The role of finance director at an academy school is potentially a very attractive career opportunity for ambitious school business managers and bursars. Ruth Bradbury explains why
In April this year I took up post as finance director at a new academy school. Since referring to my new role in SFM, I have received a number of queries from readers who are interested in exploring the possibilities of taking up similar posts.
Bearing in mind that the government is committed to opening 400 academies by 2010, and has recently announced that it is likely this programme will be increased further, there is no doubt that the academy option will become a very real one for school business managers. However, there are many differences between maintained schools and academies, not least those relating to the profile and responsibilities of the business/finance manager, and it is important that potential applicants are fully aware of these differences before considering the move.
In this article, therefore, I shall begin by outlining some of the key overall differences between maintained schools and academies. I will then focus on the implications of these differences for the finance and business management functions, and the challenges that these present. I will draw on my own experiences and on those of two academy finance directors who have come from a maintained school background and who have kindly agreed to share their experiences with SFM readers.
One of the most important differences between maintained schools and academies is the role of the academy sponsor. A sponsor can be an organisation, an individual or a group. Existing sponsors range from faith groups and individual philanthropists to local authorities and educational institutions. Sponsors are required to contribute financially to the academy; in earlier academies this money would go towards building costs, but in more recent projects it is used to establish an endowment fund, generating interest which can be used, in the words of the DCSF, ‘on measures to counteract the impact of deprivation on education in their local communities.’ Most sponsors are generally expected to contribute £2m to the fund, although this requirement is more flexible for sponsors with an education background, eg universities, colleges or independent schools.
Sponsorship is far more than a financial contribution, however. Academies generally replace seriously under-performing schools where sufficient improvement has not been achieved through traditional methods. Central to the concept of sponsorship is the idea that the involvement of successful individuals from other sectors will bring a different dimension to the leadership of the academy, challenging assumptions, culture and practice where appropriate, and introducing a fresh and innovative approach which can permeate all levels of the organisation. Sponsors have a number of seats on the academy governing body (which is usually smaller than a maintained school governing body) and they are therefore able to contribute to the ethos and strategic direction of the school, to monitor progress and to influence major decisions.
Whereas maintained schools are funded via the local authority and are answerable to them, academies are state-funded independent schools, receiving their allocation of funding directly from the DCSF. While academies are expected and encouraged to work closely with the local authority, there is no formal relationship and accountability is direct to the government. Academies own their land and buildings, act as their own admissions bodies and directly employ their own staff.
Despite their delegated powers and considerable financial freedoms, maintained schools are ultimately still cost centres of the local authority and overall responsibility for their financial performance – and for additional financial support if required – rests with the council. In contrast, academies are entirely separate legal entities: they are established as companies limited by guarantee (a private limited company, without share capital, where the liability of members is limited), are registered with Companies House and are subject to the Companies Act. They are also registered charities and have to abide by the legal and reporting requirements of the Charities Commission.
Role of the finance director
I have written many times on the role and status of finance/business managers within maintained schools, arguing quite forcibly for a higher profile and level of recognition for the position, and there is no doubt that, in the role of academy finance director (FD), many of these issues are resolved.
Normally remunerated at vice principal or assistant principal level, academy FDs are regarded as integral members of the leadership team and enjoy a status more comparable to the finance director of a private company than that of a traditional school bursar.
While this may initially seem like a dream come true, especially to those business managers who have been struggling for years on low salaries and even lower recognition, the differences outlined above between academies and maintained schools mean that with the higher profile come considerably higher levels of responsibilities and expectations.
The main challenge for any academy finance director transferring from the maintained sector will be the very different financial recording and reporting requirements. Financial management and reporting in a local authority school is a complex process, but is ultimately an exercise in the reporting of income against expenditure. In contrast, academies have to produce full statutory accounts in addition to their DCSF returns. These include an income and expenditure account, a statement of financial activities, a balance sheet and many notes and analyses. This will include accounting for fixed assets (including depreciation), and a knowledge of – and compliance with – all of the legislation and standards governing statutory company and charity accounts.
