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Grant Agreements - The Risk of Clawback

on Friday, 13 January 2017.

Conversion to academy status or the re-brokering of an academy from trust to trust without consent on a grant agreement, may give the third party organisation the right to claw back the grant funding - even if the grant was made a number of years ago.

Grant agreements are sometimes overlooked as part of the academy conversion (or re-brokerage) process which could cause the recipient school or academy to inadvertently breach the terms of the agreement, or cause a significant delay.

Schools often enter into grant funding agreements with charitable or other third party organisations (for example - Sport England or the Big Lottery Fund) in respect of grants for sporting equipment or for a contribution towards the cost of a substantial new asset - for example a sports pitch or sports hall.

Obtaining Necessary Consents

It is likely that the third party to the grant agreement will need to give their consent in order to transfer the asset or land on which the asset is situated to the academy trust (even in respect to smaller grants). This is because the third party organisation will want to monitor the academy trust's use of the grant funding and going forward, will want to know which legal entity is receiving the benefit of the grant funding.

Third party organisations have specific requirements before giving their consent. This could be by way of a short letter agreement for smaller grants or, for larger grants, a deed of transfer and release which will require negotiation between the parties. With regards to significant grants in respect of an asset, the third party organisation may also have a restriction on the school's title and require that the acquiring academy trust enters into a similar restriction before giving consent.

What steps can you take?

If you are considering conversion or if your academy is being re-brokered, we advise you to locate and review agreements of this kind at an early stage to ensure that any necessary consents are obtained in good time to avoid delays and also to avoid breaching the provisions inadvertently - which has the risk of triggering the repayment of grant funding.

We can assist with any additional documentation required to regularise the position and advise you on the risks associated with such arrangements.

For further information on how we can help you please contact Alex Ireland in our Academies team on 0121 227 3721.