The document discusses the financial challenges faced by independent schools in the UK, emphasizing the impact of rising costs, decreasing pupil numbers, and potential fee increases. It highlights regulatory requirements, the significance of bursaries for school funding, and calls for proactive financial management and strategic planning within schools. The risks associated with a lack of effective governance and the necessity of accountability in the management of independent schools are also underscored.

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

4. 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

5. 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

6. 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!

8. 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

9. 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

10. 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

11. 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”

13. 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

14. 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

16. Thank you.
Any questions?
Lorraine Ashover
Director
Minerva Procurement Consultancy Services Ltd
www.minervapcs.com

17. Independent education:
the regulatory environment
Adrian Pashley, senior solicitor
Charities and Education team

18. 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

19. 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)

20. 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

21. 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

22. Legal entities in independent education
Proprietor-owned
– Sole trader
– Partnership
– Company limited by shares
“Not-for-profit”
– Company limited by guarantee
– Community Interest Company

23. 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!

24. 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

25. 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)

26. 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

27. Regulation of all independent schools (3)
Early years
– Childcare Act 2006
– Early Years Foundation Stage
National Minimum Standards for Boarding Schools

28. 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

29. 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

30. 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

31. 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

32. 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

33. Charitable schools
Governors accountable to:
– Charity Commission
– HMRC – ‘fit and proper person’ test
– Companies House (if company)
– parents
– staff
– pupils
– members (if separate)
– community

34. 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

35. 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

36. 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?

37. 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

38. 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

39. 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

41. Adrian Pashley
senior solicitor, Charities and Education team
New Kings Court, Tollgate, Chandlers Ford,
Eastleigh SO53 3LG
adrian.pashley@bllaw.co.uk

42. Final thoughts
Adrian Owen, partner
Insolvency and Business Recovery team

43. What happens when it all goes wrong?
Newlands College – a lesson from history?
The new ‘Permissive Society’

44. Questions