UK: Academy Schools Update: Spring 2015

Last Updated: 28 April 2015
Article by Allan Hickie

In our latest update, we summarise some of the best practice approaches to procurement to help you ensure you benefit financially from having effective processes in place and achieve the necessary compliance. A number of our clients have been asking questions in relation to reserves, so we have included an article which sets out some of the key considerations of achieving an adequate reserves policy and of appropriate levels of unrestricted reserves. We also touch on key performance indicators and give some examples of potential indicators that you could use. Finally, with the significant increase in multi-academy trusts (MATs) in the last year, and the DfE's push towards them, we briefly highlight their structure and some pros and cons of joining or forming one.


Academies have lots to consider when buying goods and services, and it is easy to overlook important parts of the process. Compliance with internal finance manuals, value for money, EU tendering regulations, connected party transaction rules.... the list seems endless.

In addition to achieving the necessary compliance, there are many other benefits to having effective procurement practices in place, including financial savings that can then be re-invested to drive up standards, ensuring that all goods or services purchased are fit for purpose, and helping to manage whether suppliers deliver as agreed. With this in mind we thought it would be useful to summarise some of the best practice approaches to procurement.

Your starting point should be a good internal procurement policy, setting out the approach your academy will take. If you are a MAT it is preferable for the policy to be applied across the trust for consistency.

To help ensure transparency and value for money it is vital that you spend an appropriate amount of time on the process relative to the size of the contract, and it is common to treat contracts as either low, medium or high value in order to gauge this.

Your policy should state the agreed thresholds for treating orders as low, medium or high value. Naturally the levels should be appropriate to the size of the school and it may be appropriate to have more than just these three basic layers in larger schools.

Low value purchases

We recommend that academies have an 'approved supplier' list, which staff can turn to for lower value purchases. Low value purchases could cover orders of up to £10k, although you may wish to adopt a less stringent policy for purchases at the lower end of this scale, perhaps up to £2k or £3k.

These low value procurements do not require a detailed approach, but you should still investigate the market to obtain value for money, rather than going with the first supplier you can find. It is preferable if you can obtain three quotes for comparison, and to get these in writing, even if only by email.

A detailed specification is probably unnecessary, but a short paragraph or brief statement of requirement is often useful for suppliers.

You could also consider website comparisons, or benchmarking against other local schools.

Medium value purchases

A more detailed, carefully thought out approach is required here, starting with a clear specification which sets out precise details about the goods or services you require.

Medium value purchases would typically be those over £10k but below £40k or £50k. A common approach would be to send out a detailed specification and request three written quotes by a specified date and time. Many academies require purchases in this range, or those towards the upper end of this range, to be approved by the finance committee.

Higher value purchases

A thorough approach is required for higher value purchases since these represent a significant proportion of your school budget, and the size of these purchases means costs can vary dramatically between suppliers.

The approach is often similar to medium value purchases, but sometimes four or five written quotes are sought. It could be appropriate to advertise your requirements somewhere that suppliers are likely to look, such as local newspapers, education specific publications, online education sector procurement portals or trade magazines.

You will then need to spend more time evaluating the quotes; assessing quality, following up references, calculating whole-life cost, considering future price increases, and factoring the importance of price versus quality.

Purchases above £172,514

Academies need to be mindful of the EU public sector procurement rules. From time to time the thresholds that these apply to are reviewed and, since 1 January 2014, all schools have had to consider non-education specific goods and services greater than £172,514 (this is the sterling equivalent of the EU threshold).

There is a higher threshold of £625,000 for goods and services used solely for the purpose of delivering education. Only services used specifically in education provision are subject to the light touch regime. Other less specific services, which could just as easily be used other than in a school, ie. building maintenance, ICT, catering services etc, attract the lower threshold.

There is a separate higher threshold of £4,322,012 for building works.

