At Cooper Parry, we have a huge commitment to the not for profit sector and especially the education sector, where we work with over 100 educational focused organisations across the country, including over 70 academy trusts. Many of our partners, directors and staff are trustees of schools and academies. They have a direct insight into the issues many academies are facing and so understand the difficulties they are facing.
As the impact of the COVID-19 pandemic continues to be felt across the country, we’ve seen the dramatic, rapid change forced upon the education sector and been overwhelmed by the phenomenal response from those who work in it.
The academies sector has, to date, been relatively sheltered from the financial impact of the crisis. The government have confirmed that core funding will continue for the current academic year, irrespective of school closures, meaning that schools can continue to pay staff and meet other financial commitments. Local Authority funding for High Needs pupils will also continue. That said, many schools have incurred additional costs and lost income from non-core revenue streams as a result of the crisis.
The Department for Education (‘DfE’) are publishing frequent updates and guidance and we’d recommend all trustees, accounting officers and chief finance officers to ensure they keep up to date with all the announcements from the DfE though this site. We also have a dedicated section on our website which has daily updates on the latest information and developments on support for organisations and individuals.
In this update we have a look at some of the key announcements and guidance from the DfE in relation to governance and financial management a little more detail.
Maintaining effective governance during the crisis
The DfE have published some guidance in relation to school and academy governance in the context of the COVID-19 crisis, which can be found here.
While there is support and flexibility being provided by the Government, the DfE and the Education and Skills Funding Agency (‘ESFA’), it is vital that all academies continue to operate with strong governance at their core. All trustees and governors should continue supporting their senior leaders, but without interfering and adding to their burden. You should not lose sight however that the purpose of your role does not change; flexibility and being adaptable will be required in how you continue to fulfil your role.
Our top governance tips for trustees and governors are:
- Challenge and oversight: continue to do this, while focusing on the critical operational and business issues;
- Good communication: keep all trustees / governors, senior leaders and other key stakeholders in the loop with effective communication. Be mindful of how you communicate during this time (the tone of emails can be read differently by different people);
- Key information: share with others as appropriate. The Chair will no doubt be up to date with all matters; effective governance requires other trustees / governors to be involved with key decisions;
- Technology: make sure your virtual meeting technology is up to scratch, ensure meetings are still quorate and that the clerk to the board is involved so that all decision making is appropriately recorded. Obtain agreement if you plan to record meetings;
- Compliance: continue to focus on and adhere to the key requirements of the Academies Financial Handbook;
- Delegated authority: If urgent decisions are needed, ensure your Scheme of Delegation allows this to be delegated to certain individuals (like the Chair or Vice-Chair). If not, consider a resolution of the trustees / governors to allow this.
- Be kind: of course, support your leaders and fellow trustees / governors and remember to be kind to them during the current period of difficulty and uncertainty.
The National Governance Association (NGA) have also produced some very helpful COVID-19 information sheets for governing bodies, as well as additional guidance on business continuity and holding virtual meetings, all of which can be found here.
Responding to the increased risk of fraud and cybercrime
The DfE have also highlighted the increased risk of fraud during the COVID-19 crisis and have emphasised that all organisations should continue to follow all business processes and procedures designed to protect them from fraud. They have reminded all organisations to maintain effective governance, financial management and oversight whilst also maintaining strong internal controls and ensuring they implement clear policies and procedures during the crisis, including ensuring staff know how to report any suspected fraud.
They also highlighted further information which is available on the ActionFraud website here.
The DfE also highlighted cybercrime as an increasing risk to the education sector in the current situation and referred to their previously published guide on cybercrime and cyber security which can be found here.
The governments Counter Fraud Function also published a useful guide for public sector organisations which can be found here.
Complying with the Academies Financial Handbook (AFH)
On 21 April, Eileen Milner, Chief Executive of the Education and Skills Funding Agency (ESFA), issued a letter to all academy trust accounting officers, which can be found here.
The letter set out various information and updates from the ESFA in relation to the financial management of academies during the COVID-19 crisis. However, the key message, strongly reinforced, is that strong governance, financial management and decision making are essential in helping academies deal with the current challenging circumstances. The ESFA’s view is that the framework of controls and requirements set out in the AFH continue to be vital; they advocate academies continuing to focus on these requirements. We do not expect to see any relaxation of the AFH requirements during this period. Accordingly, we advise academies to ensure they continue to comply with the AFH and continue to maintain high standards of financial governance and regularity.