Academies must also appoint external auditors and are subject to a full annual audit of their accounts, which can be much more rigorous, and have much more serious implications, than a local authority internal audit. In effect, then, the finance director is a company accountant and, as such, it is arguable that they should have an appropriate accountancy qualification in order to perform the role appropriately. The DCSF Academy Finance Handbook strongly recommends that academies employ a qualified accountant as finance director, and most academies have followed this guidance, often appointing staff from the private sector or from independent educational organisations such as further education colleges.
A qualified accountant?
Opinion is split as to whether an academy finance director must always be a qualified accountant. Some post-holders, especially those who have come from the private sector, feel that it is an absolutely essential requirement. Others feel that it depends upon the context.
Sam Caethoven, FD of the Leigh Technology Academy in Dartford, Kent, is very hands-on in her role and feels that, for people in her position, a financial qualification of some description is essential. ‘You have to be able to understand and meet the varying demands of the Companies Act and Charities Commission regulations and to be able to understand what the auditors need, to negotiate the complexities of VAT and other official and legal issues,’ she explains.
Phil Bassill, FD of the Harefield Academy in Uxbridge, however, has a qualified accountant in his finance team and this leads to a more flexible approach. ‘Whilst you definitely need someone from an accounting background who has the right qualifications, this need not necessarily be the finance director,’ he says. ‘It is important for the FD to identify their own strengths and weaknesses and to appoint people to fill the gaps, whether on the accounting side or other areas.’
At present, the vast majority of academy finance directors are qualified accountants. However, there are exceptions: I know of at least two academies where the FD does not have any accounting qualifications and where – as Phil recommends – the technical accounting function is carried out by an appropriately skilled member of the finance team.
Another challenge is likely to come in the form of the sponsor. Whereas maintained school chairs of governors tend to be parents or members of the local community who may often defer to the professional expertise and recommendations of the head, academy sponsors often come from a highly professional and business-focused background.
In my own role, for example, three of the sponsor’s representative governors are qualified accountants and a number are highly successful entrepreneurs. They are used to particular standards of reporting in relation to finance. After all, in the commercial sector, financial performance is the most important measure of a company’s success, and business leaders are used to judging it in that way. The monthly production of full management accounts is the norm, and well-researched reports and option appraisals may well be required to assist decision-making.‘Expectations from sponsors can be very different from those of traditional school governors,’ Phil Bassill explains. ‘Meetings are businesslike, and financial issues are given a higher profile. Sponsors expect to get value for money and a return on their investment, and they expect this to be a part of your remit.’
This focus on the financial and business aspect leads directly to the third potential challenge of the post – that of educating the academy principal and leadership team in the new financial regime. The bottom line for most school leaders is contained in the examination results rather than the financial statements, and – as in any school – there will be a need to strike an appropriate balance between educational priorities and financial concerns. In academies, however, the implications of getting that balance wrong are potentially far more serious and far-reaching, and the body to which the leadership team is accountable may not be as forgiving as a local authority or maintained school chair of governors. Levels of accountability and the financial implications of decisions need to be thought through carefully; financial regulations must be adhered to, and company/charity law needs to be borne in mind as required.
A third academy FD, who does not wish to be named, provides an example of how these challenges can manifest themselves. ‘The principal had been a headteacher of a maintained school and was used to getting his own way with little resistance,’ she explains. ‘He came to an academy expecting to have more freedom, but the reality is that the focus on financial matters and interest from the sponsors has meant that he has actually been held more accountable in his decision-making. It may be OK in a maintained school to say that money doesn’t matter and it’s the educational aspects that count, but that won’t wash when over half of your governors are from the cut-throat world of business.’
Furthermore, there may also be a job to be done in terms of convincing the principal that a full accounting function requires a full company-style finance department. The production of statutory accounts takes time and expertise, not just at year-end but throughout the monthly reporting cycle, and a finance team of four or five staff, including one qualified or part-qualified accountant in addition to the FD, is not uncommon in academies. This will contrast starkly with arrangements in some maintained schools where the business manager may perform the majority of the financial administration with assistance from one or two staff who are often on relatively low grades. A small team with insufficient expertise will not be able to fulfil the financial requirements of an academy and this needs to be made very clear to the principal at the very start.