It is a legal requirement to follow the EU directives for contracts above the EU thresholds and, if you fail to follow the directives, unsuccessful suppliers would be entitled to challenge the process and, ultimately, force a contract to be cancelled. It is therefore important that you follow the correct procedures, which include:

  • advertising non-specific education contracts in the Official Journal of the European Union (OJEU);
  • setting time limits for tenders;
  • not discriminating against foreign suppliers;
  • offering debriefing to unsuccessful tenderers;

It is also worth noting that Public Contracts Regulations 2015 apply to procurements from 26 February 2015.

How should an academy assess the value of a contract?

It is important that you estimate the total contract value (excl. VAT) of what you are buying. You must not artificially disaggregate a large contract into smaller sections to bring it beneath a threshold.

Example 1: a grounds maintenance contract is worth an estimated £80k per annum. Over a three year contract the value will be £240k, which brings the contract above the EU thresholds and the rules above must be adhered to.

Example 2: a contract to provide administrative services is worth £9k per year, which is just below an academy's internal threshold of £10k. If the contract is agreed for two years the academy ought to follow its own recommended procedures for contracts over £10k, unless there is a good reason not to do so. It is important that any decision to vary from the finance policy is documented in writing.

More information can be found in the following DfE publications:

Effective buying for your school

Buying collaboratively


Academy trusts must adopt a reserves policy and disclose this in their annual financial statements. But this is an area that can cause confusion. We are increasingly asked questions concerning reserves so summarise some of the key considerations here.

What is an appropriate level of unrestricted reserves?

You should have a clear reserves policy, which includes your reasoning for building and maintaining reserves.

Free, or unrestricted reserves, are income funds which are freely available for general purpose use. Your policy should state why the reserves are held, what level or range of reserves is considered appropriate, and how the academy trust intends achieving the desired level or range of reserves.

So what is an appropriate desired level? It is reasonable to build up an 'emergency' cushion or 'working capital reserve' which can be based on a specific number of days of operating costs. Some academy trusts aim for at least four weeks or 30 days. On this basis an academy trust with annual expended resources of £4m would need over £300k of free reserves.

If your academy is not currently maintaining sufficient free reserves, or would like to increase the amount held, you should budget to leave an excess of income over expenditure in the coming years; making a decision now to put aside £10k per annum over the next 5 to 10 years may be possible if planned correctly, although in a challenging financial climate we appreciate this may not be easy.

Are there any restrictions on the level of reserves an academy can build up?

There are both 'yes' and 'no' answers to this question. It is perfectly acceptable for an academy trust to build up reserves if these can be justified, and there is no formula for calculating when reserves are too high.

You should bear in mind that The Academies Financial Handbook does state that 'trusts should use their allocated GAG funding for the full benefit of their current pupils', which is why reserves should not be built without good reasoning.

The EFA can challenge the level of reserves held, if these are deemed to be excessive, so we recommend that if the level of reserves held by your academy could be deemed high full disclosure is made in the trustees' report to explain the reasons.

A common acceptable reason would be where an academy trust is building reserves towards a longer-term capital project which they intend to fund or part-fund themselves.

Can we set reserves aside for a specific project?

Yes. If reserves are being held for something specific, like a capital project, then unrestricted reserves can be designated to a special purpose fund. This fund is then shown separately in the accounts, with an explanation of why it is held.

Although designated for a purpose, these funds would remain unrestricted, so the trustees would be free to change their minds and use the reserves for other purposes should circumstances change.

If you are thinking about designating unrestricted funds, this decision ought to be made before the accounting year end of 31 August, and the decision should be recorded in the minutes of an appropriate meeting.


Academy trusts are required to include within their strategic report an analysis of the trust's key financial performance indicators (KPIs), however these are often not well understood.

You are required to define your KPIs and to document how successful you have been in achieving these. Achievement can be considered against specific objectives for the current year, or as trends over time. Used well KPIs can drive improvement across your school.

