What is a Funding Agreement?

The short answer is that the funding agreement is the contract between the Secretary of State and the sponsor or governors of an academy or free school which specifies how it is to be run. Funding agreements vary between academies/free schools and there are issues about how they can be enforced by parents/pupils.

Academies (and thus free schools) are established and operate under what are known in the Academies Act 2010 as “academy arrangements”.

By section 1 of the 2010 Act, “academy arrangements” can either be in the form of a contract known as an “academy agreement” (generally called a “funding agreement”) between “a person” and the Secretary of State for Education or they can be in the form of “academy financial assistance” (a form of grant).

The key point about funding agreements is that they vary.

So the key rule when it comes to dealing with an academy or free school is to look at its funding agreement. They are available on the DfE web site.

There are some statutory obligations (i.e. in acts of parliament) which directly apply to academies/free schools (because they apply to all schools or because they specifically refer to “academies”).

But obligations which the law imposes on “maintained schools” (or on one or more of the different types of maintained school, such as community schools) do not directly apply to academies/free schools. What applies is what the funding agreement specifies (unless the funding agreement has been overidden by an act of parliament)

In some cases, agreements cross refer to the statutory provisions (or to Guidance or Codes of Practice) which would apply in a maintained school. In those instances, if the statutory provision, Code or guidance changes, then – indirectly and through operation of the relevant provision of the funding agreement – the obligation on the academy/free school changes too.

In some cases, agreements did not cross refer to statutory provisions (etc) but instead directly set out – as clauses in the contract – the text of those provisions (rewritten to make them apply to the academy). In those instances, if the statutory provision changes it has no impact on the position in the academy, unless and until the academy funding agreement is changed.

In other cases, funding agreements included obligations which covered the same topics as those covered by statutes covering maintained schools, but in very different terms. Again, changes in the position at maintained schools have no impact on the academy agreement in question.

Like any contract, funding agreements can be changed, but only by agreement of the parties – the proprietor and the Secretary of State. Very few have actually been changed.

Funding agrements could also be overriden by parliament. We now have an example of that in the new regime for permanent exclusion reviews.

So that means that legal rules vary from one academy/free school to another, sometimes very significantly.

So if anyone (including the Department) makes a general pronouncement about the legal position of academies (such as the claim that they all comply with the SEN Code of Practice), check the position for the academy with which you are concerned. Generalisations are likely to be wrong. It is regrettable that the Department, among others, persists with providing misleading information in that way.

Anyway, as explained in another post, many of the functions of the Secretary of State under funding agreements are now performed by the YPLA.

Chains/multi academies vs standalone academies

There is a separate post commenting on chain/multi academies. From the point of view of the funding agreement, be aware that, with a chain/multi academy, the Department seems to put in place a ‘master agreeement’ with the company that runs the chain and then ‘supplemental’ agreements with the company in relation to each individual academy in the chain. That means that, to understand the legal position in any of the individual academies you need to look at both documents (and indeed any others to which they cross refer). Sometimes there will be contract clauses in the supplemental agreement which ‘modify’ the effect of clauses in the master agreement. So the scope for complexity and variation between academies is even greater here.


  5 comments for “What is a Funding Agreement?

  1. shelllanc
    October 15, 2012 at 8:56 pm

    hi, my daughters school is being forced into academisation, the head has requested I find out more info on the legality. they are underperforming but there has been no warning, no consultation with the school/parents or governors, and no right to appeal this decision. Surely this is breaching the rules on natural justice, and an abuse of power? has the legal position been challenged yet? Any help would be appreciated thanks

  2. DW
    October 23, 2012 at 3:12 pm

    My guess is that the school is being told that UNLESS it voluntarily converts, then it will be forced. i.e. jump before you are pushed. Then, if the school does not convert voluntarily, the LA or SofS will go through the process of (among other things) installing an IEB which will then ‘consult’ on whether to convert (and so on). But the school should certainly be asking whoever (LA or DfE) to explain what process they think they are following (and what legal powers they are exercising). It would be good to know!

  3. brown bear
    December 2, 2012 at 1:46 am

    A similar thing is happening at my son’s school. We have been told that we must become an academy – ie. either comply or it will be forced. Because of similar cases recently we have decided it’s in the best interests of pupils to go along with this but have asked (and this has been agreed informally) to have our views taken into account in choosing a sponsor. I am not sure if this is actually going to happen though. Apparently it is the minister’s decision as to which academy chain to go with. What I am wondering though, is what sort of process is he required to go through? eg. When choosing whether to go with Virgin Trains or another rail company there is a formal bidding process. Does something similar apply to academy chains? If not, what protections are in place to ensure that the minister chooses appropriately and does not go with one run by his friends?

  4. DW
    December 14, 2012 at 10:19 am

    There are no specific legal requirements when it comes to choosing sponsors. General legal obligations (like the Public Sector Equality Duty) apply. On the face of it, the Minister could choose a sponsor ‘run by his friends’ as you put it.

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