Guidance

Academy trust financial operating models: good practice guide

Published 15 July 2026

Applies to England

Overview

Academy trusts have the freedom to make their own strategic financial decisions, including how they build their financial structure and operating model. While funding is usually allocated at school level, it is the trust that is the legal entity and therefore accountable and responsible. Academy trustees and academy trust leaders are accountable for their trust’s financial management. They must understand the circumstances of each academy within the trust and operate a compliant system that delivers the best outcomes for their pupils.

The Department for Education (DfE) has a role in supporting academy trusts to ensure they comply with financial management and reporting requirements as set out in the academy trust’s funding agreement and in the Academy trust handbook (ATH).

We recognise that pooling resources effectively can unlock innovation and maximise value for pupils. Different models work effectively in different scenarios. The choice of model depends on the context – for example, the type and number of academies in the academy trust, its governance and staffing structures, and its ethos and culture.

Trustees and academy trust leaders should operate the model that most effectively delivers their overarching strategy and meets the needs of individual academies, including a consideration of contextual allocations driven by the principles in the National funding formula (NFF).

Terminology

In this guidance, we use the term ‘must’ where there is a legal requirement (deriving from an academy trust’s funding agreement, the ATH or other legislation.

We use the term ‘should’ where it is best practice.

What funds do academy trusts receive and manage?

Academy trusts receive several types of funding from various organisations, including DfE, local authorities, charities and other schools or academies.

The majority of a mainstream academy’s annual income comes from general annual grant (GAG). This makes up the core funding paid directly by DfE to academies and is allocated by local authorities based on the NFF allocations they receive, and subsequent local formulae. This includes funding based on schools’ and pupils’ needs and characteristics, such as:

• support for rural schools
• areas of high deprivation
• low prior attainment
• special educational needs

DfE may provide additional revenue funding through other grants to support specific pressures or projects. Many of these grants have conditions that may broadly mirror GAG (such as early years funding or post-16 funding). However, academies and academy trusts should look at the individual conditions of grant for each grant in order to ensure the funding is being appropriately used.

Special schools, alternative provision settings, nurseries, and sixth form colleges also receive the majority of their funds through DfE grants. Academy trusts should have due regard to the different funding contexts of their academies when considering their financial operating model.

There are also smaller grants designed to support particular pupils, such as Pupil Premium or grants to support children that are looked after. Academy trusts must ensure that this funding is used in line with the specific conditions of grant, but this does not prevent pooling of these funds for larger scale interventions.

Local authorities may place conditions on how academies use high needs top-up funding and any other funding they allocate directly for pupils with high needs.

These conditions can apply whether or not the pupil has an education, health and care (EHC) plan.

Capital grants and funding secured through bids are usually linked to specific repairs or investment at academy or academy trust level and so must be used for those purposes only.

All academies receive devolved formula capital. Under the conditions of grant, academies can agree to pool this funding. Other capital funding depends on the size of the academy trust.

Smaller academy trusts can apply for the Condition improvement fund (CIF) through bidding rounds. If successful, CIF must be spent on the project set out in the bid.

Larger trusts receive School condition allocation (SCA), which provides for more discretion in its use – for example, to fund improvements to individual academy buildings or grounds, or trust-wide projects.

Role of academy trustees

Academy trustees are accountable for the overall financial performance of the academy trust. They must:

• hold the accounting officer (AO) to account for the proper use of public funds
• provide both support and challenge to ensure funds are used with regularity and with propriety
• ensure the trust complies with all financial regulations
• make sure funding is used effectively to deliver for pupils

The board makes decisions about the trust’s financial operating model. Trustees should:

• agree a clear framework of delegations for how leaders will manage finances
• make sure senior leaders across their academies have been engaged before decisions are made
• ensure there are clear ways for leaders to contribute to ongoing decisions

In all models, academy trustees should understand why their chosen financial operating model is in place. Any potential risks arising from the chosen model should be monitored and mitigated through the trust’s risk register.

Academy trustees also work with leaders to set the trust’s strategic direction and priorities. Depending on the trust’s financial model, trustees may also:

• support and challenge how a central reserve fund is used
• agree how funds are delegated from pooled income

Regulatory requirements

Academy trusts are required to comply with the ATH through their funding agreement, which gives assurance to DfE and Parliament that there is robust financial oversight of the money they receive.

