Academies risk protection arrangement
Academies are required by their funding agreements and the Academies Financial Handbook to maintain adequate insurance arrangements. Academies will be aware that their cost of purchasing insurance is generally higher than that of maintained schools because academies cannot benefit from the same economies of scale as local authorities in procuring insurance.
The DfE has introduced a Risk Protection Arrangement (RPA) for academies. This is a voluntary risk pooling scheme. It is not a conventional insurance scheme underwritten by an insurance company but a mechanism by which risks will be covered by government funds.
All academy trusts and multi-academy trusts can opt in to the RPA from 1 September 2014.
Main points of the scheme
The key risks covered are:
- property damage (academy contribution per loss of £250 (primary) £500 (secondary) and £1,000 for each subsequent claim;
- increased cost of operating the academy following damage to property;
- legal liability to pay compensation to employees for death or injury (including from exposure to asbestos);
- legal liability to pay compensation to third parties for death, injury or property damage (including liability from exposure to asbestos);
- loss of money or personal baggage while travelling on academy business in the UK
- loss of academy property due to theft;
- governors’/directors’ liability;
- personal accident;
- professional liability.
Some risks come with a “contribution” much like an excess e.g. legal expenses £250 (primary) and £500 (secondary) for each and every loss. For further information on scope of the cover please click here.
A third party claims organisation, Gallagher Bassett, which handles claims for local authorities, will handle the claims.
The RPA will be funded by EFA deducting £25 per pupil from the academy’s general annual grant (GAG) for the first 2 years of the RPA. (If an academy’s GAG includes less than £25 per pupil for insurance it still may be possible to join the RPA.)
Academies can use their own insurers, but after the 2014/15 year, the £20 per pupil supplement will be withdrawn so insurance costs above £25 per pupil must be funded from the academy’s budget. However, the DfE will reimburse the cost of insurance above £25 per pupil under current contracts until they expire.
To incentivise joining the RPA, the DfE will provide a risk management package that includes training, an on-line risk assessment tool and independent risk assessment surveys.
Some outstanding issues
- There is information still to come from the DfE. In particular it is not currently clear what the DfE will do in respect of funding after the first two years.
- The RPA is said by DfE not to be an insurance policy, although it notes that bodies such as academies funded by grant in aid under statute are exempted from the requirement to have employer’s liability. DfE or EFA are intending to issue RPA members with a single page document confirming that they are a member of the RPA and as such have cover for Employers, Public and Products Liability. This can be used in place of an EL insurance certificate.
- The lease that the academy has from the local authority may contain a provision that requires the tenant to maintain buildings insurance with a reputable insurance office. Each local authority may have different views on whether to agree to waive the insurance provisions where an academy wishes to opt in to the RPA. DfE has indicated that it considers that RPA will satisfy obligations in leases but a formal statement by DfE on this issue is awaited.
- The model funding agreement and Academies Financial Handbook have required academies to have adequate insurance. DfE have recently issued updated model funding agreements to take account of the RPA. While new academies and MATs will generally need to use the new agreements it seems that existing academies and MATs will be able to, but will not be required to, use them. No doubt the next edition of the Academies Financial Handbook will make this clear, but existing academies may wish to check the position with the EFA in the meantime.
How Eversheds can help
Academies should consult their insurance brokers for advice on whether the RPA would be a good option for them. Some academies may lose out on funding in the long term if they join the RPA if their insurance costs are above £25 per pupil. Eversheds can advise on the legal consequences of transferring risk transfer arrangements from conventional insurance to the RPA.
Links to DfE Publications
Public Accounts Committee report on establishing free schools
The House of Commons Committee of Public Accounts published its report Establishing Free Schools on 9 May 2014. The report is accessible here.
The report follows the Committee’s earlier report Confidentiality Clauses and Special Severance Payments published on 24 January 2014. The Free Schools Report has prompted questions in parliament and considerable comment in the media. This note summarises the report’s conclusions and recommendations, which will be of interest to free schools and other academies, as well as the Department for Education and the EFA.
