Dangers of Academy Status-for Academies

Helen Flynn's picture
We often reflect on how academies have more cash (at least in the short term) and general advantages than their LA-maintained neighbours. But there are inherent and real dangers of academy status, and systems are being put in place that could in extreme circumstances jeopardise their existence.

1. They are all companies, accountable to Companies House and have to remain solvent in trading terms to continue to survive. There has already been some discussion in the media about how the DfE plugged about £8 million in various academies' annual accounts last year to keep them on a sure footing. But imagine the situation when about 2,000 schools are academies (and upwards of this figure), and quite a lot of them are having financial difficulties. That level of shoring up of accounts becomes unsustainable. In the short term there would be more takeovers by academy chains, to be sure, but in the long term?

2. They all have a direct relationship with the DfE with no local body to protect their interests. I noted recently in the model pro forma financial statements, given out as guidance on financial management to academies by the audit firm RSM Tenon, that the “principal risk and uncertainty” is “government funding”, ie that each academy is ultimately publicly funded. As the document states, “There is no assurance that government policy or practice will remain the same or that public funding will continue at the same levels or on the same terms”. It recommends that this risk is to be mitigated in one or more of three ways (my comments are in brackets after each of the three points):

• by “ensuring funding is derived through a number of direct and indirect contractual arrangements” (opportunities encouraged to engage in non-core [to each school and its pupils] educational activities in order to raise cash?? Teaching schools are a prime example.)
• by “ensuring the academy is rigorous in delivering high quality education and training” (Clear incentive to raise standards [by whatever means?] or face takeover or the chop. NB: FE sector: beware over mention of “training”—looks like schools will have to begin to encroach on classic FE territory in order to keep the head out of the water)
• by putting “considerable focus and investment on maintaining key relationships with the YPLA” (encouraging a “crony culture” with the funding agency as a way of getting preferential treatment)

I think that what convertor academies have failed to realize in their race for the cash on offer and “independence”, is that having a one-to-one with the DfE may not be as cosy, preferential or safe as was anticipated. It will be quite a hard existence—simply because they are companies which can fail--and one that is bound to detract from the core mission of schools, which is education.

3. How long before the first major law suit against an academy, particularly now that there is no opportunity to appeal to the LA (or very soon the local ombudsman) when someone has a complaint? Imagine a powerful, well resourced, parent incensed by a decision made by the school and unable to seek meaningful redress without having to march to Whitehall. That distance could create the fertile ground that could push a parent to go to the law. Any law suit could put a disproportionate strain on a school’s budget and take up valuable time on the part of the SMT—all to the detriment of the school’s core mission and purpose.

4. The amount of “red tape” that an academy has to endure is quite extraordinary, and the Finance Director (not “business manager” or “bursar”, please note, as a finance director is absolutely required by an academy in order to stay afloat) has a tough role navigating his/her way through it. This is in marked contrast to DfE rhetoric about the benefits of autonomy. For example, an external audit of each company (ie academy), is required annually by the Companies Act 2006 (cost, circa £8,000 per year for a large secondary school). This includes a regulatory audit that has to be carried out to ensure probity, as public money is being spent. I recently was at a conference where a headteacher got quite a shock on being informed of this piece of “red tape” for the first time. He had been intending to dole out pay-offs to teachers to get rid of them, but was informed that this would count as an inappropriate use of resources and would not be allowed. Thus, there is still no easy way even for academies to get rid of under-performing teachers. This, obviously, is a problem for every school. But for an academy, it might affect their chances of becoming good/outstanding and thereby withstanding the onslaught of predatory chains……

There is a lot, lot more to be uncovered about academy status, and it is no way as attractive as it possibly appears superficially. So far there are about 1,300 academies, with that number growing. The problem is that the black hole at the DfE is growing as well. Peter Downes, a school funding expert and Camdridgeshire county councilor, has estimated that so far, since the coalition was formed, academies have cost £1 billion to set up, which is why some £450 million is being top-sliced from Local Authority budgets to pay for it (still leaving a giant gap). It seems inconceivable that the academy road-train can continue, as it is simply costing us too much and is unsustainable to roll it out to the other 22,500 or so.

So what will happen? It ‘s not beyond belief that these academies will become like miniature 2-D figures on a giant World War II-style horizontal map standing at DfE HQ, with government ministers and civil servants shunting them around to work out which ones can go, which can be taken over and which can be in the vanguard. There will be winners and losers, and it may make headteachers rue the day that they did not stand together and have faith in a local layer that could take much of the strain of the non-pedagogical, non-core activities off schools’ backs. It might sound dramatic now, but let’s just give it a few years.
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Janet Downs's picture
Sun, 23/10/2011 - 09:39

Many academy governing bodies will discover that academy conversion is a poisoned chalice. Some academies have already been faced with higher bills for their IT systems, while others discover they have to contribute to the deficit in the Local Government Pensions Scheme for support workers. And then there's the growing number of school-based employee disputes in academies.

There's also the hidden cost of the extra administration and legal responsibility. Each academy trust is its own company and as such has to behave like one as Helen points out. This is a heavy burden for large schools but for small ones it will be intolerable. And as more and more schools are seduced by the promise of "freedoms" (and the possibility of more money), LA support for small schools will become unviable (as Lincolnshire has recognised). Small schools, and many large ones who discover the administrative and legal responsibilities are distracting their attention from their core purpose of educating children, will inevitably join academy chains which will provide the same services as the LA but at a cost. And they're not accountable in the way LAs are.




Rob Shorrock's picture
Thu, 10/11/2011 - 09:30

RSM Tenon state “There is no assurance that government policy or practice will remain the same or that public funding will continue at the same levels or on the same terms”. I wonder how many of the the new Academies have ever done a risk assessment to look at the impact of this? I would be interested to see how they would manage a scenario such as a cut in funding from 2013 of 10% or 20%.

The key issue is that these schools will not have the freedoms to do what they want. The Secretary of State has views about the what is taught and this will be reflected in future funding agreements if they still want to continue to receive public funding. On the other hand, theoretically there is nothing stopping existing independent schools from becoming Academies and receiving state funding. By blurring the lines between public and private, Gove is ensuring that the use of public money can be employed outside the public sector schools. (we also see this model more starkly in the health service)

There is no doubt that the independent sector are sitting back waiting for the new 'independent state schools' to begin to struggle - which will inevitably begin 2 or 3 years down the line and then look at making offers to run them.

I am amazed that so many headteachers and governing bodies have jumped into this so quickly with their eyes closed. On the basis of rushed, enabling legislation that gives the Secretary of State the powers of life and death over these schools, they have been tempted by baubles, with no idea what their funding will be like after 2013. It exposes their business and political naivety. As mentioned above - a head of an academy (or CEO of a company?) didn't realise what the market rate for auditing was! Indeed, schools have been protected from the market to such a degree that it is incredible to think they can make the adjustment so quickly. And the independent sector knows this.

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