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Government Legislation Impacting the Academy Sector

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The education sector in the UK is changing at a fast pace and the short term outlook is challenging regardless of the stage of provision provided. You can be forgiven if you are finding it difficult to read, digest and then implement the guidance and support that has been published by the Government in recent months.

The impact of new Government legislation and announcements is slightly more nuanced for academies when compared to private companies and so we have set out below how some of the key developments and announcements will impact the academy sector.

Employee Costs

The Coronavirus Job Retention Scheme (“CJRS”) is a temporary scheme open to UK employers that had a PAYE scheme in place on 19 March 2020. It is designed to support employers whose operations are severely affected by the pandemic and allows employers to furlough individuals who would otherwise have been made redundant. The government will allow employers to claim 80% of an employee’s usual monthly costs up to a maximum of £2,500 per month, plus employers’ national insurance and minimum automatic enrolment employers’ pension contributions. During such time the employee cannot undertake work for or volunteer for the organisation.

We have prepared separate guidance with regards to the CJRS and how to apply here.

Clarifying guidance was issued in March 2020 for all public sector organisations (academies included) advising that such organisations should continue to pay their employees in the usual fashion – and not furlough them. The argument here was that such roles are financed largely through government grants with are set to continue at normal levels throughout the lockdown period. The clarifying guidance can be found here.

With many schools remaining open during the lockdown period, some academy employees will fall within “key worker” roles and will be required to actively work in order to maintain a provision for at-risk children and children of other key workers. However, there will inevitably be some employees who will become surplus to requirements and as things stand, those employees should continue to receive their usual monthly salary.

Whilst the guidance noted above discourages publicly funded organisations from making a claim under the CJRS it is less clear if an academy trust can make a claim through the CJRS at all. Some academy trusts employ staff in posts that are not funded directly from the General Annual Grant (GAG) or other Government grants. We are aware of some academies that have already started to furlough certain staff. These roles may include for example lettings managers (funded from lettings income), ethos or religious staff (often funded from closely related charitable organisations), boarding staff (often funded from boarding activities only), certain catering staff (funded from pupil school meal takings) and private nursery and wrap around care staff (funded from parent contributions and receipts).

For these employees, if, as a result of the COVID-19 pandemic, they are no longer able to carry out their contractual duties, or be redeployed into other areas of the academy trust there would appear to be a strong argument that an academy trust has a legitimate right to make a claim through the CJRS due to the nature of the related funding.

For any claim to be successful the academy trust will need to be able to demonstrate that the role is not funded by public money and that the employee would likely need to go on temporary leave or be made redundant if a CJRS claim was not made. Employers should also seek legal/HR advice in making these decisions, which should be agreed by both employer and employee.

Supplier Payments

Of key relevance to the academy sector is the Cabinet Office Procurement Policy Note which can be found here. The policy note sets out guidance for public bodies on payments to their suppliers to ensure that at-risk suppliers are able to resume normal contract delivery until at least the end of June 2020.

Based on the guidance such measures may include:

  • Reviewing your current supplier contracts to identify those business that could be at risk throughout the period to at least the end of June 2020;
  • Paying purchase invoices immediately upon receipt, perhaps even before supplier statement reconciliations have taken place;
  • Putting in place arrangements to help cash flow within those businesses including forward ordering, payment/part payments in advance of service/goods received;
  • For orders that fluctuate, consider using an average of the previous three months invoices for payments through to June 2020.

The policy note is currently being considered by the Department for Education and a decision on how this will impact, and ultimately be applied within the academy sector is expected to be communicated in due course. At present the ESFA feedback on this policy note has been informal and the message to academy trusts would be to continue to follow your routine procedures until such time as the ESFA communicates otherwise.  At this time it therefore follows that the usual procurement procedures should not change and you are still obliged to ensure that academy trust procurement is in line with the Academies Financial Handbook 2019 and the Trustees fiduciary duties as Directors of the limited company. 

Department for Education Guidance and Support

On 7 April 2020 the Department for Education (DFE) published guidance on school funding and exceptional costs associated with coronavirus. The guidance set out the financial support the DFE will put in place to ensure schools can focus on the vital role they are playing at this time.

