foundation, negotiations regarding the ownership of the land will have to be undertaken, although the DfE has now agreed model documents for use by church schools.

Special care needs to be taken in respect of any existing construction documentation as conversion to academy status can impact on contracts or any defects liability period arising post completion during which the contractor remains liable. Existing documentation can be assigned or novated to the academy as appropriate.

Transfer agreement
Once the Secretary of State has considered the application he has the power to make an Academy Order which dissolves the existing governing body and requires the local authority to cease to maintain the school on a specified date.

An Academy Order coming into force has the effect of dissolving the existing governing body. This being the case, all assets and liabilities will automatically revert to the local authority and there will then need to be a transfer agreement documenting the transfer from the local authority to the Academy Trust dealing with:
• records (for both staff and pupils and also for example, existing coursework);
• staff and pensions;
• third party contracts; and
• other assets to be transferred with the agreement of the local authority.

The DfE has issued a standard form transfer agreement, but aspects of this may need to be negotiated with the local authority.

A grant of £25,000 towards conversion costs including legal advice is available to schools.

How long does the process take?
Academy conversions can take about three months, but may take longer, depending how quickly the transfer of staff, assets and land can be negotiated with the local authority. The DfE has issued model documentation which is intended to make the process more straight forward.

When setting a conversion date, it is important to consider the increased demands on the governing body and senior leadership team. The DfE will have submission deadlines which also must be factored in. So, establish a clear timetable and checklist at the outset to ensure that your conversion runs as smoothly as possible.

For more information on academy conversions contact Chloe Brunton on 0117 314 5301 or at cbrunton@vwv.co.uk.

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