Bailing out academies with non-repayable grants – right or wrong?

Janet Downs's picture

Shoring up schools needs to be open and fair

If a shop goes bust, it’s likely to quickly close its doors.

But this can’t happen with schools.  Education is a right to children of compulsory school age.  Pupils can’t just be turned away if a school can’t balance its books.

State schools in the red can get support (see here)   But the support comes from different sources depending on whether the school is local authority (LA) maintained or an academy.

Questions over whether academies are more favourably treated

Academies can receive repayable advances from the Education and Skills Funding Agency (ESFA).   Non-academies can receive advances which the LA recoups via the school’s future funding.

So far, so similar.

But non-academies and academies are treated differently when it comes to bail-out grants.

Academy trusts can receive ESFA grants in exceptional circumstances to help a trust’s financial recovery.   I’ve recently written  about the £4m in ESFA grants given to academy trusts in 2016/17. 

But non-academies cannot receive non-repayable grants.

Any deficit accrued by a non-academy will remain with the LA if the school becomes a sponsored academy*.  This has led to suspicions that schools in the process of becoming sponsored academies have deliberately run up deficits prior to conversion.  

But surpluses accrued before conversion are taken from the LA and given to the academy whether sponsored or not.  LAs are doubly penalised: keep the deficit for sponsored academies on conversion;  lose the surplus accrued by any convertering academy.

Academies transferred from one trust to another can have their deficits reduced.  Such write-offs can be considerable but don’t appear in published academy transfer costs.  This adds another layer of obfuscation.

Grants to academies not open or transparent

ESFA grants to academies in financial distress aren’t routinely published.  And academy accounts aren’t much help.  Any grant bailing-out an academy is likely to appear as ‘other DfE grants’ which could also include capital grants, grants from the Condition Improvement Fund or, if the academy is selective, a grant to help the selective academy expand.

It took a Freedom of Information request to find information about financial support grants given to academies in 2016/17.  A similar request for 2017/18 was refused and is now the subject of an Internal Review.

More schools, academies and non-academies alike, are likely to fall into the red

As funding cuts bite, so more and more schools will find it difficult to balance their books.  Funding isn’t keeping up with costs.    The National Funding Formula may help some schools but doesn’t hide the fact that spending on education has fallen.  The cake may be divided more fairly but it’s still a small cake.

Mismanagement of some academy trusts

In the case of a small number of academy trusts, financial problems have been caused by incompetence or mismanagement (or both) as evidenced by the number given Financial Notices to Improve.

Increased funding needed not non-repayable bail-outs

Schools need adequate funding.  They’re not getting it now.  Until they do, more schools will need support.  But this shouldn’t be in the form of exceptional grants to just one type of schools (academies) which are kept hidden until forced into the light by FoI.


*Converter academies take any deficit with them on conversion.

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