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An issue currently facing private independent schools is one of affordability. Many families across the UK aspire to put their children through private education but are yet often unable to due to financial constraints.

With that said, it is down to independent schools to demonstrate innovation and to become more nimble and efficient businesses in order to thrive. Parents need the reassurance of excellence in education provision while being certain that the money they spend is being directed appropriately.

Alongside the increased autonomy of attracting the right students at the right cost, comes the additional concern of managing the school’s finances.

Incentives and insight

The challenges independent schools face have become more intense in recent years with governors, heads and bursars increasingly having to consider an evolving list of objectives and targets. The economic downturn in recent years had hit general affordability levels in the independent sector. Governors have been faced with difficulties in making surpluses from activities and achieving the ability to reinvest in school development.

Independent schools face growing competition from government sponsored academy projects. In 2013 more than a quarter of students in state schools in England were enrolled at schools administered under academy status. The number of schools operating as academies increased from 203 in 2010 to more than 3,000 in 2013 following incentives offered by the Government.

For governors of independent schools there is also a need to not only oversee the performance of the school but to also ensure that good governance principles are followed. Whilst this is something that applies to the quality of education provided, the delivery of education within a financially sound framework is equally important.

Numerous challenges

Whilst in a more stable position now than within the midst of the recession, the independent sector still faces a multitude of challenges such as maintaining educational standards, whilst simultaneously ensuring that pupil numbers are kept at acceptable levels and standards, and the operational and capital budgets of the school are under control. These factors are interconnected, closely linked and almost reliant upon one another in terms of the success or failure of the institution.

Another vital issue for independent schools is that when they are running below capacity they are not generating the income they need to make the school sustainable. This inevitably leads to hard choices in terms of the provision of resources and investment in infrastructure. Cutting back on either of these, though, has an impact on future enrolments.

Pupil numbers

When a new school year begins there are a number of critical areas that governors should be keeping an eye on. First among these is pupil numbers. With budgets calculated according to how many students attend the school, it is essential that the predicted enrolment and the actual enrolment figures are aligned with one another.

However, according to a recent report from stockbroker Killik, private schooling is increasingly out of reach for all but the superwealthy. The firm's figures revealed the average price of sending two children to private school has soared above half a million pounds.

Yet figures from the Independent Schools Council (ISC), which represents 1,250 private schools, suggest the number of people opting for independent education is increasing. This 5% is partly down to overseas students from wealthy families, who now take up five per cent of places. Also, a substantial number of British families are taking steps to ensure they can pay for schooling.

There are now more pupils at ISC schools than there were last year, and more than there were in 2008 at the start of the economic downturn. To that end, it is vital independent schools recognise the pressures that parents are under so they keep thinking of innovative methods to ensure fees remain as low as possible.

Planning ahead

Governors at independents need to have a Plan B for situations when there is a shortfall in enrolments so that any committed programmes and schemes, infrastructure investments and operational elements of the school remain unaffected. Shortfalls do happen and it would be naïve for an independent school to think “it will never happen to us”.

Contingency plans are needed that allows for the school to continue operating effectively on a reduced budget if the worst was to happen. By understanding in advance of this situation precisely which aspects of the budget can be trimmed without affecting the operations of the school it is possible to enact these changes before it is too late and, of course, preventing additional negative impact on the overall performance of the school.

The issue of enrolment numbers and understanding the predicted income is not something that governors can do on their own. It requires a close working relationship between school management and the governors. Having a balanced team of governors is vital as they can bring skills to the table that management may lack. There is a critical need to ensure the people running the school are accountable for expenditure and capable of controlling it.

Just as all companies require a budget to pay staff and suppliers, schools have their bills and debts. The latter are, however, in a unique position in that their income arrives in fairly predictable tranches, as the school fees are paid in September, January and April.

Monthly expenses

This seasonal cash inflow, whilst predictable, can pose a challenge in that there are expenses incurred every month which necessitate particular foresight and planning. Not to forget the fact that gearing up for the start of a new school year has the potential to incur more costs than the rest of the year.

At this time, schools are most likely have their cash flow levels severely hit and governors must undertake the correct planning throughout the previous academic year to cater for this. This should ensure that contingencies are in place for issues which may require expenditure such as environmental disasters, pupil shortages, and limitations in funding.

Undermining perceptions

There remains a danger of governors not fulfilling their duties and failures in the independent sector will undermine the perception of this particular form of educational establishment. For the education sector and by extension the country, to flourish good governance throughout the independent sector is essential to carry the day.

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The opportunity to seek academy status is an exciting prospect for many governors and school heads. However, the additional responsibilities, risks and financial implications will be daunting for many and seeking expert guidance and support is a must. This is available from all kinds of sources - and it is a good thing that all these sources are there for academies. 

You only have to look at the scale of the challenges faced by academies to realise that it is only the supremely confident who don't think they need to use the outside help available. 

Background to academies

The first academy in England and Wales was opened in 2000, ten years prior to Michael Gove announcing new legislation which led to the number of academies increasing rapidly.
In May 2010 the number of academies stood at 203 – compared to 3,879 as of 1 April this year.

Clearly the opportunity to convert to academy status has excited many governors and school heads.

The Department for Education (DfE) welcomes applications to convert from all schools which are performing well. Each application is considered on its own merits, with the decision being informed by various factors including recent exam results, the latest Ofsted inspection and any other evidence of performance that the school considers relevant.

When contemplating conversion to academy status, it is important the powers that be recognise there is no "one size fits all" column solution. Converting will create benefits but also has drawbacks, all of which must be carefully considered before a decision is reached.

Perhaps the most sought-after benefit is the freedom from local authority control, but this can also become a significant burden if the implications are not properly understood and managed.

Preparing for financial compliance

Converting to academy status gives rise to many financial and regulatory matters which must be addressed. You should plan to ensure these are dealt with effectively and at the appropriate time.

Financial experts should help schools identify the respective requirements and priorities that need to be acted on at the earliest stage.

Establishing the financial position on change of status - including the value of property and other assets and the transfer of surplus funds relating to the former school - is one of the first steps on the to do list.

Further key actions include: setting up accounting systems and charts of accounts, developing key board policies such as accounting policies, risk management, reserves and investment policies, conflicts of interest, governor recruitment, induction and training, fraud prevention and whistle blowing policies.

Establishing financial regulations and procedures, fulfilling company secretarial duties under company law, including completing statutory documents for board changes, the annual return and the annual general meeting, guidance for governors on their roles and responsibilities as charity trustees and company directors - these are also equally important.

Then throw in terms of reference for committees, interpreting and accounting for the Local Government Pension Scheme year end actuarial valuation, establishing a process for independent checking of financial controls, systems, transactions and risks, and VAT and tax to ensure the school is compliant with HMRC requirements, and there's a lot to act on.

Every school considering converting will have different needs, but all will require support to help with any of the issues raised above.

Preparation of statutory accounts

Academies have a legal responsibility to prepare annual statutory accounts that comply with legal and regulatory requirements.

These accounts must be filed at Companies House and the Education Funding Agency (EFA). Preparing these accounts is an onerous task, particularly the first set.

Support is available to prepare accounts from a school’s trial balance and management information, ensuring compliance with the Academies Accounts Direction, along with help in drafting a Trustees’ Annual Report, including the policies to be disclosed on reserves and risk management.

Pressure on financial skills

The conversion to academy status dramatically increases the responsibilities of finance teams, which become independent from local authority support.  Many academies will need additional financial skills and assistance to adequately support management and governors, whilst meeting new regulatory requirements.

Advisers are able to help address these challenges in a number of ways, from preparation of budgets and regular management accounts, completion of Teachers’ Pension Scheme and local government annual returns, payroll bureau services and completing the required independent checks on financial controls, systems, transactions and risks.

Support can also extend to preparing and submitting of returns to the EFA  such as Whole of Government Accounts information and the Academies Accounts Return, ongoing advice and guidance on any issues relating to finance and accounting, financial training for staff and governors, data governance health checks, fraud risk awareness training and reviews and company secretarial services.

Taxation and VAT issues

The VAT regulations for academies are complex and it is essential that each school accounts for VAT correctly from the outset, to ensure liabilities are minimised and penalties avoided.  The academy will also need to ensure compliance with PAYE, NI and corporation tax rules.  This will require professional advice at the time of conversion.

