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Turnaround Management Association seminar


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Blake Lapthorn solicitors hosted the TMA seminar entitled 'education, education, education - what happens when the money runs out?' on 26 May 2010.

Blake Lapthorn solicitors hosted the TMA seminar entitled 'education, education, education - what happens when the money runs out?' on 26 May 2010.

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  • 1. Education, Education, Education What happens when the money runs out?
  • 2. Introduction – Lorraine Ashover, Minerva Recruitment Consultancy – Adrian Pashley, Blake Lapthorn – Adrian Owen, Blake Lapthorn some context
  • 3. Anecdotal evidence suggests that fee rises for the 2010/11 academic year have been kept as low as possible but will still average 3.7% as schools endeavour to cover the rising costs of teacher salaries and utility bills. In addition many schools are facing a drop in pupil numbers and a drop in boarders especially at the pre-prep and prep levels where parents are clearly taken the decision to defer enrolling their child into the independent sector The independent sector suffers from a ‘recession lag’ - whilst an economic recovery may be underway the sector is unlikely to feel the benefit until the 2011/12 academic year Previous findings from public benefit inspections by the Charities Commission points to provision of bursaries as the main driver in assessing if a school passes the ‘test’. The Commission will not be drawn on what constitutes a level which is acceptable Latest statistics show that 17 schools have closed or merged since January 2009. The majority of these have been in the past 6 months As expected it is the smaller schools which are being affected most with a small drop in pupil numbers having a potentially terminal impact on the bottom line
  • 4. In the state sector yesterdays announcement of an Academies Bill will enable more schools to move to academy status meaning state funded schools have an opportunity for greater ‘independence’ Changes will also mean that “new providers” such as charities, commercial organisations and parents can set up and run schools subject to being held “properly accountable” Education, whilst an emotive subject, will not avoid the cuts necessary to reduce the national debt – although protected in 2010/11 there is no mention of this extending into future years Despite the above ‘protection’ the Department for Education will still be making £670m of savings through spending efficiencies and cutting quangos Currently no incentive for prudence as surplus is clawed back The fallout from the Learning Skills Council funding debacle will be felt by FE colleges for years to come although the newly announced £50m Government investment will enable them to leverage up to a £150m fund for cap investment projects for those FE colleges which need it most On the thorny issue of university tuition fees it seems inevitable they will increase in the future but vice-chancellors will need to justify why
  • 5. Don’t bury your head in the sand – act now! Engage your professional advisors early – don’t be embarrassed and don’t wait too long, early intervention is imperative Forget sentiment – be commercial Review your Board of Governors and strengthen where necessary Consider alternative/new funding options i.e. fees in advance Always do scenario planning – what if.......? Possible merger Single sex to co-ed Implement effective cost management strategies!
  • 6. Profits and margins will remain under pressure Cost control is vital just to stand still Low (negative) fee income growth Direct impact on bottom line – every £1 saved is directly added to profit If it’s good enough for Tesco...... Within your control Should be a key strategy during good times and bad – stakeholder management To be effective a school’s purchasing strategy should be proactive not reactive A positive message to parents and Governors
  • 7. Cost/revenue £k Cost/revenue £k Fees 1000 Fees 1020 Salaries 630 Salaries 630 370 390 Less overheads 270 Less overheads 270 Profit 100 Profit 120 Cost/revenue £k Fees 980 Salaries 630 350 Less overheads 230 Profit 120
  • 8. Lack of time Absence of formal purchasing function within school Staff with no specific purchasing or negotiation training Perceived lack of savings especially for bottom 50% of spend No cost category benchmarking data No supplier appraisals Embarrassment factor – supposed integral part of Bursar role