Main Points in the Report
The report concludes that DfE has “made clear progress on implementing a policy priority by opening new free schools quickly”. It notes that DfE has also “ strengthened aspects of the way it selects which applications to approve”. However, the Committee expresses a number of concerns, leading to five recommendations, as follows:
- The Department can do more to draw on their experiences of the early tranches of free schools to understand take up of places. While the National Audit Office has shown that in their opening year, free schools attracted three quarters of their planned number of pupils, many free schools admitted fewer pupils than planned. Sometimes this was a consequence of the schools having only temporary accommodation, sometimes it was due to a lack of accurate forecasts of demand. The Committee recommends that the DfE should reflect on what it has learned about demand, using the evidence based on free schools already opened, and review its guidance to free school applicants, as well as its assessment criteria, accordingly.
- The Department should be open about the reasons for making decisions in favour of opening free schools. While applications are initially scored against published criteria, DfE then consider several other factors, including practical ones such as whether applications are competing for the same parental demand or the same site and other factors such as a serious level of deprivation or the need for extra pupil places. The Committee recommended that DfE should be more open about publishing the reason for determining that an application should be progressed.
- The Committee is concerned about the escalating capital costs of the programme. The Committee noted that DfE’s costs estimates have often proved to be inaccurate. In particular, publicity surrounding applications could inflate the market value of the proposed site. This pressure could be reduced if local planning authorities allocated sites for schools when developing the local plan. The Committee recommended that DfE apply tighter management of capital costs and work with local authorities to identify sites for schools so that land costs are not inflated.
- One of the Committee’s primary concerns was that arrangements for the audit and governance of free schools were not yet effective. The Committee noted serious failures of financial governance in three free schools. The EFA told the Committee that it had extended its requirements for financial reporting to reduce the risk of fraud. It stressed that in the future it would insist on certainty over who holds key positions in the governance and management of free schools. EFA agreed strongly with the Committee that related parties should not profit from procurement transactions undertaken by free schools. The Committee was also concerned that EFA does not in the Academies Financial Handbook have a specific prohibition on the use of confidentiality clauses in staff employment contracts. The Committee recommended that DfE and EFA evaluate whether their arrangements for audit and accountability fully address the risks of the programme. EFA must address the poor levels of compliance by some free schools with its governance and financial reporting requirements and update the Academies Financial Handbook to forbid the use of confidentiality clauses in staff contracts.
- There is no demand to open free schools in some areas with significant forecast need for additional school places. DfE had received no applications to open primary free schools from half of districts with a high or severe forecast need for extra school places. The Committee noted that DfE did not regard the free schools programme as its main way of addressing need for places. However, it recommended that DfE should set out how and by when it will encourage applications from areas with a high forecast need for extra places, working with local authorities where appropriate.
Implications for existing free schools and academies
The implications for the governors and senior managers of existing free schools and academies would seem to be:
- The need to monitor the free school’s educational standards closely, since all free schools will receive a full Ofsted inspection within two years of opening. A good inspection outcome is regarded by DfE as the main criterion for the success of free schools.
- The need to consider carefully whether the arrangements for governance and financial management are sufficiently robust. Relevant issues include the adequacy of the financial regulations, the internal auditing arrangements, the arrangements for procuring goods and services, the policies on conflicts of interest and on preventing fraud and bribery and corruption; and suitable arrangements for delegation of authority to committees and to the principal.
Pupil absences and penalty notices
While schools, including independent schools and academies, have the discretion to grant or refuse to authorise a pupil’s absence during term time, changes to the Education (Pupil Registration) (England) Regulations 2006 have since 1 September 2013 required head teachers only to grant leave of absence during term time in exceptional circumstances. The legislation no longer refers to family holidays, indicating that the Government wants schools to take a stricter stance on not authorising absence for family holidays in term time.