These documents set out the financial reporting and controls an academy trust must have in place to maintain sufficient oversight over the use of public funds. However, they include limited requirements on how academy trusts should structure themselves to achieve this.

The ATH requires that, where academy trusts choose to pool GAG, they must consider the funding needs and allocations of each academy within the trust.

Trusts must not pool GAG where one or more of their academies is funded on estimated pupil numbers.

The ATH also limits the ability to pool GAG where a trust has been issued with a Notice to Improve (NtI). Trusts under an NtI must seek DfE approval for any new GAG pooling arrangement.

Multi-academy trusts must publish on their website a summary statement by 31 January alongside their annual accounts. The statement should outline how funds are distributed across their schools. The information should:

• match that set out in the annual accounts notes (Disclosure of central services and Funds)
• include a summary overview of the themes listed in the DfE example statement

Raising concerns

Academy trusts should proactively engage with academy leaders on their approach to financial operating models, including reporting and decision making.

Academy leaders (and local governing committees) should have a clear, documented pathway for raising concerns if they feel their academy is being treated unfairly regarding financial decision making.

However an academy trust chooses to structure its financial operations, academy trustees have a responsibility to try to resolve disagreements and disputes.

The academy trust must have in place a policy for leaders to raise concerns and should ensure that all leaders are aware of the policy.

This policy should set out:

• how the academy trust will manage internal disagreements and challenge
• how the academy trust will maximise engagement (regarding financial management) with senior leaders and school business professionals within the trust
• the process by which senior leaders or governors can raise concerns or challenge if they believe their academy is being unfairly treated (for example, they believe the top-slice is set too high, funds are being unfairly distributed, or they want to challenge the academy’s budget)
• who to report concerns to within the trust, how they will be managed and include the academy leaders’ route to escalation, as set out in the ATH

Options for strategic financial management models within academy trusts

This section outlines the main financial management models academy trusts can use. It explains how each model works in practice, what decisions trustees need to make, and the key requirements to follow when applying them across their academies.

While the following models may be used in isolation, an academy trust may choose to adopt aspects of each model to best achieve their aims.

GAG or income pooling

GAG pooling is where GAG paid by DfE or other income for each academy is held centrally by the academy trust, which then delegates the funds to each of its academies in line with the trust’s agreed policy.

In practice, all (or a proportion) of the GAG for each academy is collected at a central level, and the academy trust decides how to delegate budgets to each of its academies through, for example:

• a locally agreed formula
• a needs-based budgeting approach
• taking into account other local and strategic priorities

When setting budgets, academy trusts should involve appropriate staff at academy level (likely to be headteachers or finance staff), although decisions will be taken by academy trust leaders and trustees. All academy trusts should use integrated curriculum and financial planning approaches as part of any budget setting process.

The academy trust should set out its approach to GAG pooling in its financial management policy. It should have this in place before starting a GAG pooling arrangement across the academy trust. This may result in constituent academies receiving a different amount to their full GAG allocation to reflect the responsibilities delegated to academy level. An academy trust may decide to pool all GAG at once or may choose to slowly introduce pooling over time as it grows or develops its central offer.

What can and cannot be pooled

When deciding on an approach to pooling income or GAG, the academy trust must ensure it complies with its funding agreement, the ATH and any conditions of grant that may restrict its use of particular funding.

In principle, the kinds of funding that can be pooled includes:

• all general DfE school income grants (including GAG, early years funding, post-16 funding, place funding, and Pupil Premium)
• EHCP funding (provided that the named pupil still receives the full support outlined in the document)
• unrestricted income (for example, lettings)
• devolved formula capital (DFC) with constituent academies’ approval (as outlined in the capital spend guidance)

The following funds cannot be pooled:

• Private finance initiative – PFI income
• other restricted funds – these funds are meant for a specific purpose, either from DfE grant funding or from funding received from donations or sponsors
• capital funding awarded for specific projects, such as CIF
• GAG in academy trusts with any academies funded on estimated pupil numbers

Academy trusts should be clear what funds they are pooling across different income streams. For example, they should make a clear distinction between funds pooled for revenue and for capital, and may further distinguish between mainstream and high needs funding depending on their academy contexts.

