Essential Reading on Governance in Multi Academy Trusts

Essential New Year Reading on Governance in Multi Academy Trusts

2017 looks set to be a year of relentless focus on improving governance in Multi Academy Trusts. Over the past two months a number of excellent resources on governance in Multi Academy Trusts have been published. In case you missed them amid the seasonal commotion, here is a synopsis of the main points.

DfE Guidance

In January the Department for Education published a new version of the Governance Handbook which applies to all schools, alongside a new Competency Framework for Governance.

The Governance Handbook is an essential resource for all those involved in governance of education institutions. It outlines the roles and responsibilities of trustees and governors, their legal duties and provides useful links to further resources.

The new edition has been re-structured around a new clearer articulation of the six key features of effective practice and should be read alongside the new Competency Framework, which describes the knowledge, skills and behaviours needed for effective governance.

The DfE believes effective governance is based on six key features:

Strategic leadership that sets and champions vision, ethos and strategy.
Accountability that drives up educational standards and financial performance.
People with the right skills, experience, qualities and capacity.
Structures that reinforce clearly defined roles and responsibilities.
Compliance with statutory and contractual requirements.
Evaluation to monitor and improve the quality and impact of governance

The most significant changes to the content within other sections include:

Section 2: Strategic Leadership

There is a new section at 2.3 bringing together material about the board’s role as the key decision-maker.  Stresses that the Board is accountable and responsible for all the decisions made and that executive leaders must operate within the powers and authority delegated to them.

Section 3: Accountability

There is a much stronger emphasis on ensuring financial propriety at 3.4. It stresses that everyone on the Board must have a basic understanding of the financial cycle and the legal requirements on accountability and spending. There are suggested questions for trustees to ask and a greater emphasis on securing value for money, using tools such as financial benchmarking resources providing comparative data around consumables, resources and utility costs (useful links are provided).

Section 4: People Makes clear the new requirement that all those involved in governance schools and academy trusts, must have a Disclosure and Barring Service (DBS) check.

  • New advice at 4.1.4 on conducting ‘informed’ elections in which the expectations of, and credentials required of, prospective candidates are made clear.
  • New sections bringing together material on the important role of the chair at 4.3 and of the professional clerk at 4.4.
  • A new explanation at 4.8 of the risks associated with close family relationships between those involved in governance or between them and senior employees (The requirement to publish a register of business interests, to avoid conflicts of interest and related party transactions).
  • Details of the duty on boards to provide information about individuals involved in governance via the Edubase system at 4.8.

Section 5: Structures

Updated guidance on the role of and distinction between Trustees and Members at 5.2.1. An explicit statement that “the most robust governance structures will have a significant distinction between the individuals who are Members and those who are Trustees.”

  • 5.6 that all boards are required to publish a scheme of delegation on their website to explain their governance arrangements, together with new guidance on what makes an effective scheme of delegation.
  • Updated guidance on MATs at 5.2.2 emphasising that a MAT is a single legal entity and that the buck stops with the Board of Trustees in relation to the performance of all schools within the Trust. A section on umbrella trusts at 5.5.1. Now an explicit statement that the DfE will not approve existing trusts wishing to join an umbrella trust which has powers of intervention or governance over its member schools.

Section 6: Compliance

Confirmation at 6.7 that a designated individual on the board must take leadership responsibility for the organisation’s safeguarding arrangements, which include its Prevent duty. New advice at 6.7.1 on handling allegations of abuse made against other children, including ‘sexting’.

Section 7: Evaluation

Updated content on schools causing concern and on coasting schools at section 7.4, outlining OFSTED’s new approach.

The new Competency Framework for Governance

With a foreword by Sir David Carter, the National Schools Commissioner, the new Competency Framework is designed to help governing boards assess what knowledge, skills and behaviours are needed to govern their school or group of schools, most effectively. The Competency Framework is organised into blocks of ‘who needs to have this’. There are some skills or knowledge that the DfE thinks everyone on the board needs to have, and others that the Chair or ‘at least someone’ on the board will need to have.

