Hereford Sixth Form College - Rough Guide to Academisation

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1 Hereford Sixth Form College - Rough Guide to Academisation These notes are based on Hereford Sixth Form College s experience in converting to a Single Academy Trust. Hereford meets the criteria to become a Single Academy Trust (Ofsted and Financial Health grades Outstanding) and currently has no loans, existing connections to Charitable Trusts or a Catholic/Anglican Diocese and no complex issues relating to land or buildings. The process of reaching the decision to become an academy and completing the application were pursued on a number of fronts in parallel: Consultation and agreement by governors Consultation with staff Consultation with local stakeholders and publication of proposals Appointment of legal advisers Completion of Transition Grant and Academy Conversion application forms Incorporation of the SAT company at Companies House Liaising with pensions agencies on implications of conversion Liaising with auditors, contractors, insurers, bankers on actions needed prior to or after conversion Liaising with the RSC and DFE on the application, in particular the Funding Agreement and Asset Transfer As the first Sixth Form College to complete the process a number of issues have been resolved which apply to SFC s generally which should facilitate the process in future. Copies of documents produced by Hereford SFC are provided in the appendices. A number of issues will be a major factor in determining the decision to academise. At Hereford we had no bank loans, no trading activity, no international students, no higher education, no apprenticeships and no significant leases. Our legal advisers (Blake Morgan) provided an excellent Conversion Manual including a checklist of actions and exemplar documents relating to dissolution of the college and the establishment of the SAT Company. In addition to regular dialogue with them we established strong links with our DFE lead in the Academies Unit who was most helpful and supportive throughout. As the first college to convert the process took 10 months owing to the DFE needing to amend the Funding Agreement for use with sixth form colleges. Having done this, it is hoped applications will be approved more quickly. Although it is not yet known if the changes made to the Funding Agreement will also apply to the Supplemental Funding Agreement (used in conjunction with a Master Funding Agreement in multi-academy trusts).the work needed to be carried out by the college took around 6 months and was carried out by the Principal, Estates Manager and in large part by the Finance Director.

2 1. Review of Options A review of the different academy options and status quo (appendix 1) was discussed by governors. These will depend on local circumstances such as the number of secondary schools in your area which are already academies, existing MAT s, sixth form proposals. From an Area Review perspective the inclusion of academisation as an option under consideration will militate against recommendations involving merger with a GFE. If the college decides to consider becoming an academy the EFA and RSC should be informed. 2. Funding the conversion process Transition Grant This simple form (appendix 2) allows you to apply for funding to cover legal and administrative costs of the application up to a total of 50k. You are not required to refund this should you decide not to proceed with conversion. You can only spend funding on relevant skills through externally procuring advice or temporarily bringing in additional staff. Relevant skills include project management, advice on legal, financial, commercial issues, due diligence and property issues. Hereford SFC received funding for estimated legal fees ( 20K), actuary/pension costs ( 5K). VAT consultancy ( 10K) and additional audit costs ( 15K). The grant is transferred to the college in advance of the expenditure in a lump sum. Spending has to be recorded and unspent funds returned. The legal costs include contingency to cover complications arising from Diocesan links, Charitable Trusts, leases etc. Restructuring Fund This fund can be used to cover the costs of mergers following area reviews but is also the fund to which colleges apply when conversion would make the new academy responsible for VAT payments on stand-alone buildings built after 2012 which were previously VAT free. Hereford SFC was not in that position. 3. Application Form to Convert to an Academy This form is relatively simple, particularly if you apply to be a SAT (appendix 3). Even if you are applying to become a SAT you need to provide information regarding existing and proposed partnerships. SAT s are required to collaborate with institutions to improve educational standards and the range and quality of provision in the college and its partners. You must state what form this will take in the first year and in the longer term. Hereford is proposing to work with 3 geographically close partner schools (all of which are currently not academies but aspire to be SATs). We have indicated that we would carry out peer inspections with our partners, meet regularly to review quality assurance systems and financial issues and share resources as appropriate. Letters of support for this form of collaboration were received from the Chairs of Governors and Head Teachers of our proposed partners (appendix 4). Other sections of the form relate to governance, financial health, existing loans, current assets and quality. Issues relating to borrowing, existing charitable trusts, Diocesan links and ownership of assets were not relevant in our case but are covered by the form. The form is reviewed by the RSC and the Head Teacher Advisory