That said, the ESFA recognises that academies will need to adapt some of their procedures in the current environment, particularly in relation to reflecting the realities of working remotely for both school staff / management teams and trustees.
However, academies must play close attention to key financial controls during this period. With people working remotely, key processes such as payment authorisations, approval of new suppliers and / or changes in supplier details, approval of new members of staff on the payroll and / or changes of staff details will all need to be completed over email or by other remote working options, which increases the risk of error and, crucially, the risk of fraud.
Our top internal control tips for academies during this time are:
- maintain and operate your existing control processes as much as possible;
- if you need to temporarily depart from your existing procedures, then ensure you agree an amended process and seek approval of this from the Trustees;
- keep a log of any changes or departures in procedures, so that when things get back to normal, these departures and changes can be reviewed and records updated.
- keep a log of any key decisions, especially ones around value for money and regularity, and ensure that appropriate documentation is kept in relation to these decisions (e.g. emails, files notes of phone call discussions, recording of any virtual meetings etc).
Academies are also strongly encouraged to continue to review their arrangements for internal scrutiny. Eileen Milner’s letter set out that it’s at the boards’ discretion whether remote checks are feasible and helpful in managing risk during school closures. However, it’s important the board considers this decision carefully. It is still a requirement under the AFH and, depending on the scope of work that has been agreed, it may still provide important and helpful insight for boards during the current crisis. We have continued to deliver internal scrutiny remotely to our clients over the last month, whether mainstream controls and process reviews or more bespoke reviews around AFH compliance, management reporting processes and functions or risk management / risk register processes.
Keeping on top of your financial returns and deadlines
To help reduce the administrative burdens on academies, on 20 April the ESFA and the wider DfE announced the cancellation and pausing of all but the most essential data collections and requests from academy trusts (and other education and care settings).
The full details of the data collections and requests cancelled, paused or deferred are detailed in the DfE’s announcement which can be found here.
For academies, the Budget Forecast Return Outturn (BFRO), which was due to be submitted to the ESFA by 19 May 2020, has been cancelled altogether.
The other key financial returns that have been paused until 30 June 2020 are:
- The annual capital grant assurance exercise.
- The land and building information requests for new academies.
- The Financial Management and Governance Self-Assessment (FMGS) submissions.
Other useful points to note are:
- The Budget Forecast Return (BFR), which is due for submission to the ESFA by 31 July 2020, has not yet been cancelled or paused. Although the online BFR was due to go live on 23 June, a decision on this has been deferred until later in the year.
- The deadline for submission of the annual audited financial statements for the 2019/20 year remains as 31 December 2020. The ESFA will continue to monitor this position, including discussing it with stakeholder groups and external auditors.
- There is also no change in expected deadline for the submission of the Annual Accounts Returns for the 2019/20 year, which is likely to be 18 January 2021. As with the audited financial statements submission, the ESFA will continue to monitor this position.
Key data services will continue, so all academies should continue to comply with the requirements in relation to keeping their details updated on “Get information about schools” website and reporting or seeking approval from the ESFA for any related party transactions.
Whilst not a return to the ESFA, it’s also worth mentioning the Teachers’ Pensions Scheme End of Year Certificates (EOYCs). We are not aware of any relaxation of the current timetable for these; all academies must submit their completed 2019/20 EOYC’s to the TPS by 29 May 2020, with the audited EOYC’s to be submitted to TPS by 30 September 2020. Further details on the EOYC timetable are available on the TPS website here.
To claim (or not) under the Coronavirus Job Retention Scheme
This is one area where we’ve had a lot of questions from clients on over the last month and it’s not completely straight forward. The DfE have published some very helpful guidance on the financial support that is available for different types of education, early years and children’s social care providers, which can be found here.
From this guidance, the key position for academies is that the DfE do not expect, in general, academies to furlough any staff given all academies continue to receive their core funding for the current academic year. The guidance does however recognise there are situations where some staff employed in an academy will not be specifically funded by government funding and will be funded from separate private income streams (like catering, sports facilities etc). In these cases, staff can be furloughed, subject to certain conditions being satisfied as follows:
- the employee works in an area of business where services are temporarily not required and whose salary is not covered by the public funding.
- the employee would otherwise be made redundant or laid off.
- the employee is not involved in delivering provision that has already been funded.
- (where appropriate) the employee is not required to deliver provision for a child of a critical worker and / or vulnerable child.