The Competency Framework is made up of 16 competencies. The competencies are grouped under the headings of the ‘six features of effective governance’, which are described in the Governance Handbook:

1 Strategic leadership

a) Setting direction
b) Culture, values and ethos
c) Decision-making
d) Collaborative working with stakeholders and partners
e) Risk management

2 Accountability

a) Education improvement
b) Rigorous analysis of data
c) Financial frameworks and accountability
d) Financial management and monitoring
e) Staffing and performance management
f) External accountability

3 People

a) Building an effective team

4 Structures

a) Roles and responsibilities

5 Compliance

a) Statutory and Contractual requirements

6 Evaluation

a) Managing self-review and personal skills
b) Managing and developing the boards effectiveness

However, the guidance emphasises that principles and personal attributes that individuals bring to the board are just as important. All those involved in governance should exhibit the 7 C’s:

Committed – devoting the required time to the role
Confident – of an independent mind, able to lead and contribute to courageous conversations
Curious – an enquiring mind and analytical approach
Challenging  – providing appropriate challenge to the status quo, not taking information at face value
Collaborative – prepared to listen and work in partnership with others
Critical – critical friendship which enables bot challenge and support
Creative – able to challenge convention wisdom and be open-minded

The Framework will help with board performance reviews, identifying training needs, succession planning and induction. It may also help prepare interview questions for prospective trustees and governors.

The new Governance Handbook and Competency Framework can be accessed here.

Multi Academy Trusts – Good Practice Guidance and Expectations for Growth

The DfE published this guidance on establishing and developing a multi academy trust in December.

This guidance provides a framework which helps trusts at all stages of their development learn from other multi academy trusts. It sets out the characteristics of successful academy trusts, and the barriers that they will need to overcome in order to secure expansion and ongoing success. It gives advice on what Regional Schools Commissioners look for when they assess and approve:

  • the establishment of new multi-academy trusts (MATs)
  • plans for growth in existing MATs

It also gives guidance on developing a successful multi academy trust, including advice on:

  • school governance and leadership
  • helping schools improve
  • financial sustainability and risk management

In his foreword Sir David Carter states: “There are at least three core elements that the strongest trusts exhibit. First, a board that contains a wide range of professional experiences that can deliver the dual responsibility of building strategy to deliver great outcomes for children alongside the culture of accountability that is necessary across the organisation. Second, the appointment of an executive leader, typically an executive head or chief executive officer, who is held to account for standards across the schools. Third, the creation and execution of a school improvement strategy that develops and improves the workforce, builds succession and enables the strongest teachers and leaders to influence outcomes for more children.”

He signals clearly the move towards more consolidation of schools into Multi Academy Trusts, as well as more collaboration between and possible mergers of MATs.

“This guidance is intended to support and encourage those trustees and leaders seeking to start a new MAT, as well as those who have a strategic plan to grow the number of schools they are accountable for in the coming years. In simple terms, this is how we intend to build the culture and ethos for this to happen. We want to encourage, support and challenge the best leaders to take responsibility for more schools and to bring their expertise in school improvement to benefit more children… At the start of the 2016/17 academic year we saw more schools than ever enjoying the benefits of working in a MAT, with 97% of schools converting to become academies now joining MATs.”

In looking at system design, the guidance states “the academy system provides greater opportunities for teachers and leaders, which makes it easier to put in place those factors – better teaching, leadership, career development, curricula and accountability – that incontrovertibly drive up standards”. However, interestingly there is also an explicit statement that flies in the face of received wisdom: “The government has also made clear that schools will [still] be able to become or continue as single academy trusts, provided they are successful and sustainable.”