Many academy trusts will have similar KPIs, but you need to consider what is 'key' for you. The starting point is choosing which indicators the trustees use to manage the school. KPIs can be financial and non-financial, and include things such as Ofsted inspection outcomes, examination/key stage results, pupil attendance data and pupil recruitment data, in addition to financial performance.

Some good examples of KPIs include:

  • Net incoming and outgoing resources for the year to be positive, prior to any depreciation charge and other recognised gains and losses.
  • Funds carried forward at the end of the year to be in surplus.
  • Unrestricted funds to be in surplus.
  • Restricted DfE funds to be in surplus.
  • Net current assets/liabilities to be in surplus.
  • Cash at bank and in hand to be maximised.
  • Pupil numbers.
  • Percentage of income received from the EFA spent on staff costs.
  • Staff performance reviews.


Over the past year the number of MATs has increased significantly.

Our recent blog article Could your school be a sponsor? suggested that the EFA see the MAT as the future, since the number of single academy trusts becomes almost unmanageable. It is inevitable that the number of MATs, and the size of existing MATs, will increase further.

More of our academy clients have formed MATs in recent months, and the DfE are pushing other academies into joining a MAT in response to financial or governance concerns.

What is a MAT?

A MAT is a single entity established to undertake a strategic collaboration to improve and maintain high educational standards across a number of schools. The MAT is responsible for the governance and is accountable for the performance of each member school. The MAT itself becomes the single legal entity employing staff across all academies within the MAT.

The structure and governance arrangements in MATs can vary considerably. It is common for a board of trustees or directors to sit at the top with ultimate responsibility, but for this body to delegate day to day responsibilities down to Local Governing Bodies (LGBs) of individual schools; however, there are other structures. The level of responsibility handed to LGBs can also vary, with some given substantial control but others receiving very little power.

MATs need to have service level agreements with their academies setting out what they receive for any "top slice" which is taken from an individual academy's funding to cover central trust costs and terms of reference for the LGBs. Many MATs allow LGBs different powers according to set criteria, for example the most recent Ofsted rating.

What are the advantages of a MAT?

Some advantages are clear. The formal structure allows more collaboration and more school to school support. Weaker or smaller schools can therefore benefit from the experience and skills evident in stronger or larger schools. Single, stand-alone academies usually convert into a MAT to support other schools in the locality or to become a formal sponsor of under-performing schools.

Economies of scale can often be achieved through shared services, and MATs can often negotiate preferable contracts and services if contracts at multiple schools are renewed together.

Since the trust itself is the employer it is far easier to transfer staff resources between academies within the trust.

Stand-alone academies usually join an existing MAT because they are either forced to (as a sponsored school), because they feel it will give them better access to resources, or because they already work closely with other schools in the MAT.

It is worth noting that the EFA offer additional funding to encourage the formation of new MAT partnerships. The primary academy chain development grant is available to groups of three or more primary schools. This offers a one-off grant of £100,000, plus £10,000 for each additional school joining the MAT, up to a maximum of an additional £50,000. Open and converting academies are also eligible to apply, provided they are setting up a MAT with at least two primaries.

...and the disadvantages?

There are risks and disadvantages. Directors of the trust, with ultimate responsibility, may feel that it is difficult to take on this responsibility for schools that they have had no day-to-day involvement with.

Expectations at individual academies need to be managed, and some individual academies may feel that their own independence is threatened. It is worth remembering that even if an LGB is provided with certain powers when an academy joins a MAT, it is possible for these powers to be taken away or altered in the future.

Should one of the academies in a MAT fail, there is a risk that this will affect the reputations of all the schools in the trust.

Should I join or form a MAT?

The decision to join or form a MAT should not be taken lightly, and it is important that you take professional advice at an early stage to help you understand all of the implications.


If you would like further information on any of the issues highlighted from this latest update, or would like to arrange a meeting to discuss your specific circumstances in relation to any of the above, please contact your usual UHY adviser or find your local academy expert on our website at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.