The legislation now makes it clear that parents in England and Wales have a legal responsibility to ensure their child attends school. If a child is absent from school without authorisation, head teachers have the power to issue Penalty Notices to the parents which impose a fine for having taken their child out of school. Further, the timescales provided to parents to pay fines issued under a Penalty Notice, where they fail to ensure their child’s regular attendance at school (or fail to ensure their child is not in a public place for the first five days of an exclusion) have been shortened. Consequently this has left parents more likely to be prosecuted.
These changes are further evidence of the “harder” line the Government wishes schools to take regarding pupil absence, following the increase in the value of penalties in 2012. The changes have resulted in a 74% increase in the number of Penalty Notices issued, which suggests that many schools are not reluctant to use their powers to try to reduce the absence of pupils. The Penalty Notice scheme seems to have had a dramatic effect on raising attendance rates. A Government commissioned report entitled “Investigating the use of Parental Responsibility Measures for School Attendance and Behaviour”, published in September 2010, indicated that 79% of those surveyed, which included local authorities as well as primary and secondary schools, viewed Penalty Notices as being “very successful” or “fairly successful” in improving attendance rates.
Where a pupil has irregular attendance or periods of unauthorised absence for more than 10 school days, and/or a Penalty Notice has been issued by an academy, notification must be made by the school to the relevant local authority, as it is a local authority’s overarching duty to ensure all children are in education. All local authorities must issue a Code of Conduct for the use of Penalty Notices, after consulting with schools and academies in their area. The Code will set out the triggers for the issue of Penalty Notices. Only the local authority can enforce the Penalty Notice by issuing court proceedings. A local authority must withdraw the Penalty Notice where it chooses not to issue proceedings, or decides the Penalty Notice ought not to have been issued, or the Penalty Notice contains material errors.
Implementation of the new Special Educational Needs and Disabilities regime
On 13 March 2014, the Children and Families Act 2014 (‘the Act’) received royal assent. The Act introduces a new Special Educational Needs and Disabilities (‘SEND’) regime whereby children and young adults can be issued with an Education Health and Care plan (‘EHC’) from birth up to the age of 25.
The new system will be implemented from September 2014 and encourages a system of collaboration and consultation between educational settings, local authorities, health bodies, parents and the relevant learner.
Impact on Academies*
From September 2014, academies will be expected to comply with the new SEND regime and have regard to the new SEND Code of Practice, the draft of which was published in April 2014 and is accessible here.
The Act sets out a number of statutory duties that will apply to an academy, although, in reality, academies have already been complying with many of these, through compliance with the previous SEND regime. However, the Act and the new SEND Code of Practice will reinforce these obligations and provide guidance on best practice.
Under the new SEND regime, parents and learners have the right to request that a particular academy is named in their EHC. The local authority is then under an obligation to comply with that preference unless it can be shown that the academy is unsuitable for the leaner in terms of their age, ability, aptitude or special educational need or, alternatively, that the learner’s admission to the academy would be incompatible with the efficient use of resources or the education of others.
Where an academy is named in an EHC, it is under an obligation to admit that leaner and must use its best endeavours to ensure that the necessary provision is made for them. However, before an academy is named on an EHC, the local authority is obliged to consult with the academy and consider its comments. Therefore, from a practical perspective, if an academy considers that it is unable to meet a learner’s needs, it would need to persuade the local authority of this before it is named on the EHC.
Whilst there is an obligation on the local authority to consult with the academy before naming it on an EHC, the academy is also under a general duty to co-operate with the local authority, specifically to identify and meet the needs of learners with SEND. Academies will also need to publish information about their SEND policies and will need to designate a member of staff as having responsibility for co-ordinating provision for learners with SEND (the SEN Co-ordinator or SENCO).
Given the sensitive nature of SEND, we anticipate that any breach of the new regime is likely to be challenged by learners and parents alike. It is therefore vitally important that academies are aware of their statutory obligations under the new regime and become familiar with the SEND Code of Practice once it is finalised.
*For 16-19 Academies, please see the guidance issued by the Department for Education entitled “Implementing a new 0 to 25 special needs system: Further Education” .
