19 Aug 2019

Academies and afterschool provision

Publications

The DfE’s publication Charging for School Activities (May 2018) highlighted certain complications for academy trusts which charge parents and guardians for the provision of afterschool clubs (ASCs) or other similar ventures termed ‘optional extras’.

Whilst charging for optional extras is allowable, so far as to cover costs incurred, the guidance states that ‘schools cannot and must not make a profit from charging for optional extras’. This applies even if the profits are to be fully reinvested into the trust.

Does this create a problem for academy trusts?

Whilst provision of an ASC is prevalent within the sector, it does present certain difficulties when there is a formal charge made for this service. The relevant sections of the Education Act 1996 (449-462) discuss the legalities of charging fees for education services and optional extras. Section 456(3) states that ‘charge [fees] shall not exceed the cost of the provision of the optional extra’, thus indicating that these services have to be provided with no ‘profit mark-up’.

It is therefore the responsibility of each individual academy trust to ensure that it’s in compliance with the Education Act, and that any charges made for these such provisions are in accordance with the current legal requirements, not exceeding the cost of providing these optional extras.

Is there anything that can be done?

Below are the options available to academy trusts which will enable them to legally charge for the provision of ASCs. These are detailed below, alongside a summary of the necessary requirements to ensure compliance with the regulations.

Apportionment of costs

The Education Act 1996 Section 456(4) details that an appropriate proportion of costs can be applied, in relation to staffing, premises and other relevant materials and services, which apply to the usage of the ASC. In practice therefore, one needs to appropriately apportion relevant and legitimate costs against the income received.

On a very basic level, if the school premises are open 8am-6pm and the ASC runs from 3:30pm-6pm, one could potentially apportion premises costs (e.g. electricity, gas, water), by 2.5hrs / 10hrs. One could also apportion the following costs: materials, insurance costs, building maintenance costs (where relevant), rates, cleaning costs, premises staff (if they have to stay at the school for a longer period), etc.

Any cost apportionment model applied must be appropriate for the ASC and fully justifiable. It is the responsibility of the governing body of the academy trust to confirm this.

Voluntary donations

If the academy trust did not formally charge for the provision of the ASC, instead asking for voluntary donations, then it does not matter if a ‘profit’ is made, as the income received will be classified as a donation. However, there are certain other considerations here: as the payment contribution is voluntary, one cannot fully guarantee from year to year the total amount that will be paid. This will depend somewhat upon the demographics of the local area.

One option for trusts is formally charging parents at the actual cost level of providing the ASC, whilst requesting top-up voluntary contributions. Under this option, there would be an increased administrative burden upon the trust, as very clear records detailing and confirming this course of action will need to be kept.

Charitable company / outsourcing

To maximise revenue, if a trust were to remove the provision of the ASC from the trust’s control, either by way of the creation of a charitable company or fully outsourcing to a third party, then the income received would not be subject to the same legislation.

By creating a charitable company to run the ASC, the new entity would be able to Gift Aid all the profits up to the trust. However, setting up and running a charitable company will incur both initial and ongoing annual governance and administrative charges.

The trust will also have to consider:

  • The legal governance of the trust – who will become trustees of the charitable company? etc.,
  • The implications of annual reporting – will the charitable company need to be consolidated into the trust’s annual accounts?

If the trust wishes to outsource the ASC to a third party, then the income received would be classified as ‘lettings’, with all the income and running costs being the responsibility of the third party. The trust, however, would be losing control of the ethos of the ASC, which would potentially be detrimental to the reputation of the academy trust.

Community use

As seen from the legislation above, charging for an ASC anything in excess of the cost incurred is prohibited. However, if the ASC provision were available to the wider community and not just pupils on the roll, different legislation would apply – stating that ‘a governing body may charge for any [community] services or facilities provided’ [Education Act 2002, Section 27(3)]. This would provide an opportunity for a surplus (‘profit’) to be generated.

However, the above clause must not be applied in detriment to either the trust’s articles and memorandum of association and/or the requirements of HM Treasury – Managing Public Money.

To put this into action, there must be tangible evidence of the marketing of the provision to the community, with no preference given to pupils on the roll. This will provide proof that the provision is available to the wider community, even if no children ultimately join the ASC. As ever, clear notations must be made in the governing body minutes, with all relevant documentation retained to support the course of action.

There is a further potential complication to the above. The explanatory guidance to Education Act 2002, Section 27 indicates that ‘any surplus raised though community usage actually belongs to the owner of the land on which the school is situated, as opposed to the trust directly’.

As the majority of academy trusts include the land and buildings within their balance sheet (as opposed to Local Authority schools), this is not a significant issue. In the cases where the land and buildings of the trust are not included on the balance sheet (typically faith schools, where the land and buildings are held by an external organisation e.g. a diocese), the trust will need formal permission from the external organisation in order to generate the revenue initially, as well as having control over the funds. The external organisation is under no obligation to cede this to the trust, but practically are highly likely to do so.

Again, formal documentation of this (e.g. signed letters), will need to be obtained prior to the commencement of this option, and updated regularly with copies retained as evidence.

Summing up

Whichever of the above options academy trusts chose to employ, these must be formally documented and minuted as having been discussed in the governing body meetings.  Documentation will need to be created and retained to support the decision(s) made, e.g. basis of apportionment, evidence of community use.

Trusts may also wish to engage their legal advisers to confirm their approach, given the complexity of the issue.

With regards to the above options, there is no optimum which can be applied to all trusts. The choice made will depend very much on the governance and senior leadership team at the academy, to identify and implement (if applicable).

For more information, please get in touch with your usual Landau Baker / BKL contact or use our enquiry form.