Preliminary advice on funding to maintained schools considering conversion to academies

This page outlines how maintained schools converting to academies will be funded. It also sets out the principles of academies' funding and how it is calculated.

Principle of funding

The principle of academies' funding is that academies should receive the same level of per-pupil funding as they would receive from the local authority (LA) as a maintained school. In addition, they receive top-up funding to meet additional responsibilities that are no longer provided for them by the LA.

The Government is clear that becoming an academy should not bring about a financial advantage or disadvantage to a school. However, academies have greater freedom on how they use their budgets, alongside the other freedoms that they enjoy.

How funding is calculated

Unlike maintained schools that are funded on the traditional financial year basis (April to March), academies are funded from September to August to reflect the academic year.

The funding for academies comes in the form of a grant, known as the General Annual Grant (GAG), paid by the Young People's Learning Agency (YPLA). For schools converting in September, the YPLA will issue formal notification of grant funding for each school in August. This note explains how the grant will be calculated. The GAG is made up of different elements, as indicated below:

  • An amount equivalent to the school's current budget share
    By far the largest element of GAG is the school's core funding, know as its delegated budget share. This will be the same as the school's current budget share received from the LA. We make a small adjustments to reflect any reduced business rates, paid by an academy as a charitable trust, and for insurance, which is paid separately in GAG.
  • Local authority central spend equivalent grant (LACSEG)
    This is the additional money to cover those central services that the local authority no longer provides. Important note - this is not a uniform figure across the country. It varies between LAs and will reflect the amount the LA already holds back to pay for central services. This element of grant is calculated by the Young People's Learning Agency (not the local authority), using a formula, based on an academy's pupil numbers and the amount that the relevant local authority spends on the services and costs. It is not based on the actual costs of the services supplied to the individual school. The relevant services and costs include:
Services and costs funded from a local authority's Schools Budget Services and costs funded from other local authority sources
  • Special educational needs (SEN) support services (see next section)
  • Behaviour support services
  • 14-16 practical learning options
  • School meals and milk
  • Assessment of free school meals eligibility
  • Repair and maintenance of kitchens
  • Museum and library services
  • Licences and subscriptions
  • Central staff costs (maternity, long term sickness and trade union duties)
  • Costs of certain employment terminations.
  • Costs of a local authority's statutory/regulatory duties
  • Asset management costs
  • School improvement services
  • Monitoring national curriculum assessment
  • Education welfare service
  • Pupils support (e.g. clothing grants)
  • Music services
  • Visual and performing arts services
  • Outdoor education services
  • Certain redundancy and early retirement costs.

Academies need to consider how they will obtain these services using the additional funding they receive. They are free to buy back the services from the LA or find them elsewhere. Depending on which LA the academy is in, it might be the case that the school is already responsible for some services, and will already receive money rather than services from their LA.

The LA also retains some funding for services that it has to continue to provide, and related costs. These are:

  • home to school transport (including SEN)
  • education psychology, SEN statementing and assessment
  • monitoring of SEN provision, parent partnerships, etc.
  • prosecution of parents for non-attendance
  • individually assigned SEN resources for pupils with rare conditions needing expensive tailored provision (this is usually a top-up to formula funding)
  • provision of pupil referral units or education otherwise for a pupil who is no longer registered at an academy.

SEN funding

If LAs retain funding for services for pupils with SEN, a grant in respect of this is paid to the academy using numbers of children registered as School Action and School Action Plus attending the academy. Some authorities retain little or no SEN funding centrally, choosing to delegate this funding for services to schools through the formula funding (budget share).

For academies in these LA areas, the SEN element of the central spend equivalent for these authorities will be much lower than for academies in other authorities, as the funds will already be included in their budget share. Individually assigned funding for children with statements will continue to be paid as normal, through the LA. The LA will continue to have a legal duty to ensure that the statement of SEN is fulfilled and does this by paying the individually assigned funding, and monitoring provision made by the academy.

Other funding

Academies also receive grant funding to meet the additional VAT they incur because they cannot use the LA's VAT reclaim facility and to meet their insurance costs. All other specific grants, including Standards Fund grants and Schools Standards grants will continue to be paid as normal by the LA up to 31 March 2011. Arrangements for these grants after that date, for all schools, are still under consideration.

Deficits

Academies are not allowed to run a deficit without remedial action. Any that open with a transferred deficit will need to agree with the YPLA, at the earliest opportunity, a plan to repay it from GAG instalments. Any that develop a deficit after opening will have to agree a restructuring plan with the YPLA.

More information

Further pages on this site provide detailed information on academy funding. They include:

  • A ready reckoner which will enable schools considering conversion to academy status to calculate the level of funding they should receive as an academy, and allow them to compare this with the funding they currently receive
  • A spreadsheet setting out LACSEG numbers for each local authority.
  • Further information on how the local authority services equivalent amount is calculated.
  • A calculator for local authorities to use to work how much DSG is recouped for an academy conversion in the financial year 2010-11, together with guidance notes on recoupment.
  • The full set of documents on academy recoupment is available to download.