Core strategic functions

In all types of schools, governing bodies should have a strong focus on three core strategic functions:

1. Ensuring clarity of vision, ethos and strategic direction.

2. Holding the head teacher to account for the educational performance of the school and its pupils.

3. Overseeing the financial performance of the school and making sure its money is well spent.

A range of organisations will be able to provide help and advice at all stages of conversion. The DfE will provide a named contact for each school during the process.
Various professional bodies offer events and forums of relevance specially designed for governors of schools considering converting and schools which are recent converters, including the National Association of School Business Management, SSAT (The Schools Network), and Freedom and Autonomy for Schools - National Association.

In addition, experienced legal advisers, accountants and business advisers are essential for ensuring you receive the right guidance at every stage.

Talking to these support networks, and other existing academy schools, will also help schools determine whether conversion is the right step.

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DEBORAH PARKS-GREEN of accountancy firm BAKER TILLY comments: HMRC has started sending letters to private schools to begin employer compliance reviews, which could result in sizeable settlements with interest and penalties where mistakes are found. Settlements typically go back four years, but can go back even further to six years in certain circumstances.

Every school should now review its current procedures as it’s clear that HMRC is adopting a more aggressive approach in its interpretation of the law. The most topical issues arising from these reviews are around the provision of accommodation to employees and the associated bills.

Most schools are heavily leaning on the exemptions available for work related accommodation, but they need to ensure that these exemptions are being correctly applied to all resident employees. It’s clear that some schools are providing accommodation which would not meet the strict requirements, but in any case, all schools should consider undertaking a review of their employees’ duties to ensure that they fall within one of the exemptions.

Even if the accommodation is exempt, many schools are providing electricity, gas, cleaning, decorating, gardening services and even furniture for resident employees, all of which represent a taxable benefit in kind reportable on forms P11D. Some schools ignore the provision of utilities on the basis that the properties don’t have separate meters, but in reality this just makes the measurement of the benefit more complex and does not give any basis for exemption.

We may be in the middle of the holiday period, but schools which receive letters about this issue need to speak to their tax adviser quickly. And even if they’ve escaped the scrutiny of the taxman this time, then perhaps a new academic year is the perfect excuse to make sure their (school) house is in order.

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HEATHER WHEELHOUSE of accountancy firm BAKER TILLEY comments: As charities, independent schools generally enjoy favourable tax treatment. But, there is a great deal of misunderstanding and uncertainty within the sector about their VAT and tax liabilities. This is perhaps not surprising as the tax and VAT rules for the independent schools sector are notoriously complex. But schools do need to understand the potential pitfalls, and quickly, or they could find themselves exposed to unforeseen VAT and tax liabilities.

To protect a school’s charitable objectives, many trading activities outside these objectives are undertaken by subsidiary companies. However, if trading companies are set up incorrectly, or indirectly subsidised by the school, this may cause partial loss of the school’s tax exemption, and lead to unexpected VAT costs as the school could fail to maximise VAT reliefs on expenditure, and potentially miss out on valuable opportunities.

If set up correctly, a trading company can, in some instances, enhance the VAT recovery position or alternatively, reduce the VAT costs unnecessarily paid on the trading company’s income.

For example, as the trading company does not enjoy the same VAT exemptions as the school, the letting of sports facilities by the trading company can, depending on circumstances, have a different VAT liability than if the sports facilities were let by the school itself. The provision of sports facilities to the local community can, in fact, create opportunities to recover VAT on capital expenditure.

There are also complex tax issues associated with the use of the school’s accommodation. Accommodation provided to staff creates potential tax exposures, and the letting of boarding accommodation by the school or its trading company to other educational providers creates a conflict between direct tax and VAT which it is very difficult to resolve.

The tax and VAT rules in the independent schools sector are indeed complex, and perhaps it is time for a greater awareness of them.

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Social media is increasingly a part of people's lives socially and in employment and education. If they have not done so already schools should embrace and use social media to engage with pupils and parents in innovative ways. However, in doing so it is important they appreciate the legal risks involved in using such a platform and how these could be managed.

The pros of social media

The advantages of using social media outweigh the disadvantages, provided the medium is used within safe parameters. It is a reliable means of broadcasting a positive image of the school publicly, reaching a large audience quickly and cost effectively, saving on printing costs.

If used sensibly social media can enhance teacher-student relationships and engage disengaged students and parents. Social media networks can be used to communicate with students and share information.

Social media can enrich learning in the classroom by providing a more interactive method of teaching, and also enables schools and teachers to share learning materials more effectively.

The cons of social media

It has become common practice for employers to vet candidates' online profiles during the recruitment process. Where information is found online that would lead to a candidate's application being rejected an employer would most likely give a different reason for rejection. However there is still a risk that a candidate might become aware of the real reason and, if that reason were discriminatory, there is a high risk that a discrimination claim will ensue.

Even where the reason for rejection is unclear, inferences may be drawn where the evidence points to a discriminatory reason. As such it is not advisable for employers to vet candidates' online reputations as part of the recruitment process.

Confidentiality is a key risk in the use of social media. Employees may advertently or inadvertently divulge confidential information or personal information about colleagues or pupils online. Schools must ensure that contracts of employment are amended to prevent employees from posting confidential information on the internet.

Appropriate policies and training should encourage employees to ensure account settings are restricted to private to minimise the impact of any potentially harmful comments. Teachers should be encouraged to have separate personal and work accounts and advised to avoid, where possible, connecting with pupils and parents online. Where photographs of or information on pupils is to be posted online the schools should ensure consent is first obtained from parents and pupils.

Phones and tablets

The accessibility of social media is both a benefit and a pitfall. Many staff and pupils will have smartphones even where they do not have access to a laptop or desktop computer, meaning they can access social media accounts at any time including during school hours. This could result in a loss of productivity and so needs to be properly managed.

Again appropriate policies should be put in place concerning the use of mobile phones, tablets and other devices during school hours as well as personal use of the school's IT facilities. Staff and pupils should be informed where internet use may be monitored. Restrictions on the use of social media sites on the school's network could be considered.

Schools and teachers may be concerned about damage to reputation where negative media is posted online. It is all too easy now for unflattering photographs and videos to be uploaded almost instantly and for vindictive comments to be made by pupils to a wide online audience, particularly through sites such as RateMyTeachers.com.

Again appropriate policies and training should be used to reduce such risks and requests should be made to relevant website administrators to remove damaging content where possible.

Potential claims

Schools should bear in mind that an employer can be held liable by their employees for discrimination against other staff or pupils. Schools could be held liable for comments made online by an employee about a colleague, parent or pupil where this amounts to harassment. To avoid liability schools must take all reasonably practicable steps to prevent harassment.

This could include putting in place a social media policy and providing training to employees to make clear that their behaviour both in and out of the school must conform to appropriate standards. The school's bullying and harassment policy should express that harassment may occur online as well as in person. Teachers should also receive training to prevent inappropriate relationships forming between teachers and pupils online.

One conundrum when it comes to social media is the conflict between a school wanting to protect itself and the rights of its staff in respect of private life under Article 8 of the European Convention on Human Rights.

Where a school is considering disciplinary action or dismissal of an employee owing to comments or media posted online, particularly where these occurred outside work hours, the school as an employer must consider whether it is proportionate and fair to discipline an employee.

Schools will need to take into account all of the circumstances including the impact of such actions, the likely audience given any relevant privacy settings and the nature of the employee's role.

Managing the use of social media

It is not all doom and gloom but it is important for schools to ensure that they have adequate resources in place to allow them to reap the benefits that social media can deliver. To recap, the following guidelines will help schools to protect themselves:

• Put in place a clear social media policy.

• Update contracts of employment and policies to address the use of social media.

• Advise staff to keep personal and professional profiles separate.

• Encourage staff to maintain professional standards online.

• Advise staff to avoid making contact with students or parents online.

• Obtain permission before posting photographs/information.

• Advise staff to use appropriate privacy and password settings.

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The concept behind academies and free schools is to improve educational standards in schools. Both offer more flexibility in terms of delivering education services in comparison with maintained schools. The purpose of this is to inspire innovation so as to raise standards. However, to succeed schools must also seek to achieve a healthy budget to ensure they have the finance to deliver and sustain their objectives.

Governing bodies of academies and free schools may wish to use their additional flexibility to restructure or reorganise processes and procedures in the school. This could involve varying employees’ contracts of employment or even dismissing employees.

When considering ways of reducing costs or managing change it is important to view redundancy as a last resort. This is because implementing a redundancy programme is extremely unsettling for all concerned and, as such, can have long term detrimental consequences. There are numerous advantages for both employers and employees in considering alternatives to redundancy including saving management time, avoiding the financial costs of going through a redundancy programme and improving staff morale.