Reserves pooling

Reserves pooling refers to forming a centrally held revenue reserve that pools some or all revenue reserve surpluses (and deficits) from an academy trust’s constituent academies. This central fund may enhance an academy trust’s ability to allocate resources to improvement projects targeted at individual academies or for trust-wide initiatives.

The Charities statement of recommended practice (SORP) defines reserves as “that part of a charity’s unrestricted income fund that is freely available to spend on any of the charity’s purposes”. These are often referred to as ‘free reserves’.

When applying this to academy trusts, DfE considers revenue reserves as being the balance of unspent:

• unrestricted funds, to the extent that they have not been used for the acquisition of fixed assets – this may also include unrestricted designated funds
• GAG, and other general school income grants as listed in what can and cannot be pooled

GAG is a restricted fund. It is to be used for the general running of the academy trust’s main activity of delivering education in line with the academy trusts’ Articles of Association. As this is the main expenditure for the academy trust, any unspent GAG is usually considered as revenue reserves because they will still be used for delivering education.

In pooling arrangements, revenue reserves are held and managed centrally, with a clear reserves policy setting out how the academy trust intends to use the funds for the benefit of all pupils. All academy trusts must ensure they have a clear strategy and plan in place for their reserves as part of their annual budgeting process – see the ATH and Academy trust reserves for more information.

For academy trusts that pool reserves, the reserves policy should also set out:

• whether any funds are to be retained at academy level
• how the academy trust will manage the competing demands for this central fund from across all their academies
• the treatment of pooled funds should an academy join or leave the trust

Top slice or recharge

Top slice is a charge paid to the academy trust from each academy to pay for shared services and central support.

It may be a percentage of each academy’s GAG allocation or a recharge for central services, joint procurement or shared development priorities.

Academy trustees, alongside the trust’s AO and chief financial operator (CFO), will decide on the level of the charge according to the range of services and support delivered from the centre, and any changes to the level should be agreed in consultation with the academy trust leadership.

The academy trust should develop a clear policy that sets out:

• the amount being charged and the methodology used
• the services and support being provided centrally
• a process for academies and their local governing board to follow if they have any concerns or questions about the top slice or recharge and the central offer

Like other financial models, some restricted funds cannot be included in the top slice calculation, such as PFI.

Conversion or transfer

Where the decision is made for a school to convert to join an academy trust, or an academy to transfer to a new academy trust, leaders, alongside trustees and governors of both parties, should ensure that they have reviewed and considered the incoming school’s financial operating model.

Where there are significant differences between operating models, academy trusts may consider a phased approach to bring the new school into alignment.

How to decide which strategic financial model is most appropriate for your academy trust

While there are many financial operating models, as academy trustees, you can decide to adopt whichever model you feel is most appropriate to your academy trust, its academies and its pupils.

All models should take account of the principles of the NFF, including considerations of the academy context, such as deprivation, low prior attainment, and school-led costs.

Whichever model is chosen, it is important that the academy trust has a robust policy in place to ensure maximum transparency for its stakeholders.

Trustees, alongside the trust’s AO and CFO, will need to consider which financial model to adopt based on the characteristics and strategic direction of the academy trust. Existing multi-academy trusts choosing a new or refreshed model will have different considerations to a new academy trust developing its initial approach.

Key considerations for selecting a strategic financial model

Choosing the most appropriate financial operating model requires careful consideration of the academy trust’s strategic priorities, operational context, and long-term sustainability.

The following questions may be helpful to prompt development of proposals and updated policies for all trusts.

They provide a structured framework to support trustees, leaders and finance professionals in evaluating options, identifying risks, and ensuring alignment with both the trust’s vision and national funding principles.

The questions are designed to guide the development or refinement of financial policies, ensuring that any chosen approach delivers value for money, maintains transparency, and supports improved outcomes for all pupils across the trust.

