Academies record £6.1bn deficit

8 Nov 18

Academy schools in England recorded a £6.1bn deficit at the end of last August, leading to one major teaching union calling them “unsustainable”.

The 7,003 academies received total income of £22.5bn in 2016-17, compared to £20.5bn in the academic financial year before, and spent £24.8bn, compared to £20bn in 2015-16, according to the academy schools annual report and accounts released on Tuesday.

The £6.1bn deficit recorded includes an £8.4bn asset derecognition charge. The government took land and buildings assets off academies’ balance sheets where they did not feel trusts were controlling them, even though, academies continued to occupy them.

The number of academy trusts, charities which academies must be part of, in cumulative deficit at the end of August 2017 went up to 185 from 167 in August 2016, the report showed.

Kevin Courtney, joint general secretary of the National Education Union, said academies’ financial situation was “unsurprising” given the overall pressures on school budgets. “But it is particularly serious for academies which cannot call on help or support from the local authorities,” he added.

“These accounts also show us why the academy system is unsustainable and undemocratic.”

Academies are independent state schools funded directly by the Department for Education via the Education and Skills Funding Agency – rather than through local authorities.

Courtney said it was “high time” the government recognised the academy system was a “failed policy” that needed to be consigned to the “dustbin of history”.

“We need to return to the principle of local schools, accountable to local communities,” he added.

The accounts also showed that 8% more trusts (from 873 to 941) were paying some staff £100,000 or more in 2016-17 compared to the year before.

The number of academy trusts paying salaries of £150,000 or more went up 3% from 121 to 125 over the same period.

“Robust evidence-based processes in setting pay, and to ensure that particularly pay of leadership in the sector is transparent, proportionate and justifiable” were needed, the report suggested. 

Lord Theodore Agnew, parliamentary under-secretary for the school system, stated in the report: “On executive pay, we continue to challenge trusts where executive pay is not managed in a transparent, proportionate and justifiable manner.”

The total reserves and net assets of the academies went down from £43.4bn in 2015-16 to £42.6bn by 31 August 2017.

Shadow education secretary Angela Rayner said: “With academies now [billions of pounds] in to the red and raiding their reserves to keep going, it should be clear to ministers that their squeeze on funding has created an unsustainable situation in our schools.”

Loic Menzies, director at the education think-tank LKM, was concerned the report showed a decline in Regional School Commissioners reports.

The RSC was a watchdog set up on 1 September – made up of civil servants and answerable to the education secretary – to keep an eye on schools’ expenditure and take action where necessary.

Eight warning notices and 24 pre-warning notices were issued to academies in 2015-16 compared to two of each handed to schools in 2016-17, according to the report.

“The declining figures on RSC notices and interventions raise important questions about whether we are seeing a decline in RSC’s activities and willingness to intervene or whether we are beginning to see and more mature sector that is gradually improving its performance,” Menzies said.

A Department for Education spokesperson said: “All academy trusts have to be more transparent than maintained schools, and are subject to financial and governance-related scrutiny by the Department and ESFA, or they risk having their funding withdrawn. Because of this extra financial scrutiny, we are able to act quickly to tackle financial underperformance or mismanagement.”

They added that acadmies paying very high salaries must set out the rationale for doing so and be prepared to be challenged by central government. More than 200 academies had already been challenged on this basis.

Facts and figures from the academies report:

·        At the start of the 2016-17 academic year there were 5,773 academies

·        The sector grew by 21% during the year with 1,230 academies opened. The majority doing so voluntarily

·        By August 2017, around two-thirds of secondary schools and one-fifth of primary schools were academies

·        They now educate around half of all children across England

·        The number of free schools also continues to increase, with 60 new free schools, University Technical Colleges and studio schools opening their doors in the year to July 2017

·        The Academies Act 2010 requires reporting of performance information over the academic year.

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