Academies annual accounts: 6 things we’ve learned about academy finances

The Department for Education has for the first time published consolidated annual report and accounts for the academies sector.

The report relates to the 2015-16 year, and gives an overview of the finances of England’s academies.

Here are some of the key findings…

1. 102 academy bosses are paid £150,000+

According to the annual accounts, 102 “trustees” – which can include chief executives and principals – were paid more than £150,000 a year in 2015-16. This includes bonuses but excludes pension costs.

This includes seven people at trust level and 95 people in academies themselves.

This represents a slight decrease on the previous year, when 111 trustees were paid in excess of £150,000.

2. Almost £59m paid out in exit packages

Academies and trusts paid out £58.7 million in exit packages in 2015-16. This is up from £51.6 million in 2014-15.

Of the 5,598 staff departures agreed, 2,699 (48 per cent) were compulsory redundancies and 2,899 were “other” departures.

In the previous year, 4,689 departures were agreed, of which 1,964 (42 per cent) were compulsory redundancies.

3. Related-party transactions hit £120m

Academy trusts paid out more than £120 million to “related parties” – companies or individuals with links to the trust – in 2015-16.

This includes 70 payments of more than £250,000 and 25 payments of between £200,001 and £250,000.

Trusts also received £73 million in payments from related parties.

4. Donations and fundraising make up 4% of academy funding

Although income from the DfE and its various component bodies made up 88 per cent of the £18 billion income received by the academies sector, around 4 per cent came from donations (£300 million) and “fund-generating activities” (£400 million).

The rest of the funding came from capital grant income of £1.9 billion, and “other” sources, which provided £800 million.

5. Academies are holding more cash

The sector held assets valued at £52.7 billion as of last August. Of these, land and buildings made up 86 per cent, while cash holdings formed 6 per cent.

Cash holdings in the academies sector totalled £3.2 billion in August last year, up £86 million on the previous year.

However, the government says this is still only equivalent to an average cash balance of £560,000 per individual school.

The level of cash balances is also likely to be higher in August than at other times of year “due to the high proportion of capital improvement works conducted over the summer months”, the DfE says.

6. Pension liabilities almost double

The academies sector reported pension liabilities of £7.4 billion at the end of 2015-16, up from £3.8 billion in the previous year.

According to the DfE, the primary driver of the increase was “actuarial losses” of £3 billion, based on “changes in both demographic assumptions and the discount rate”.

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  1. Mark Watson

    With regards to related party transactions, I’ve said before that I don’t think these are always a bad thing. If an academy trust is buying 100 desks and the cheapest price available is from a trustee’s company (because there will be no profit involved) then that is a positive thing as it means the academy trust saves money.
    That being said, public perception and the potential for conflict and corruption should be recognised. The Academies Financial Handbook sets out clear and sensible rules that must be followed for related party transactions, and an academy trust should (a) make sure they follow them closely, and (b) publicise full details so there is no ambiguity.
    I would go further in the case of these significant transactions (whether the bar is set higher or lower than the £250,000 referred to above). If I was a trustee and was proposing to enter into such a substantive deal, presumably because I thought it was a good deal for my trust, I would want some objective independent review of the transaction to confirm it follows the rules and provided best value. I would then ensure the report was published (transparently, not buried in the annual accounts), accepting that there may be a good reason not to publish specific figures.

    • Mark – as long ago as 2012, the National Audit Office expressed concern about conflict of interest between academy trusts and sponsors. It recognised academies could benefit from economies of scale when central services are procured in this way but concluded such arrangements should be tested against industry benchmarks and regularly checked to ensure value for money.
      But academy auditors aren’t expected to ensure value for money. They just check accounts have been made up properly.
      In 2016, evidence given in court showed how academy trustees could profit under the DfE radar.
      Former head of the Public Accounts Committee, Margaret Hodge, said related party transactions should be banned. This would remove any incentive for trustees to profit from providing services or goods to academy trusts and also prevent any abuse of the system.

