Meeting compliance and statutory obligations

The issue of compliance and regulatory requirements in education is an ever-evolving and growing topic. Once very financially focused, compliance covers a wide range of fields, including safeguarding and health and safety.

We sat down with ISBL CEO Stephen Morales to discuss the complexities of compliance and how to avoid common pitfalls.

Good morning, Stephen. Thanks for speaking with us today. We all know that compliance with the latest legislation and statutory guidance is one of the most important responsibilities for school leaders, yet this is an area that can change quite significantly – and frequently. How complex is it for people to navigate these updates?

Navigating your way through compliance can be enormously challenging. Things certainly ramped up during the pandemic, and they have continued to do so, particularly in terms of health and safety and safeguarding. It’s important that schools understand what's expected of them.

There’s currently a piece of work going on in the background, referred to as the Commissioning and Regulatory Review. A recent DfE publication sets out three really important areas: i) risk-based proportionate regulation; ii) a quality trust framework (what an effective trust should look like); and iii) the capability of the sector to respond to the first two items. Embedded within this initiative is the notion of simplification. The aim is to identify areas where administrative and regulatory burdens could be eased.

However, while there is a recognition that managing these existing burdens is challenging, it doesn’t change the reality on the ground and the many onerous tasks school leaders have to undertake to remain compliant. I would argue most leaders, governing bodies and trust boards spend the majority of their time on compliance. This effort feels disproportionate.

You mentioned there’s a move to try and simplify legislation. Do you know when those changes are likely to come or how long it is going to take for us to get to the point of simplified compliance?

The straightforward answer is no, unfortunately. We’re right at the beginning of these conversations, and I think we need a bit more clarity from the DfE about their simplification plans and future ambitions. I should say that I am part of these initial conversations and progress is being made – we now need to test some of this early thinking with the sector.

We saw a couple of straightforward regulatory concessions last year – for example, the removal of budget forecast return outturn (BFRO) requirements. Rather than requesting multiple BFR returns, the ESFA now just asks for one – this gives a little bit of capacity back to trusts. There are ongoing conversations about internal scrutiny and what is appropriate and proportionate. There are also steps being made to slim down the Academy Trust Handbook – although we are cautioning against the removal of critical guidance.

But these are fairly marginal gains. The bigger conversation needs to be around the broader regulatory and accountability environment. The high-stakes nature of accountability (financial, operational and pupil progress) means education is increasingly a less popular career option and the demands unsustainable for existing leaders. Politicians and ministers need to find a better balance between accountability and a manageable workload that does not unreasonably detract from the central purpose of teaching and learning. We hope this is one of the core aims of the simplification agenda.

We’re seeing a continuing push toward academisation across the country. Is this move impacting compliance, and how?

Firstly, there’s a view that structures of a certain size are better equipped to deal with compliance and regulation. For instance, as a standalone school or a small trust, you need to consider, amongst other things, sustainability, health and safety, safeguarding, cybersecurity, building and premises regulations, and all of the financial requirements. Often this needs to be managed with a very small team. It’s different for larger trusts as they can build central teams with dedicated specialists covering each of these areas.

A benchmarking report carried out by Kreston Reeves suggested that larger trusts were better equipped to respond to the ever-changing guidance during the COVID-19 pandemic.

If you take that example and extrapolate it across the normal regulatory environment, you can see how bigger central teams are in a better position to respond. It's important to note that responsiveness to compliance is not a proxy for improved pupil progress or outcomes.

This is why a grown-up conversation about proportionate regulation and ensuring it’s at a level that’s achievable for school is so important. There are many single schools, maintained primaries and small trusts that do incredible work in their community of learners, and they shouldn’t be disadvantaged by an overly onerous regulatory framework.

Given the constant changes in the regulatory environment for schools and academy trusts, how do school business professionals keep up?

It's a really good question, and the answer is that it's not just one place. Effective school business professionals have their tentacles reaching so many areas of activity. They draw information from numerous sources.

This includes information that flows from the DfE, government alerts, ESFA bulletins for trusts, and local authority updates for maintained schools.

Then, of course, there's the peer-to-peer support that the colleagues can lean into, whether that’s through social media or regional groups. There are professional bodies, like the Institute of School Business Leadership, sector bodies such as NGA and CST, and, of course, unions, who all try to keep their members well informed.