Capacity to Grow

When agreeing whether a MAT has the capacity to grow, or when approving a MAT arrangement, RSCs will want to explore with the trust:

  • the plans for medium and long-term development of the trust and how they build capacity within their trust and their schools;
  • how it intends to support school improvement and whether this is underpinned by a clear school improvement model;
  • what the needs and development challenges are for all the schools within the trust, irrespective of current performance levels;
  • whether the trust’s model of due diligence enables the depth of the operational and strategic challenge to be fully understood; and
  • how the trust will contribute to wider system improvement and develop and retain good links with other MATs, teaching schools and a wide range of stakeholders

Financial sustainability

Addressing concerns about MATs which have expanded too quickly, the guidance stresses the importance of Trusts having strong and sustainable finances. RSCs will want to see evidence that enables them to assess whether:

  • there is sufficient financial expertise to oversee the trust’s financial operations;
  • financial planning is integrated in to the trusts overall strategy for its school(s);
  • the trust’s vision remains deliverable and resilient to operational changes in income, such as changes in pupil numbers or characteristics or the implications of the introduction of a national funding formula. Scenario or sensitivity analysis should be used to evidence this;
  • there are robust contingency plans in place, with clear triggers for enacting these plans; and
  • the accounting officer has sufficient oversight and control of their finances, to enable them to achieve value for money and ensure propriety with public money.

In future, before agreeing that a MAT can expand the number of schools it runs, or a standalone academy can create or join a MAT, RSCs will assess whether:

  • the plans to grow the size of the trust are credible – and that the trust understands that while growth can bring about economies of scale, there are also costs associated with centralising functions. Where a trust’s plans are such that they want to remain small (e.g. below 1,200 pupils for primary trusts and 2,000 for mixed or secondary trusts), the RSC may recognise the financial limitations and be more cautious. They may ask to see more detailed plans, including how the trust’s senior leadership team will be funded from across the schools;
  • plans to secure efficiency savings through economies of scale are realistic and have been benchmarked against other trusts;
  • any central functions are properly costed and sustainable, and that there are clear plans that set out how these functions will be paid for, for example, through a charge or “top-slice” to individual schools within the trust;
  • these centrally delivered functions deliver value for money for constituent schools; and
  • the trust’s financial processes are sufficiently robust to withstand the increased responsibility of the trust, and in particularly the need to ensure propriety and value for money across a wider number of schools.

Risk Management

The guidance states that RSCs will take in to account what is known about the way successful academy trusts manage risk. In particular, they will test whether:

  • the trust has the capacity to fulfil the mandatory requirements set out in the Academies Financial Handbook especially if, having consulted with the Education Funding Agency (EFA), they know that it has not fulfilled those responsibilities in the past;
  • there are effective procedures in place to identify, monitor and mitigate at both school and trust level – risk management is not a box-ticking exercise;
  • its scheme of delegation makes clear what risks are managed at what level so no issues ‘fall between the gaps’;
  • the trust has a clear idea of how the way it manages risk may need to change as the trust grows, and has made a balanced assessment of the risks expansion and opportunities might pose to its existing schools;
  • the trust has access to appropriate due diligence expertise so that they can be confident the trust knows what it is taking on (both in terms of benefits and risks) when an additional school joins it; and
  • the trust has capacity to manage the estate for which they are responsible.

This guidance provides some welcome transparency and consistency around the ways RSC’s will take decisions on whether to allow Multi Academy Trusts to expand in future.

The NGA’s ‘Welcome to a Multi Academy Trust’

The National Governors Association’s long-awaited guide to governance in Multi Academy Trusts was published in November 2016. The 100 page booklet contains a useful overview of academies which will be a good resource for induction of new trustees. The guide is organised into a series of sections covering:

  • The legal role of trusteeship: introduction to governance in a Multi Academy Trust – the relationship between trustees and local governing bodies (or ‘academy committees”) and the importance of the Scheme of Delegation, the importance of recruiting for skills and carrying out regular performance evaluations.
  • The culture and ethos of the trustee board
  • What makes governance in a MAT different?
  • The business of the board- how trustee meetings should be organised, as well as meetings of members, the vital role of the Chair
  • How schools work: curriculum, assessment, safeguarding, complaints and exclusions
  • Knowing your schools: how to tell if your trust is doing well, chief executive reports, visiting school and performance data
  • Staffing: senior executive team, staffing structures and HR
  • Fiduciary functions: the importance of maintaining financial propriety, accounts and managing the budget and insurance
  • Relationships with external agencies: OFSTED, the Charity Commission, Department for Education, EFA and Regional Schools Commissioners
  • Growing the Trust: is there an optimum size for a MAT? Getting it right and routes to expansion
  • Glossary of education terminology

Priced at £12 for non-members and £6 for NGA members, the guide can be purchased here.