- the grant from the CJRS would not duplicate other public grants received and would not lead to financial reserves being created.
If you do establish you are eligible to furlough certain staff by applying the above conditions, then in terms of making a claim under the CJRS, the DfE guidance appears to lean towards an income-based calculation to determine the amount of funding that can be claimed. For example, if the income generated from a private income stream is 4% of total income, then the maximum grant that could be claimed for furloughed staff would be 4% of the total pay bill.
There are lots of issues to consider here, so if you are in any doubt about whether you are eligible to furlough certain staff members, then we would recommend that you contact HMRC, DfE and your legal advisors.
One other important issue for academies to consider here are the requirements under the AFH and specifically the requirements around seeking ESFA approval for any novel or contentious transactions. If you were to claim funding under the CJRS for staff who are also actually funded through the core government funding, then this could be considered a contentious transaction.
Funding for exceptional costs incurred during the crisis
Although academies continue to receive their core funding, the DfE recognised that many have and will incur additional “exceptional” costs in responding the COVID-19 crisis, and so released some specific guidance on this issue which can be found here.
The key costs that academies can access the funding for are:
- increased premises related costs 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.
- additional cleaning required due to confirmed or suspected coronavirus (COVID-19) cases, over and above the cost of existing cleaning arrangements.
If an academy faces other, extraordinary costs to deliver appropriate support to their pupils through this period that are not covered by the above and cannot be met by existing budgets, then they should contact DfE at CoronavirusHelpline@education.gov.uk.
Access to the funding will become available in June 2020 when further guidance will be published on how schools and academies can inform the DfE of the additional costs they have incurred. The funding is restricted however to the specific limits set out in the guidance. If an academy’s exceptional costs exceed these limits, they will have to put a case to the DfE for further funding.
It’s important remember this funding is only available to academies that are unable to meet such additional costs from their existing resources or which can only be met by drawing down on existing reserves (and hence “undermining their long term financial sustainability”). The DfE do not expect an academy to make a claim for this funding if they are already anticipating that they will add to their reserves in the 2020-21 academic year. This is an important issue for multi-academy trusts (‘MATs’), as our understanding is that this “test” is applied at an individual school level rather than an academy trust level, so MATs will need carefully assess which schools in the trust are able to claim. This could be particularly difficult for those MATs that are utilising GAG pooling for example.
All academies making a claim will need to keep appropriate records and information to support their claims. The DfE do have the right to check and audit any claims. The Association of School and College Leaders (ASCL) have published a cost calculator to help schools keep a log of additional costs, which can be accessed here.
Funding for online learning platforms
Given the current circumstances, its vital that all academies (and schools) have access to a remote learning platform. If you don’t yet have this in place, then you can apply for Government-funded support to set up on one of two free-to-use digital education platforms – G Suite for Education or Office 365 Education.
To be eligible for the funding, an academy must not currently have an existing G Suit / Office 365 Education platform that it’s using to deliver remote learning for pupils at home. For academies that are then eligible, the funding will provide support to get set-up on either G Suite or Office 365 Education and training on how to use the platform.
If you believe you are eligible, then you can register for the support using a website specifically provide by The Key here. The site also includes more details on the support available for this. One of the questions you will be asked when registering is whether you have a preferred partner to install the platform for you. If you do not, then Google or Microsoft will allocate one to you.
Paying suppliers and contractors during the crisis
This is another area where we have had a lot of questions from clients on over the last month. The Government published Procurement Policy Note (PPN) 02/20, which sets out information and guidance for public bodies on payment of their suppliers during and after the COVID-19 outbreak. The guidance is therefore relevant for academies. The detailed PPN, along with model interim payment terms, some FAQ’s and also some specific guidance in relation to paying contingent workers impacted by COVID-19, is all available here.
The overall position in the PPN is that the supplier being paid by the academy must be able to deliver the contract in full as and when required by the academy (for example, when academy re-opens fully post lockdown).
In order to qualify for payment under the PPN, suppliers should agree to operate on an ‘open book’ approach with the academy. The model interim payment terms included with the guidance provide provisions for this. As part of this, academies should agree with their supplier how frequently they want to undertake a review of their payments.
The PPN also sets out that suppliers cannot be paid in full under the contract and claim for some or all the same employees working on the contract under the CJRS. This is not only a double funding issue, but any staff being covered under the CJRS would not be able to work for the supplier anyway. A good example of this is an external catering contract. If the catering supplier has furloughed its staff, then no payment should be made to them under the PPN.
