Shining a light on the state of academy trust finances

This year marks the publication of the 12^th Kreston Academy Benchmarking Report, which provides the latest analysis of the key financial trends across the academies sector.

In my view, as head of academies for the publishers of the report, there are two key areas of focus for the sector’s finances. Firstly, the question of whether or not to centralise operations, and secondly, the rising cost of SEND provision.

The question of centralisation

For clarity, in a fully-centralised academy all functions are managed centrally by the group, from financial planning and IT to HR and procurement. What’s clear from the report is that more trusts are centralising their operations: 60 per cent now describe themselves as fully centralised, up from 55 per cent last year.

The big question is, does centralisation bring financial efficiencies that trusts could divert elsewhere?

It seems so. According to the report, centralised trusts spend more per pupil, but still have a higher level of free reserves per pupil. On average they spend £7,289 on total costs per pupil, compared to £7,159 for non-centralised trusts – £130 more per pupil. The average free reserves per pupil for a centralised trust is £742, compared to £691 for devolved groups, an increase of £51 or 7.4 per cent.

GAG and reserves pooling are forms of centralisation more trusts are considering. 32 per cent of MATs confirmed they are GAG pooling this year compared to 23 per cent in 2022.

When decisions on income allocation are taken centrally, better decisions can be made on where to target resources to the areas of most need. The report shows trusts that GAG pool have spent more on total costs per pupil, £7,498, compared to £7,176 in those that have not. The impact is less if trusts only pool their reserves, where on average spend is £7,353 per pupil.

However, centralisation is not the only way to improve efficiencies.

The limits of collaboration

Schools within trusts can work together to achieve cost efficiencies, even if the group is not fully centralised.

Staff can be deployed across an academy trust to minimise supply costs. This is more achievable when schools are geographically close together as people can travel between schools more easily.

The mix of schools is also important as sharing staffing resources is more straightforward between schools with similar cohorts, such as primaries.

We know of trusts where kitchens in primary schools have been shut and meals are prepared by another local school in order to save money too. Realistically this type of cost saving can only happen if the schools are close by.

Some trusts seem to have grown relatively randomly, which means distance can become a barrier to more cross-school working. Trusts that routinely review their growth plans can address these difficulties, allowing for greater efficiency.

The SEND conundrum

Among the biggest questions for all schools is achieving the efficiency related cost savings needed to counter the increasingly significant challenge of funding SEND provision.

Data from the Institute for Government shows that 65 per cent of local authorities have cumulative deficits for school spending, with the primary reason being the cost of SEND provision. Difficult financial positions have been reported in a number of LAs, including Bournemouth, Christchurch and Poole Council, where a high dedicated schools grant (DSG) deficit has outweighed the funding available. The deficit has grown rapidly from £3.6 million in April 2019 to £35.8 million by March 2023, with £63 million estimated for March 2024.

This comes at a time when the number of pupils being allocated an Educational Health Care Plan (EHCP) is soaring. According to government data, there were 517,049 plans as at January 2023, 9 per cent up on the previous year. Add to this the delay in issuing the plans – reportedly only 50 per cent of plans are issued within 20 weeks – and trusts have little option but to fund the additional care required from their core budgets.

This also results in a real staffing challenge to those schools affected, when staffing flexibility is a key factor in being able to cope with the funding problem.

There are some tough challenges ahead, many of which are not under the control of academy trusts.

Those trusts that can recognise the potential obstacles and adapt will be in the strongest position to navigate the choppy financial waters in the coming year.