Top academy schools sound alarm as cash crisis looms

CREDIT: This story was first seen in The Guardian

Major trusts warn over pay, staff levels and maintenance costs, The Guardian reports.

More than half of the major operators of the government’s flagship academies programme have sounded the alarm over school funding, heaping further pressure on Theresa May to ease the squeeze on public spending.

An Observer investigation into the Conservatives’ treasured education initiative found that six out of the top 10 academy trusts, which operate hundreds of schools across England, have raised warnings over pressures on pay, staffing levels, building maintenance and mounting deficits.

The revelation will worry Tory MPs, many of whom blame pressures on school budgets for the party’s disastrous election result last year. It comes with the prime minister already under intense pressure over NHS funding and facing internal criticism over a lack of focus on domestic issues.

An analysis of the most recent accounts of leading multi-academy trusts reveals that eight of the top 13 largest groups have issued warnings. One said that funding was failing to keep pace with costs and inflation, creating risks of ‘unsustainable deficits’ and staff cuts.

The Kemnal Academies Trust (TKAT), which is based in Kent and operates 41 schools, had core government funding of £124m last year, but reported a loss for 2016-17 of £6m. Eight academies were in the red. “Recent government announcements have indicated that funding per pupil will be unchanged in the short to medium term,” it states. “This increases the risk of mounting and unsustainable deficits. Careful budget planning will inevitably recommend fewer staff are employed at academies. This will be necessary to balance the budgets when additional income is not forthcoming.”

Birmingham-based Ormiston Academies, which operates 33 schools, said funding increases were falling well short of a rise in pupil numbers. Eight Ormiston schools had deficits in 2016-17. Six funded this through their own reserves, but two had no reserves to rely on and the trust had plans to return them to surplus ‘in the short to medium term’. “Core funding received from [government] grants during the year was £134.4m, an increase of 3.8% in comparison to the previous year,” it states. “Total pupil numbers have increased by 16.2%…There is increasing pressure to maintain building standards with limited resources.”

Of the 66 schools being run last year by England’s largest academy chain, the Academies Enterprise Trust, a quarter (17) were in deficit. Of those, 14 saw the deficits increase. “The sector faces uncertainty over the level of future finances,” the accounts say. “Financial sustainability reviews are being undertaken in key academies…comprising staffing reviews, future pupil and income projections, and the effectiveness and efficiency of bought-in services. This will accelerate the speed of such deficits being eradicated.”

South London-based Oasis Community Learning, which educates 25,000 pupils in 49 academies, described its current funding situation as ‘very challenging’, adding: “We remain concerned about continuing pressures on unfunded pay settlements and pension cost increases.”

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The 32-school, 16,000-pupil Greenwood Academies Trust, based in Nottingham, had core government income of £96m in 2016-17, but reported a loss of £2.8m. Four of its schools reported deficits for 2016-17, one of which has since been “rebrokered” – meaning it was transferred to another trust by the government.

“There remains significant uncertainty regarding future years’ funding allocations,” its accounts state. “The trust is seeking to reduce this risk by seeking to maximise the number of students in its academies and to plan its budget over a longer period of time. However, clearly there remains a significant risk.”

E-ACT, a south London-based chain operating 25 schools with 15,000 pupils, said: “It is already clear that [future funding] will not be sufficient to cover known increases in costs and so E-ACT is prudently basing its future planning on decreasing buying power next year.”

The David Ross Education Trust, which operates 34 schools and is sponsored by the Carphone Warehouse co-founder and Tory party donor of the same name, states: “The principal financial risks facing the trust are the future levels of government grant funding.” Its accounts warn: “Financial risks include…uncertainty over the distribution of funding to academies from 2018-19 onwards.”

Even London-based Ark Schools, a successful chain operating 35 academies, has concerns. The chain reported a £4.1m operating deficit for 2016-17. This was five times the corresponding deficit of £800,000 in 2015-16. Seven of its 35 academies had deficits in their revenue reserves.

TKAT said the £6m deficit was due to its local government pension liability, “something out of the trust’s immediate control and a wider national issue”. Ormiston Academies said it had “resilient financial planning and management systems”. Greenwood Academies Trust said its schools were in a ‘solid position’.

Ark Schools said its finances were ‘very strong’, with reserves of more than £16m. It said its quest to turn around difficult schools resulted in a ‘planned, short-term deficit’. E-ACT said while government funding was uncertain, it had increased education spending by 6.7% as a percentage of total costs. Academies Enterprise Trust said it had undergone a ‘radical overhaul’ in the past year, including a “major programme of reform” that had already delivered improvements.

The Department for Education said: “Core school funding is rising from almost £41bn in 2017-18 to £43.5bn in 2019-20, and every school will see an increase in funding through the national funding formula this year. All trusts operate under a strict system of financial accountability, including the requirement to publish their audited accounts. The latest reports show that in 2016 academy trusts had a net cumulative surplus of £2.2bn.

“The Education and Skills Funding Agency monitors all academies’ financial position and takes timely action whenever they identify concerns.”

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