What academies should therefore be doing is reviewing all their key contracts for goods, services and works in order to identify any suppliers that are at risk and then look at continuing to pay those suppliers even if you know that services or goods are likely to be disrupted or temporarily suspended (e.g. contracts for school transport, cleaning etc). Before considering any “up-front” payments, a careful risk assessment should also be undertaken to consider why upfront payments may be necessary, how they would be recouped from later payments and whether the obvious risks are outweighed by the need to ensure business continuity.
Academies will need to ensure that all spending is regular, proper and presents value for money in line with the requirements of the AFH, so will have to have undertaken some appropriate and proportionate due diligence.
An important aspect the PPN is that consent has temporarily been granted until the end of June 2020 for payments to be made in advance of need. This is however only where the accounting officer is satisfied regarding the value for money case by securing future delivery and is capped at 25% of the value of the contract.
Paying contingent workers under the PPN
The PPN guidance also provide some specific guidance around paying contingent workers. The DfE’s guidance here also sets out the general principles that state-funded schools (hence academies) and employment intermediaries (i.e. agencies) should follow for contingent workers during the Coronavirus outbreak.
The guidance to follow depends on whether the academy is the director employer or not as follows:
- Where the academy is the workers’ direct employer: Here, the academy should continue to pay them in the usual fashion and correspondingly not furlough them. Also, where the academy has terminated a contract due to COVID-19 earlier than the original contract set out, they should reinstate these contracts on the terms previously agreed, as long as the contractor is not already accessing alternative support through another government support option (like the CJRS).
- Where an academy is not the workers’ direct employer: Here, it depends on whether the person is working on a live assignment or not. With live assignments, the academy should again continue to pay them in the usual fashion where they continuing to work. Where they are unable to work due to COVID-19 (e.g. due to sickness, self-isolation, temporary closure of offices etc), then they should be paid at 80% of their pay rate up to a maximum of £2,500 per month up to 30 June 2020. Where the assignment is not live and there is no further requirement for the worker, then the director employer can furlough the worker under the CJRS.
With the latter situation, the are several potential scenarios here, so any academies in this position should refer to the detailed information in the PPN on Contingent Workers.
A few tax considerations
Although academies benefit from several tax exemptions, they still have tax liabilities to consider and the management of cashflows in relation to this are still an important consideration.
VAT payment holiday
With the VAT payment holiday, for VAT registered business with a VAT payment owing in the period from 20 March 2020 to 30 June 2020, they can defer the payment of this until 31 March 2021 on an interest free basis. Again, our COVID-19 hub includes some more detailed information on the scheme which you can find here.
As most academies that are VAT registered will be in a VAT repayment position, this is unlikely to have much application, but is worth mentioning and could be applicable for VAT registered trading subsidiaries.
With this, it is important to remember though that your VAT return should still be submitted to HMC by the normal submission date.
VAT Making Tax Digital deferral
This is some other good news on the VAT front with the deadline by which VAT registered organisations needed to have ‘digital links’ in place for VAT reporting under Making Tax Digital (MTD) being deferred until April 2021. Again, our COVID-19 hub includes some more detailed information on the scheme which you can find here.
Although HMRC have confirmed the they will postpone the introduction of the off payroll working rules to the private sector until 6 April 2021, there are no changes in the previous rules for off-payroll working in the public sector, so these continue to apply for academies.
Other links and sources of information relating to COVID-19
National Governance Association
The National Governance Association (NGA) has a dedicated resource web-page which details all the latest guidance and information relating to the coronavirus crisis, which can be found on their website here.
Association of School and College Leaders
The Association of School and College Leaders (ASCL) has a dedicated resource web-page which details all the latest guidance and information relating to the coronavirus crisis, which can be found on their website here.
Institute of School Business Leadership
The Institute of School Business Leadership (ISBL) has a dedicated resource web-page which details all the latest guidance and information relating to the coronavirus crisis, which can be found on their website here.
Confederation of School Trusts
The Confederation of School Trusts (CST) has a dedicated news web-page which details all the latest guidance and information relating to the coronavirus crisis, which can be found on their website here.
Want to know more?
If you have any questions on any of the details included in this update or just want more information, guidance or advice in relation to your academy during this challenging time, then please contact any of our academy sector specialists – Simon Atkins, Andy Jones, or Sarah Chambers