We have pleasure in detailing below, an article on the issues raised by academies in Yorkshire and Derby which warns financial uncertainty, by guest author Philip Allsop who is head of the academies team from BHP.

This is the Kreston Academies Benchmarking Report for 2019 which is based on academy financial statements for the year ended 31 August 2018. It is the largest independent survey of the financial health of the academy sector being based on 370 academy trusts nationwide, made up of 1,000 individual schools, including 106 schools in Yorkshire and North East Derbyshire.

The report reveals that half of academy trusts had an operating deficit again last year with only stringent cuts and the sharing of resources within multi-academy trusts stopping the figure from being higher. It is particularly concering to note that 7.7% of the trusts in the survey were showing a cumulative deficit position which must presumably have necessitated loan funding from ESFA

The report provides clear evidence that MATs are more efficient than standalone academy trusts in terms of non-staff costs and so are able to spend a higher proportion of their income on staff costs. It also demonstrates for the second year running that MATs with a relatively centralised or hub structure are on average, more efficient than those with a looser, more diversified structure, to quite a significant extent

Although the report identifies that progress has been made in reducing the size of deficits overall, it warns that further spending reductions will be hard to achieve, and future funding uncertainty could start to hit the way in which education is provided.

The report states:

“Our clients across England are telling us that the ‘easy savings’ have already been made. We are already seeing reductions in learning support assistants, and staff contact ratios will be increased to save costs. This means teachers spend longer in the classroom so, in theory, schools wouldn’t need as many teachers. There has been several years of cost cutting and the trusts that we work with are telling us that there are no more areas where they can save significant costs without impacting on the way in which education is provided.”

Furthermore, the ability of trusts to effectively plan is severely restricted by uncertainties caused by increased teachers’ pay and higher pension contributions. The report highlights that in 2018, the government agreed pay scale increases of 3.5% and a 7% increase to Teachers’ Pension Scheme (TPS) contributions to 23.4% of gross salaries. The TPS increase alone will cost in the region of £200k to the average-sized secondary school. Currently, the government has agreed to fund these costs until 2019/20 but not beyond.

Integrated Curriculum Financial Planning is increasingly being taken on board by academy trusts as a tool to review the financial efficiency of the curriculum and to facilitate the comparison of key metrics against those of other schools and trusts. The report provides some case studies to illustrate this in practical terms.

Copies of the report can be obtained by emailing info@bhp.co.uk or download from the academies page of our website www.bhp.co.uk

For further information or advice please contact Philip Allsop, partner and head of the academies team at BHP on 0114 266 7171 or Philip.allsop@bhp.co.uk

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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