Coronavirus and the Academy sector

Coronavirus and the Academy sector

Matt Doyle-Healey, Director, Audit
02/04/2020
Coronavirus and the Academy sector

COVID-19, in the space of two weeks, has led to the most dramatically changing landscape in recent history. You could perhaps be forgiven if you are finding it difficult to read, digest and actually implement the quite substantial changes that have been published by the Government in recent months.

The impact of new Government legislation is slightly more nuanced for academies when compared to private employers and so we have set out below how some of the key developments will impact the academy sector. The points highlighted below could have significant implications for the way you pay your employees and the way you pay your suppliers.

Payments to Employees

The Coronavirus Job Retention Scheme (“CJRS”) is a temporary scheme open to all UK employers for at least three months starting 1 March 2020. It is designed to support employers whose operations are severely affected by COVID-19. In its most basic interpretation the government will allow employers to claim 80% of an employee’s usual monthly costs up to a maximum of £2,500 per month, plus employers’ national insurance and minimum automatic enrolment employers’ pension contributions. During such time the employee cannot undertake work for the organisation. Such employees are referred to as furloughed employees.

Crowe has released an update on how employers can apply for this funding here.

On 26 March 2020 clarifying guidance was issued for all public sector organisations (academies included) advising that such organisations should continue to pay their employees in the usual fashion – and correspondingly not furlough them. The argument being that such roles are financed largely through government grants with are set to continue at normal levels throughout the lockdown period. 

The clarifying guidance can be found here.

With schools currently set to remain open over the coming weeks, some of your employees will fall within “key worker” roles and will be required to actively work throughout the coming weeks and months in order to maintain a skeleton provision for at-risk children and children of other key workers. However, there will inevitably be some employees who will become surplus to requirements and as things stand, those employees should continue to receive their usual monthly salary.

Whilst the guidance discourages publicly funded organisations from making a claim under the CJRS it is less clear if an academy trust can make a claim through the CJRS at all. Some academy trusts employ staff in posts that are not funded directly from GAG, or other Government grants. Indeed, we are aware of some of our academy clients who have already started to furlough certain staff.

Such roles may include:

  • lettings managers (funded from lettings income);
  • ethos or religious staff (sometimes funded from closely related charitable organisations);
  • boarding staff (sometimes funded from boarding activities only);
  • certain catering staff (funded from pupil school meal takings);
  • private nursery and wrap around care staff (funded from parent contributions and receipts).

For these employees, if, as a result of COVID-19, they are no longer able to carry out their contractual duties, or be redeployed into other areas of the trust there is a strong argument that an academy trust has a legitimate right to make a claim through the CJRS.

For any claim to be successful the academy trust will need to be able to demonstrate that the role is not funded by public money and that the employee would likely need to go on temporary leave if a CJRS claim was not made. Employers should also seek legal/HR advice in making these decisions (which should be agreed by both employer and employee) as it is likely to require changes to existing employment contracts. 

We would encourage academy trust’s in this position to feedback to us on the success or otherwise if any such claims are made over the coming months.

Payments to suppliers

Perhaps of more relevance to the academy sector is the recent Cabinet Office Procurement Policy Note which can be found here

The policy note sets out guidance for public bodies on payments to their suppliers to ensure that at-risk suppliers are able to resume normal contract delivery until at least the end of June 2020.

Such measures may include;

  • Reviewing your current supplier contracts to identify those business that could be at risk throughout the period to at least the end of June 2020;
  • Paying purchase invoices immediately upon receipt, perhaps even before supplier statement reconciliations have taken place;
  • Putting in place arrangements to help cash flow within those businesses including forward ordering, payment/part payments in advance of service/goods received;
  • For orders that fluctuate, consider using an average of the previous three months invoices for payments through to June 2020.

The policy note is currently being considered by the Department for Education and a decision on how this will impact, and ultimately be applied within the academy sector will be communicated in due course.

At present the only ESFA feedback we have received on this policy note has been informal and our message to academy trusts is to continue to follow your routine procedures until such time as the ESFA communicates otherwise whilst at the same time reducing supplier payment lead times as much as reasonably possible. 

At the point of writing it therefore follows that your usual procurement procedures should not change and you are still obliged to ensure that academy trust procurement is in line with the Academies Financial Handbook 2019 and the Trustees fiduciary duties as Directors of the limited company. 

If you would like to talk with one of our dedicated Academy team members about any of these matters in more detail please contact Helen Drew or Matt Doyle-Healey.

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Helen Drew
Helen Drew
Partner, Audit
Midlands