How are academies funded?: an overview

In maintained schools, the Local Authority provides the school’s budget.  The Local Authority will retain a proportion of the school’s budget to fund some central functions.  Maintained schools also purchase some services from the Local Authority such as payroll services, financial management systems and buildings maintenance.  Schools then choose how to spend the rest of their budget.  The vast majority of a school’s budget is usually spent on staffing and essential services, such as utilities.

In contrast, academies receive their entire budget directly from central government from the Education Funding Agency (EFA), in line with their Funding Agreement, without any ‘top slice’ being taken by a Local Authority.  An Academy is then free to choose, independently, how to purchase services.  Academies can still opt to buy some services from the Local Authority if they choose to.  Academies are therefore responsible for securing best-value in the procurement of a wide-range of supplies and services.

As a consequence of the financial freedoms and autonomy gained, each academy is required to produce annual accounts which comply with both charity and company law.  These annual accounts must be audited by an independent auditor and gain a Statement of Regularity in order to assure the EFA and the National Audit Office that appropriate systems and processes are in place to mitigate the occurrence of fraud.

Upon conversion, each academy must obtain an actuarial valuation of the financial position of its share in the Local Government Pension Scheme (LGPS) for associate staff.  It is widely recognised that the LGPS is in a deficit position and therefore each academy will share a proportion of this deficit.  This figure will be entered into the academies annual accounts as a liability.  An actuarial valuation will be required in subsequent financial years to ensure the figure entered into the accounts truly reflects the position of the academy’s pension fund.

There is an expectation that academies will change their financial reporting year to 1 September – 31 August. 


FAQ
Webpage icon How is the work of the Trust funded?
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