The issue of high salaries paid to top officers by some academy trusts, highlighted in the previous post, isn’t the only financial issue facing the sector. Now that more of the 2017-18 account are appearing a Companies house, it is possible to see the extent of the revenue balances being held by many academies; together with the occasional deficit.
So far, in Oxfordshire, 20 of the 39 Trusts operating academies or free schools across the county have reported their accounts and had them published on the companies house web site. In aggregate, they reveal around £4.6 million of revenue reserves held by primary schools and £4.3 million held by secondary schools. However, the deficits across both sectors total £1.1 million, mostly from one secondary school that has been in financial special measures for a couple of years and is gradually reducing its deficit.
One multi-academy trust, United Learning, operates six schools in Oxfordshire, but does not reveal revenue balances by school in their accounts. This MAT pools the money centrally for all their schools, and can then presumably use it where it can do the most good. Pooling also allows the total amount held in reserves to match the needs across the MAT in any one year and the amount can be set at a lower level than if the figure is chosen by each school. This was the approach taken in the past by local authorities, before schools gained control of their own budgets nearly 30 years ago.
A MAT operating say, 30 schools can decide that a reserve of five per cent overall might be appropriate to meet the contingencies and future needs in any one year of all schools in the MAT, whereas each school governing body might be more cautious and aim for 10% if setting a level on its own.
There is, however, a risk with pooling across geographical boundaries that schools in one area could be subsidising schools in another area. If parents discovered that a school in a MAT was taking this approach, they might choose not apply to that school, but to a school where the full funds were available for the education of their offspring.
This is an argument that balances are reducing because of the financial pressure that school currently face. There are certainly schools where revenue balances were lower in 2018 than in the 2017 accounts. But it is not yet a universal truth for all schools.
Could all schools in a local area be required to bank either with the local authority or an arm of central government? Such pooling would only work if these balances can be used rather than be treated as a deposit accounts. Pooling balances might also free cash being saved by schools for special projects at some point in the future for more immediate use, including cash being accumulated for capital projects. There seems little other justification for revenue balances of more than £1 million being held by some secondary schools other than future capital projects, especially while other school have insufficient funds.
Funding schools is a tricky business, but money should not be tied up in reserves when it can be released for improving teaching and learning.