Covid

Trust blames not balancing books on lack of DfE Covid cash

An expert said standalone academies faced particular challenges, but Covid boosted rather than worsened many schools' finances

An expert said standalone academies faced particular challenges, but Covid boosted rather than worsened many schools' finances

9 Aug 2022, 13:14

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A single-academy trust which failed to balance its books has blamed the government for not covering all its extra costs and lost income during Covid.

One expert said standalone academies faced particular challenges facing Covid without central trust or council support, but most schools’ finances had improved rather than worsened during the pandemic.

The Education and Skills Funding Agency issued Bamford Academy in Rochdale, north-west England, a notice to improve last month.

The move slaps spending controls on the 335-pupil primary school, and it must now make “every possible economy” and consider joining a larger trust by October.

The published notice says it failed to achieve a balanced budget or provide documents to ESFA. The regulator acknowledges “some action” subsequently by the trust, but continued issues mean ESFA lacks “sufficient assurance of good financial management and governance”.

The most recent trust accounts for 2020-21 show it spent £276,000 more than it received in general restricted funds, which cover most day-to-day expenditure.

Its current assets stood at £112,000 at the start of the academic year, when it had £190,000 due to lenders over the next year – leaving a net £78,000 deficit.

Trust blames funding ‘restrictions’

The trust did not respond to request for comment, but after highlighting the deficit its accounts state: “During the year…it became evident that one-off costs due to Covid were not going to be reimbursed and the reduction in expected income would have a negative impact of around £75,000.”

This included £50,000 on “following the government’s guidelines”. It gives examples including additional cleaning, supply cover for vulnerable staff, and staggering start times, which saw the trust pay teaching assistants for extra hours. The trust highlighted a further £25,000 shortfall in lost income from “typically strong” lettings.

“Funding parameters and restrictions applied to Covid claims meant not all costs could be recouped.” They argue their reserves policy needs rewriting to “safeguard against future government policy on health and safety”, diverting cash from provision – though admit they are missing current reserves targets anyway.

Micon Metcalfe, a school finance expert, noted government limits on Covid compensation had been “fairly tight”, and regions like the north-west had seen “much higher incidents of Covid and staff absence”.

Rochdale had the highest coronavirus cases in Greater Manchester when the hotspot region faced a localised lockdown in autumn 2020, excluding schools.

Schools could claim for some but not all Covid costs. One study found less than a third of costs were directly reimbursed, and Schools Week revealed the £42 million of rejected claims from PPE to food to trauma training.

School reserves already low in 2019-20

But a DfE spokesperson said the trust “received all Covid funds they were entitled to and bid for”.

Bamford Academy’s accounts show it did receive £11,000 exceptional support funding, and £38,000 catch-up premium funds.

It had also gone into 2020-21 with net assets of just £8,000, after recording a £149,000 in-year deficit on its general funds in 2019-20. It acknowledged in the previous year’s accounts reserves then were “considerably short” of the amount needed to cover one month’s payroll, £93,000, or handle emergencies.

Breaches of academy rules alleged by ESFA include “failing to take sufficient action to avoid the current cashflow position”.

A government spokesperson said it was the trust’s financial management that had “led it to accrue a deficit without a plan to return to surplus”.

Bamford Academy’s accounts say they have cut staff costs and plan expansion to two-form entry to plug the deficit.

The notice also told the trust to consider appointing new auditors to ensure “robust independent challenge”. Current auditors Haines Watts declined to comment.

Covid savings but standalone schools struggle

Metcalfe said she could understand if the lack of extra Covid cash felt “unfair” to a school with small margins, but the case should not be seen as indicative of a wider Covid cash crunch.

While some schools saw significant difficulties with costs like supply, for many there were reduced costs such as lower bills during partial site closures and scrapped visits.

“Schools received full funding. There were savings elsewhere, though the money’s never quite where it should be. For some savings weren’t possible.”

Official figures this year showed the average trust’s reserves jumped by a quarter in 2020-21, and 97.4 per cent broke even or reported surplus cash. Similarly, the number of maintained schools in deficit plummeted at a record rate, though the DfE acknowledged “substantial variation” nationwide.

But Metcalfe said the case did “highlight the challenges of a single-academy trust with low levels of reserves”. She said many maintained schools benefited from local authority support during Covid, while many multi-academy trusts provided central support.

Standalone academy numbers were already falling pre-pandemic, and former education secretary Gavin Williamson warned last year Covid showed they were “no longer viable”.

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