Tag Archives: finance

UTCs: will they survive?

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Recently, the DfE published the accounting details for academies and free schools and their Trusts and Committees for the year September 2020 to August 2021. Academies consolidated annual report and accounts: 2020 to 2021 – GOV.UK (www.gov.uk)

There are several interesting annexes. One contains 15 pages of Trusts where at least one member of staff was paid more than £150,000 as recorded in the accounts for that year! However, more relevant for the purpose of this post is the list of schools with deficit balances. The list contains 12 identified University Technical Colleges (UTCs) plus a Trust with 4 UTCs in its portfolio of schools three of which appear to have negative balances in the Trust’s 2022 accounts).

This means that possibly 16 out of the 47 UTC could possibly have been in deficit in this accounting year. Home | University Technical Colleges (utcolleges.org) cites 47 colleges.

This means that at least a third of the UTC sector might have been in deficit in the 2020-21 accounting year. I cannot say that I am surprised. Way back in 2017, this blog contained my post Can UTCs survive? | John Howson (wordpress.com) asking whether UTCs could survive.

I am not opposed to the idea of a UTC, but here is part of what I wrote in a 2106 post on the topic.

‘So, might UTCs be set to become the ‘De Lorean’ of the education world; a good idea, but not financially viable? Having visited the Didcot UTC recently, I can see the attraction of the concept as supported by Lord Baker. But, they do run into a number of challenges. Firstly, changing school at 14 isn’t a normal part of the school scene, so the UTCs have to persuade young people and their parents that the change is worthwhile. Secondly, the schools that they are departing from will lose cash for every pupil that transfers. After four years a school losing ten pupils a year could be £200,000 down on income, but still be trying to offer the same curriculum to its remaining pupils. Lose twenty pupils a year and the cash burn become even more concerning. Some schools might fight to keep their pupils or only be interested in losing those that cost more to educate than they generate in revenue.’ W(h)ither UTCs? | John Howson (wordpress.com)

Since then we have had the National Funding Formula covering two years of most UTC’s rolls, with the other two years being funded by the post-16 funding that has never been seen as generous.

Even with increasing pupil numbers in the secondary sector, the fact that most UTCs recruit at age 14 and don’t have free travel probably restricts their ability to grow unless they are in an area of significant housebuilding, as is the Didcot UTC mentioned above. Even there, the issue of loss at 16 to other institutions or apprenticeships can significantly affect the UTC’s income. For many, being science and technology biased in their curriculum, also affects their outgoings, both in resources and in attracting STEM subject teachers.

So, where will the UTC programme go, even with the support of Lord Baker?

Do your best, but stick within the rules

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The recently issued report on a capital project at a single academy trust school may well exemplify why the DfE is no longer seemingly in favour of such single academy arrangements Investigation report: Queen Elizabeth Grammar School Penrith – GOV.UK (www.gov.uk) The report ended by stating that the Trust had ‘overclaimed by, and was paid, £1,502,393.40 (£269,193.56 + £1,204,779.04 + £28,420.80)’ for the various works.

It is clear that the work undertaken benefitted the school, but since there was a limited pot of funding for this type of capital work, other schools presumably will have missed out on access the funds that should have been returned to the DfE according to the report.  The school is now transferring from a single school trust to join a multi-academy trust in the same region.

A detailed analysis of the evidence in the report reveals that at least one trustee had concerns about the way the project was being handled, and that cash could be claimed back by the DfE.

In former times, would internal auditors at a local authority have been more diligent in preventing the transfer of funds from the specified project to other needs? What is clear is that because the school had been rated as ‘outstanding’ by ofsted in its previous form it had not had an inspection since becoming an academy. Might an inspection team have noticed if they had visited the school during the period of the project: who knows, but it would not have been the focus of attention.

This type of report is rare, but the school is not unique in being the subject of such a report. Doing the best for your school or schools is a long-established principle providing the scheme is undertaken within the rules.

I well recall a local authority in the 1960s where their building branch was very good at gaming the system. In those days, LA listed capital projects in order of priority and the Ministry specified which projects would be funded. This authority would often come back during the financial year to ask if there was any unspent capital as a project that was unfunded had moved up the order, normally because a developer had started to build a new estate faster than expected and places were now needed sooner than anticipated for the pupils living in the new houses.