  • 9. Cost cutting affects quality and is not sustainable i.e. training, travel etc Pay less buy twice – false economy Ensure there is a ‘high level’ strategy review not just a benchmarking exercise One off ‘quick wins’ versus continuous review Cost cutting does not consider all elements of purchasing i.e. performance, product, time, legality, source and price “Money is irrelevant if you cannot get what you want, when you want it, at the right location, from a reliable source and under acceptable legal conditions”
  • 10. Ensure you have a reminder of when any contracts in place are renewable. Many contracts have an auto-rollover committing you at prices imposed by the firm in situ Get specialist expertise where appropriate Consider collaboration/consortiums/local buying groups Develop a cost management culture within your school – ensure staff own the process Be aware that loyalty to a supplier does not always translate to the best pricing or service Offer negotiation training for those staff involved in the procurement process
  • 11. Are they independent? Will they manage the process or are they focused on ‘tariff swapping’? Will they implement the findings or simply recommend? Is the review strategic or price driven? How are they paid – commission/one-off fee Could you work with them? They should be an extension of your management team for the duration of the audit Are they members of the Chartered Institute of Purchasing and Supply? CIPS commits members to a Code of Ethics
  • 12. Thank you. Any questions? Lorraine Ashover Director Minerva Procurement Consultancy Services Ltd
  • 13. Independent education: the regulatory environment Adrian Pashley, senior solicitor Charities and Education team
  • 14. The Independent education sector: an overview + 2,500 independent schools in the UK Educate 615,000 children (7% of all children) Types of school (by provision) – Preparatory schools (to age 11/13) – Secondary schools (age 11 or 13 up) – All age – Day and boarding – Single sex/co-educational – [Non-maintained special schools] Type of school (by purpose) – Proprietor owned (profit making) – Not-for-profit – Charitable
  • 15. Independent Schools Council (ISC) 80% independent schools are members of ISC– 1,260 schools ISC constituent associations: – Association of Governing Bodies of Independent Schools (AGBIS) – Council of British International Schools (COBIS) – Girls’ Schools Association (GSA) – Headmasters’ and Headmistresses’ Conference (HMC) – Independent Association of Prep Schools (IAPS) – Independent Schools Association (ISA) – Independent Schools’ Bursars Association (ISBA) – Society of Headmasters and Headmistresses of Independent Schools (SHMIS) Affiliated members: – Boarding Schools’ Association (BSA) – Scottish Council of Independent Schools (SCIS)
  • 16. Trends and predictions (ISC Survey 2009/10) Pupil numbers fell by only 0.6% Lowest annual fee increase since 1994, averaging 4% 32.5% of pupils attending ISC schools receive some form of financial assistance, amounting to £540 million annually Increase of 7.4% of non-British pupils with parents living overseas (23,307 pupils) Pupil/teacher ratios remain low - average of 1 teacher for every 9.4 pupils 56,930 pupils at ISC schools have been identified as having special educational needs More than 4 in 5 schools are involved in partnerships with maintained schools or the wider community
  • 17. Trends and predictions TES online 14 May 2010 – “More independents fall victim to recession” David Verey, Eton College governor – Full effects of recession would not be felt until as late as September 2011 – “the last thing parents would want to give up, after fine wines and holidays, but before cigarettes..” Expenditure on building projects falling in every area except boarding (ISC survey) Mergers Failures – 5 ISC schools lost since 2009
  • 18. Legal entities in independent education Proprietor-owned – Sole trader – Partnership – Company limited by shares “Not-for-profit” – Company limited by guarantee – Community Interest Company
  • 19. Legal entities in independent education Charities – Unincorporated trust or association Trust deed Charity Commission Scheme – Company limited by guarantee Memorandum and Articles of Association – Royal Charter Bodies Royal Charter/Letters Patent Statutes and bye-laws Advantages: tax, kudos, access to funding Once a charity, always a charity!
