Concerns are growing around the management of academy trust reserves, and whether the centralisation of fund management is in the ultimate best interest of the schools, or the benefit of the academy trusts themselves.
Following revelations that a number of multi-academy trusts (MATs) across the UK are sitting on significantly high reserves, the Department of Education (DfE) is cracking down on General Annual Grant Pooling (GAG Pooling), and seeking assurances that funds are being used appropriately, and are not being hoarded at a time where school budgets are increasingly under pressure.
GAG Pooling versus Top Slicing
GAG Pooling is a financial mechanism used by MATs to amalgamate their general annual grant into a single centralised fund. This mechanism enhances a trust’s ability to allocate and redistribute resources across its constituent academies, based on the individual and specific needs of constituent academies.
There are a number of conditions placed on GAG Pooling, as set out in the Academy Trust Handbook. If a trust determines to pool GAG, it must:
- consider the funding needs and allocations of each constituent academy;
- implement an appeals mechanism which allows appeals to be escalated to the Education and Skills Funding Agency (ESFA), enabling ESFA to make final decisions which may result in pooling provisions being dis-applied; and
- not pool Private Finance Initiative (PFI) funding in accordance with the PFI funding agreement.
This differs from top slicing, another financial mechanism employed by MATS whereby a percentage of its constituent academies’ GAG is deducted by the MAT to fund centralised services, such as finance, legal services, HR and IT. Some trusts may rely on a standard flat-rate contribution from its constituent academies, whilst others may top slice based on size or performance. Top slicing figures are generally transparent and published in annual accounts.
Benefits and detriments
The most common reason for pooling GAG is to give trusts greater flexibility around tailoring funding allocations based on needs-led approach. For example, a MAT can provide significantly more funding to a struggling constituent academy than if that constituent academy were to receive its allocated GAG. Consequently, a more successful constituent academy may receive less funding to balance it out. GAG Pooling also supports a policy of centralisation, in which MATs consolidate administrative, operational and financial control, essentially moving control from a constituent academy level up to MAT level.
GAG pooling fosters collaboration and a sense of community between constituent academies, allows MATs to be more strategic in their use of funds, and enables greater concentration on educational improvements across all constituent academies.
Despite these benefits, GAG Pooling is considered to be a fairly controversial practice, particularly in the absence of clear DfE statutory guidance. Some of the challenges contributing to this reputation include the potential for inequitable treatment between constituent academies. This may trigger resistance from high-performing academies, seeing a diversion of funds to under-performing schools as punishment for efficiency. This also increases the risk of resentment, animosity and hostility both between constituent academies, and with the trust itself.
A general lack of transparency around GAG Pooling further intensifies the scepticism, with many querying whether pupils are receiving the government’s guaranteed minimum level of funding, and if so, whether this information should be publicly available to hold MATs to account.
Addressing concerns
Constituent academies that are subject to GAG Pooling often have an expectation that they will be informed about how MATs deal with their reserves, with a view to understanding and being satisfied that MATs are using the funds in a way that prioritises them and their pupils.
Whilst the Academy Trust Handbook requires the board of trustees to set a policy for holding reserves, and provide an explanation in its annual report about its plan for managing reserves, it provides minimal guidance on GAG Pooling, and specifically does not require MATs to set policies around GAG Pooling.
For the purposes of transparency, and growing trust and unity across constituent academies, it is best practice for MATs to have stringent GAG Pooling policies. This policy will be intertwined with the reserves policy, and should set out how the funds are distributed and for what purpose. With the rise of centralisation, it is important for constituent academies to understand what proportion of GAG is being dedicated to constituent academies, centralised services and capital projects.
Conclusion
Increased DfE scrutiny arising from high reserves across a number of MATs, coupled with frustration and resentment around a lack of transparency has resulted in noteworthy contention around GAG Pooling. Clear guidance and stronger means of accountability will help to disarm the tension, and garner support for a strategy designed to make academies stronger.
As a MAT, you should consider your existing policies, and whether they stringently address the challenges associated with GAG Pooling, or whether they require further consideration. As a constituent academy, you should hold your MAT to account, and maintain open lines of communication around funding and what is required to support your pupils.
If you require further advice or assistance including with the development of GAG pooling policies or review of existing reserve policies, please contact the Schools Support team at schoolsupport@wslaw.co.uk