Eventually, the government moved from selecting actual projects to providing a cash sum and letting local authorities decide their own priorities. The change placed the onus on the authority to decide the order of priority.

As there is never enough capital funding for schools – Ted Short and Mrs Thatcher when Labour and Conservative Education Ministers in the 1960s and 1970s both wanted to rebuild pre-1906 primary schools, but were frustrated by economic circumstances – and the present economic state of the nation is likely to once again to put capital funding under pressure, and highlight the need for a fair and just allocation system that all responsible for schools will adhere to operating properly.

Memo to incoming PM

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Despite the record levels of tax receipts, the present economic situation does suggest that genuine economies should be looked for in the public sector. So, here are a few from the school sector that might be worth investigating.

First, sort out the cost of the failed middle tier experiment. Overall, the national leadership costs from academy chains are way too high. This has been recognised in the dreadful Bill working its way through parliament. Maybe there is a need for more than 150 Directors of Children’s Services, but do we need all these additional Chief Officers with their associated costs? Much of the inflated costs stretch back to failure to get grip on Executive Headships by the Labour government under Tony Blair. Sort out the shape of the school system and save money.

Recruiting teachers: axe the DfE jobsite in its present form and put the cost out to tender. As this blog has consistently pointed out, the present DfE site fails on several fronts, and probably isn’t even as cost effective as local authority jobsites.

Encourage central procurement. Delegated budget to schools is a great idea, but so is central purchasing. Do more to facilitate such outcomes across Trusts and local authorities.

Axe the Apprenticeship Levy for small primary schools, or at least reform it so that there can be a benefit. At present it is just a tax on schools.

Dump the tax on Insurance. This would help more than schools, and, at present, taxes the virtuous while encouraging others to avoid protecting themselves and their possessions.

Introduce a fund for investment in renewable energy that schools can use to spread the cost of introducing new energy sources over several years. Target the fund first at small schools in rural areas where the school can act as a community energy hub if the grid fails in a storm or for other reasons.

Regular readers will know my feelings about making use of playgrounds in supporting energy procurement. Where is the research programme

Longer-term, evaluate how teacher preparation programmes can meet the needs of the school sector in the most cost-effective manner, especially as school rolls start to reduce and fewer new teachers may be needed.

Review the National Funding Formula, and whether it meets its aims? In its present form, will it lead to wholesale closure of small schools as unviable financially, and what will be the costs of such closures and who will bear them?

The National Funding formula doesn’t take any account of whether schools can top-up income by lettings; from wealthy parents or by selling resources. As such, it is a crude instrument for school funding and needs a rethink.  Schools in pockets of disadvantage in otherwise wealthy areas are especially vulnerable unless in a MAT that is prepared to switch funds between schools. Much depends upon what the school system is trying to achieve and how the financing can be used to help. Equality based on superficial equal shares of the funds available has its consequences.

So, Prime minister, we need a world-beating school system for all. Over to you.  

Dead money?

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The DfE has published some research into the funds held by Trusts for the year 2020/21. As academies and Trusts report their finances on an academic year basis, these statistics cover the period from September 2020 to August 2021.  Academy trust revenue reserves 2020 to 2021 – GOV.UK (www.gov.uk)

The main findings are summed up in the following two paragraphs from Page 4 of this short report.

Trusts average reserves – In 2020/21 average revenue reserves across academy trusts were £1.48 million, compared to £1.15 million in 2019/20, an increase of 29%. In 2020/21 the average surplus balance was £1.53 million, compared to £1.22 million in 2019/20, an increase of 26%. The average deficit balance in 2020/21 was at £318,000, compared to £376,000 in 2019/20, a decrease of 15.5%

Reserves across the sector – The 2020/21 data shows the total cumulative surplus of trusts with positive reserves was £3.96 billion. Trusts in a cumulative deficit had a total deficit of £22.24 million. In 2019/20 the total cumulative surplus was £3.17 billion against a total cumulative deficit of £42.1 million.

So nearly 4 billion pounds was tied up in reserves sitting in academy trusts waiting to be spent by August 2021. What’s more the pandemic has resulted in more cash in reserves in the average academy trust than in the previous year. Indeed, the average increase is a whopping by 29% in one year.