  • 20. Set up of An Academy Funding from DfE • Transfer of assets (transfer agreement) (Funding Agreement) • Short lease (pending development) • Long lease (post development) £ Academy •Community use agreement LEA School Local Education Authority • School closes • Governing Body dissolves • Assets transfer to LEA
  • 21. Regulation of all independent schools All independent schools must be registered with Department for Education (formerly DCFS) Independent school: – provides full time education for five or more pupils of compulsory school age – or one or more such pupils with a statement of special educational needs or who is looked after and – is not maintained by a Local Authority, or – a non-maintained special school (NMSS) Criminal offence not to register (fine/imprisonment)
  • 22. Regulation of all independent schools (2) Basic requirements to comply with: – Independent School Standards Regulations 2003 to 2008 – School premises regulations – Child protection regulations/safeguarding vulnerable groups legislation – Corporal punishment legislation/use of force guidance – Special Educational Needs and Disability Act (SENDA) – Race, gender and sexual discrimination legislation DCSF guidance (not legally binding), includes – Health and Safety of Pupils on Educational Visits – Safeguarding Children and Safer Recruitment – Anti-Bullying
  • 23. Regulation of all independent schools (3) Early years – Childcare Act 2006 – Early Years Foundation Stage National Minimum Standards for Boarding Schools
  • 24. Independent school standards Education (Independent Schools Standards) Regulations 2003 Cover: – The quality of education provided – The spiritual, moral, social and cultural development of pupils – The welfare, health and safety of pupils – The suitability of proprietors and staff – Premises and accommodation – The provision of information – Complaints handling
  • 25. Inspections ISC schools in England inspected by the Independent Schools Inspectorate (ISI) Every 3 years Five days notice or unannounced Standard and interim inspections Purpose of inspection – Report to DfE on compliance with Independent School Standards – Report to Ofsted on Childcare/Early Years compliance – Assure that quality of provision maintained – Help schools improve/inform parents
  • 26. Boarding Schools School arranges or provides overnight accommodation at school or elsewhere National Minimum Standards for Boarding Schools, which cover: – welfare policies and procedures – organisation and management – welfare support to boarders – staffing – premises Boarding provision inspected by Ofsted
  • 27. Charitable independent schools Governors are: – Charity trustees – If CLG: Company directors Often, company law members Duties and responsibilities – Key duty: advance purpose of charity – Responsible for proper administration of charity – Ultimately responsible for everything charity does – Act reasonably and prudently
  • 28. Duties and responsibilities (2) Safeguard and protect assets Act collectively Act in best interests of charity Avoid conflicts of interest Meet public benefit test – Have regard to guidance when exercising powers/duties – Report on how meeting test If company director, comply with Companies Act duties
  • 29. Charitable schools Governors accountable to: – Charity Commission – HMRC – ‘fit and proper person’ test – Companies House (if company) – parents – staff – pupils – members (if separate) – community
  • 30. Charity Commission Dual role to supervise and regulate charities in England and Wales Powers to: – instigate formal inquiries – act for protection of charities – supervise charities Include powers to: – suspend, remove or appoint trustees/officers/employees – freeze assets and bank accounts – restrict transactions – appoint an interim manager – make orders directing action
  • 31. Regulation in action – St Peters Independent School Charity Commission Investigation Headmaster - allegations of physical harm Failing educational, welfare and organisational standards Failure to address complaints made about child protection and about the school and staff
  • 32. The Governors’ response No action against Head - allegations unfounded and malicious Ignored advice of agencies to suspend Head to retire at end of academic year Head to return as a consultant to effect ‘hand over’ Access to pupils to be monitor Ofsted inspection Did this satisfy the Charity Commission?
  • 33. No….Commission found Governors failed to discharge their duty to act in the best interest of the School, its pupils, staff and stakeholders – Inadequate management of allegations about the Head – Failure to take adequate steps to protect beneficiaries (pupils) – Inadequate supervision and monitoring of activities of the School – Inadequate Child protection policies and procedures Complaints policy Decision-making processes Risk management processes
  • 34. Intervention by the Commission Initial investigation - misleading information given Formal inquiry 1st direction for protection of charity - failure to comply 2nd direction for protection of charity – Governance review (six months) – Reports to Commission
  • 35. Governance review Delegation (policies and procedures) Procedures to ensure Governors engaged in the supervision of the school its staff and activities Complaints procedure Child protection policies and procedures, training Risk management strategy Make up of the Board of Governors
  • 36. Adrian Pashley senior solicitor, Charities and Education team New Kings Court, Tollgate, Chandlers Ford, Eastleigh SO53 3LG
  • 37. Final thoughts Adrian Owen, partner Insolvency and Business Recovery team
  • 38. What happens when it all goes wrong? Newlands College – a lesson from history? The new ‘Permissive Society’
  • 39. Questions