Concerns for academies

Particular care will need to be taken by academies seeking to vary contracts of employment or effect a redundancy programme. This is because employees will be protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) following an academy conversion.

TUPE seeks to protect employees’ rights in the transfer of the whole or part of a business or undertaking by assigning the rights and liabilities contained in their contracts of employment with the maintained school to the academy on the date of the transfer.

This means that the academy will not be able to dismiss transferring employees or vary the terms and conditions of their employment where the dismissal or variation takes place because of the transfer or in connection with the transfer - for example, harmonising contracts of employment across employees in a multi-academy trust. Any such dismissal would be automatically unfair and any contractual variations void.

However, an academy may vary the terms and conditions of, or dismiss, transferring employees where there is an "economic, technical or organisational" (ETO) reason for doing so. This might include variations to contracts of employment to reflect changes to the hours of the school day or redundancies to address overstaffing.

Consulting with staff

It is important to involve employees at an early stage in discussions about the need to cut costs. They could have some good ideas for cost-saving measures and it is potentially obligatory should redundancies be necessary after all viable alternatives have been explored. Many cost-cutting measures will involve varying employees’ contracts of employment and as such employees’ consent will be required to implement such measures. This is because generally a contract of employment cannot be varied unilaterally but instead only by the agreement of both parties.

Where measures are being taken as an alternative to redundancy any alternatives to redundancy should be explored as part of a redundancy consultation process. The following contractual variations might be considered to avoid redundancies, subject to obtaining employees’ consent:

• Retraining and redeploying staff into other areas of the business.

• Reducing or removing paid overtime.

• Introducing flexible working in hours, scope and location of work.

• Reducing the number of days or hours that employees work per week.

• Implementing pay freezes or pay cuts.

• Offering sabbaticals or career breaks.

• Reducing or stopping bonus payments.

• Implementing a lay-off or short time working.

In all cases the school should first seek employees’ agreement to the proposed change or confirm whether there are sufficient volunteers to avoid making any further changes. However, where employees refuse to accept a proposed variation to their contract the school could consider dismissing the employees and immediately re-engaging them under the new terms. But note that unfair dismissal rules will still apply. To avoid claims for unfair dismissal the school will need to be able to show strong business reasons for the dismissal and re-engagement and that it has considered all reasonable alternatives (including alternative employment) before proceeding to dismissal.

Employees must be treated equally to avoid discrimination. Meaningful consultation with the affected employees is a vital part of this process. At the end of the consultation procedure, the employer would need to dismiss the employees on notice in line with their current terms and conditions of employment and then offer them immediate re-engagement under the new terms and conditions.

Where an academy carries out this process as an alternative to redundancy it should take place during a redundancy programme. The recent case of Manchester College v Hazel [2012] has confirmed that where employers seek to harmonise terms and conditions of employment following a TUPE transfer by dismissing employees and re-engaging them on new terms they cannot rely on an ETO reason where the variations take place after a redundancy programme has concluded.

This is because where the reason for the dismissals is simply to harmonise terms and conditions of employment and not because of an ETO reason such as redundancy, the dismissals will be automatically unfair.

Redundancy as a last resort

There are four situations that can give rise to a dismissal on the ground of redundancy. The one most likely to be relevant here is "a diminishing requirement for an employee to carry out work of a particular kind". This would cover both overstaffing and restructures or reorganisations.

Although redundancy is a potentially fair reason for dismissal, an employer must nevertheless act reasonably if the dismissal is to be fair. As part of a fair process the school is required to consult with individual employees irrespective of the number of redundancies proposed. A series of consultation meetings should be held with each of the affected employees which may include both those at risk of redundancy and those whose roles are safe.

It is good practice to give employees the opportunity to request voluntary redundancy to reduce or avoid compulsory redundancies in a redundancy programme. The school will not be obliged to accept requests for voluntary redundancy (for instance where a request is made by a key member of staff) and so the school may still revert to compulsory redundancy.

Where, after exploring all other alternatives, there is still a need to make compulsory redundancies, the school should carry out a fair selection procedure. This will only be necessary where there is more than one employee to choose from.

Where everyone in a particular department or in the school is to be made redundant, or there is only one affected employee, a fair selection procedure will not normally be relevant and the redundancy procedure should be tailored accordingly. In case of doubt, schools should always seek legal advice.

Collective consultation

Additional provisions apply where the school is proposing to dismiss 20 or more employees at one establishment within a period of 90 days or less. In such circumstances it is required to consult with the "appropriate representatives" of any of the employees they are proposing to dismiss and of any employees who may be affected by measures taken in connection with the dismissals.

This is known as "collective consultation" and should include employees who, although not under threat of dismissal, might be affected by a redundancy situation. In the case of academies and free schools ‘appropriate representatives’ will be the trade union representatives of affected employees.

Collective consultation must begin ‘in good time’ and must in any event begin:

• Where 100 or more redundancies are proposed at the school within a 90 day period, at least 90 days before the first contract of employment is terminated.

• Where 20 to 99 redundancies are proposed at the school within a 90 day period, at least 30 days before the first contract of employment is terminated.

For the purposes of the consultation, the school must disclose in writing specific information to trade union representatives including the reasons for its proposals and the number and descriptions of employees it proposes to dismiss as redundant.

European law

European law extends the requirement to consult to not only straightforward redundancies but also dismissals which might occur "for reasons not related to the individual concerned".

This might include circumstances where terms and conditions of employment might change (for example hours of work, place of work, pay cuts, job titles, job descriptions) and where this might result in employees being dismissed and then re-engaged. As such the obligation to consult in a redundancy situation is broad.

The mishandling of redundancy situations is a common reason for a finding of unfair dismissal by an employment tribunal. The principal procedural errors for which employers are criticised are:

• Lack of meaningful consultation.

• The unfair selection of an employee for redundancy.

• Failure to consider the employee for alternative employment available.

This means that effective communication and consultation between schools and employees is essential to manage any change successfully, whether changing hours of work or implementing a redundancy programme. Keeping everyone involved and informed will help to achieve the best outcome for the school, the employees and, most importantly, the pupils.

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There are those who say that heads of independent schools have to be "prepared to be managers as well as head teachers" and that "people running schools have got to 'box clever'". Forgive me, I am by training an historian and it is in the nature of the beast to be disagreeable, so I am going to take exception to the head of any organisation who describes themselves as a "manager". It is not what I do and it is not what I want to do!

First of all, as the (relatively) new head of a small girls' independent school (junior and senior schools) in a leafy part of the West Midlands, I see myself not as a manager but as a leader or perhaps a director without a capital D. It is not just a question of semantics The words that we use to describe what we do really matter. Calling people names can define their roles but may also restrict their freedom. It is not sufficient to just "manage".

The more I think about the words connected to manage (-ment,-er) and their definitions, the more I have come to dislike the word and some of the assumptions that go with it. In fact, I am positively "bristling" with indignation about how entirely inadequate the word is to describe what I do. If there is such a thing as good management it should have the ambition to move far beyond the maintenance of the status quo.

Yes, I need my PA, bursar and site manager to be good managers, but the leadership of the school is something entirely different. I told parents at a recent prize giving event, a story about an exchange between myself and my very efficient and quick witted PA.

In my first term as head I had been locked away in my office doing the paperwork which needs to be done, and which I had nearly left undone. I broke out of the office and stomped over to see if my PA had found me something more interesting to do and said, in a mock wail, "and what is the point of me, I'm not feeling very pointy or sharp!" Her response, without the flicker of an eyelid, was: "Headmistress, the future direction of the school is in your hands."

Well, that put me back in my box, not a knock out blow, but certainly a quick jab to the midriff to get me focused on what my role is. I can see that the analogy of boxing has some merit. Leadership is not unlike a boxer in a bout, ultimately you are on you own out there.

You need a good team to work with you, but you are on your own when the bell rings and when you are held to account at the final reckoning. But you have to be able to fight for what is right and what you believe in – I feel a song coming on!

Wrestling match

The role of the head inevitably means that one does not face one opponent at a time. It can be a little bit like being in a tag wrestling match but your opponent can have multiple substitutes whilst you have none. It would be entirely impossible to lead the school if the staff were your opponents in that context. There are enough issues to deal with without having the staff not on your side. The head has to be able to deflect the blows, chose the right response, pick themselves up when a blow hits its target and always believe that they can win.

