The Hazlewoods Charities and Education team teamed up with Harrison Clark Rickerbys in the third week of January to provide two virtual forums for our education clients. These forums provided an opportunity for Business Managers, Bursars and Financial Officers to get together and discuss the legal and financial changes which have impacted schools and academies over the past year, and to discuss areas of focus to consider over the coming months - including the implications of COVID-19 and Brexit in managing commercial arrangements.
Emma Swann from Harrison Clark Rickerbys discussed commercial contracts and new legislations. Some of the key points highlighted included:
- When considering commercial contracts, it is better to try to make changes where possible and be flexible, rather than to end the contract completely if things are not working as planned. It is recommended that current termination and variation clauses are checked, and a letter written to clarify the situation in the first instance. If there are issues with the termination process or variation clauses, consider where changes can be made by thinking outside of the box. For example, could the contract be split to find an alternative provider for part of the contact, could the timing of the supply be changed?
- It is important when considering new contracts to check for any references to EU laws. Following the exit of the UK from the EU, EU laws no longer apply to UK contracts, so any references to these laws in new contracts are a clear indicator that they have not been reviewed or kept up to date.
- Following Brexit, legislation with regards to GDPR is currently being reviewed, with a decision made by the end of April 2021 as to whether personal data can be imported from servers based outside the UK. The responsibility for this will be with the provider of the server/software, but customers should check their terms and conditions or look at the provider’s website, as they may have detailed their plans there.
On the finance side, Hazlewoods Partner Scott Lawrence, highlighted new funding that may be available to academies and the loss of income for independent schools.
- Additional funding for academies has been announced by the Government to aid with new additional costs such as extra cleaning and COVID-19 testing. However, if schools had surplus last year, then they are not eligible to claim this extra funding.
- The Government will also continue to support academies by providing the Teachers’ pay grant and the Teachers’ pension employer contribution grant to assist with the increase in costs faced by academies.
- Pension funds – the triennial actuarial valuation for LGPS for 31 March 2019 was completed in March 2020 and will be used to set contribution rates for the Fund’s participating employers for the period from 1 April 2020 to 31 March 2023. It was noted during our work this year that many schools saw an increase in the pension liability this year – mainly due to fall in discount rate last year which has impacted on this year’s costs. This increase in costs has led to the current service costs being higher than contributions paid in, so academies should expect to see an increase in LGPS pension contributions going forward.
- Many independent schools are suffering from the loss of additional sources of income, such as rental income from sports halls or other facilities. However, there have also been some costs savings due to these facilities being closed.
- Parental contracts were discussed and the obligations to provide an education to the pupils. Some elements cannot be supplied remotely, for example, boarding facilities, catering, sports facilities so consideration needs to be given as to whether a reduction of fees is required for this element of the contract. However, if the education element is being provided remotely, then the school should be fulfilling their obligation (but schools should check the wording of their contracts).
- It was noted that some schools did offer a discount on fees during the first lockdown in March 2020, but these discounts have not been extended to the current fees while schools consider what cost savings they have been able to make and whether these can be passed on to the fee payers. Any discounts given must be balanced with the reserves held by the school and the future impact on the school. The possibility of bad debts was discussed and whether these will increase as the government funding schemes such a furlough and loans are reduced.
- In discussion it was noted that most parents appeared to be happy with the reassurance they are being given by the schools, but it was noted that the Independent School Standards (Part 7) provides guidance as to how any complaints by parents should be dealt with.
The forums provided an opportunity to share the knowledge and experience of the participants. If you have any questions on any of the points discussed, or would like some advice for your school or academy please do get in touch with Scott Lawrence at email@example.com or Judith Carrington at firstname.lastname@example.org or on 01242 680000.
If you would like to participate in future education forums, please email email@example.com.