A school will be granted “extremely rare” permission by its local authority to run with a deficit for five years while it implements cost-cutting measures to get back into the black.
An interim executive board (IEB) was appointed to take over the running of Sedeghill School (pictured), in Lewisham, London, last month after it received a requires improvement grade from Ofsted. Upon taking over the school’s accounts, the board discovered a £1 million overspend.
The IEB applied to Lewisham council for a licensed deficit, which would allow the school to end the financial year with a loss. These can only be sought in “exceptional circumstances”, with the council’s dedicated schools grant used to cover the losses.
Council leaders have drawn up a five-year plan to make savings and the application was due to be approved by Lewisham’s mayor at a meeting on Wednesday.
But the anticipated cost-cutting measures may have a detrimental impact on the curriculum or lead to “unnecessary” redundancy costs, according to an agenda for the meeting.
Councillar Paul Maslin, cabinet member for children and young people, said: “This is about recognising the deficit exists and that the recovery plan will take time.
“The school is only two thirds full. The hope is the new executive headteacher and IEB can get the school full again so dealing with the deficit will have less of an impact as they will have a larger budget.”
The local authority will use 13 per cent of the collective balances of all its schools to fund the deficit, which it plans to clear by 2019/20.
Sedgehill had projected a budget overspend of £45,000 for the 2014/15 financial year. However, when the IEB took over they investigated and found the actual deficit was near £1 million.
The council report states: “No evidence of a deliberate attempt to misrepresent the financial standing of the school or any unusual transactions were identified.”
It said both overspending on salaries and overestimation of income from external sources had contributed to the deficit. Sedgehill was noted to be spending 19 per cent more on support staff than a similar sized secondary. Teaching pay and admin staff costs were also higher.
The IEB has now identified savings of £1 million. Although the majority of this is said to come from non-staffing expenditure, some reductions in staff costs will be required.
The report said leaders have “tried to maintain the balance of not impacting on the standards, while maintaining wherever possible the extra-curricular activities available in the school”.
Cllr Maslin said the cutbacks could include scrapping a partnership with Fulham Football Club and an artists-in-residence programme.
“Sadly, talking to parents these were some of the reasons that attracted them to the school,” he added. “But you can’t spend money you haven’t got.”
In December last year, Lewisham Council tried to appoint an academy principal as executive headteacher at the school but the former governing body rebuffed the attempt.
The council asked the Department for Education for powers to install an IEB, which was granted in January. Campaigners have protested against what they called a “hostile takeover”, raising fears it paves the way for the school to convert into an academy.