I have two particular influences on my thinking about education and leadership: Sir Ken Robinson and Professor Tim Brighouse. To quote Professor Brighouse, leaders will have "…an endless well of intellectual curiosity and an almost inexhaustible amount of energy, hope and enthusiasm". That sums up to me what leadership is about.

This view is supported by my recent reading of the autobiography of Bear Grylls, which has many insights into his character, and in the end he puts his achievements down to the quality of enthusiasm above all else. Professor Brighouse has a view that heads need to move on after seven years. My view would be that heads need to move on when their enthusiasm is exhausted.

At Dodderhill the application process involved giving a presentation to the governors on "My Vision for Dodderhill", which is a common theme for heads' applications. I have gone back to my original notes for that presentation, which has been a useful experience, as I take time in the summer break to think ahead for the next year.

Tellingly, before I dived into what my "vision" was, I prefaced it with my view that organisational problem solving would be far too complex a problem for one person to do on their own.

Complex relationship

It would be impossible for one person to have access to all of the data, come up with all the possible variations on a plan and to understand the complex relationships between the staff. I added that by valuing the contributions of all members of the Dodderhill community, we would open up the possibility for more creative solutions than just my ideas in isolation.

I went on to speak about how my educational vision was a reflection of my values or to put it succinctly, "A vision driven by values". I made it clear that I wanted to lead a school where education is not a means to an end but an end in itself. It is the idea of the head holding the moral compass.

The league table positions are not what dictates the direction of the school, although one has to navigate through them as part of the route. It is the passion for opening minds and helping the girls to love learning and have the skills to be life-long learners that is the driving force and the ultimate destination. Equally importantly, I want my girls to have the resilience and the courage to risk failure, and to face these challenges with a healthy sense of irreverence and fun. So how have I got on?

I was fortunate to take over a school that had been very well "managed" and the previous charismatic and dynamic head had lead the school skilfully through an amalgamation of two schools on to one site and a large building programme. The school had topped the GCSE league table two years in a row and a third time last year. It was, and is, a successful school.

But an important part of my role as the new leader was to test and analyse the assumptions that underpin the behaviours and policies in the school, and look for improvement.

Management team

After interviewing all the staff and analysing their responses to the two key questions, "what do we do well?" and "what can we do better?", it became clear that there was considerable dissatisfaction with the lack of opportunities for staff and that a culture of "us" against the Senior Management Team (SMT) had become engrained in the mind frame of the staff common room.

I had inherited a Senior Management Team which, without the forceful figurehead of the previous head, proved themselves to be dysfunctional. They were most definitely not a team. Key personnel could barely "manage" their roles let alone lead or add value. They lacked the will or confidence to inspire, initiate or innovate.

Whilst trying to work out the complex relationships within the SMT (only three other members) I set up five working parties and gave the lead of three of them to "ordinary" members of staff. It had the effect of letting open the flood gates to a tidal wave of ideas. Things happened, enthusiasm was catching and ran through the school like a wild fire. Staff were able to see the concrete results of their collaboration.

I was able to help refine the direction and support the leaders of the groups, but only when my assistance was requested. I could make a long list of my achievements this year. It sounds impressive in my report to the governors, but that is a falsehood. They are not my achievements, they belong to the school as a community.

What have I done with the SMT? Well the working parties demonstrated that I had considerable under-used talent on the staff and the collaborative strategies had been successful. I researched at great length different management structures and proposed a radical, if not entirely original plan. Many thanks to the internet for being able to access so many other models.

I decided to replace the SMT with a Leadership Team (note: no use of the word senior). This would be a flat structure with six members with clearly defined responsibilities and the freedom to develop their ideas and careers. These roles do not come with any symbols of status, no office or parking space and these leaders are quite deliberately still part of the staff common room.

What is my next challenge?

Working on eliminating the next "us" and "them" issue is my next priority. This entails enabling the "Junior School" staff to overcome their belief that they are not treated as equally as the "Senior School" staff. I have some cunning plans and once again it will involve some changes in names, but of buildings and not staff this time!

The most important role of any leader is the development of their most valuable resource, the staff, and to do this people need to be valued and have their time on the ball, but not in the boxing ring- that is still the role of the head, although it is handy to have someone tell you when to duck!

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Schools considering converting to academy status are likely to be affected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). There are a number of issues particular to schools that may arise in the event of such a transfer.

TUPE IN BRIEF. The purpose of TUPE is to protect employees’ rights in the event of the transfer of the whole or part of a business or undertaking so that the rights and liabilities arising from contracts of employment of employees assigned to the original employer (the transferor) will transfer to the new employer (the transferee) on the date of the transfer.

A standard transfer takes place when a school converts to academy status. Transferring employees keep their original terms and conditions (with some limited exceptions) with no break in their continuity of service. Any rights, issues or claims they had against the local authority or school’s governing body (the school), depending on who is the employer, are inherited by the academy (except for criminal liability).

All employees likely to be affected by a transfer (not just those who actually transfer) have a right to be informed and consulted by the school about the proposed new arrangements. Failure to properly inform and consult entitles the employees to bring a tribunal claim for a compensatory award of up to 13 weeks’ pay.

Consulting time

The informing and consulting of staff should occur long enough before a relevant transfer to enable the employer to consult with employees’ representatives. As such, trade union representatives should be consulted in good time before any proposed conversion date.

Employees’ representatives will need to be informed of and consulted on:

• The fact that the transfer is to take place, the date or proposed date of the transfer and the reasons for it.

• The legal, economic and social implications of the transfer for any affected employees.

• The measures the school envisages will be taken in connection with the transfer, in relation to any affected employees or, if no measures will be taken, that fact.

The school must also include specific information relating to the use of agency workers working temporarily for and under the supervision and direction of the local authority or school’s governing body.

The Cabinet Office Statement of Practice on Staff Transfers in the Public Sector (COSOP) was introduced in January 2000 and remains the main reference point for public sector transfers. COSOP, revised in November 2007, sets out a framework which should cover all public sector organisations, including schools, where the public sector is the employer in a transfer situation.

Where local authorities have adopted COSOP, the local authority or governing body must have regard to the guidance but it is not legally binding on them. The guiding principle of COSOP is that public sector organisations should ensure that TUPE applies except in truly exceptional circumstances and that where TUPE does not apply, its principles should still be followed.

Exceptional circumstances

COSOP sets out the exceptional circumstances where TUPE will not apply. These essentially mirror the general position in relation to TUPE. Schools should ensure that, where it is applicable, they follow the guidance set out in COSOP.

The effect of TUPE essentially is that the academy will not be able to dismiss transferring employees or vary the terms and conditions of their employment where the dismissal or variation takes place because of the transfer or in connection with the transfer (e.g. harmonising contracts of employment across employees in a multi-academy trust). Any such dismissal would automatically be unfair and any variations would be void.

However an academy may vary the terms and conditions of transferring employees where there is an ‘economic, technical or organisational’ reason for doing so. Such a reason might be where an academy wishes to vary the hours of the school day or where there is an economic downturn resulting in the need to make redundancies.

It should also be noted that there is little flexibility for academies in relation to staff pensions. The funding agreement that must be entered into during the conversion process insists academies must offer membership of the Teachers’ Pension Scheme to all teachers and the Local Government Pension Scheme to all support staff.

Who is assigned?

TUPE applies to any person employed by the transferor who is assigned to the organised grouping of resources or employees that is subject to the relevant transfer. As such casual and temporary staff would not necessarily be covered, nor would it apply to employees who are seconded from another employer.

It is important to note however that workers who are recorded as being casual or temporary staff may, depending on the nature of their working relationship, in actual fact be deemed to be employees and so come within the scope of TUPE. This might be the case, for instance, where they work on a regular basis, the offer of work is expected and they have never turned down work offered to them.

As such, when carrying out their investigations into the staff employed by the school the governing body of the academy should not accept workers’ status at face value but instead should further investigate the nature of the working relationship, particularly where casual or temporary staff work regular hours.

The academy should likewise check the contract end date of any fixed term employees. Where fixed term contracts come to an end prior to the date of conversion, the academy should ensure that such contracts do in fact come to an end rather than being allowed to roll over. Where employees on fixed term contracts continue to work for an employer after the contract end date, in the absence of any agreement to the contrary, the employee’s contract will become permanent.

Collective agreements

The employment of teachers in the maintained sector is governed by a collective agreement setting out the conditions of service for school teachers in England and Wales (generally known as the Burgundy Book) and the school teachers pay and conditions document (STPCD).

