academies - what's in it for the private sector?

[morningtoncrescent62]

I feel very ignorant having to ask this. But I really don't understand what's in it for the private sector companies and individuals who run academies and academy chains. They're not allowed to be run for profit, is that right? So apart from a few lucrative chief executive-type posts in the larger chains, what do individuals and groups get out of running them? Sorry if this is a very stupid question but I'd be very grateful if someone could explain it.

This is a total guess but I'm guessing there will be subsidies from the state which won't all be spent on the schools and might find its way into profits. I think they end up buying the land for next to nothing and then can sell it onto developers.

But I could very well be wrong.

No, they definitely don't end up buying the land, or as far as I know being able to sell it. They also aren't allowed to make "profits" - they are organised like charities, and any excess has to be ploughed back into the school.

What people have mostly complained about is of services and supplies being bought in from contractors who have links to the academy executives. Mind, I believe there have been similar scandals with LEAs. I don't know to what extent this is genuinely a problem, however.

I've seen a lot of exaggeration and alarmism around this issue by people with political motivations. That doesn't mean academisation is necessarily a good idea, of course!

Ah, then I was very wrong. As I said, a total guess - a wrong one at that!

mornington:

Its by no means a stupid question. Its taken me a while to understand the structure. There is a lot of confusing information out there. But I have to say that most of the misleading comments I have seen have been from advocates of Academies.

Just keep a focus on your question

"what's in it for the private sector companies and individuals who run academies and academy chains.?"

To begin with the legal provisions relating to Academies and to Free Schools are the same. The Government use the term "Free School" to refer to new schools that are set up using the Academy structure, reserving in general the discription "Academy" for schools which have converted to being academies. So everything I write applies to both.

Every Academy, is run, or governed if you will, by an "Academy Trust". The Trust may run a single school, or run a number of schools as a "Multi- Academy Trust" or "Chain"

Each trust is require to be set up as a "not for profit company limited by guarentee" which then applies to the Secretary of State (currently Nick Morgan) for recognition as an educational Charity. Its called an "exempt" charity as they do not, unlike ordinary charities, have to be regulated by the Charity Commission.

An ordinary "for profit " company has shareholders, who own it, elect the Board, and get paid a share of profits as dividends on their shares. If the company goes bust, the most a shareholder can loose is the value of their shares. That is why it is called a Limited Company as the shareholders liability is limited to the value of their share.

A "company not for profit limited by Guarentee" is in law, likewise owned by its "members". These are people (or a company can be a member) who apply to join the Company, and agree, in the event of the company going bust (Being "wound up and found to be insolvent') to contribute a sum of money, usually one pound to pay off debts. So their liability is limited to the size of their guarentee. The members elect the Board.

You will see from this that it follows that who the members are is a rather important point. The member(s) can be commercial, for profit companies. So you can have a trust Board, consisting of employees of the for profit company, which then buys services from the parent company. This is perfectly legal, by the way.

I will give some examples in later posts after you have had a chance to comment on this one.

regarding land.

When an Academy Trust takes over the running of a community school, it has the ownership of the buildings and land, which were owned by the Local Authority, transferred to it. Not Freehold, but leasehold. They get it on a 125 year lease. They do not pay for it, they get it free.

It is not true to say that they cannot then sell it on, should they decide the land surplus to their requirements. It is that they cannot sell it on without permission from the Secretary of State. Some proponents of academies will claim this amounts to the same thing as no S of S would give permission for such a sale.

Thanks for these replies. nolondondad, just a couple of questions about what you've said.

Each trust is require to be set up as a "not for profit company limited by guarentee" which then applies to the Secretary of State (currently Nick Morgan) for recognition as an educational Charity. Its called an "exempt" charity as they do not, unlike ordinary charities, have to be regulated by the Charity Commission.

That's interesting. So what is a) the reason given for them being exempt, and b) the implications?

The member(s) can be commercial, for profit companies. So you can have a trust Board, consisting of employees of the for profit company, which then buys services from the parent company. This is perfectly legal, by the way.

Ah, that starts to explain it. As kesstrel said, there were probably examples of LEAs contracting out services to their friends, but this is a much more systematised version of it. Are there examples of existing trusts that have drawn their membership from a parent for-profit company from which they've gone on to buy services? It seems to me that any opponents of academisation could make good use of any such data.

So what is a) the reason given for them being exempt, and b) the implications?

They're exempt from regulation by th Charity Commission because they're regulated by the DfE instead. Otherwise they're the same as other charities.

This Wikipedia page explains exempt charities:en.wikipedia.org/wiki/Exempt_charity

Universities and other types of institutions are exempt charities too so it's not a new thing.

Academy Trusts still need to comply with Charities SORP and are audited by external auditors, they also need to submit returns to the EFA. In my experience, a MAT still carries the same amount of regulatory checks that a LA school might.

Governors and Trust members must complete a register of business interests and any related party transactions are reported and queried - where evidence must be provided to ensure all is above board.
It is also worth noting that any company with links to the governing body or trustees must supply at cost basis and can therefore not profit from any dealings with the academy.

The MAT I work for have a policy that all Academies within each have their own local governing body who are in control of the running of the individual school. The trust is there for guidance and assistance.

