62B The Secretary of State may give a DFE Principal Agreement Warning Notice to the Governors where3:
the Secretary of State is under a liability to make payment to the LA pursuant to the DFE Principal Agreement in respect of any Normal Payment Matters; or
[the Secretary of State considers that in the immediately preceding 12 month period, the aggregate of payments made by the Academy Trust to the LA pursuant to the DFE Principal Agreement in respect of Normal Payment Matters has reached a level which the Secretary of State considers to be excessive and which may (assessed objectively) cause the Academy Trust material financial difficulties; or]
OR
[in the immediately preceding 12 month period, the aggregate of the payments made by the Academy Trust to the LA pursuant to the DFE Principal Agreement in respect of Normal Payment Matters has reached more than 5% of GAG (as defined in the Funding Agreement); or]
c) NOT USED; or
d) [the Secretary of State considers (acting reasonably) that the Academy Trust's compliance with its obligations under the [Development and School Agreement] [School Agreement] and/or the DFE Principal Agreement (including its approach to contract management and cooperation) is such that claims and/or disputes under such contracts are of a number and/or nature likely to materially and adversely impact on the provision of educational services at the Academy; or]
OR
[the Secretary of State considers (acting reasonably) that there has been a Persistent Breach of the [Development and School Agreement] [School Agreement] and/or the DFE Principal Agreement likely to materially and adversely impact on the provision of educational services at the Academy, and for the purposes of this Article 62B(d) "Persistent Breach" means:
(i) a particular breach (including, but not limited to, a breach which relates to contract management and co-operation) which has recurred three (3) or more times in any rolling six (6) month period; or
(ii) the occurrence of five (5) or more different breaches (including, but not limited to, breaches which relates to contract management and co-operation) in any rolling six (6) month period; or]
e) the Academy Trust has committed a material breach of the [Development and School Agreement] [School Agreement] and/or the DFE Principal Agreement.
62C The Secretary of State may appoint Additional Governors as he thinks fit if4:
a) the LA has recovered any sums from the Secretary of State pursuant to the DFE Principal Agreement; or
b) the Academy Trust has received a DFE Principal Agreement Warning Notice pursuant to Article 62B and the Academy Trust has not, within [10] working days of such notice provided a remediation plan: (i) setting out the Academy Trust's proposals to improve compliance with the [Development and School Agreement] [School Agreement] and/or the DFE Principal Agreement; (ii) setting out a response by way of explanation to the description of the breach or other circumstances which gave rise to the DFE Principal Agreement Warning Notice; and (iii) dealing with such other matters as may be the subject of the relevant DFE Principal Agreement Warning Notice, such plan to be acceptable to the Secretary of State (acting reasonably); or
c) [the Secretary of State considers there to be mismanagement of the Academy Trust's finances; or]
OR
[the Academy Trust has failed to comply with a material recommendation of the auditors appointed by the Secretary of State under clause 69 of the Funding Agreement where such recommendation relates to the implementation of any statement of any recommended accounting practice required to be adopted by the Academy Trust; or]
d) [the Academy Trust has committed a material breach of the [Development and School Agreement] [School Agreement] or the DFE Principal Agreement (whether or not such breach has been the subject of a DFE Principal Agreement Warning Notice); or]
OR
[the Academy Trust has committed a breach of the [Development and School Agreement] [School Agreement] and/or the DFE Principal Agreement which causes an [Authority Default] (as defined in the Project Agreement); or]5
e) the circumstances envisaged by clauses [60A.9] and [60A.10] of the Funding Agreement in respect of EAG funding are applicable;
provided that the Secretary of State may only appoint such additional persons if to do so is in the interests of the Academy.
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3 See footnote in respect of 62C for a discussion of this provision.
4 The intention of the warning notice and flooding arrangements in Article 62B and 62C is to provide the Department with an ability to exercise varying degrees of control over the Academy, and in so doing enable the Department to manage and mitigate its potential exposure under the Normal Payment Matters in the DFE Principal Agreement. Readers are advised to review the Department standard form Principal Agreement, and drafting and footnotes therein for further information. In the event that difficulties in the Authority / Academy relationship arise, the Department anticipates in most circumstances submitting a suitable DFE Principal Agreement Warning Notice to the Academy, thereby allowing the Academy the opportunity to rectify and/or remedy the circumstances. In the event that the issues are not resolved, and the Department remains concerned, it will have the ability to flood the Governing Body and thereby influence decision making. The DFE, however, retains the ability to flood the Governing Body without having first provided a warning notice if it considers such action necessary in the circumstances. Readers will note that the flooding triggers in Article 62C are carefully scoped, and intended to apply directly to the features of the Development and School Agreement and DFE Principal Agreement. They are also deliberately widely drafted, so as to allow the Department flexibility as to exercising its rights.
5 If this option is adopted, check the terminology used against the Project Agreement and add a definition for "Project Agreement" to the Articles which reads along the following lines (to be checked against the Project Agreement in question): "means the project agreement between the LA and a project company for the design, build, finance and operation of school facilities (including the Academy's facilities) dated [insert date] (as may be varied from time to time)".