The Burgundy Book is the result of collective negotiations between trade unions, employers' organisations and government, and applies to most teachers employed in the maintained sector in England and Wales. The STPCD is a statutory document and is usually revised every year by the Secretary of State for Education and Skills after consultation.

The employment of most support staff in the maintained sector is governed by the National Joint Council National Agreement on Pay and Conditions of Service Handbook (the Green Book). This "single status" agreement is effectively a national collective agreement which is intended to replace all regional collective agreements and end the historic pay (gender) discrimination in local government. Where a local authority has reached an agreement on a job evaluation that agreement would probably be a contractual right which would transfer and bind the academy.

Doubt exists

The status of collective agreements post-transfer has been the subject of ambiguity for some time now. Doubt exists over whether transferors should be bound by any subsequent changes to collective agreements even where the changes take place after the date of transfer or, in the case of schools conversion (the dynamic approach) or whether the terms of the collective agreement transfer only as at the point of transfer (the static approach).

The Supreme Court has referred the question to the Court of Justice of the European Union (CJEU) in the case of Parkwood Leisure Ltd v Alemo-Herron and Ors [2011] UKSC 26. The case turns on whether the terms of the National Joint Council for Local Government Services, to which the original council subscribed, continue to apply to the claimants in the case following the transfer date. Decisions in the UK tribunals seem to favour the dynamic approach but we await the outcome of the referral.

Caretakers and their premises

A common issue often overlooked in academy conversions is the matter of a caretaker’s premises. Where a caretaker lives in premises on the school site there are a number of further investigations to be completed. Firstly the academy will need to check the basis on which the caretaker is occupying the premises. This might be by way of service agreement or tenancy.

The provision of accommodation to the caretaker may well be a term of the caretaker’s contract of employment that would transfer to the academy, particularly where the accommodation is subsidised or provided free of charge. As such the academy would be obliged to honour this term.

The academy will need to confirm whether the caretaker’s premises are within the school site that is transferring to the academy. If it is not, and where the caretaker’s accommodation is a term of the caretaker’s contract of employment, the academy will have to explore options in relation to securing the lease of the premises, so that the caretaker may remain in its occupation or consider offering alternative accommodation.

Where this is not possible the academy may seek to agree a variation to the caretaker’s contract which may involve offering to compensate the caretaker for the loss to secure his or her agreement to the variation. It should be noted that unless there is an economic, technical or organisational reason for the variation there is still a risk that the variation would be deemed to be void even where the caretaker’s agreement is obtained.

Similarly where a caretaker occupies premises on the school site by way of a tenancy agreement, arrangements will need to be made to transfer the tenancy where this is required.

Due diligence

This is a selection of key points which schools would be wise to address when contemplating an academy conversion. It must be emphasised that in all circumstances a thorough due diligence exercise should be carried out prior to an academy conversion to ascertain accurate and necessary information concerning the school’s workforce, in order for the academy to assess the risk and liability which is to transfer and prevent claims arising from any errors made during the conversion process.

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In the two years since the Academies Act received Royal Assent in July 2010 over 500 schools have converted to become academies, with hundreds more applications in the pipeline. This is all part of Michael Gove's "education revolution", and the Government is actively encouraging schools to convert to academy status.

Much has been made of the advantages of becoming an academy. Michael Gove's vision is to cut red tape and give schools more freedom to strive for excellence and improve standards. Academies have greater autonomy and flexibility and they have control over their previously "top-sliced" funding. However, these new freedoms also come with new responsibilities and challenges.

All academies are run by a charitable company with exempt charitable status. All contracts and other legal affairs of academies are made in the name of the charitable company. The directors of the company are responsible for the day-to-day operation of the academy (or academies) which are run by the company.

They are therefore responsible for: the daily running of the academies and the management of their business affairs; maintaining a high standard of education; ensuring that all records and reports are maintained and filed as appropriate. They are also responsible for managing the company's finances and property. Where the company is responsible for a number of academy schools the directors may delegate the day to day running of the individual academies to a local governing body which is accountable to the directors.

In this capacity, directors (as well as head teachers and business managers) and any local governing bodies at new academies will be faced with a number of new legal considerations that arise as a result of the school becoming part of an exempt charitable company, which is the employer of all of the school staff and the leaseholder of the school site.

Employing staff

Probably the most significant change for the majority of new academies is the academy company becoming the employer of all of the school staff and therefore being directly responsible for its HR, payroll and pensions issues. Academies need to be careful not to make lots of changes to terms and conditions too quickly, but one of the key benefits of being an academy is the freedom from national pay and conditions for staff.

Despite this freedom, the academy sector does not yet seem to have significantly moved away from national pay and conditions. Most academies have made no changes and have no plans to do so. It therefore seems that change will be slow, possibly due to fears of union opposition to perceived inequities, resultant disharmony within the sector and concerns about the risk of shortages of teachers in less advantaged areas.

Making changes

Notwithstanding the political and cultural challenges surrounding changes to teachers' pay and conditions in academies, it is likely that most new academies will eventually want to consider making changes to some extent, even if there is no significant departure from national pay and conditions. Academy companies are also responsible for pensions and dealing with any employment issues that arise with staff. Handling these matters in compliance with the law can put a huge burden on management.

Many new academies choose to continue using the HR and payroll services of their local authority after conversion. However, it is important to remember that the local authority is no longer the employer, and the academy company remains legally responsible for all employment issues. Outsourcing HR and payroll may help with practical day to day affairs, but directors should always consider whether specialist legal advice is required for any specific issues that arise.

The school site

Most academies occupy the school site under a 125 year lease to the academy company from their local authority (although, in some cases, there may also be foundation land or other ownership or occupation arrangements). Becoming the leaseholder of the land creates some important conditions and obligations that directors and managers at academies need to keep in mind as the academy grows and develops.

It is important that the directors and managers at academies understand the terms and conditions which apply under the 125 year lease. In some cases consent will be required (for example, entering into a sublease or if alterations are required to buildings), but in others the obligation is simply to keep the local authority informed (for example, if the condition of the buildings deteriorates). Understanding the academy company's obligations will avoid the risk of breaching the terms and conditions of the lease and ending up in an uncomfortable and difficult situation.

In addition to managing the relationship with the local authority, in its capacity as landlord, there are other legal obligations that arise for the academy company as leaseholder. In particular, it is essential to comply with all statutory requirements to obtain appropriate surveys, certificates and other checks whenever any works are carried out. For example, a FENSA certificate should always be obtained for electrical works, installing a new boiler, or replacing doors and windows.

Asbestos removal

Another key issue for many new academies is the management of asbestos, which exists in a significant number of school buildings around the country. On conversion, responsibility for the management or removal of asbestos at the academy site is passed to the academy company. This means that any future direct and indirect costs arising from the need for asbestos to be removed from the site (including any incidental costs, for example temporary buildings) need to be met by the academy itself.

This will be an important consideration whenever any works are carried out to buildings containing asbestos. Although the academy company will receive general funding for repairs and maintenance of the site from the Education Funding Agency (EFA), it is likely to have to apply to it for additional funding from the Academies Capital Maintenance Fund to cover the costs of any asbestos removal. Both the Department for Education and the Health & Safety Executive publish useful guidance on managing asbestos.

Contracting and procurement

Most new academy companies are looking to maximise their "top-slice" funding by shopping around for the services that were previously supplied by their local authority. The process of contracting for these services independently from the local authority involves new requirements and considerations for managers.

Academies are publicly funded and their directors are accountable for all expenditure of grant funding and for the conduct of the academies which are run by the company. Careful consideration should be given to all contracts for goods and services to ensure the appropriate and effective use of public funds, and to minimise legal risk. Academies must deal with contractors in a fair and equitable manner without private gain for their directors, and should avoid any suggestion of impropriety or corruption.

In addition to the general requirements, for some larger purchases it will be necessary to comply with the law on public procurement. This will involve a competitive tendering process, but the extent of the requirements depends on the nature and value of the contract, so professional advice may be required if the directors are unsure of the requirements.

Being an exempt charitable company

All academies are formed as charitable companies with exempt charity status. So the directors need to ensure compliance with company law and charity law requirements. However, the exempt status means that they do not need to register with the Charity Commission and are, instead, regulated primarily by the Secretary of State for Education although Charity Commission involvement may be required for particular situations.

Authority and responsibility may be delegated by the board of directors to headteachers and managers at the academies, but the overall responsibility for the affairs of the academies rests with the directors, who must keep the company solvent and well managed.