Governance

The academy trust’s approach to financial management can be explored through the following questions:

• what is the central offer? What do we want it to be? How will this be funded?
• is the scheme of delegation fit for purpose?
• does the scheme of delegation set out clearly where responsibilities lie and decisions are made?
• how do we ensure compliance with the ATH?
• where do funds need to be targeted – now and for the longer term?
• how will the academy trust maximise engagement from senior leaders and school business professionals in the academy trust?
• how will the trust ensure that any pooled funds are delegated in line with the principles of the NFF?
• do academy trustees, the AO and CFO understand their statutory duties and have appropriate oversight in place?
• does the trust have appropriately experienced and qualified staff?

Value for money

To assess how the academy trust achieves value for money, consider:

• how can the academy trust support school leaders to achieve the best outcomes for their pupils, while managing their academy delegated budgets effectively?
• what economies of scale can be achieved?
• are all opportunities for savings and economies of scale being fully explored and utilised?
• how does the academy trust approach integrated curriculum financial planning across its academies? Is this linked to the financial operating model?
• how will the academy trust measure if the model is delivering value for money?

Revised or new approach

To assess how the academy trust will plan for adopting a new or revised financial model, consider:

• how do academies in the academy trust currently fund their operations at individual school level? Do we want that way to continue?
• is it appropriate to change the academy trust’s financial model in one go or adopt a transitional approach?
• does the current central structure support the delivery of the new model?
• what training and development might be needed across the academy trust?
• have the trust’s auditors been consulted on the regulatory compliance of the proposals or policy?
• are the current governance and oversight arrangements suitable for a revised approach? How might they need to change?
• how will the academy trust ensure internal scrutiny and oversight is not undermined during the transition?
• how will staff be supported to adjust to any changes to the financial operating model?
• has the academy trust developed a clear delivery plan, including timelines and training schedules for school business professionals and other affected staff?
• are there circumstances specific to individual academies or in local communities that need to be considered?
• has the academy trust developed testing to ensure the strategy adopted is suitable for the academy trust?
• is there suitable IT infrastructure in place to operate the chosen model?
• how will academy and academy trust bank accounts be impacted by any changes?
• what communications might be needed to staff throughout the academy trust?
• what actions need to take place to inform DfE, banks and academies of any changes that might take place?

Compliance

To assess how the academy trust ensures compliance with the ATH and auditing regulations across all its academies, consider:

• have we included the appropriate explanations in the academy trust’s annual accounts?
• is there a policy in place for academy leaders and school business professionals to share their concerns if they feel their academy is being unfairly treated?
• does the desired approach adhere to the framework set out in the ATH?
• are the required policies in place – for example, reserves, pooling challenge process? Will the reserves policy require updating?
• does the trust have plans in place to publish a summary statement each year outlining its approach?

Finalising a policy and approach

Academy trusts need to be transparent in their decision-making and reporting to ensure that academy leaders and wider stakeholders can clearly see how the academy trust’s approach to financial management benefits all pupils across the academy trust.

In developing the policies for the chosen approach, the academy trust should consider the following:

• the rationale for the chosen approach, including why this fits the strategy, needs and culture of the academy trust
• what funds the policy covers and what is out of scope
• an outline of how the responsibilities for costs are shared across the academy trust central team and each of the academies for the benefit of students.
• clearly defined roles and responsibilities across the different governance layers of the academy trust
• a process for academy trust leaders to raise concerns
• what happens if a new school joins the academy trust
  • what happens to their reserves?
  • what happens with their income?
• what happens if an academy transfers out of the academy trust
  • what will happen to their reserves?
  • what activity needs to take place for their income?

Academy trusts will want to use peer networks, professional advisers and sector stakeholders to research best practice in developing their own policy and delegations, as well as engaging with their school communities.

Academy trustees should approve and confirm the policy and associated scheme of delegation to assure themselves that it accurately reflects the academy trust’s intentions and controls.

Support for academy trusts

Maximising-value-for-pupils - GOV.UK

The school resource management advisers (SRMA) programme - GOV.UK

Academy trust handbook - Guidance - GOV.UK

Academy trust governance guide - Guidance - GOV.UK

Managing academy trust reserves - GOV.UK

Buying for schools - GOV.UK

Academies financial returns - GOV.UK