Converting to an Academy
Introduction
All schools ranked as Outstanding by Ofsted were invited to apply to become Academies under the provisions of the Academies Act which was passed on 27 July 2010. At this date, over 1,500 schools had expressed an interest in becoming an Academy and 153 had applied to convert to Academy status by September.
Opening as an Academy will be an exciting time for all of the schools involved, but there will be significant legal and financial changes resulting from the change in status.
Changes to status
Governing Body and Trustees
On becoming an Academy, a school will opt out of local authority control. The Governing Body of the Academy will be required to establish an Academy Trust and to determine the composition of the Board of Trustees.
The Board of Trustees will be responsible for the strategic direction of the Academy and for appointing the Governing Body who will take responsibility for the day to day management of the Academy (including the curriculum and finances).
Legal status
Academies are exempt charitable companies limited by guarantee. As such, they will need to comply with the accounts and filing requirements of the Companies Act 2006, the Charities' SORP (Statement of Recommended Practice) Accounting and Reporting by Charities and with the directions of the 'principal regulator,' which is likely to be an agency appointed by the Department for Education DfE).
The Memorandum and Articles of Association to be used for an Academy established under the Academies Act are available from the DfE's website (see below).
Land and buildings
The land and buildings currently occupied by the school will be made available to the Academy by the local authority on the basis of a long lease. The model document for the lease is available from the DfE's website (see below).
Other assets and liabilities
Each Academy will need to enter into a transfer agreement with the local authority to cover the transfer of records, pensions, third party contracts and other assets (for example fixtures and fittings). The model document for the transfer agreement is available from the DfE's website (see below).
Financial considerations
New financial reporting requirements
Academies will be financially independent of the local authority and Consistent Financial Reporting (CFR) will no longer be required. Instead it is likely that there will be a requirement to report periodically to the 'principal regulator,' although the format and timing of these reports is at present undecided.
Financial statements and audit
Each Academy will have to prepare financial statements annually to 31 August. These will need to be audited and filed with the Secretary of State and the principal regulator by 31 December each year, and with the Registrar of Companies within nine months of the year-end.
The financial statements will need to include:
- a Trustees' report
- a Statement of Financial Activities (income and expenditure)
- a balance sheet
- a cash-flow statement (depending on the size of the Academy)
- accounting policies and notes
- an audit report.
A proforma set of Academy Financial Statements, covering many different possible accounting circumstances, is available from the DfE's website (see below).
Internal controls
Greater financial independence from the Local Authority may result in the need to change and improve financial controls. This could involve tighter controls over new bank accounts or improving methods for assessing and achieving value for money.
A review of the finance manual will be needed within the first year of operating as an Academy to ensure that the controls in place are sufficient for the new entity.
If you would like to discuss our services, please contact Sarah Morrison on 0207 516 2266 or email smorrison@littlejohnllp.com
Additional Information
Department for Education Academies Website - supporting documentation
http://www.education.gov.uk/academies/supporting-documents
Academies Bill pages on the Parliament Website
http://services.parliament.uk/bills/2010-11/academieshl.html
Questions for Governors and Head Teachers
http://www.education.gov.uk/academies/issues-governors-headteachers
