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Friday, June 18, 2021

What academy finances can tell us about the future of the sector

Despite a slow-down in academy sector growth overall, some have clearly out-performed others. Who? How? And what can we learn from this? Pam Tuckett finds out.

Decision-making during the pandemic has been challenging. However, trust boards appear to have adapted quickly to the demands of pandemic leadership, and MATs have shown remarkable strength and flexibility in dealing with continual change.

At a general level, Covid creates an increased pressure to focus on operational matters rather than strategic decisions across the sector. This change in leadership emphasis means that the skills and knowledge required of MAT trustees have continued to increase. Boards have to be far more effective in the way governance is undertaken. Their legal and moral responsibilities, both as employers and chief supporters or organisation leaders, really come to the fore.

Covid has also contributed to the annual rate of sector growth slowing from 10.8 per cent in 2019 to 7.8 per cent in 2020. However, this whole-sector trend disguises an unequal growth that has seen the strongest and more centralised trusts continue to lead.

Looking closer at the detail, we can see that while MATs overall are still growing, fully centralised MATs are growing most. In fact, decentralised trusts have decreased in size, indicating that some have rebrokered schools while others have themselves been rebrokered. This is also consistent with feedback from our clients that moving to a more centralised model is often part of the conditions headteacher boards apply.

In the past year, non-educational issues have highlighted some of the benefits of being in a MAT, particularly a larger one. The academy sector has many stakeholders to consider, which can hinder necessary changes to the delivery of education. Having a central leadership team with the time and expertise to respond quickly to external events improves the impact a trust can make.

This has been a year of difficult choices, and we’re not out of the woods yet. With more tough decisions ahead, the crucial matters are how trusts go about making these decisions, how their resources are spent and how effective their decisions are.

Even before Covid, trusts were ensuring they spent their budgets as efficiently as possible, reviewing staffing levels and identifying cutbacks in non-essential expenditure. While this year’s operating environment has been incredibly tough, the first lockdown actually resulted in many schools saving money, improving the financial position of the academy sector. However, while lockdowns reduce demand for supply cover, for example, these costs are likely to increase again.

That’s why trusts are finding it difficult to approve budgets that enable them to be agile in the face of constantly changing demands. This is especially needed during the pandemic. So while additional income from government has been welcome, the manner in which it has been made available has not. In fact, it has made it near-impossible for trusts to budget accurately. As a result, it is difficult to predict the outturn for this financial year.

In these increasingly challenging times, it is crucial that reliable management accounts are produced to aid decision-making. Trustees should be prepared to robustly challenge both the management accounts and budgets to ensure delivery of educational objectives in the most cost-effective way.

Our advice to clients when preparing budgets is to avoid falling into the trap of automatically placing incremental increases on actual costs incurred in the previous year. It is by remaining focused on the financial challenges that fresh thinking and considered alternatives emerge. And in the end, budgets should be based on trust improvement plans to ensure resources are deployed effectively and sustainably.

There are positive take-aways from the past year. The move to virtual governance, for example, has brought benefits such as time saving and increased inclusion and accessibility. Most importantly, MATs have demonstrated the robustness, effectiveness and agility of centralised governance.

As we emerge from these troubled times, the centralised MAT model is increasingly demonstrating its potential to deliver schools that are free from financial and logistical distractions and able to focus on education and community.

And that is surely what we need as we look to the recovery.

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