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.


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