The issue is that quite often you can go to different places and get three slightly different slants on an issue. One of the roles of ISBL is to try to synthesise what is being said and explain the impact of sector developments or changes to education policy. We do this through our regular bulletins and finance and business updates.

What do you find are the common stumbling blocks for many leaders?

The first thing I would say is: you don’t know what you don’t know. Since 2010, when schools were offered new freedoms through academy status, many schools worked on their due diligence to ensure legal compliance at the point of conversion but left other matters unresolved.

The devil is in the details. It's really important to understand the expectations set out in the master funding agreement and Academy Trust Handbook. Indeed, they often direct the reader somewhere else, to another document or set of regulations that need to be understood and adhered to.

There's so much to think about, and if you've not been in that environment before and don’t appreciate the complexities of how various documents intersect, then you might find that suddenly you've missed something quite big.

More and more schools are moving into the trust environment, and without local authority support, it’s critical that someone is reading the fine print. Often the trust regulations are not second nature to those school leaders who have developed their careers in maintained schools, and that can be very daunting. After all, trusts are not only a collection of schools but a company limited by guarantee, a charity, and an arms-length government body. As such, they are highly regulated.

As a starting point, there are some key documents that you’ve got to make sure you’re across. The Academy Trust Handbook is certainly one of them. The master funding agreement is another, and the articles of association. These documents underpin everything, and it’s so important for trusts to be close to them. From there, it will take you to other bits of compliance that you have to consider – it's not to be taken lightly, and being compliant is a huge job.

I'm focusing particularly on compliance in the trust world here because in the maintained sector, while not universal, the local authority should be guiding schools through their obligations, and if they miss something, they should be there as the backstop to advise. There is no such backstop for academy trusts.

If trusts breach the regulatory requirements, there are serious consequences, including a notice to improve, re-brokerage or the termination of the master agreement.

You touched on the consequences of getting it wrong there – just how serious can this be and, if the worst was to happen, how would you handle it?

So as I mentioned, for a maintained school, it’s almost entirely within the gift of the local authority to decide what to do or what support comes next (notwithstanding serial underperformance when the Regional Director may step in). For trusts, the stakes are much higher.

If you breach your regulatory requirements, you can very quickly be served with a notice to improve, which could mean a period on the watchlist of the ESFA as well as reputational damage because all of this is in the public eye.

In the worst cases, as I mentioned earlier, the master funding agreement can be torn up, which effectively terminates the contract with the Secretary of State, and control of the trust is then taken away. From there, it wouldn’t be unusual to expect a change of leadership and trust board.

So the consequences are significant, and they can be for a range of things. Historically, the focus was on finance-related matters, but that focus is now expanding to cover areas such as health and safety and safeguarding. Isolated instances and even minor breaches are taken very seriously.

We have a high-stakes accountability framework and some vulnerable new leaders not necessarily completely conversant with trust regulation making for a perfect storm.

What is ISBL doing to help school business leaders navigate the complexities of compliance today?

We’ve been very close to compliance for years. I was the first chair of the working group that provided sector oversight of the Academy Financial Handbook, now the Academy Trust Handbook, and passed the baton to Stephen Lester (ISBL Chair) over a decade ago.

We're very proud to have been instrumental in amendments to the Handbook. We did a lot of work to turn what was a very long document into something more digestible and user-friendly for all stakeholders. We’re also very much a part of the ongoing conversation around simplification, identifying which parts of the administrative and regulatory bureaucracy imposed on schools we can make more straightforward. In addition, we fed into the regulatory and commissioning review.

As these conversations continue, we take important steps to make sure that our members understand what's expected of them and what's expected of their school leader colleagues, governors and trustees. We do that through our regular bulletins and, more recently, through our finance and business updates. We also have a new panel of experts ready to support schools and trusts with a whole range of issues including regulation and compliance.

Any final pieces of advice?

Don’t sit in silence and worry if you’re unsure. Don’t be concerned that you should know the answer and that if you ask for help you’re somehow admitting a failure or incompetency. Not to ask is negligent!

If you don’t want to ask someone within your organisation, or a colleague, then come to us. Even if we don’t know the answer straight away, we’ll connect you with the right expert.

We have a huge network of subject matter experts, we’re well connected to the big law firms, legal partners and audit firms, and we have colleagues who are completely immersed in the regulatory space.

It’s easy to get overwhelmed in this area, but you’re not alone – just reach out.