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Mike Giddings

Balancing the books

Academies are failing to economise quickly enough, says Clement Keys

Posted by Stephanie Broad | October 13, 2015 | Law, finance, HR

A growing number of individual academies and some multi-academy trusts (MAT) are in danger of running out of money in the current academic year because they have not managed to deliver efficiencies quickly enough. 

Having submitted their budgets to the Department for Education (DfE) at the end of July, some trusts now need to reduce costs urgently as their reserves run out and, in some cases, become negative. The situation is becoming even more critical due to rising salary costs in the form of increased employer contributions to the Teachers’ Pension Scheme and the increase in National Insurance Contributions, which becomes payable in April 2016. 

Mike Giddings, Director of Education Services at Clement Keys, says: “Individually-run academies are finding it more difficult to balance the books and are at a loss to know what they should do next. Many academies have staffing structures that are now not sustainable based on reduced funding and rising costs. Small schools in particular are the most vulnerable, where changing a staffing structure is not always possible. This is not a sustainable situation and they urgently need to find solutions to enable them to operate more efficiently.  Some MATs are experiencing similar difficulties despite having a greater opportunity to deliver economies of scale.” 

In some cases, the decision to become an academy was driven by increased funding, but now that the LACSEG grant has been significantly reduced, Trusts are finding that the staff hired using the extra funds are now not affordable. 

Mike Giddings continued: “Some MATs initially thought that they could continue operating each academy individually and avoid making any fundamental changes to their structure. However, it is becoming clear that this is not possible. These organisations can achieve significant cost savings by restructuring and operating as one organisation, centralising many of the activities that are currently duplicated in each academy.” 

There was a slowdown in the number of academy conversions in Q4 2014 and Q1 2015 due to uncertainty surrounding the outcome of the General Election. However, there has been a resurgence of interest in conversions since May and the elected Government has stated its commitment to encourage all schools to become academies. 

Mike Giddings commented: “It’s definitely not too late for schools and individual academies to join a MAT. The DfE and Education funding Agency (EFA) are doing everything they can to encourage schools to form larger MATs so that the organisational efficiencies can be obtained and the education of the children protected from a potential lack of funding. Academies that have concerns over reducing reserves must act now by contacting the EFA sooner rather than later.” 

Clement Keys are currently working with a number of academy trusts and the EFA on restructuring projects, and recently helped stabilise a four-school MAT that had run out of cash reserves. 

www.clementkeys.co.uk    

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