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What financial challenges must a school overcome when it becomes an academy?
In George Osborne’s Budget it was announced that as part of the education bill, all schools are to become academies by 2020, or have plans in place to do so by 2022. When a maintained primary school makes the transition to academy status, it becomes responsible for full control of its finances and budget. These changes can often be challenging to start with; with this in mind, Howard Jackson, Head of Education & Founder of HCSS Education, a leading education finance specialist, outlines the financial challenges schools face when converting and identifies steps newly-converted academies can take to manage the changeover effectively.
Currently 2,440 out of 16,766 primary schools have become academies. The key difference between maintained schools and academies is that academies are independent, state-funded schools that get their funding straight from central government, rather than from a local authority. The proposed benefits of becoming an academy are greater autonomy over key issues such as what is taught in the curriculum and greater financial freedom.
However, research we conducted into the changing education landscape and the rise of academies found that almost 60 per cent (59%) of teachers at maintained schools do not wish for their school to convert. In addition, 61 per cent of parents disagreed with the government that all schools should become academies. These statistics suggest that the recent announcement that all schools will be forced to convert in just four years’ time is likely to have been met with considerable reluctance from both teachers and parents.
Financial implications of academy status
However, despite the scepticism felt towards academy conversion by some teachers and parents, 82 per cent of school leaders surveyed agreed that they would be able to provide a better education if they were given greater freedom to manage the budget. This highlights just how significant financial independence is for a large proportion of schools. In addition, 73 per cent of parents said they would be happy to send their children to an academy school.
With the new legislation now in place, whether they back the changes or not, school leaders must ensure that they take the necessary steps to ensure the transition runs as smoothly as possible. When asked what the major concerns surrounding academisation was, 34 per cent of academies said they were worried about having complete control over the management of finances and procurement. With this in mind, to ensure that the changeover is handled in the best manner possible, there are three financial considerations that must be tackled:
1. Appoint an experienced finance committee
To ensure that the budget is handled in the most cost-effective way possible and to guarantee that value for money is achieved, it is vital that the academy appoints an experienced finance committee. This committee is usually chosen by the academy’s Board of Trustees and committee members are chosen for their wealth of experience in making both financial and managerial decisions. One of the key people on an academy’s financial committee is the chief financial officer - the CFO is responsible for overseeing the entire budget and making executive decisions on what it should be spent on. Because of the added financial responsibilities that CFO’s have, often an academy will have to employ an external candidate who possesses a business or accountancy qualification.
2. Ensure effective procurement
Academies are expected to demonstrate complete transparency when it comes to the purchasing of items such as school equipment. This is to prove that the academy has shown effective procurement practice and that each purchase is cost-effective and entirely necessary. An academy must publish a statement of best value within their annual statutory accounts as this can demonstrate that financial savings have been made – which can then be reinvested into other areas of the school.
To ensure effective procurement, academies must also choose a supplier that helps to achieve the best value for money. However with the increase in the number of schools becoming academies, supply chains will need to adjust to meet these growing demands. For example, many academies rely on local suppliers, however as academy chains grow there will be a greater need for sophisticated supply chains that can effectively serve all academies up and down the country. To help achieve this, it is vital that senior executives of academy chains work closely with the financial committees of individual schools to help deploy efficient and competent corporate-level procurement strategies.
3. Install a reliable financial management system
When investigating schools’ concerns over academisation, we discovered that 49 per cent of academies believe that one of the biggest challenges of conversion stemmed from not having adequate financial management systems in place. Because academies are expected to keep track of every single purchase and manage their budgets carefully, it is recommended that they invest in a sophisticated financial management system as this can help ease the transition and meets the needs of a newly converted school. Although there are many products on the market, it is advised that academies install one that is custom-built and tailored to the education sector. This is because a specialised financial management system can help keep a very close track of the budget and how it is being spent. A tailored financial management system will also be able to support ordering and payment, and provide an inventory to record an academy’s assets and ledgers. It can also help the financial committee to make informed decisions on the budget to ensure value for money is achieved.
When a primary school converts to an academy, it is expected to show much greater transparency and complete financial accountability. As all primary schools across the country are expected to become academies by 2020, it is vital that school leaders ensure a strong team of skilled personnel are in place and that the necessary financial systems are installed to manage the transition as seamlessly as possible.
For more information, please visit www.hcsseducation.co.uk