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update on sponsored schools and transfer of surpluses

29 August 2018

Sponsors should be aware of the recent guidance released by the Department for Education (DfE) in connection to the transfer of surplus on sponsored academy conversions.

Section 5 of the DfE guidance on surplus and deficit balances states that where the sponsored school has a surplus, such surplus will remain with the local authority, unless the local authority agree otherwise. The surplus would only remain with the sponsor if the governing body (GB) or interim executive board (IEB) of the sponsored school has itself applied for the academy order.

Whilst it is recognised that a sponsored school is more likely to be in deficit than surplus (and the DfE guidance confirms that deficits remain with local authorities) the position on surpluses goes against the general perceived understanding about how deficits should be dealt with. We are aware of a number of sponsors who had agreed to sponsor schools on the basis that they would retain a surplus and have now been forced to rethink their plans on the basis that the school would be in a significantly worse financial position.

We recommend that sponsors seek clarity as early as possible about the treatment of the surplus on any new project. Additionally, there is also scope for disagreement about how the sponsored schools’ budget should be managed in the time between the granting of the order and conversion. We would therefore recommend that sponsors agree principles in writing with the local authority to ensure that the schools’ finances are managed in a fair and appropriate manner in this period.

training and events


ISBL regional Conference Sheffield

Browne Jacobson’s Associate Sophie Jackson discusses the rise in growth of SEN and the impact of this on schools. Please note that this event was postponed from June 2020.

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CST Inaugural Annual Conference Hilton Metropole, NEC, National Exhibition Centre, Pendigo Way, Marston Green, Birmingham, B40 1PP

Come and meet the team at CST’s Inaugural Annual Conference this summer. Partner Nick MacKenzie will also be delivering a workshop on governance leadership.

View event

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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