ASCL Guidance

The Association of School and College Leaders (ASCL) has also published three linked guidance notes, under the theme “Staying in Control of Your School’s Destiny”. The first instalment in October “Considering forming or joining a group of schools” examines the benefits of schools working in larger groups, with a particular emphasis on the implications of being part of Multi Academy Trust, the governance structures which are available and the factors which will be critical to success. A useful checklist is provided for schools considering their options for the future.

‘Joining a Multi Academy Trust’ published in November, outlines the process for seeking out a partner Multi Academy Trust to join. It stresses the importance of both partners carrying out due diligence on each other to ensure that their ethos, vision and values are aligned, and that both parties know what they will be taking on in terms of leadership, school performance, financial stability and liabilities. “Effective due diligence is essential in ensuring you find out as much as you possibly can about any MAT you are considering joining. MATs will also undertake due diligence into schools that are considering joining their trust”. Recognising the crucial importance due diligence when joining a Multi Academy Trust for busy education leaders, Elderflower Legal has launched a new fixed price product EduDiligence™ – find out more.

The third paper in the series ‘Forming a Multi Academy Trust’ sets out the process towards setting up a MAT, including reasons for forming your own Multi Academy Trust, how to choose the right partners, things to think about when scoping your new MAT, and how to undertake due diligence on your potential partners, as well as the importance of engaging and consulting with stakeholders before the decision is taken.

Some suggested key strategic questions for leaders of prospective MATs to ask themselves include:

  • What do you hope to achieve in the next three to five years?
  • What do you want for the children and young people in your schools?
  • How will you work together to achieve your aims?
  • Do you have a sense of how big you would like your MAT to grow? (Think in terms both of numbers of schools and numbers of pupils.)
  • Will this result in an organisation which is educationally and financially sustainable?
  • What is your attitude to the risks that new organisations have to take, such as creating leadership capacity to grow the organisation?
  • What capacity will you need to take on struggling schools? How will you make sure you don’t over-stretch yourselves?
  • What do you think will be your biggest challenges in your first few years, and how will your strategy mitigate these?
  • What central support do you plan to offer your schools? Where might this be located, and will all the schools in the proposed MAT be able to access it?

The ASCL guidance will be particularly helpful to schools beginning the journey of considering whether to form a new academy trust or join an existing Multi Academy Trust. The guidance can be accessed here.

 


Mark Johnson is an independent legal and governance specialist working with academy trusts, schools and not for profits to help them succeed. He serves as the company secretary of a MAT in Cheshire and independent audit committee member of a large MAT in Manchester. Get in touch today or find out more at elderflowerlegal.co.uk or call 01625 260577.

The information above is provided for general guidance only and is not a substitute for professional advice which may depend on your specific circumstances. If you would like to be kept up to date on more topics like this, then why not sign up to receive our regular newsletter.

Due Diligence for Schools Joining a Multi Academy Trust – Part 3

In Part 1 and Part 2 of this post on due diligence for schools joining a Multi Academy Trust, I examined the strategic, leadership, workforce and financial issues of due diligence when schools join a multi academy trust. In this final Part 3, we look at commercial and asset-related issues.

Commercial

How are support services organised at present in the school which is joining the Multi Academy Trust?

Will any existing contracts be taken over by the MAT or need re-organising e.g. catering, cleaning, statutory testing, property maintenance, photocopiers, transport and vehicles, IT, telecoms? You should obtain copies of and review any agreements with suppliers or service users.

Is the school part of a PFI agreement? If so, what are the terms of this, and can some of the liability and responsibility remain with the local authority? This can be an area of high risk on which professional advice will be needed.