So, a sector that sometimes loudly complains it is short of cash managed to put quite a bit away in reserves for a rainy day. One wonders what sort of rainy day that would be? One where teachers earn a minimum of £30,000 and where soaring utility costs must be financed from reserves not in-year revenue? Perhaps educating children at home is more cost effective for schools than having them on-site.

Where were the savings made? This ad-hoc set of statistics doesn’t allow for an answer to that question. But, presumably, supply cover and less wear and tear on school premises, plus a slowdown in construction of new build and refurbishment costs anticipated to be spent during the year but for the pandemic, may have accounted for a large amount of the cash going into reserves?

There should have been some savings on recruitment costs, but, as many trusts have subscriptions with the tes and other job sites any reduction in vacancies would not necessarily result in a saving in costs compared to paying for each recruitment round individually.

As we are now half-way through the 2021-2022 academies financial year, it should be possible for the government to have sight of what has been happening since September. Will this be the year reserves start reducing in size or will the £4 billion level be reached or even exceeded?

I always maintain that revenue funding should be spent on the children in the schools at the time when it is received and not stashed away in reserves. However, some provision for depreciation of equipment and eventual replacement is prudent. Delving into these numbers in more detail should allow for consideration of whether there are economies of scale with larger trusts or the opposite. From that perspective, the data here allows for more questions than it provides answers.

Public Accounts Committee concerns over the academy system

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The Public Accounts Committee (PAC) has today published its latest annual report into the academies sector. Academies Sector Annual Report and Accounts 2019-20 (parliament.uk)

The Committee accepts that the government wants all schools to become academies, but doesn’t yet see a clear path for some types of schools to be able to do so. Such a move to full academisation would remove local democracy from the school system and make it much more like the NHS, with limited accountability, and no guarantee of local accountability. This does not strike me as a good move for democracy. Hopefully, the government’s plans will be set out in the forthcoming White Paper.

Also, of interests, was the PAC’s views on the financial management of academy trusts. Unlike local authorities and maintained schools, Trusts can aggregate funds and do not have to publish accounts for each school separately. Trusts could move funds between schools and create capital for new buildings at one school by levying other schools in the Trust.

The PAC said:

 ‘Academy trusts have been set up as charitable companies, with more freedoms and responsibilities than maintained schools, including being responsible for managing their own finances. There is a tension between this autonomy and the oversight role by the centre via the Education & Skills Funding Agency which is required to provide assurance to the Department who hold ultimate responsibility for the delivery of education in England. The Department provided additional financial support of £31 million to 81 academy trusts in 2019/20 to support financial recovery, build capacity, facilitate a transfer of academy schools triggered by financial or educational factors, or as a short-term advance. Of this, £21 million has been provided as non-repayable funding. The Education & Skills Funding Agency has reported that £10 million of debts held by academy trusts have been written off in 2020–21, including £5 million for one trust. We are concerned that there is a risk that a trust becomes too big to fail and could therefore see large sums of public funds being pumped into it to keep it afloat.’ (Page 7)

Writing off £10 million of debts in one year means cash that could have been spent on children’s education probably disappeared in a manner not possible with local authorities.

Of more concern is the lack of control over senior staff salaries in Trusts. To quote the PAC again;

‘17. The number of academy trusts paying at least one individual above £150,000 increased to 473 trusts (17% of trusts) in 2019/20, from 340 trusts (12%) in 2018/19. Almost two thirds of trusts (1,772; 64%) in 2019/20 reported paying at least one individual between £100,000 and £150,000, compared with just over half (1,535; 53%) in the prior year.’ (Page 14)

This is not a new issue, as my blog from 2018 highlights: CEOs pay: what’s happening? | John Howson (wordpress.com) If there were just 160 local authorities with Directors of Education, how much more cash might be available to schools that is currently disappearing due to the diseconomies of scale inherent in the model of academisation established by Michael Gove in the hurry to pass the 2010 Education Act.

So, no democratic control, high salaries for some, but pay freezes for workers. Not a good structure for our school system when we cannot even recruit enough teachers.

Education spending: government less than generous

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The House of Commons Treasury Select Committee has today published its Report on the Autumn Budget and Spending Review 2021. Normally, this blog doesn’t read Treasury Select Committee reports, but this Report did have something to say about government spending on education.