      • Mark Watson

        Without being facetious, theft is not only banned but it’s illegal. Doesn’t stop it happening though.
        Where I do agree with you is that I feel related party transactions involving an academy trust sponsor should be taken more ‘seriously’ than others. (As a side note, it would be interesting to know how much of the £120 million related to ‘sponsor contracts’). Again, as my first post sets out, maybe ALL related party transactions involving a sponsor should be subject to independent review and transparency.
        I know that some people are resolutely cynical about why people become academy sponsors, but there is actually the potential for it to be a philanthropic gesture. Using Lord Harris as a theoretical example, without knowing any of his or the Harris Federation background and knowing he’s no longer involved in Carpetright, if the Academy Trust was looking to recarpet all of their schools and the lowest cost they could do it for on the open market was £200,000 and he offered to have it done for £100,000 because the carpet would be provided at cost and the labour provided for free – are you seriously saying that out of principle you would force them to spend an unnecessary £100,000?

  2. Mark Watson

    I read that story and it was complete rubbish. It referred to heads “who cannot talk openly about the brutality of their treatment because of gagging clauses they are compelled to sign as part of their settlements”. This is so misleading I can’t understand how even a moderately knowledgeable journalist could have possibly written it in good faith.
    Firstly no-one is ever compelled to sign a settlement agreement. This is an entirely discretionary document that the employer and the employee can agree to sign if both want to, on the basis both get a benefit out of doing it.
    If a headteacher’s employment contract is terminated they don’t have to sign anything to get outstanding salary/expenses, payment in lieu of notice etc.
    A settlement agreement is used where an employee is paid MORE than they are contractually entitled to in return for something – usually agreeing not to take action against the employer, undertaking to not discuss their departure or accepting a shorter notice period. There is no ability for the employer to force the employee to sign it, and if the employee doesn’t believe what they are being offered is worth it they won’t sign it.
    Not only is it highly likely that all headteachers in this position will have consulted with their unions (who are of course highly experience in dealing with these types of agreement), it is a legal requirement that a settlement agreement will only be binding if the employee has taken independent legal advice (and almost always this is paid for by the employer). So any headteacher who signed a settlement agreement will have had it explained to them exactly what it meant and made their own mind up as to whether to accept it.
    So when the article refers to heads risking their “financial package” if they spoke up this is because they knowingly agreed to take money they weren’t otherwise entitled to in return for a confidentiality obligation. I can’t really see the iniquity here.
    BTW, this isn’t in any way defending how/why heads are sacked. It’s simply pointing out that if I’ve freely negotiated a payment from someone for not doing something I can’t then whine about not being allowed to do it.

  3. I wonder why MATs are willing to pay sacked Headteachers “more than they are entitled to”, in order to stop them speaking publicly.
    This is taxpayers money they are giving out, to prevent Headteachers they have sacked going to the press. In common parlance this would be called a bribe.

    Obviously it is easier to give away if it is someone else’s money, but can anyone shed light on why you would give away money that you did not need to give away? With school budgets so stretched, to give money away it would need to be a really important issue that needed to be kept quiet.

    Perhaps there is someone out there who refused the money, who could enlighten us.

    • It’s also worth remembering that heads removed in this way are very unlikely to gain employment in schools after their removal. It wrecks careers. If the head has behaved unprofessionally then it’s a disciplinary matter and if proven s/he should be sacked. But removing a head following one year’s poor results risks football coach syndrome where the coach is immediately sacked if the team loses matches. Or worse, if a head is removed when a school joins a MAT as happened recently at Great Yarmouth Charter Academy or at TKAT academies where TKAT gave written evidence to the Education Select Committee admitting one of its first actions in most of the schools it took over was to remove the head.
      With cases like this it’s no wonder teachers are becoming reluctant to become heads – it could be career suicide.

    • Mark Watson

      “Local authorities have paid out more than £220m in settlement payments over the last five years to just over 17,000 ex-employees, with many agreements including gagging orders, but the LGA says all payments were only authorised in the public interest.”
      Hmmmm, curious. Seems like it’s not just big bad academy trusts that do this sort of thing.
      Why would local authorities give away money that it did not need to give away? With council budgets so stretched, to give money away it would need to be a really important issue that needed to be kept quiet. Perhaps there is someone out there who refused the money, who could enlighten us.