Are there existing building projects, grant conditions, partnerships or collaborations with other schools or outside bodies in place which could be inherited by the MAT?

Does the school own any intellectual property rights (e.g. logos, copyright, design rights or trademarks, internet domain names) which need to be transferred over?

Any pending law suits, claims or complaints which could give rise to liabilities in the future e.g. disputes with suppliers, safeguarding issues, health and safety, data protection, equality and human rights commission, breach of public procurement/ tendering requirements?

What insurances are in place at present and would they cover any issues identified post-transfer (e.g. an employment claim)?

Any permits or licences that need to be replaced or put in place post-transfer (e.g. copyright licensing agency, music performance, event licences)?

The MAT will enter into a Commercial Transfer Agreement (CTA) with the current owner of assets and contract holder (usually the Local Authority or Voluntary Aided School Governing Body). It has become increasingly common for local authorities to demand a contribution to their legal costs of negotiating and concluding this agreement and the Lease of the site. Have you included this in your project budget and perhaps stipulated deadlines and conditions of your own in return for this payment?

Asset Condition

What state are the school buildings in? What kind of backlog maintenance liabilities are there, and what is the likelihood of significant capital expenditure in coming months and years, e.g. will heating systems, roof repairs, water tanks, windows need repairing? Can the current owner be persuaded to fund/ carry out any works pre-transfer?

Who owns the school buildings and surrounding land and will this be transferred cleanly and effectively to the MAT? Are there any outstanding statutory transfers between public bodies not fully completed? Is the title to the land correctly registered at HM Land Registry – if not, consider asking the existing owner to tidy this up pre-transfer to avoid delays or problems if the title deeds cannot be located.

Watch out for thorny issues such as shared use of outdoor space, part of the premises leased to an external organisation (such as a private nursery provider or leisure operator), accommodation provided to school staff, which may be subject to protected tenancies making it difficult to remove the occupier and possibly leading to a costly dispute.

Have there been any significant building works recently- were all necessary consents and approvals obtained for these (e.g. building regulations and planning). Did the contractor provide a warranty? Have solar panels been installed on the roof- if so, who owns them and what contracts were put in place at the time?

IT systems- evaluate the age and utility of the current systems -are they fit for purpose? What do managers and staff think of the current systems and support service?

Who owns the equipment? Are there third party software licences which may need to be renewed after the transfer?

Have data security issues been considered? How will legacy equipment be disposed of securely (no data back-up tapes or machines found in a skip!) What will happen to the joining school’s website post-transfer?

Final thoughts

Due diligence is a vital part of any acquisition or merger of schools into a MAT. Handled sensitively and proactively it can lay the foundations for creating genuine ‘marriage value’ by allowing each party to get to know each other, explore the respective strengths and weaknesses of the other and find real opportunities to improve the life chances and attainment of pupils across all the schools involved. Contrary to popular belief, it is not a rigid process designed to unearth ‘dealbreakers’. Neither is the process  an exercise in box-ticking: it needs to be a dynamic and living one deploying a range of skills and a healthy dose of emotional intelligence. Addressing soft issues such as cultural compatibility and management succession can be just as important as hard issues, such as legal and financial aspects. Professional advice from advisers familiar with the sector can provide very valuable intelligence and support. Remember the maxim ‘due diligence is cheap, litigation is not’. Leaders need to be as sure as they can be before taking the plunge to merge their schools. As the old saying goes, ‘marry in haste, repent at leisure’.

Find out more about our Due Diligence Service here.

 


Mark Johnson is a highly experienced independent solicitor & chartered company secretary helping schools and academies with conversions, creation of MATs, legal and governance issues. We can help your academy to flourish. Find out more at elderflowerlegal.co.uk.

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Due Diligence for Schools Joining a Multi Academy Trust – Part 2

In Part 1 we examined the purpose of due diligence when a school joins an academy trust. In this Part 2 we look at workforce aspects and financial due diligence.

