School Funding

School funding: NAO calls for inquiry into academy trust surplus


An official investigation should be launched to determine why more than a fifth of university trusts accumulate reserves worth 20% or more of their annual income and “spend less” on their students, the National Audit said today. Office.

In a new report released today, the watchdog says the Education and Skills Funding Agency (ESFA) should investigate why university trusts are racking up these surpluses.

He adds that there are concerns that trusts will accumulate reserves instead of spending income on their students.


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“The concern about the university sector is that a significant minority of university trusts accumulate substantial reserves, which means they spend less than their annual income on their students,” the NAO report says.

In 2019-2020, 22% of trusts built up reserves representing 20% ​​of their annual income or more.

School funding: more university trusts reporting surplus

The proportion of surplus trusts has also increased, with 93% of trusts reported a cumulative surplus in 2019-2020, up from 88% in 2017-2018.

The report finds that the school system “has faced considerable financial pressures in recent years”.

While most schools – 88% – were in surplus in 2019-2020, the proportion of secondary schools that were kept in deficit was 27%, almost three times the proportion of primary schools in deficit, at 10%.

And 11% of maintained schools reported a cumulative deficit – up from 5% in 2014-15, the NAO found.

The proportion of maintained high schools reporting a cumulative deficit peaked at 30 percent in 2017-18, falling to 27 percent in 2019-2020.

While the report concludes that school finances have “held up well” in recent years despite financial pressures, the data does not yet reflect the impact of the pandemic on the sector.

For school finances at local authority level, the report shows that the total deficit, for local authorities reporting a deficit, was £ 675million in 2019-2020, an increase of £ 664million since 2014 -15.

And the NAO report notes that while Ofsted has consistently rated 80% of mainstream schools as “good” or “excellent,” both inspection research and stakeholder comments consulted by the NAO show that “the measures schools taken to remain financially viable have affected aspects of their provision, ”including downsizing and changes to the support provided to students with SEND.

Gareth Davies, head of the NAO, said: “A financially sustainable school system is vital for the learning and development of the country’s children. The Department of Education has implemented a series of smart programs in recent years that have helped schools save money.

“However, until it improves the reliability of its data, it will not be able to make informed decisions about the support it provides to schools.”

The NAO also recommends that the Department of Education and ESFA investigate the reasons why maintained secondary schools are under particular financial pressure and develop performance management systems so that they can evaluate their support programs.

The NAO found that the DfE lacked “hard data” to assess the impact of its financial support.

Meg Hillier, Chair of the House of Commons Public Accounts Committee (PAC), said: “There are worrying signs that this surplus has come at the expense of services. Many schools have been forced to tighten their belts by reducing staff or reducing support for students with special needs.

“The government needs to understand whether this surplus really shows better financial sustainability, and is not just a time bomb in the education system that will ultimately fail children – especially those in greatest need.”

She added that the “real impact” of the Covid-19 pandemic on school finances is still not known.

School leaders described the financial situation of schools as “extremely difficult”.

Geoff Barton, Secretary General of the Association of School and College Leaders, said: “Schools have worked very hard to manage their finances under extreme pressure due to the terrible underfunding of the education system by the government.

“This has necessitated reducing their supply, and in an increasing number of cases deficits have been inevitable.”

He added that the government had improved funding since 2020 but ASCL was still not convinced that this would be enough to repair the damage caused, while the financial situation remained “extremely difficult”.

Barton said the pandemic had “increased pressure on the sector” due to the government’s “dismal failure” to support schools and colleges with additional costs, such as covering staff absences and introducing new security measures.

“It is of paramount importance that the government treats education as an investment rather than a cost and that it improve the level of funding for schools, colleges and young people,” he said.

Paul Whiteman, General Secretary of the NAHT School Heads Union, said: “The NAO is right to point out the very significant financial pressures schools have faced in recent years.

“With the demise of many local services, schools have had no choice but to step in and fill the void – but it comes at a significant cost.”

Mr Whiteman added that the lack of investment in SEND and other costs associated with managing the pandemic were putting budgets “even more under pressure”.

“We have to be very careful when drawing conclusions about the apparent financial health of schools on the sole basis of budget surpluses,” he said.

“The reality is that many schools will simply not be allowed to end up in a deficit budget position and will be forced to make cuts before that point is reached.

“With that in mind, it is very alarming that the number of maintained schools facing a budget deficit has doubled. The real question is, what have schools had to cut to get to this point?”

Kevin Courtney, Deputy General Secretary of the NEU Teachers Union, noted: “Schools faced very difficult circumstances, but the NAO report shows too clearly that this is not a sustainable path forward.

“Even before covering the costs of Covid security with little government support, schools were struggling to make ends meet with successive cuts in funding in real terms over many years. “

He added that school budgets were often balanced only by staff cuts that hurt supply for students.

“The NAO report reveals that nearly half of primary schools and four-fifths of secondary schools were forced to reduce the number of teachers to balance their books in 2017-18 and 2018-19,” he said. declared.

“These are staggering numbers and should serve as a wake-up call to a government which throughout this period has denied there is a problem with funding schools.”

A spokesperson for the Ministry of Education said: “During the pandemic, we invested millions in additional support for schools and in our ambitious education recovery plans, and this report shows that the majority of mainstream schools and academies are in surplus despite the challenges faced.

‘Core funding for schools and high needs will increase by £ 4.7bn by 2024-25, surpassing the previous spending review for schools in 2022-2023 regulation – which provided the biggest financial boost in a decade.

“Thanks to this increase, state-funded secondary schools will see an average of £ 6,150 per pupil in 2022-2023, £ 160 more than this year.”