In paragraph 48 the Committee noted the evidence it received from Dr Tetlow and in paragraph 54 it made its own comment, noting that the DfE …’ , did not receive such a generous settlement’ and that ‘School funding per head has only now returned to 2010 levels following the latest Budget.’

The two paragraphs are reproduced below.

48. While the Department for Education (DfE) will have received a real-terms increase in its budget of 2.3 per cent compared to 2009–10, Dr Tetlow told us that the DfE had not done as well in the Spending Review as the sector may have hoped for, given how it had been impacted by the loss of learning during the pandemic, and the need there would be for educational catch-up: Education was clearly one of the relative losers from the Spending Review. Certainly, the £5 billion that has gone into education isn’t large enough to meet our estimate of what might be needed to catch up on lost learning. […] Poorer skills in the cohorts going into the labour market over the next few years does run the risk of having longer-term impacts on productivity.58 […] Even though the Chancellor hailed in his speech that per pupil spending would go back to its 2010 level, it is pretty remarkable to have a decade with no real-terms growth in spending in schools. That is quite unusual and not a strong signal of prioritising improved skills in the UK.

54. While some departments which had been significantly disrupted by the pandemic, such as the Department of Health and Social Care and the Department for Transport, received large increases, the Department for Education, which was also affected by the pandemic, did not receive such a generous settlement. School funding per head has only now returned to 2010 levels following the latest Budget.

Budget report (parliament.uk) 27th January 2022

No doubt in their defence The Treasury would point out that more children are being educated because of the increase in the birth rate and the move to all staying in education or training until age 18 than in 2010. They might also point out there are more students in higher education, but most of their costs are probably being taken on the student loan account.

Without a more generous settlement over the next few years, spending per pupil on education is once again going to be tight, and probably will fall in real terms. The DfE needs to look at the costs of running a mixed system of academies and maintained schools. Why are there several hundred Chief Executives of Academy Trusts when previously there were only around 150 Chief Education Officers in local authorities. What is the extra salary bill costing and how many more civil servants are needed to manage the Department to School budget process compared with discussing with just a limited number of local authorities? It really is time to sort out the middle tier of schooling and the extent to which there should be democratic accountability.

Finally, if I can suggest a simple cost saving measure to the DfE. Compare the cost and effectiveness of your job board for teacher vacancies with other products offering similar services and check that you are now spending more than necessary on this service.

Understanding Academy Finances

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Recently, I came across a new study into the income and expenditure of academies by Xeinadin https://www.xeinadin-group.com/industries/academies/ When following up on that report, I also came across another and lengthier report from Kreston Reeves https://www.krestonreeves.com/news/academies-benchmark-report-2021/ published last month.

Both are interesting in their own ways. However, neither accounts clearly for the fact that there are different pay areas within the School Teachers’ Pay and Conditions Document and the annual recommendations from the School Teachers Review Body. Now, these differences do not matter when percentages are used, but comparing on cash figures may introduce some distortion in the outcomes if the difference between MATs in Inner London and those outside the London and Home Counties pay band areas are ignored, although the Kreston Reeves report does have some regional benchmarking data for six areas of England. Whether lumping together London and the South East and seemingly totally ignoring the East of England is helpful is a matter for the reader to decide.

Neither report considers the labour market for teachers nor the costs associated with it in detail, although there are discussions about both staff and supply teacher costs. Future reports might like to focus on both the costs of retention over recruitment, and the most cost effective ways of recruiting new staff.

I was interested to read in the Kreston Reeves report that:

“The full financial impact of the pandemic will not be known for a while yet. As schools went back in to another lockdown in January 2021, then the savings made in the first lockdown can perhaps be expected to recur, although as there are much higher numbers of key worker children in schools post Christmas, these savings are likely to be more modest. Where this leaves the Academy sector finances for the current academic year is anyone’s guess. The length and frequency of lockdowns, the criteria for allowing children into schools, and the education provided will all have an impact.” (Page 10)

Both reports discuss the matter of how much of a school’s budget is used for central costs of a MAT. They both seem to coalesce around a figure of 5%, although some MATs do seem to operate with either a much higher or lower percentage.  