It is important for all directors to understand their responsibilities and duties under company law and to ensure that the company's records are kept up-to-date, and that all appropriate filings are made with Companies House. Academies may wish to consider organising professional training for directors who are unfamiliar with their statutory duties and responsibilities.

In addition to the company law requirements, directors must ensure compliance with charity law. In particular, this involves ensuring that the charitable objects (i.e. the advancement of education) are delivered, filing all necessary reports and returns with EFA, and taking special care when investing the funds of the academy. It is important to remember that the assets and funds of academies must only be used to further the company's objects, and EFA closely monitors the use of annual grant funding.

Other governance considerations

Before the DfE will consent to the academy conversion of a school, it requires confirmation that the new academy will have all of the necessary insurances in place from midnight on the date of conversion. The need to maintain appropriate and sufficient levels of insurance cover is an ongoing and essential requirement, so directors should keep this under regular review. Guidance on suggested levels and types of insurance can be found on the DfE website.

Academies have significant tax advantages due to their charitable status and are normally exempt from direct taxes but care is needed to ensure eligibility. However, there are certain circumstances where taxes may be payable, in particular in relation to VAT. Where local community groups make use of the academy site, the VAT position is complex and guidance may be required from HMRC and EFA.

Financial management

In relation to financial management, it is very important that directors and managers at academies understand the terms and conditions set out in their funding agreements. The funding agreement is a legally binding contract between the academy company and the Secretary of State setting out the arrangements that must be complied with as a condition of receiving grant funding. Academies are accountable to the Secretary of State for the effective use of their funding, and it is important to ensure ongoing compliance with the terms of the funding agreement and all DfE and EFA guidance on financial management.

Although academies have a lot of flexibility in terms of their management, there are a number of matters where the Secretary of State's prior consent will be required. These are set out in the funding agreement and include borrowing from the private sector (including overdraft facilities) where the borrowing will be repaid from grant funding or secured on academy assets that were purchased with grant funding, and entering into any guarantees, indemnities and letters of comfort.

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All head teachers know that they are charged with effective financial management. Clearly the responsibility to safeguard and manage school funds is an essential prerequisite of being an effective financial manager. However, is there a wider purpose of effective financial management that impacts on pupil attainment and wellbeing? I would argue this is the case. Indeed I would suggest that this is the primary role of effective financial management. Without there being effective financial management in place the attainment of pupils will be reduced.

Where schools manage their finances well, anecdotally, there seems to be a correlation with pupil attainment. Equally, and certainly in connection with academies, there seems to be a correlation with poor financial management and governance and pupil outcomes. There may just be a management problem in the school or is there a deeper underlying truth here around the use and management of resources?

We have a chicken and egg problem here – what came first, the finance or the learning problem? It is likely that the two are bound together in a permanently revolving spiral – you won’t get one without the other and skill and expertise are needed to manage both.

The role of the head teacher

At its most fundamental level the role of the head teacher is to ensure that the expense of running the school is not in excess of the income received and that a sustainable business model is maintained. In this they are assisted by the annual budgeting process to carve up the resources to allocate them to their priority areas. The budget is then monitored through the year and amendments are made as required. It is in the expertise with which this process is managed by the leadership of schools that outcomes for students are affected.

Aware more of the economics

In setting budgets head teachers need to be aware of the economics of the provision of education. There are both long and short term fixed costs and variable costs that need to be accounted for on a yearly basis. The greatest scope for impacting outcomes for pupils lie in the short term fixed costs and the variable costs.

What is the nature of these costs? Long term fixed costs relate to the essential overhead costs of opening the school's doors and are relatively immoveable. Such costs would include utility costs and property overheads. Short term fixed costs are those that are relatively static over the course of the year such as the core establishment staffing costs.

Variable costs, those over which there is a degree choice, can be altered on a yearly basis but within them there are the core costs of delivering the curriculum that have to be accounted for. There is only a very small margin of variable costs in schools that can truly be modified and changed. So which have the greatest impact on student attainment?

Specific pupil support

All elements of school funding must have an impact on the resources made available to students. However, the availability of those variable funds that can be directed to specific pupil support – such as additional tuition, small group work, and group enrichment trips and visits – are perhaps likely to have the greatest effect. This implies that the core activities of the school are being provided in the most cost effective value-added way.

The initial creation of the curriculum plan and its staffing requirement, a short term fixed cost, is the starting point. As a minimum this needs to be decided early in the year preceding the new academic year and certainly by December to enable effective recruitment to take place. Earlier planning of the curriculum and its staffing requirements, up to two or three years in advance, will further facilitate effective financial management.

A clear analysis of budgeted utilisation rates will enable staffing decisions to be made to ensure the correct level of staffing is procured. However, utilisation is only one metric of the curriculum that will feed through to financing.

The number of students in a class at any one time can be carefully managed with creativity. The use of variable set sizes with expert staff, where the infrastructure allows, can maximise both the financial and pedagogic outcomes. Effective management of this part of the budget will release significant variable funds for utilisation elsewhere in the provision for pupils.

Levels of expenditure

If the amount being spent on overall staffing in a state funded school rises much over 80% alarm bells should start ringing. A ratio in the 70% to 80% range is preferable. For fee paying schools this may be much lower to allow for capital replacement strategies.

Where schools are keeping their overall staffing levels in check the outcomes for pupils are improved. Although this may seem counter intuitive, the release of funds for specialist activities or capital purchases will significantly contribute to the richness of the educational experience of pupils and improve overall attainment. It is that core provision which needs to be clearly defined allowing the school leadership to have resources available to develop other strategies for learning.

Determining the allocation variable budgets

In seeking to determine the allocation of the variable budgets, many schools have in the past used a prescriptive allocation method based on a set of factors such as the number of students taking a subject. A process where individual account holders must create a bid from a zero base each year is a preferable way of creating budgets. Only by requiring individual budget holders to confront their actual needs on a yearly basis can real improvements in allocations be achieved.

Where resources are short there is strong justification for maximising effect by requiring budget holders to identify their spending priorities. It may be that one subject area or year group want to introduce a new curriculum offering which will need additional set up costs for the first year. In requiring a zero based justification of the spend required, the senior leadership and governors can identify with greater clarity the strategic priorities and divert funds accordingly. Pupil outcomes improve as a result of this.

Integrating back office staff

All financial management is improved by effective systems operated by suitably qualified staff who are closely integrated into the fabric and being of the school. Too often the back office staff are marginalised in their role within schools. At the very least the senior management team should include the senior financial manager in the school.

It is by effective financial management alongside pedagogic expertise that schools will improve outcomes and attainment for their pupils. By utilising the opportunities afforded to them in the allocation of their resources schools will maximise their potential for delivering a first class education for the pupils in their care.

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New teacher appraisal and capability procedures are to be introduced with effect from 1 September 2012. This will come as a breath of fresh air to school governing bodies as the current regulations are to be revoked and replaced by the much leaner Education (School Teachers’ Appraisal) (England) Regulations 2012. Given these upcoming changes now is a good time for schools to review their performance and capability policies and procedures to ensure not only that they are legally compliant but that they also achieve maximum staff engagement.

Most employers will be familiar with disciplinary and dismissal procedures and would usually associate such measures with situations where an employee’s conduct has warranted taking formal action. However one of the fair reasons for dismissal as set out in the Employment Rights Act 1996 is capability, that is whether the employee is actually capable of carrying out the job in terms of qualifications and training. Note that incapacity owing to sickness, physical or mental disability is addressed separately.

Substandard performance

An employee's substandard performance is not always attributable to laziness, negligence or lack of application warranting disciplinary action. If the reason for it is found to be a lack of the necessary skills, the employer should provide appropriate advice, training and close supervision to enable the employee to reach the required standard, before a decision is taken to dismiss.

Employers should put in place a separate capability procedure for this purpose. Dealing with such matters using a disciplinary procedure is unlikely to bring about an improvement as an employee who is struggling to meet required standards despite a desire to do so will often need support and/or further training to meet the employer’s expectations.

Maintained schools

The new regulations apply to all teachers who are employed for one term or more and who are not undergoing an induction period nor subject to capability procedures. These regulations apply only to state-maintained schools. Academies, free schools and other independent schools are free to put in place their own disciplinary, performance and capability policies.

However as the new regulations will remove much of the additional burdens on state-maintained schools these schools will now be more in line with minimum legal obligations applying to academies, free schools, other independent schools and the private sector generally.

