Academy schools find that charity status is tough going

Thousands of schools have become exempt charities, changing their governance, writes Stephen Cook

Department for Education: principal regulator for schools
Department for Education: principal regulator for schools

Over the past few years, some 4,000 schools have joined the charity sector by becoming academies or free schools, which are exempt charities – subject to charity law, but regulated by their "principal regulator", the Secretary of State for Education, not the Charity Commission.

Some such schools are reported to be finding it difficult to get used to the principles of charity governance, which require greater transparency, financial accountability, independence and concern for conflicts of interest than were required when they were part of their local authorities.

The change has also given the Charity Commission the task of working through competing priorities with the Department for Education, which some observers say is more used to primacy in schools resting with head teachers than with the governors (who are in this case charity trustees).

The collapse of Kids Company rang alarm bells at the National Governors' Association, which has become increasingly involved in the issues thrown up by charitable status: its membership has doubled in the past three years, and more than half the new members are academies.

Emma Knights, chief executive of the NGA, feels that some of the problems at Kids Company – funding streams, excessive influence of a founder, over-long tenure by trustees – could easily trip up some academy schools. Increasing numbers of academy trustees, she says, are founders.

"Academy school status was sold on its freedoms," says Knight, who formerly worked at the Daycare Trust (now the Family and Childcare Trust) and Citizens Advice. "But what has taken trustees and leaders by surprise is financial accountability and the publishing of detailed accounts.

"So the transparency of the charity sector is a bit of a shock. They have also had to set up their own business systems – a lot didn't have school business managers. Some will say they have coped well with such things, but there are a number of academies that will say privately that they didn't realise how much was involved. There has been quite a lot of protest and moaning."

Knights says she recently talked to one school leader who wondered if he could set a deficit budget while waiting to hear whether the Education Funding Agency would help, as he might have done when part of a local authority, where budgets would be more flexible. The answer was an emphatic no, she says – this would breach the school's funding agreement, which could then be terminated.

"A shift in mindset needs to happen," she says. "Issues such as redundancies and oscillations in funding are familiar to other charities, while schools work more to a formula. The issue is the same as for Kids Company in the sense that academy schools cannot assume that the money will just flow in. Academies face the prospect of pay and pensions going up while cash remains flat, so trustees need to ensure that their risk analysis and financial planning are absolutely sound."

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