How are schools bridging the funding gap?
Posted on 9th March 2018 at 13:00
There are numerous examples of schools which, having set their deficit budgets for several years, are using their reserves to balance their current financial position. Where this is the case, some schools are now running out of reserves, leaving them with the need to do something different to bridge the gap.
So, what are their options?
The first, is to look at restructuring staff.
For many, this is a complex and difficult challenge and restructure costs can be significant. However, the ESFA (Education & Skills Funding Agency) will look to fund restructure and recovery plans providing they return the school to a reserve surplus and any loans provided by the ESFA are then repaid.
The preferred option by the ESFA, is to reduce costs for schools through economies of scale. A growing number of academies are therefore choosing to join forces with others to bolster their financial position and secure their futures.
Joining a multi-academy trust (MAT) instantly potential for synergies. This is achieved by centralising back-office resources and sharing specialist staff across the trust. It may also be possible to make changes to the structure of the senior leadership team to ensure that resources are spread across the group.
Delivering such efficiencies can help individual schools balance their books and remain viable. For instance, the larger multi-academy trusts are reporting significant reductions in costs through group procurement. In some cases, these savings can be up to 50%. In addition to this, it can also create opportunities for schools to take greater control over their fiscal management.
Despite the advantages, some academies and local authority schools may be putting off the decision to join a group. However, some schools have been forced into a situation where they need to do so due to a lack of funds.
Why an individual school consider joining a group?
Over the last decade, all schools have experienced significant increases in their team costs. Employer contributions to the Teachers’ Pension Scheme increased in 2015 by 2.4%. When this is added to the increase in National Insurance contributions from April 2016, it has increased the total cost of a teacher by as much as 5%.
However, the potential savings made by joining a group could help schools to offset such costs. The Government is very active in trying to help academies restructure to ensure budgets remain positive. This means, no matter what the financial position of the school, a solution could be found by acting sooner rather than later.
Another reason why an academy or school might have to join a group is when its Ofsted rating drops to “requires improvement” or “extraordinary measures”. As part of a group, schools generally see an improvement in their performance. This is because they can share best practices and have experts target the areas that require the most work.
Conversely, for organisations looking to join a group, it could be counter-productive to wait until the next Ofsted report. School leaders should act now while they have some power to negotiate which group to join or even take the lead by forming a new group.
Another benefit that larger MATs receive relates to capital funding. MATs which comprise five schools or more and have more than 3,000 pupils, are normally formula-funded for capital maintenance. This is without any need to bid to the ESFA for additional funds. This money is paid to the MAT and it is then their responsibility to prioritise the works required across all of the schools within the trust. For some schools which have previously struggled to find the funding to “fix the roof”, joining a MAT that is formula-funded could be their solution.
Overall, MATs have much greater financial freedom including the opportunity to pool the funding of all of their schools. This allows money to be directed to the most urgent areas within the MAT where it can provide the greatest impact.
What are the opportunities for staff in a MAT?
Despite their understandable concern about structural changes, there are plenty of opportunities for both head teachers and teachers alike within a MAT. Some groups employ thousands of staff. The extra financial stability that accompanies this operating model, provides added job security as well as opportunities for role development.
Joining forces with other academies also means that schools are less susceptible to changes to their funding and have greater room for manoeuvre with budgets. The dynamics of a MAT structure give staff the flexibility to move around and for leaders to be strategic in placing staff where they are most likely to progress.
How does a school join a group?
Local authority schools hoping to join an existing group should contact their regional school commissioner (RSC) before completing the application form on the Department for Education’s (DfE) website. This is the same process whether the school needs to convert to single academy status or to join an existing group.
However, it can be particularly difficult for failing or struggling schools to forge relationships with larger trusts. Therefore, schools are being urged to act sooner rather than later if they want to make the transition to academy status or join a group.
It would significantly hamper a school’s ability to negotiate if the DfE has already been forced to intervene because of poor financial or failing academic results. Regional schools commissioners are responsible for sanctioning the transfer of schools to groups as well as handling the application process for group or academy status. These individuals are responsible for overseeing standards at the school and stepping in when a school is struggling financially or academically.
Key considerations when joining a group
There are some salient points that academies or schools need to consider before deciding which group to join or whether to form an entirely new group.
First and foremost, the DfE will need to consider whether an existing group has sufficient capacity. Ultimately, such a decision centres on whether the joining school is going to move forward and improve a child’s education which is always the most important consideration.
If a group of schools decides to opt for trust status by merging to become a MAT, they need to ensure that the deal is structured carefully by preparing accounts and undertaking due diligence. Issues linked to staff disputes, insurance arrangements and debts also need to be addressed openly and transparently as the MAT will inherit these.
What are the due diligence checks that forming groups need to know?
The most important factor the DfE looks for is the performance of the merging schools in terms of teaching standards. Latest Ofsted reports will rank a school as either ‘special measures’, ‘requires improvement’, ‘good’ or ‘outstanding’. However, the first question that will be asked of merging schools is whether they are improving.
This is one of the reasons why it is so important to act early, rather than waiting for the next Ofsted report. A report could potentially hamper a school’s options, in terms of progression into a strong group.
2) Building facilities
This is a significant problem for many schools and one where merging schools can get caught out. When converting to academy status or, joining a MAT, schools assume responsibility for the maintenance of the building. It could be detrimental for merging schools to take on a long lease, for example, without carrying out a condition survey to identify the state of the facilities.
Some schools have moved forward unaware of the terms of such ‘repairing leases’ and have been hit with large bills for improvement works while being tied down to a lengthy lease. In such cases, money that should have been spent on improving a child’s education begins to diminish because millions of pounds have had to be diverted to improve the school building. It is therefore important that schools are fully aware of how the changes will impact them and take account of this as part of any transition.
3) Staff disputes
When joining a group, checks should be made against partner schools to discover if there are any ongoing legal disputes between staff members. Schools need to declare any employee-related liabilities they face and make sure that these are dealt with as part of the conversion agreement.
It would also be a good practice to check if there are any long-term sicknesses or concerns about absenteeism within partner schools so that potential problems can be addressed in advance. This will ensure that groups understand the shared implications of taking on another school and can take steps to mitigate any liabilities.
The next question to be asked of forming groups and individual schools is whether they are financially viable and if their cashflow is sustainable. This involves taking a detailed look at a school’s accounts as well as considering demographics that might impact pupil numbers.
How to make the decision of conversion
At a time when education funding is either being cut or staying the same, it is not surprising that some schools are finding it difficult to make ends meet. Most are aware of MATs but some are reluctant to take this option because of the possible upheaval and the local impact it could have on jobs. There is also sometimes a perception that the school could suffer because of competition with other schools in the group.
These factors shouldn’t stop individual schools from making the move. Academies within a group structure still have the power to control their own destiny.
For trustees of existing academies, being part of a MAT brings significant benefits.
In addition to providing greater ownership and accountability, it also means that they can deliver efficiencies and operate more cost effectively. While joining a group is not a decision to be taken lightly, it is important that schools realise that it could bring significant long-term benefits.
Job losses in some cases are inevitable, however a group structure can create employment opportunities too. Rather than delay, schools should act at an early stage. They should consider their options carefully and allow sufficient time to plan and select the right group to join.
For further information and advice on transitioning from local authority to a MAT, please visit: www.mlgeducationservices.co.uk
Tagged as: Funding Gap
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