The process of becoming an academy requires a big change to the culture, management and financial administration of your school. And as we pointed out in our last blog, there are plenty of areas where you will need to plan ahead to make sure the right levels of financial management are in place.
If your school is going through the conversion process to become an academy, there are a few key questions that you will need to consider.
What type of accounting system is right for your academy?
The nature of your academy will define which is the best kind of accounting system is the best fit for you.
What works for a multi-academy trust, with various cost centres for each teaching department, won’t be appropriate for a smaller single academy – so the complexity of your accounting system will differ on a case-by-case basis.
What every academy, however big or small, will definitely need is a solution that gives a high level of control over your financial information and the flexibility to tailor and customise your accounting processes to fit the needs of your school.
Who will be responsible for the year-end accounts?
The financial conversion process is a complicated one that will take a great deal of planning and preparation to get right. To help potential academies complete their accounts and financial statements as easily as possible, the Education Funding Agency (EFA) has produced the Coketown template.
This template provides guidance on how to complete the financial statements for academies with a 31 August year-end. It is an extremely worthwhile template for any school that is converting to an academy and gives you a great overview of the amount of financial administration that will be required to complete your accounts.
As a larger academy, your finance team are likely to have the resources to prepare your accounts without outside assistance. What will be needed is a third-party audit of those accounts, in line with EFA regulations. This is an area where the Saint & Co Academies team can assist, by providing that external audit and helping your academy to meet its compliance requirements.
If you’re running a smaller academy, you may not have the resources to produce your accounts in house. This is where outsourcing the role of ‘responsible officer’ to a professional accountant can really add value, by putting your accounts in the hands of an expert and removing the responsibility for their financial management to a third party. Our Academies team can help you with this and we provide the responsible officer for a number of local academies, helping these schools to stay on top of all their accounting and financial administration.
What financial controls should the academy have in place?
The income that drives your academy comes from funding supplied via the EFA and central government (rather than through the local education authority as currently happens for state schools)
As such, the EFA states that there must be strict procedures and financial controls in place within an academy to make sure funds are not being mismanaged. If concerns arise, or your academy’s funds become overdrawn, the EFA will investigate robustly – so it is important to keep a tight reign on your budgets, to have a transparent view of your spending and to be able to produce detailed reporting on your financial situation and health.
With most schools, 85% of expenditure relates to the salaries paid to teachers and staff – although the size of that payroll will differ depending on the size and age of the school. Some academies may have 100+ teachers, where the average length of service is 30 years or more. Salary expenditure will be far higher in this kind of established academy than in a relatively new academy with less experienced staff. However, the school with the longer-serving teachers will experience tighter controls on their budget and expenditure as opposed to a new academy with teacher with less years of service.
Your academy has to commit and submit an annual budget to the EFA by 31 December. It’s important to be aware that the EFA may challenge you on where you are spending your money. If the EFA feels that funds are not being used effectively, it may ask you to make changes to the structure of your school and to re-work your budget accordingly.
Our Academies team understands the requirements of a sound academy budget and will help your finance team to get a handle on budgets and where you are able to allow for expenditure. When you can recognise where expenditure might be exceeding normal levels you can proactively focus on recouping monies in other areas of the academy.
Do I have to run my school like a business?
One of the biggest cultural changes for your school is the need to begin running your academy as a business. For many in education, this is a significant change in outlook and means reassessing the ways in which you manage your finances, bring in additional revenues and go about creating and tracking your budget.
As with any school, the prime purpose of an academy is always to deliver the best quality education to pupils. But a focus on ‘good business practise’, alongside the other policy changes involved in becoming an academy, can have a positive change on the level of education your school delivers
Learning to deal with the challenges of being independently funded can be a confusing process as changes in education policy still affect you, even though you’re now an independent institution. Our Academies team understand how unsettling this can be for career teachers, and our 6+ years’ experience of working with academies means we understand the financial changes and can help to make the conversion as stress-free and non-disruptive as possible.
How should I manage my academy’s funding?
In the new world of academies, you are given a general annual grant (GAG) from the EFA, based on the number of students you have in your school. If you do not spend the full amount of your GAG by the year-end, you can keep it and save in reserves.
Having an understanding of local demographics, and potential student intakes year-on-year is vital. Your funding is entirely based on student numbers, so if your intake falls then so does your income. On the flip side, pupil numbers can also increase, meaning you will qualify for a bigger GAG and greater income to feed into your budget.
Having a clear budget and plan helps your academy to deal with these fiscal ups and owns more effectively – something that our Academies team will help with, by helping you create clear budgets and cost centres for each area of the school.
Options for controlling finances could include:
- Looking at where part-time or job-share teachers can be used rather than full-time staff – you will have to consider union requirements and the HR recruitment policies that your academy has in place).
- Running apprenticeship schemes that can attract additional sponsorship and investment from private business – worth investigating if you are a larger academy with the resources to offer apprenticeship schemes.
- Managing your staff pensions contributions effectively. The responsibility for paying teachers’ pension contributions lies with the academy and comes out of your annual budget. So it is important to look at reducing pension costs where possible and appropriate.
Managing the change process effectively
Part of applying a business mind-set to your academy is learning to plan ahead and get your goals, budgets and systems in place early.
- Start planning early to get your finances in order
- Get the best systems in place to manage your accounts and finances
- Ensure you have great financial reporting and forecasting available
- Arrange for financial training for all the key members of the academy team
- Get used to working to, and tracking, your budget effectively
Our Academies team will help your academy with all the changes that are required and will support you and advise you on the change management needed to become an effective academy.
Contact your local Saint & Co office to arrange an informal chat with a specialist from our Academies team.