DfE consultation on changes to home to school travel guidance
On 25 March 2014, the Department for Education (‘DfE’) confirmed that it was proposing to introduce new guidance on “Home to School Travel and Transport”, to replace the previous 2007 version, for pupils of compulsory school age (5-16 year olds). The DfE published a draft guidance document for consultation (‘the Proposed Guidance’) which can be accessed here.
The consultation period ended on 03 June 2014.
Please note that separate guidance is available for post 16 transport which can be accessed here.
The Proposed Guidance
The first thing to note about the Proposed Guidance, is that the legal position will not be changing and (for eligible pupils) the duty to provide home to school transport, will remain with local authorities. However, the DfE considers that updated statutory guidance is required in the light of the changing landscape for school provision, including the expansion of the academies programme.
Under the Proposed Guidance, the DfE is attempting to reduce prescription and allow local authorities to come up with innovative travel solutions, taking into account the particular needs of their area and the views of relevant stakeholders.
The Proposed Guidance reiterates the statutory duties imposed on local authorities in respect of school transportation, and affirms the applicability of those duties to eligible pupils in academies. The Proposed Guidance also reaffirms the importance of matters such as:
- the sustainability of the transport;
- the need to consider safeguarding and contactor/employee suitability;
- safety; and
- how to deal with poor behaviour on school transport.
The Proposed Guidance also reiterates the need for consultation on any proposed changes to local school travel policies, including a consultation period of at least 28 working days during term time.
Aiming to create more transparency and consistency between local authorities, the DfE has also set out in an annex to the Proposed Guidance a recommended appeals process for parents to pursue if they have concerns. A flow chart is also provided for easy reference.
Given that the consultation period expired on 03 June 2014, a final guidance document is expected shortly and all local authorities will need to have regard to this guidance when considering, and setting, their home to school travel policies.
For academies the implication is that local authorities may soon be looking to update their travel policies and, hopefully, more tailored and innovative transport solutions may become available. Academies with views on how local travel policies could be improved to meet their particular needs should ensure that their respective local authorities are aware of their suggestions.
Pre-conversion works contracts and due diligence
On conversion of a school into an academy or into a multi academy trust (“MAT”), one of the main preliminary enquiries raised in the DfE’s land questionnaire, relates to current or proposed building works at the school’s site. Nevertheless, historic building works or other contractor related works where warranties, guarantees or other contractor liability remains in force must not be forgotten. Any relevant documents need to be reviewed to ascertain whether there are any provisions that will impact on the ability of the academy or MAT to rely on or take assignment of any benefit or which limit the extent of liabilities to those who were not a party to the original contract.
The period that needs to be examined is the 12 years prior to conversion , as warranties given are usually limited to a 12 year period liability period, but the actual liability period will vary from contract to contract. The key documents that project managers need to obtain from local authorities are:
- build contracts (such as standard form JCT design and build contracts) or other works contracts
- contractor or sub-contractor appointments
- professional team appointments (e.g. architect, specialist engineers)
- collateral warranties
Some examples of limitations are:
- Limitations on assignment: the contract documentation may contain provisions which either place an absolute prohibition on assignment, or a limitation of no more than one assignment during the warranty period. Alternatively, it may be possible to assign only with the prior consent of the contractor. If the contract is assignable a deed of assignment and notice of assignment will be required before the academy or MAT can take the benefit;
- Limitations on liability: the contract may contain a fixed cap on liability that restricts the amount that can be recovered from the warrantor to a certain amount usually in the sum of £5million or £10 million, depending on the value of the works. The academy or MAT will need to consider whether that the relevant limit is sufficient;
- Net contribution clause: the contract may contain a clause which purports to apportion blame for a losses between the responsible parties, depending upon their degree of culpability for the loss. This may result in circumstances where the academy or MAT would have to recover a proportion of any loss suffered from other consultants or contractors involved in the project. If these parties are, e.g. insolvent, there would be no real prospect of recouping the losses.
These matters can affect the very viability of an academy project. As such, they need to be raised with the local authority at the earliest possible opportunity. Many academy projects have been unnecessarily delayed because of late requests for local authorities to review their historical records and discloses relevant documentation in a timely manner.