Under the regulations, governing bodies and local authorities have to put in place a written appraisal policy for their teachers and appoint an external adviser to advise them on appraising their headteacher. Schools must put in place an annual appraisal process during which teachers will be monitored throughout the year culminating in a formal annual assessment of each of those teachers.

Objectives have to be set for each teacher during the appraisal period that contribute to improving the education of pupils. Following an appraisal teachers must be given a written appraisal report setting out an assessment of their performance, their training and development needs and, where relevant, a recommendation on pay progression.

Decision making

The main changes under the new regulations are that governing bodies and local authorities are free to make their own decisions about the amount of observation that is appropriate for their teachers. In addition teachers’ performance will be assessed against relevant standards which for the vast majority of teachers are set out in “Teachers’ Standards”, published in July 2011.

The Teachers’ Standards Review Group recommended in its report on the post-threshold, excellent teacher and advanced skills teacher standards that these standards should be discontinued, and that a new master teacher standard should be introduced.

The Secretary of State welcomed in principle the review's recommendation. However, as the existing higher level standards are pay related, he will be asking the School Teachers’ Review Body (STRB) to consider the implications of the review’s recommendation.

Qualified Teacher Learning and Skills (QTLS) teachers are teachers who are recognised as fully qualified teachers in Australia, Canada, New Zealand and the USA or who are teachers in further education who have been awarded Qualified Teacher Learning and Skills status by, and are members of, the Institute of Learning. QTLS teachers will not have to be assessed against the new Teachers' Standards.

Model policy

The Department of Education has a new model policy on teacher appraisal and capability outlining model procedures. The model policy applies only to teachers in maintained schools or unattached teachers employed by a local authority, however schools may wish to adapt it for use with all staff and other schools are free to choose to use the policy.

There are two sections to the policy: Part A covers teachers’ appraisals and Part B sets out the model capability procedure.

MODEL CAPABILITY PROCEDURE. The model capability procedure sets out a model process for teachers where there are serious concerns which the appraisal process has been unable to address. The steps are broadly as follows:

FORMAL CAPABILITY MEETING. The teacher may be invited to a formal capability meeting. The teacher must be given reasonable written notice of the meeting, and sufficient information on the concerns about their performance and the possible consequences. The meeting is intended to establish the facts. The teacher must be given the right to be accompanied to the meeting by a colleague, trade union official or trade union representative.

WARNING. Where a warning is issued the teacher should be informed in writing of the matters covered in the meeting. The teacher must be given a period of time to improve (the review stage) and the warning should give information about the timing and handling of the review stage including details of the process for appealing the warning. In very serious cases a final written warning may be issued which would remove the need for a formal review meeting, described below.

REVIEW STAGE AND FORMAL REVIEW MEETING. During the review stage formal monitoring, evaluation, guidance and support should be given. Unless the teacher was issued with a final written warning, at the end of the review stage the teacher should be invited to a formal review meeting. This follows the same format as the formal capability meeting.

FINAL WRITTEN WARNING AND DECISION MEETING. Where there is no improvement following the formal review meeting, or where performance is so poor following the formal capability meeting, the teacher may be issued with a final written warning providing for a further review stage at the end of which the teacher should be invited to a decision meeting.

If there has been no improvement a decision or recommendation may be made to the governing body that the teacher should be dismissed. The decision should not be made at the meeting, only afterwards to allow time for consideration.

Any review stage should allow sufficient time for the necessary training, support, guidance and evaluation to take place.

Other schools

There is no requirement for academies, free schools and other independent schools to carry out annual appraisals or for state-maintained schools to carry out appraisals for support staff. However, appraisals are recommended as a means of improving staff performance and identifying issues early on when they can be resolved easily.

The appraisal process provides an excellent opportunity to engage with employees on a one to one basis. During formal appraisals the employer and employee should discuss matters including achievements and concerns, any difficulties encountered and how the work environment and process could be improved. Employees, as stakeholders, could also be asked about their opinion on wider issues within the school thus giving them a greater sense of ownership and commitment.

Whilst the regulations apply only to teachers in state-maintained schools, all employers are expected to comply with the principles set out in the ACAS code of practice on disciplinary and grievance procedures when handling disciplinary situations, including poor performance in the event of serious concerns.

Code compliance

The ACAS Code, which came into force on 6 April 2009, provides basic practical guidance to employers, employees and their representatives. Whilst a failure to follow the ACAS Code will not, by itself, render an employer liable to legal proceedings a tribunal is required to take it into account when considering relevant cases. Where there has been an unreasonable failure by either party to comply with the ACAS Code the tribunal may increase or decrease compensation by up to 25%, depending on which party is at fault.

The ACAS Code covers poor performance. The code states: "If employers have a separate capability procedure they may prefer to address performance issues under [that] procedure. If so, however, the basic principles of fairness set out in [the] code should still be followed, albeit that they may need to be adapted."

The ACAS Code identifies six key stages when an employer is dealing with a disciplinary situation or poor performance. The employer is required to:

• Establish the facts of the case: investigate.

• Inform the employee of the problem.

• Hold a meeting to discuss the problem.

• Allow the employee to be accompanied at the meeting.

• Decide on appropriate action.

• Provide the employee with an opportunity to appeal.

The ACAS Code is supported by “Discipline and Grievances at Work: Acas Guide”. The guide provides more detailed advice on dealing with disciplinary situations. Unlike the ACAS Code, it does not have statutory force, and tribunals are not required to have regard to it when considering relevant cases. However, tribunals are likely to consider the guide when interpreting the code.

Warning issued

When issued with a warning for poor performance the employee should be given a reasonable time to improve; details of what the employee is expected to achieve during the review period; and how the employer will assist the employee to achieve this – for instance by providing further training, support and guidance.

The employee should also be informed of the potential outcome in the event of insufficient improvement. Additional informal meetings during the review period will assist both parties to monitor the employee’s progress.

The Employment Rights Act 1996 requires that each employee is issued with a written statement of terms and conditions of employment within two months of commencing service. These terms are usually set out in a contract of employment. The statement must include details of any disciplinary rules or procedures applicable to the employee or must refer the employee to an accessible document where such information is specified.

Where an employee brings a separate claim against an employer and is successful, if there is also a breach of the written statement requirements an employee may claim additional compensation of between two and four weeks pay, currently capped at £430 per week

So to recap, remember these key points:

• Annual appraisals should be used to improve employee engagement and performance.

• Teachers in state-maintained schools are subject to the Education (School Teachers’ Appraisal)(England) Regulations 2012.

• All employers should comply with the provisions of the ACAS Code.

• A capability procedure should be regarded primarily as a means of helping and encouraging improvement amongst employees rather than a means of imposing sanctions.

• An effective capability procedure should be set down in writing, be specific and clear.

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Schools under charitable status have become highly regulated organisations, and rightly so. With risk assessment and management now essential rather than simply ticking off the to-do list, it is important to quickly establish who is responsible for each role within the risk process. Larger schools may well find themselves in a position to hire an in-house team of specialists; one which can keep abreast of current regulation updates and ensures that annual audits are completed.

However, for the smaller school, these responsibilities can often fall on the already stretched senior management team. This can obviously have a severe impact on their performance in frontline duties and, let’s face it, on their overall morale in the job, thus leading to your very first risk – a negative impact on their performance, or even an actual loss of staff.

More obvious risks

Some other risks will present themselves clearly to the risk management team. Quite often these come as a result of falling pupil numbers, unsatisfactory exam results, poor financial management and even fraud. An unexpected disaster such as a flood, the collapse of a building, and other major physical catastrophes will obviously harm the reputation of a school. The key is in the preparation of a response to these risks. Do not discount any eventuality.

Less obvious risks

The same can be said for the less obvious risks such as operating without the benefit of limited liability, or inadequate monitoring of potential overcharging by suppliers. The possibility of going wrong somewhere is still dangerous, which is why in the modern era and under the watchful eye of charity law, schools must be able to identify the probable risks they face over their complete working life. This way, the charity’s goals are not hindered from being achieved.

SORP 2005. When the SORP – or a Statement of Recommended Practice (specifically for charities entitled "Accounting and Reporting by Charities") – was last updated back in 2005, it brought risk management high up the agenda for schools. The guidelines published were seemingly reviewed regularly by those who needed it which enabled them to quickly identify the risks to which they were exposed.

However, the interest in SORP 2005 has unforgivably waned somewhat with many preferring to look at it on an annual basis. This error of judgment and almost lackadaisical approach means that schools may not be making the most of the benefits that risk management under SORP 2005 can bring.