The fact that academies are on a different financial year to local authority schools isn’t an issue for these reports, but is something that makes comparisons between the different types of schools more difficult, especially over a short-period of time.

How schools receive and spend their income is a matter for public interest, and these reports are helpful, in as far as they go, in understanding the academy sector, and especially the behaviours of MATs.

As most readers of this blog will know, I personally, prefer schools to be under the democratic oversight of locally elected councillors, albeit with a significant degree of autonomy. The fact that some schools have access to considerable letting income while other schools struggle to educate challenging groups of pupils on far less financial support is but one reason to ask for a system designed to benefit all pupils and not just some.

Accountability and asbestos

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The Public Accounts Committee (PAC) of the House of Commons has just published a report into Academy accounts and performance, with a final paragraph about asbestos reporting by schools tacked on the end for some reason. https://publications.parliament.uk/pa/cm201719/cmselect/cmpubacc/1597/159702.htm proving that Brexit is not quite the only game in town at Westminster this week.

The PAC don’t think that accounts for academies are clear enough and provide enough information at the school level for parents and others from the local community interested in the spending of individual schools. Personally, I have found academy trust accounts more forthcoming than financial information about individual maintained schools. However, there are clearly Multi-Academy Trusts where information has not been forthcoming in the views of the PAC.

We can all cite issues of questionable behaviour by the leaders of some Trusts. The DfE spent a lot of time and effort last year trying to deal with the high salaries some CEOs of Mats were paying themselves, with some degree of success.  However, it wasn’t as if everything was fine and dandy before. Head teachers had been known to fiddle the books and use the school credit cards for unacceptable purposes: a few even end up being prosecuted and doing time in prison.

The PAC has set out a list of demands that the DfE must comply with by the end of March, although I expect that deadline will be extended should there be a general election before to date to exit the EU.

Personally, as I have explained in previous post, entitled ‘Does local democratic control matter in education?’ written in August 2017 that someone has viewed earlier today ,I would rather democratic control was exercised where the school is located by democratically elected local authorities and not from London. I suppose, however, if you believe in the Regional School Commissioner role, and I don’t, then they might be the office best placed in the DfE hierarchy to oversee financial transparency of academies.

I am disappointed that the PAC didn’t mention the behaviour of some academies and MATs in respect of in-year admissions and especially the way they deal with children taken into care requiring a school transfer. That is another subject this blog has championed and will continue to so.

Finally, the difficulty in making schools report about asbestos and the importance of this matter is a real concern. The PAC reported that:

The Department originally asked schools to respond to its survey by 31 May 2018. However, due to the poor response rate, it extended the deadline to 25 June 2018 and again to 27 July 2018. Despite this, only 77% of schools responded to the survey. The Department said that it was disappointed with the response rate. We asked the Department what action it had taken with the 23% of schools that had still not provided the information requested. The Department said that it had re-opened the survey and extended the deadline for the third time, to 15 February 2019, to allow the remaining schools to respond. It also told us that those schools that still failed to respond would be picked up in its school condition survey. However, this survey will not be completed until autumn 2019.

Paragraph 30 PAC Report

This really does reveal why we need a governance structure for schools in England that is both accountable and able to act effectively on important issues of whatever description.

Lollipops and Déjà vu

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Yesterday’s budget handout of £400 million to schools reminded me of Gordon Brown’s budget of 2000 after he had stopped following the Tory plans for the economy set out under John Major’s government. Those with long memories will recall both the 1997 decision by Blair and Brown to continue with government spending restraint and the spending spree after the Labour government changed direction.

One of Gordon Brown’s rabbits was to announce from the dispatch box in his 1999 and 2000 budgets extra funding for schools. This was great news for the schools, but less so for the orderly planning of teacher supply. As now, the extra cash came at a point in time when recruiting new entrants into teaching was proving quite a challenge: the cash make the situation far worse as schools went out seeking to hire teachers that just weren’t there. Eventually, the Education Department stopped the rot by upping the salaries of existing teachers in a way that prevented unchecked growth in teacher numbers. The result was a period where teachers were relatively better paid than for a generation. The end only came with the 2008 recession and the freeze on public sector pay.