3 Board to the RSC and the Transactions Unit in the DFE. The RSC Head Teacher Advisory Board questioned our proposal to become a SAT rather than a MAT. Following our providing further information on our local circumstances the application was approved. The Transaction Unit of the DFE review the application and will ask for further information on the college s current and future financial position following academisation, projected student numbers based on demographics and a market assessment, governance arrangements, cost plans, curriculum developments, quality, staffing projections, quality assurance, the timeline for the conversion, evidence of governor approval and consultation with staff and stakeholders. 4. Action Plan for Conversion An action plan for conversion was agreed and reported on to governors (appendix 5). This was implemented by the Principal, Finance Director and Estates manager. This was informed by advice from legal consultants who were appointed shortly after the decision to proceed with an application was initiated. A number of specialist firms were considered and Blake Morgan were appointed. They have been excellent, providing expert advice, preparing and reviewing documents and negotiating with the DFE on our behalf. The key role of the legal advisers is to ensure due diligence and to provide guidance issues relating to governance, the Funding Agreement, property and contracts, employment and pension issues, insurance, liabilities and any outstanding litigation or claims. Primarily they prepare and agree on our behalf the Funding Agreement (appendix 6) for approval by the DFE, draft the relevant documents required to transfer the land and assets/operations of the Sixth Form College to the new Academy and incorporate the new Academy as a Company with Companies House. 5. Governance The Academy Governance structure comprises Members and Directors. The Members are a small number of people, normally not Directors (although this is negotiable with the DFE) who usually meet only 2 or 3 times a year to oversee the work of the Trust, appoint and if necessary remove Directors, approve the accounts and monitor that the Trust is meeting its charitable aims. The academy directors (also referred to as trustees) effectively carry out the same role as governors in incorporated colleges. As an incorporated college since 1992, with many years experience of corporate governance, the College proposed to the DFE that the existing governing body members become the Directors of the Trust and the current Chair and committee Chairs become the Members. This governance structure (appendix 7) was accepted by the DFE but we have undertaken to consider appointing external Members when vacancies arise. The governance structure of MATs is more complex with the Trust having ability to delegate powers to local governing bodies of its individual member institutions. This delegation is usually done by way of a Scheme of Delegation and a model version of this document is available on the DFE website.

4 6. Consultation with Staff At Hereford this has been a part of our normal whole staff meetings where strategic developments and funding issues have been discussed. Depending on the union representation in your college you may wish to meet union representatives separately prior to the larger meetings. The joint statement on academisation issued by the NJC of the SFCA and unions (appendix 8) was issued to staff and the reasons for the conversion rehearsed at meetings. A document based on the statement was prepared specifically for Hereford Sixth Form College and its staff (appendix 9) and this has been signed by the Chair of Governors, a representative of the Teacher Unions and the Unison representative. A TUPE letter has been prepared to issue to all staff on conversion (appendix 10) 7. Consultation with Stakeholders/Notice to dissolve the corporation A proposal to dissolve the corporation to form an academy trust (appendix 11) must be published at least once and 4 months in advance of the proposed conversion date in at least one local and one national newspaper. The consultation document (appendix 12) must include the proposed name of the academy, conversion date, reasons for the conversion, a description of the education to be provided, the numbers composition of the student body (% in the age range) at the conversion date, the name and address of the trust who will run the academy. Once published the consultation document must be circulated to all local colleges and schools with sixth forms, the Director of Education, the RSC, the EFA and local MP s. The consultation should last for one month following its publication. Questions and queries should be responded to within the consultation period and a summary of the responses published and action to be taken by the college published. The DFE have advised this only needs to be in the local press. 8. Financial and Estate Issues Priority Considerations If you have loans speak to your bank as soon as possible. Determine the VAT status of buildings. Ascertain whether the land and buildings are registered at the Land Registry or not. In our case some buildings dating back to incorporation were not and conversion will automatically trigger registration. Your legal advisers will deal with the registration applications for you. A valuation is required to complete the application for registration in order that the correct Land Registry fees are paid. It is important to recognise the difference between an insurance valuation and that based on current market valuation which could be less. Your legal advisers will confirm the best possible course of action if your land and buildings are