SORP 2005 requires trustees to make a statement in the Trustees Report of their annual financial statements. Here, they need to confirm that the major risks to which they are exposed, as identified by the trustees, have been reviewed and the systems have been implemented to manage those risks.

Particular use to academies

SORP 2005 will also be of particular use to academies, which must prepare accounts under the legislation. Stipulations within their funding agreements ensure that they must adhere to prepare accounts.

Since the introduction of the Academies Act 2010, the formation of academies is becoming an increasingly attractive option for schools. However, new academies may be less knowledgeable of SORP 2005 and prove more vulnerable to risks than established schools. Therefore governors of the academy will need to fully understand the process to ensure they are fully informed of the major risks – those which would have a severe impact on operational performance and the objectives or reputation of the school.

To put it simply, SORP 2005 shouldn’t just be about compliance – it must be a document reviewed on a regular basis. It should be one of the first things read by the risk management team within a new academy.

The role of the governors

Governor involvement when it comes to risk management should not be underestimated. Governors are the ones by whom the final decisions are made. Of course, the risk management tasks can be delegated down throughout the internal team or to external advisers, but it’s the governor s who must be satisfied that all risks are covered.

As basic as it sounds, the first thing an appointed governor must appreciate and understand is their role and responsibilities. It is vital for them to gain the trust and confidence of the senior staff before organising teams to look after different areas of risk management. Of course, higher level risks – such the general conduct of the overall school and important expenditure and financial decisions – are better addressed by the governors whilst operational risks, such as IT failure and health and safety issues, are better handled by staff members.

Establishing and implementing policies

A board of governors should ensure the school fulfils its requirements to have statutory policies in place, and, in addition, can choose to have a wider range of other policies, broadening the options for running the school. It is therefore vital that the governors provide a strategic view and act as a critical friend to senior staff and others depending on them throughout the duration of their tenure.

A governor must have the ability to identify where risk management improvements can be made. The performance of their school rests on their shoulders. Are critical impact risks clearly recognisable and mitigation actions integrated into the year's plan? Are you confident about the systems that are in place to manage high and lower priority risks?

By regularly monitoring such questions, preferably on a termly basis, the Governor will quickly be able to monitor and evaluate the effectiveness of the risk management process.

SCHOOL SECURITY. Risk management is a key area of school security. It is an issue that must not be ignored. The key is to take nothing for granted and prepare for every eventuality. However, without an effective school policy, none of the individual strategies that are suggested for each aspect of the risk management process will be particularly effective. All risks are important. But it is up to individual schools to determine which are most important or relevant in their own context.

Current top risks

This guide will give you an insight into the current top risks faced by our schools and academies throughout the UK right now:

COMPETITION. From both a private and state school point of view, this is one of the most consistent risks. With everyone looking to up their game, it is vital for a school to be prepared for what the competition has to offer.

THE ECONOMIC CLIMATE. Fee paying schools are generally 12 months behind on the impact of any recession, so there could be worse to come. Keep on top of slow paying parents. Yet be realistic with them, whilst still offering sympathy.

AN INACTIVE GOVERNING BODY. Now is in the time when the skills of a good board of governors should be coming to fruition. I cannot reiterate enough the importance of the role played by a governor.

A REVIEW OF STRATEGIC PLANS. The changing market place might mean your school has to tweak or overhaul its strategic plans. The key is to offer flexibility. Be prepared to make changes at the drop of a hat.

FINANCES. Accurate and timely information on cash flows, profitability and projected pupil numbers should be readily available to assist in the key decision making process.

RECRUITING AND RETENTION OF STAFF. Recruiting the right employees and retaining your very best staff is good for the morale of your team and this will be reflected in the performance of the school.

SOCIAL MEDIA. This huge platform has changed the way we all think, behave and respond. It is vital to develop social media guidelines to enable your team to effectively and consistently engage with your fans and followers. Inappropriate behaviour shouldn’t be tolerated. Once it’s published, it’s published forever.

RECRUITING THE RIGHT SKILL SET FOR THE GOVERNING BODY. It might sound obvious, but the governing body must be confident that it is recruiting individuals with the correct skills which are going to impact the governance and performance of the school.

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In 2011 a decision was made by judicial review which supported the opinion of the Independent Schools Council (ISC), against the Charity Commission, that as charities independent schools were providing "pubic benefit".

The Charity Commission's guidance had stated that the public benefit test included the requirement that people in poverty must not be excluded from the opportunity to benefit. The Charity Commission's argument was that certain fee charging schools did not appear to comply with the requirement to provide public benefit as schools provided insufficient bursaries to enable people in poverty to take up places at the schools.

The ISC, which represents 1,234 independent schools, claimed that the advancement of education is, in itself, an exclusively charitable purpose which provides public benefit. Why is this case important when discussing the issues of investment for the independent schools sector?

Firstly, given their charitable status independent schools enjoy a favourable tax treatment, estimated to be over £200 per pupil. If this tax benefit were to be removed, it would put a significant financial burden on their finances. At the same time, the need to offer bursaries and other assistance to poorer members of society, to meet the public benefit test, adds financial pressure on less well off independent schools. According to the latest ISC census, 33.2% of all pupils received help with their fees.

Further constraints

The global economy places further constraints on the operation of independent schools, especially boarding schools whose average annual fee is over £25,000. Fees at Westminster School are £30,000 a year for boarders and £21,000 for day pupils. Parents are under increasing financial pressure to afford the level of fees as average school fees have trebled in real terms over the past 20 years.

Critics of the sector argue that in London and the South East relatively affluent middle class families have been priced out of private education. Meanwhile, schools are facing a growing influx of Asian and East European children, whose parents can now afford the cost and are prepared to pay for the high level of education, tradition and security the British independent schools system offers.

Competition between schools has undeniably caused financial pressure. Teachers' salaries account for about two thirds of school costs, as there has been pressure to attract and retain the best talent. On top of this comes increased National Insurance and pension costs. Another factor of independent school inflation is the cost of building projects in an "arms race" to outdo each other for state of the art facilities. In light of the credit crunch, schools are looking at slowing down building projects and may have to re-examine the breadth of subjects they teach and class sizes in order to stay affordable. For example, slowing down the pace of spending on capital projects enabled Eton College to keep its fee rise at 2.75% in 2009.

Costly regulation

Lastly, schools are facing an increasing burden of costly regulation given child protection, health and safety, and many other standards or codes of practice they have to comply with. Against this backdrop, independent schools with a meaningful endowment to support their activities are not unlike other operational charities in the UK. The balance of collecting fees to pay for the annual running costs of supplying education is essential. The endowment helps improve the standard of service and provide public benefit. Like all charities, their financial situation will influence their investment policy.

Thereafter the principles of charity investment apply to schools. Most will have a long term objective with some ability to take risk. One of the benefits of the current economic slowdown is the reduction of inflation. Wage inflation has come down in the short term, and while certain other costs may have increased, in 2010 school fees increased at 4.5% below the education component of CPI inflation of 5.3%. This was the second lowest rise since 1994.

Simple truths

The last few years have brought home some simple truths about investment. Diversification of assets, particularly into illiquid assets, had a dramatic effect in 2008. This was particularly evident for the US educational endowments and the concept was replicated by certain larger UK schools. Many had invested in illiquid investments, such as hedge funds and private equity, in the hope that ongoing capital gains could pay for capital projects and certain operational running costs.

This resulted a liquidity trap as the illiquid assets paid no income and could not be sold to pay ongoing operating costs. As a result, any liquid assets were sold at the bottom of the market. Having sufficient liquidity to meet immediate capital commitments is essential.

When setting out the investment strategy, school governors or trustees need to be clear about the medium term cash flow of the institution and levels of sustainable income. If there are planned capital projects, a clear plan of funding these works needs to be in place with a contingency fund. Most schools have a development fund, attracting financial donations from alumni, parents and other supporters, but unless this is very successful it cannot be a guaranteed source of income.

Maintaining value

As most charities want to maintain the real value of the endowment over the long term, it is logical that the investment objective should be to keep pace with costs of the school and real economy. An inflation based benchmark or target makes sense as this allows for a more flexible asset allocation, which should allow more freedom to preserve (and preferably grow) the real value of the endowment. If a school has a permanent or restricted fund, it will need to concentrate more on income.

In conclusion, independent schools do not have significant differences from other operational charities. They are under pressure to maintain their public benefit in a competitive market for education and at a time of relative economic austerity. Many will have seen these pressures before. Careful management of the endowment to meet the future costs of education on a sustainable basis is the secret of their success.

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