So, yesterday felt like a sense of Déjà vu, with a Chancellor pulling a rabbit out of his budget red box and handing an average of £10,000 to each primary school and £50,000 to each secondary school: so much for a National Funding Formula. Of course, these numbers aren’t anywhere near the amount Gordon Brown had on offer in real terms in his 2000 budget when he announced that:

To support these reforms in our secondary schools he will now make a payment to every head teacher for books, equipment and staffing.

 Last year he was able to make an extra payment for books and equipment of 2,000 pounds.

 This April every one of these 3,500 secondary schools will receive a minimum payment of 30,000 pounds and the largest schools will receive 50,000 pounds.

 A total of 300 million in new investment through these measures alone, money paid direct to the school and to the head teacher for use in the classroom.   http://www.ukpol.co.uk/gordon-brown-2000-budget-speech/

but if used to recruit extra teachers, the new cash announced yesterday could seriously affect the plans announced only last week by the DfE for the ITT allocations in 2019/20. After 2000, schools went shopping for teachers. Perhaps, this time the cash will be used to pay for the unfunded Leadership pay increases, rather than extra teachers. But, it could distort the distribution of teachers in real shortage subjects, such as teachers of Physics, if some schools decided to offer recruitment and retention allowances to attract such teachers. However, the confusion over the use of the word ‘capital’ alongside ‘little extra’ is budgets where schools can spend money mostly as they see fit and the timescale for the cash arriving in school’s budgets will make understanding of how the cash is spent challenging, even should the DfE really want to know.

The £10,000 will certainly make a difference for many small primary schools, especially those losing pupils as the birth rate has slowed down. For some it may make the difference between possible closure and staying open that bit longer.

There must be a question about the purpose of a National Funding Formula if a Chancellor can override it on the one hand and an academy trust can ignore it on the other hand. As ever, it seems like back to the future.

 

Fewer teachers, classroom assistants and technicians

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Today is the day that the DfE publishes two important datasets: the results of the 2017 School Workforce Census and the data providing the identification of schools and their characteristics. You can find the details at https://www.gov.uk/government/statistics?departments%5B%5D=department-for-education

There are a large number of tables to assimilate, but the DfE helpfully publishes what used to be known as a Statistical Bulletin on the School Workforce data at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/719772/SWFC_MainText.pdf Now it only has a title.

The headline figure is the reduction in staffing levels almost across the board, whether teachers, technicians or classroom assistants. This is the manifestation of the funding issues facing schools that have been well documented both on this blog and elsewhere. As the DfE note states’ ‘The total FTE number of teachers in all schools has fallen by 1.2%’, between November 2016 and November 2017. The note is not totally accurate, because the figure includes centrally employed teachers, but since there are now less than 4,000 of these the latitude in the wording can be overlooked.

There was also a fall in the number of entrants to teaching, meaning that entrants and leavers were both recorded as at 9.9% of the qualified teaching force. This is the first year for some considerable time and probably since the School Workforce Census has been collected at its present November date that entrants into the profession have not exceeded departures as a percentage of the qualified teacher workforce.

As noted in the previous post on this blog, older applicants were taking more training places as younger graduates seem less interested in becoming teachers. The same trend is visible in the workforce data. Table 7b shows a large increase in departures among teachers in the 25-44 age brackets and especially among the key 25-34 age group where just over 14,000 were recorded as leaving compared with just 10,400 of this age group in 2011. Are we losing the leaders of tomorrow and where are they going? Are international schools tempting them overseas with better pay and easier working conditions?

Although much is made of working conditions and workload, teacher absence rates still continue to fall as Table 16 reveals. There was a one per cent rise in the percentage of teachers taking sickness absence, but the total days lost was the lowest for many a year.

After some years when the match between teachers’ qualifications ad subject expertise had been improving, there was something of a setback between 2017 and 2018 in some subjects. This may be due to the increasing challenge in recruitment into training and can be expected to show further declines in key subjects when the next set of data are published next June. In 2017 among EBacc subjects, only German and ‘other’ Modern Languages saw an improvement in the percentage of hours taught by a teacher with a relevant post A level qualification. Spanish and Chemistry recorded no change.

Now that secondary pupil numbers are on the increase and primary numbers are falling among the entry age groups, it is likely that we will see more rebalancing of the teacher workforce over the next few years. Unless funding improves, it also seems likely that more support staff will also lose their jobs as schools strive to protect teaching posts.