There are plenty of examples out there alreadt. Schools buying curriculum from parent companies for 100k, schools buying in consultants for 100k from companies their families own, most recently a head paying himself twice, once via another company. But most are probably in it for the long game eg when the gloves are off and they can make profits directly.

There have certainly been some cases of noses in the trough - that's what the regulators are there to catch. But then there were always dodgy financial dealings at LA schools too. I saw one online the other day about a head at a maintained school buying himself photography equipment and a trip to the south pole, and being banned from teaching because of it.

Much easier in academies - so much less transparent. Thats a government choice

Oops, it was the North Pole not the South Pole: www.dailymail.co.uk/news/article-3504538/Primary-headmaster-blew-100-000-school-funds-himself.html

They're not less transparent to the auditors. They still have to account for how they spend public money, it's just that the lines of accountability are different.

Interesting that we are already getting into arguments rather than staements of fact...

Oh well, ever thus.

My own reply to your question about exempt charities is this:-

You wrote:

" So what is a) the reason given for them being exempt,"

Actually I do not know. The Academies Act 2010 was fast tracked through parliament using a provision intended to be used for emergency anti terrorist legislation, so had minimal parliamentary scrutiny, and I dont recall any discussion of that technical detail.

and b) the implications?

The practical effect is that the Academy Trusts, while in law charities, and thereby, for example enjoying significant tax advantages are not regulated by the Charity Commission which otherwise, by law regulates charities. Instead they are regulated by the Secretary of State. Obviously this means that they are not being regulated by an independent body but by a politician. It meant that, Michael Gove, for it was him at the time, did not have an agency outside the DFE, and independent of it, scrutinising the Academy Trusts.

You asked:

"Are there examples of existing trusts that have drawn their membership from a parent for-profit company from which they've gone on to buy services?"

Oh yes. And it is entirely legal for them to do so.

For example (information from Janet Downs of the Local Schools Network)

...... some MATs are charitable arms of for-profit education providers eg The Learning Schools Trust (Kunskapsskolan), The Collaborative Academies Trust (EdisonLearning) and GEMS Learning Trust (GEMS Education Solutions). When such organisations become involved in education, it isn’t altruism, but investment. Wey Education admitted as such in its preliminary announcement for the year ending 31 December 2012. Its approved academy sponsor, Zail Enterprises Limited (now Wey Consultancy Limited), would be the ‘the operator of record of any Academies which come under management’. Wey said this ‘specialist vehicle’ would help Wey in its ambitions to establish ‘a business capable of making a return to shareholders."

It is that they cannot sell it on without permission from the Secretary of State

Under Schedule 1 of the Academies Act 2010 any land formerly held by an LA that is transferred to an academy trust that is no longer required for the purposes of the school is transferred back to the LA.

The position is a little more complicated when dealing with publicly funded land held by the school's governors, foundation body or trustees. In that case the academy trust may be allowed to sell the land but first they will have to make an appropriate payment to the DfE.

Instead they are regulated by the Secretary of State

No, they are regulated by the EFA. They are exempt because they are regulated by the EFA rather than the Charity Commission.

Just to clarify my last answer, legally the SoS is the regulator just as for certain other educational institutions but the powers and duties of the regulator are exercised by the EFA and the DfE. The Charity Commission also exercises some protective and support powers including investigating serious breaches of charity law.

An exempt charity is one that is considered to be adequately regulated by some authority other than the Charity Commission. Every exempt charity should have a principal regulator which in most cases is a minister. In practice that means the charity is a government department. So, for example, the principal regulator for the Victoria & Albert Museum is currently John Whittingdale as the SoS for Culture, Media and Sport but in practice the regulator is the DCMS.

using a provision intended to be used for emergency anti terrorist legislation

Opponents of academies characterise the process used for the Academies Act 2010 in this way but it is not true. It is based on a comment made by Ed Balls at the time but it is a distortion of his comment. The Committee stage was dealt with by the whole House of Commons. This allows all MPs to take part but is a quicker process than the usual Committee stage. This is not something "intended to be used for emergency anti terrorist legislation" although it is used for all kinds of emergency legislation, including anti terrorist legislation. It is also generally used for bills of constitutional or ethical importance and parts of the annual Finance Bill.

In practice that means the charity is a government department

Oops! That should say "In practice that means the regulator is a government department".

There are far more claims of financial irregularities at free schools/academies. Some are fraud, many are allowable using legal loopholes. The headteacher at the state school could have just used those loopholes if he was running an academy

Claims of ‘irregularities’ at free schools and academies

gu.com/p/4c5y7?CMP=Share_AndroidApp_Copy_to_clipboard

Apart from of course payments to bank accounts for no service received. Thats fraud and a bit stupid when they could just bill for consultancy work instead

Education in the uk is not a business. Thats why its so easy for snouts in trough if regulations are not tight

The dept for ed tried to cover up financial irregularities at this school for ecample. Police were only called in (conviction for fraud followed) after the financial report was leaked to and chased up by the police
Thats what happens with politicians instead of independent regulator - politics comes in to play - govt reputation at stake = coverup
www.theguardian.com/education/2015/jun/11/dixons-kings-academy-bradford-troubled-history

Leaked to and chased up by the press

Apologies again
Charges not conviction. I think case is ongoing? He was dismissed from the school. I cant find anything about professional misconduct tribunal though. Wonder if that has to wait til after court case?