The DFE have previously confirmed that schools will continue to receive their core funding allocations – as determined through the general annual grant (GAG) for academies – for the 2020 to 2021 financial year (i.e until August 2021 for academies). It was confirmed that this will happen regardless of any periods of partial or complete closure and that will ensure schools can continue to pay staff and meet other regular financial commitments.  It was also noted that local authorities will also continue to receive their high needs budgets and should continue to pay top-up and other high needs funding to schools. This will ensure that the employment and payment of staff supporting pupils with special educational needs and disabilities (SEND) can continue.

The guidance issued notes that there will be some instances where schools that remain open have already, or will over the coming months, face additional costs as a result of the COVID-19 outbreak, and that in some instances, schools will not be able to cover these from their existing resources.

The funding to be made available will be available to all state-funded mainstream and special schools, and alternative provision, including  primary and secondary all through maintained schools, academies and free schools, 16 to 19 academies and maintained schools, maintained special schools, special academies and free schools, non-maintained special schools and pupil referral units.  Funding will be available to cover costs relating to specific items-see details further below. These items are ones the DFE judge are likely to be necessary to allow schools to provide appropriate support to those children who will continue to attend school under the current arrangements.

Funding will be available to schools that are unable to meet relevant additional costs from their existing resources, or which they could only meet by drawing down on reserves and undermining their long-term financial sustainability. The DFE notes that while they are not asking schools to draw on existing reserves to meet these costs, they do not expect schools to make a claim against this funding if they are anticipating that they will be able to add to their reserves in the 2020 to 2021 financial year.

The DFE are asking schools to initially make the necessary payments from their existing budgets and record these in line with local finance policies. In June, the DFE will publish further guidance for schools on the process for informing them of any additional costs relating to COVID-19. They note that they intend to make the process for reporting this information as simple as possible. They will then make payments – direct to academies, or to local authorities to pass onto their schools – to reimburse schools for costs they apply for up to certain limits as outlined below.

The specific areas the DFE believe is it most likely that schools may face additional costs, as a result of the COVID-19 outbreak are:

  • Increased premises related costs (including utilities and resources needed to keep the school open, such as hygiene services) associated with keeping schools open during the Easter and/or summer half term holidays, for vulnerable children and the children of critical workers, over and above the costs that schools would have faced in other circumstances
  • Support for free school meals (FSM) for eligible children who are not attending school, where those costs are not covered by the FSM national voucher scheme - this covers costs to schools arising before the introduction of the national voucher scheme and costs where schools are providing free meals to children for whom the national voucher scheme is inappropriate (for example, because there are no participating supermarkets locally or schools are providing meals directly)
  • Additional cleaning – required due to confirmed or suspected coronavirus (COVID-19) cases, in line with COVID-19: cleaning of non-healthcare settings, over and above the cost of existing cleaning arrangements

Where they need to, schools will be eligible to claim up to the limits set out below.

Limits for Schools

Mainstream schools

250 pupils or fewer       £25,000

251 to 500 pupils          £30,000

501 to 1000 pupils       £50,000

Over 1000 pupils         £75,000

Special schools and alternative provision

All schools                   £50,000

Schools will need to provide assurance that costs are legitimate additional costs incurred due to COVID-19 by taking necessary measures and should consider the following before submitting claims:

  • Schools should keep records of all expenditure relating to COVID-19, as is usual with all spend, these records will be necessary for local audit arrangements
  • The headteacher or school business manager who submits the claim should give due consideration to their financial duties when doing so, including signing their name against any claim
  • There is an expectation for schools to be able to identify this income, and the related expenditure, when reporting their accounts

The DFE will not be asking for detailed information of the individual items on a claim routinely, but schools should hold a record of what has been covered, in case of individual enquiries. The DFE reserves the right to audit the expenditure and clawback money if claims have not been made in accordance with the guidance, in order to protect public spending.

The DFE recognise that some schools may be unable to make up-front payments to cover the additional costs due to COVID-19 because of cash flow issues. In these circumstances, schools should follow the normal process for seeking short-term advances to support their cash flow by contacting the ESFA if they are an academy, or their local authority if they are a maintained school.