Independence from the local authority also brings its own challenges across the spectrum of business management. Maintained schools receive a wide range of support from their local council in areas such as premises management, health and safety, personnel/ payroll support and legal advice. Many of these services are, of course, delivered at a price via service level agreements, but are often lower cost than commercial alternatives. Furthermore, in a maintained school the ultimate legal responsibility for these areas rests with the local authority, whereas academies bear the risks themselves. There are also other areas – approval of educational visits, for example, or support for admissions – which are funded centrally by the local authority and delivered to schools at no charge.
Academies are not entitled to any of this support and must therefore source and pay for it themselves, either via additional expertise on the staff team (in premises, say, or personnel) or via a tender process. Of course, if a tender is required, an appropriately detailed specification must be drafted – yet again requiring expertise and time not normally available within maintained schools. Since taking up my post in April, I have organised tenders for marketing services, insurance, banking, public relations, external audit, payroll and personnel advice. I have also negotiated a contract with the local authority educational visits approval team, and have advertised for a premises manager with high-level building-related qualifications to bring the expertise we need to site management, health and safety and the new building project.
All of this work has been a fantastic opportunity to learn and develop, but the challenges should not be underestimated in terms of the requirement for time and expertise. Sam Caethoven underlines this point: ‘An academy FD will need to understand that they have responsibility procuring a range of services that have been traditionally provided via the LA in maintained schools. This includes having a full knowledge of procurement procedures and how to ensure value for money for the academy through the competitive tendering process.’
The direct employment of staff can also raise a range of issues for academies. Local authority support and guidance is not automatically available for dealing with employment disputes and contractual issues, and it is vital that expertise is available either in-house or via a Service Level Agreement. In addition, academies are free to set their own terms and conditions of employment, and to devise their own pay spines and performance-related pay. Many academies have initially chosen to retain teachers/local government pay and conditions, but the flexibility still exists for the future, and with it the possibility of complex personnel and payroll administration implications.
Finally, increased staffing and in-house expertise means that the role of the academy FD will become less hands-on and far more strategic. For those school business managers used to doing everything, from filling in on the switchboard to taking registers for absent staff, this may be a difficult step. ‘You will need to learn to let go and move away from doing everything yourself. Delegate tasks to the appropriate staff and use their skills,’ advises Sam Caethoven.
An appropriate career step?
So, with all of the above in mind, could (and indeed should) existing SBMs make the transition to academy FD roles? At present, this is certainly not a trend: of the 16 academy projects overseen by one DCSF adviser, for example, only one has transferred its existing business manager to the FD role, and that person already happened to be a qualified accountant. This said, the expansion of the academies programme, including accelerated transition for some schools, means that there is every chance that this picture could change in the future. Despite all the differences between academies and maintained schools, academies are schools nonetheless, and business managers have a wealth of experience in school management.
Phil Bassill certainly believes that this should not be overlooked. ‘It is a challenging role,’ he says. ‘You will need someone with accountancy skills on your team, but someone from an education background would also be invaluable.’ Similarly, Sam Caethoven appreciates that some modern school business managers already have many of the skills required for an academy. ‘Some post-holders are more business director than traditional bursar,’ she admits. She continues: ‘They already understand a lot of the issues, including those around tendering and value for money.’ Nonetheless, she still believes that one of the most important preparations for an SBM considering an academy post could be to undertake an accounting qualification, especially if, like her, they are taking on a hands-on role.
For both Sam and Phil, the key to success in the role is all about attitude and ensuring you have the right support. ‘You need to accept that you will be moving out of your comfort zone,’ says Sam. ‘You need to make sure that you have the right people to make it work.’
Phil echoes this sentiment: ‘You need to be determined to build the right team’, he advises. ‘And you need to be very sure of yourself. It’s a very doable job if you have a positive attitude and business managers have to be encouraged to make the leap.’
There are many attractions in the role of academy FD, not least the status and the salary. Nevertheless, these benefits come with a wide range of responsibilities including increased exposure, raised expectations and a shift in the way that you manage and approach your team and your workload. The expansion of the academies programme is undoubtedly a huge opportunity for school business managers wishing to move forward in their careers. However, they should not underestimate the step up that they will need to make and the challenges they will face if they wish to apply for an FD role.
Ruth Bradbury is assistant principal (finance and business management), Darwen Aldridge Community Academy
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