5 unregistered (it may be possible to apply for voluntary registration before conversion which could have cost savings). Consider whether you need to employ a project manager (we did not consider it necessary). Inform the bank (you will need new accounts, online banking, BACS reference for payroll. This can take time. Checklist of other key actions: Prepare your budget and ensure that you have historic information available for Transaction Unit (you may have to revisit this on numerous occasions!) Be realistic about legal costs when claiming from Transition Fund as legal issues may crop up Possible obstacles requiring greater involvement from solicitors: o Shared use buildings, e.g., sports facilities o Charitable trusts o Catholic/Anglican Diocese o PFI Identify your assets Identify your liabilities Identify contracts that you want to transfer and those that you need to end and any termination provisions that may require particular action (ie the Payment of a fee). Identify licenses e.g. software Identify leases and whether any specific consents are required. Review valuation of land and buildings. Ensure this reflects figures in the Annual Accounts before logging with Land Registry Ensure employee records are up to date Inform your Payroll Provider, NB, you will need to register for a new PAYE reference Inform Teachers Pensions Inform Local Government Pension Scheme and determine if action is required Inform Insurers Speak to your Internal and External Auditors they have a wealth of knowledge to share Read the Academies Financial Handbook note the range of transactions that require prior approval from EFA, e.g., acquisition of land and buildings Register for new PAYE reference on Government Gateway Confirm TUPE arrangements with your HR adviser. Register the new company with Companies House if you are not joining an existing MAT (this was done by our legal advisers). Determine who should be the Company Secretary (could be your Clerk to the Governors or this is a service offered by legal advisers) Seek VAT advice Collate information for first VAT return (you may need some help to dig out old invoices)! Attend VAT training to refresh your knowledge If appropriate, register for VAT number

6 Assess capabilities of your finance system. Is it fit for purpose, e.g. reporting, or invest in new system? Assess capabilities of your finance team Send bank details form (BAN1A) to EFA in plenty of time Cashflow planning needs to recognise the academy payment profile funding is in 12 th s on the 1 st of the month Year-end now 31 st August Reporting charity SORP not Casterbridge Different returns in different formats how will your accounting system cope? Potentially, three sets of accounts in 13 months. Could be more if you are forming a MAT Speak to Actuary to obtain LGPS accounting / FRS 102 information for the accounts Access to JISC / JANET still being discussed future cost uncertain. Send novation letters to contractors / suppliers Inform exam boards Register with the Information Commissioners Officer for data protection Publish appropriate documents on our website Complete and submit the Financial Management and Governance Self-Assessment within the first four months Use the JISC and SFCA Finance Directors networks if you have queries or questions. Other Estate Considerations 1. For any Sixth Form College which has either been subject to works carried out under the PFI or will be setting up as a MAT and is considering having a school become part of the MAT which is a PFI school (for example under the BSF programme), it is important that you consider very carefully which legal advisors you instruct. PFI is a particularly complicated and specialist area. In the past local authorities have outsourced school conversions which they would normally have kept, to an external firm to assist due to the school having had buildings constructed using PFI monies. Extra budget should also be allowed for legal fees as you may need a detailed review of the PFI documentation. 2. If a college knows that it wishes to convert and is aware that its land position may be complex then it is often sensible to instruct a law firm with experience of academisation to carry out an initial review. This can be particularly useful for institutions considering becoming part of a MAT where they will not be the lead institution as it can be a chance to 'get their house in order' and make themselves look a more attractive partner in advance. If a college knows that it has unregistered land then it may be sensible to consider registering this in advance of conversion to highlight any boundary problems or other title issues. 3. Colleges should remember to budget money to cover legal extras which can include searches (this may be prudent where a college for example does not have much knowledge of leasehold land) and to cover Land Registry fees. A valuation of freehold land interests at

7 an early stage is important as it will then allow the lawyers to confirm fees due. Discuss with your legal advisers at the outset whether standard conveyancing searches or any checks on the planning history of your properties are appropriate given your specific circumstances. 4. It is important for converting institutions to be aware of the restrictions placed on what they can do with their land going forwards. Applying to the EFA for consent for restricted land dealings can take some time and there are cost implications if external help is needed. Although the EFA forms are in theory designed so that institutions can complete and submit them themselves you may find that you need a lawyer to assist, partly to ensure the college is using up to date paperwork and to ensure that you are aware of the latest practice by the EFA/DfE. In particular if a college has any leases in place then it may well need both landlord consent and consent from the EFA for proposed works or dealings such as underleases so it is best to obtain advice. 5. Converting colleges should consider at an early stage whether the RPA would be suitable for their future insurance needs. The only thing to be aware of is that it has not been in place for that long so it is not yet clear how well the insurance works and how claims are handled. The DfE are regularly asking now if new proposed academies have considered the scheme. The link to the basic information is here: Afterword I should like to thank Sally-Anne Griffiths, Finance Director of Hereford Sixth Form College and Chris Williams, Louise Brooks and Rachel Sales of Blake Morgan for their assistance in preparing these notes. Copies of the appendices can be obtained by from Jonathan Godfrey, jtg@hereford.ac.uk

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