Time to think about Academy Trust Reserves

At the end of April the ESFA published a short paper on academy sector reserves. Please click here for the full article.

This provides a number of statistics relating to the revenue reserve position of Academy Trusts for the year ended 31 August 2021 and compares the position with the previous year.

The period under review includes part of the impact of the coronavirus pandemic on schools’ finances. This time period includes the full school re-opening in September 2020, partial school closures from January to March 2021, before full re-opening after that point.

The data shows that 97.4% of academy trusts had a cumulative reserve surplus, an increase of 1.5% compared to the previous year. Other notable statistics included:

• The cumulative surplus of trusts with positive reserves was £3.96 billion compared to £3.17 billion in the prior year
• Of trusts with deficits, the total cumulative deficit was £22.4 million compared to £42.1 million in the prior period
• Average revenue reserves were £1.48 million compared to £1.15 million in 2019/20
• Average academy trust reserves as a percentage of income were 12.9% compared to 11.4% in the prior year

All of the reported statistics indicate an improving financial position for academy trusts. However, this may also indicate that trusts are accumulating funds for the future that are intended to be spent on today’s students.

The Public Accounts Committee (PAC) have asked the DfE to investigate the geographical variation in the health of maintained schools. An additional requirement has been added to the 2022 BFR workbook and ESFA are requesting more information where reserves are greater than 20% of income.

Trusts will be asked to provide more details about the minimum amount the trust would want to keep in reserves along with a narrative. To comply with PAC request trusts will be asked to select the main purpose(s) the trust is holding its reserve balance for. Trusts will be required to select from this list of options: 

• Specific building/estates projects (site development or maintenance e.g. new classrooms, sports facilities, CIF contributions) 
• Other non-building capital expenditure (curriculum development, ICT infrastructure) 
• Staff retention and development (planned training commitments) 
• Strategic development of the trust (increase in schools, conversions or transfers in) 
• Growth of existing schools in the trust (increase in pupil numbers/age range changes) 
• Future change/uncertainty (reduce income due to decreasing pupil numbers or a future in-year deficit) 
• Other not listed above 

The government are interested in the reserves that academy trusts are keeping and their reasons for having them. This is something that trusts need to consider in the formulation and disclosure of their own reserves policies. Please get in touch if you would like more information about reserves and what might be considered a reasonable level of reserves and policy.