Sweet-talking the government worth six figures to struggling trusts

Academy trust reserves have grown.

Some academy trusts are getting extra money simply because of their “powers of persuasion” while others struggle with their finances, leading accountants have warned.

The government’s “official message” is that no further funding is available for schools but “there appears to be a pool of money” available to some trusts, while others cover restructuring costs themselves, according to the wide-ranging new Kreston benchmark academies report.

For example, Delta Education Trust negotiated a £500,000 boost from the government in 2016-17, at the same time as by the Education and Skills Funding Agency slapped others in a similar financial position with financial notices to improve.

The Kreston report, which analyses the finances of 750 schools, found that negotiated grants and loans are the “one area” where academy income is rising.

A small number of trusts are demanding more money from the ESFA, usually for “cashflow purposes” or to deal with “unusual circumstances” such as taking on difficult schools.

“There does not appear to be a formula as to which it should be, so rather than funding being equitable, the outcome is down to the trust’s powers of persuasion,” the report concluded.

Trusts are also persuading the ESFA to fund them based on their estimated pupil numbers rather than on the previous year’s, an arrangement with a “significant cashflow advantage”. Officially, only free schools are allowed to be funded on this predictive model, but some academies have managed to switch to it, again “based on the skill of the negotiator rather than any fixed set of criteria”.

Pamela Tuckett, a partner at accountancy firm Bishop Fleming, and author of the report, said only a handful of trusts are “savvy” about negotiations, with the majority only starting to “hear about it on the grapevine”.

“This imbalance has been going on a long time,” she said.

The latest accounts for Delta concluded it had a “reasonable expectation” of continued operations due to a £480,000 government advance to its general annual grant as part of a “recovery plan”.

Both Tuckett and Phil Reynolds, an academies specialist at Kreston Reeves, agreed this was an example of a trust negotiating funds on its own terms. Schools Week has approached the trust for comment.

Chatham Grammar School for Girls also negotiated instalments of cash payments when it ran into financial difficulties, before it joined the University of Kent Academies Trust this September. By being upfront with the ESFA immediately, the school managed to avoid a financial warning, Reynolds claimed.

“We always say, tell the ESFA as soon as you can. Otherwise they come down like a ton of bricks,” he said.

But other trusts are not so lucky. In September, the government handed Plymouth CAST, which runs 35 schools, a financial notice to improve over its “weak financial management and inadequate governance” – even though its chief executive insisted the trust referred itself to the ESFA.

Plymouth CAST must now run most spending decisions past the funding agency, and could even have had its funding terminated, had it failed to submit an action plan.

The critical importance of negotiating with the ESFA has led to much more demand at academy trusts for top chief financial officers, and the biggest trusts are offering salaries upwards of £80,000 a year.

Mary Bousted, the joint general secretary of the National Education Union, said the report’s findings confirmed a “lack of transparency” about academy funding arrangements. She wants the finance needs of all schools to be “objectively assessed.”

The DfE was unable to comment by the time of going to press.

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  1. John Connor

    The Tories have created this toxic climate where this kind of corruption becomes possible, and then normalised. There is no accountability, coherence or rationale behind any of these decisions. They are taken on the hoof using criteria which seem to evolve on a case-by-case basis. In other words they make it up as they go along. The whole rotten system should be pulled down and its architect, Gove, severely sanctioned for the chaos and wreckage he has wrought.

  2. Mark Watson

    Pious hand-wringing.
    Twas ever thus – back in the day some schools had better links to local authorities and miraculously seemed to get more money when it came to fixing buildings etc.
    Some schools had parents and governors who shouted loudest or had personal links to those individuals in the council who made decisions – guess what, those schools did better.
    Everyone knows this, but it somehow seems to be forgotten in the rush to demonise academies.

  3. A comparative analysis may or may not prove your points gentlemen. It is not going to happen though. Whatever the outcome would be or what happened in the past if these accountants are right and this story is accurate it is a poor show. Could we all agree on that?

  4. Perhaps if schools of all types were funded adequately, then there would be no need for academies to go cap-in-hand to ESFA.
    That said, LA maintained schools have been able to apply to their LA for a ‘Licensed Deficit’. This isn’t extra funding but legal permission to set a deficit budget.
    The school must put in place a recovery plan within conditions set by the LA in its local Scheme for Financing Schools. This would include a maximum period (no more than three years) and regular monitoring meetings to make sure the school achieves the recovery plan.
    This appears similar to the arrangements made for academies in financial difficulties. However, transparency and consistency is essential, not ad-hoc, inconsistent arrangements where it appears one trust gets help while another in a similar situation is slapped with a financial notice to improve.
    LAs can operate loans schemes to schools, but these are not supposed to replace a licensed deficit arrangement.
    However, in April the Gov’t consulted on changes to criteria for agreeing loan schemes. It’s still analysing the feedback.