Workforce

Payroll costs typically account for 75-80% of a schools’ expenditure (DfE, 2013) so this is obviously an area to pay careful attention to. When a school joins a MAT, normally the MAT is the legal entity which will become the employer of the staff. In a community school, the existing employer will usually be the local authority and so the HR department of the authority will have a key role to play in providing information about the workforce and smoothing the transition. However, in voluntary aided schools it is usually the governing body that is the employer. Even in some maintained schools, the governing body may be the legal employer of certain staff (e.g. premises assistants, community workers, nursery staff). This is a trap to watch out for since it is the existing employer that has legal duties to comply with.

The new joiner school will want to understand what will happen to its staff when they join the group. Under the new structure, who will have the power to suspend staff, appoint performance management reviewers, undertake threshold assessment or exclude pupils?

The MAT, on the other hand, will be interested in the profile of the staff it will be taking on, and the associated payroll costs and liabilities. The transfer of teaching and support staff will be covered by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’) and the contractual terms of the Commercial Transfer Agreement (CTA). The practical effect of this is threefold:

  • The new employer inherits the contracts and payroll costs (including pension entitlements) of the staff who transfer; the ability to make changes to employment contracts or release staff is very limited and requires specialist advice.
  • The current employer and new employer need to inform staff and consult with them about the transfer arrangements – failure to do so can result in a financial penalty.
  • Any existing grievances or claims relating to the staff transfer to the new employer and become their problem to manage.

Remember that TUPE can also apply to staff employed by external contractors. So, if the joining school has a contract for maintenance or cleaning with an outside provider with staff who spend most of their time servicing that location, and the intention is that these functions will in future be performed in-house by the MAT, these staff may also end up transferring onto the MAT payroll as well.

Some key questions to probe:

  • Obtain an organisation chart and biographies of key staff. Check historical and projected headcount. Any recent changes of leadership or restructuring?
  • Details of all staff, including date of birth, age, date of starting employment, length of service, salary, benefits, notice period, pension details.
  • Are appropriate contracts in place for all staff? Arrange to review a sample. Any consultants or self-employed contractors who regularly provide services?
  • Have any verbal assurances or agreements been made with staff outside of their formal contract?
  • Are personnel records up to date and securely stored? Will they be handed over on the transfer date?
  • Are payroll records up to date and complete? Have all necessary deductions been made and accounted for to HMRC and others? Do the figures tally with the contractual entitlements?
  • What are the figures for staff turnover? Are there any pending disciplinary or grievance investigations? Have any staff been dismissed recently?
  • Details of sickness records, employees on maternity leave or secondment.
  • How will occupational health support be provided in future?
  • How will absence management be dealt with post-transfer?

Stakeholders

Both the new joiner and the MAT will have a range of stakeholders whose views and attitudes can shape the future success of the integrated organisation. These will include parents and carers, pupils, former pupils, the staff, the local authority, external sponsors or foundations (such as the local diocese in the case of religious schools), local residents, local media, the Regional Schools Commissioner. It is important to map out these stakeholders, solicit their views and decide how best to consult with them and keep them informed about future plans. What are their hopes, fears and dreams for the future? A stakeholder communication plan should be drawn up. Digital communications and social media could play an important role in doing this cost-effectively. Surveys, press reports and Google searches may produce useful insights.

Financial

Financial due diligence should determine the current financial position, as well as identifying any support or training needed for managers going forward. New joiners will need to understand how the ‘top slice’ deduction to their school budget to pay for central support services will be applied and whether it represents value for money. Typical rates can vary from 3% to 5%, in some cases even 7%. Are the service levels to be expected from central support services in return for this deduction clearly documented?

Typical areas requiring examination will include:

  • Income/ Expenditure Budget reports and cashflow projections
  • Summary of month end bank and cash book position for current year and last two years, explanation of variances and major inflows/ outflows
  • Five-year financial forecast for the school. Are assumptions realistic? Particularly with respect to pupil numbers, which is ultimately the key financial driver.
  • Any negative balances, deficits or outstanding loans (e.g. for capital projects funded by local authority, Priority Schools Building Programme or Targeted Basic Need)?
  • Any grant funding