An academy trust says it had no choice but to break finance rules and use £530,000 of revenue funds to save its multi-million pound sports centre after regulation changes threatened to derail the project.
Herts and Essex Multi Academy Trust (HEMAT), which operates two schools, was issued a financial warning to improve after breaching the academies financial handbook. The warning notice was published on Friday.
The trust had failed to ensure spending had been “used for the purpose intended” after using revenue funds as capital to help to build a £6.5 million sports centre at The Hertfordshire and Essex High School.
The sports centre broke ground in May 2018 and was due to open by Easter last year.
However, new regulations banning the use of combustible materials in certain structures came into effect in December 2018. The new rules followed the Grenfell fire in west London in which 72 people died.
A building inspection of the centre showed that alterations had to be made, including swapping cladding for bricks, while 30-minute burn-time glass was updated to 60 minutes.
A trust spokesperson told Schools Week the redesign created a “significant delay”. The trust had already utilised “sizeable grants” from Hertfordshire County Council and East Herts District Council.
“As a result . . . it was decided that the project would have to go ahead, even with the knowledge of the deficit that would inevitably accrue,” the spokesperson said.
The extra design work, building and delay costs – with the cost of the waste from materials ordered, but not used – plunged the trust into a £530,000 deficit.
Matthew Clements-Wheeler, the chair of the Institute of School Business Leadership, admitted he had “a degree of sympathy” for the trust. But when projects went wrong, trusts had to make “swift communication” with the Education and Skills Funding Agency (ESFA).
“Whenever something goes awry the first port of call should always be back to the department – officials there are reasonable, measured and experienced in taking steps.”
However, he warned “conversations” with officials were not the same as approval.
The financial warning also noted the trust “has evidenced significant weaknesses in the control of its cashflow and the monitoring of its financial position”, requesting urgent financial support on “multiple occasions” only to “withdraw or delay the request at the last minute”.
In its most recent annual accounts, which cover the year up to August 2019, the trust admits it has “considerable reliance on continued government funding through the ESFA”, with most of the school’s incoming resources “ultimately government funded”.
But the trust spokesperson added: “We have a solid plan that will enable us to pay back the existing deficit. HEMAT is pleased to working closely with the EFSA with regards to this.”
The warning notice will mean the trust has to have some actions, such as paying compensation payments and writing off debts and losses, approved in advance by the ESFA.
The sports centre, which has facilities such as an artificial turf pitch, dojo, gym and six outdoor courts, finally opened in September last year.