Guidance

Financial support for academy trusts in financial difficulty

Updated 5 April 2023

Applies to England

Academy trusts are responsible for managing their finances and should have the financial, leadership and management capability to plan and make decisions in the best interests of their pupils.

There are tools to help as part of the schools resource management and governance GOV.UK pages. The offer here has been designed in partnership with schools and academy trusts to help manage budgets and prioritise resources where they can have the greatest impact on pupils’ education. This should support schools in the first instance to drive maximum value from their existing resources.

In some circumstances, an academy trust may require additional financial support to protect its pupils’ interests and education. If your academy trust is experiencing financial difficulties, we can help your trust work through all possible options and suggest practical support, including our schools resource management offer to schools.

If this is the case we suggest that you contact ESFA through our online form to discuss the circumstances at your trust. Once we receive your form, we will contact you to discuss your academy trust’s situation and the support we can offer. Our starting approach is a supportive conversation to understand the challenges facing your individual academy trust so we can work with you to find an appropriate solution.

We continue to make decisions on a case-by-case basis, taking into account the financial, educational and governance aspects of the academy trust, prioritising financial support for the most serious cases. We will only move to formal intervention where we find very serious issues and breaches of the Academy Trust Handbook (ATH) or the Funding Agreement (FA).

ESFA will work closely with the Regional Director and their team, to support you throughout this process to find the best outcome for your academy trust and your pupils. If approved, we normally expect any financial support to be repayable to ESFA within an agreed timeframe – we will only consider non-repayable funding where there is no other means to protect pupils’ interests. We may add conditions to the financial support, which will be tailored to secure the long-term financial stability of the academy trust through strong governance and compliance with the ATH and FA.

Being transparent about the support we provide

We publish information regarding academy trusts in receipt of additional financial support as an annex to the Academies sector annual report and accounts. This sets out the value and a brief description of the reason why the support has been provided.

Short-term advance

Strategic aim Eligibility criteria
To enable an academy trust to manage cashflow effectively over a 12-month period Academy trusts:

must have an ESFA-agreed repayment plan showing full recovery within a 12-month period

must have strong compliance and financial management for this short-term arrangement, meeting the requirements of the Academy Trust Handbook.

Enabling financial recovery

Strategic aim Eligibility criteria
To secure a return to financial stability for a trust in cumulative deficit within an agreed timeframe Academy trusts:

must have an ESFA-agreed repayment plan showing full recovery as soon as is realistic, ideally within 3 years

should have met the requirements of the Academy Trust Handbook on compliance and financial management requirements.

Building financial capacity

Strategic aim Eligibility criteria
To enable a trust with a projected cumulative deficit to build sustainable financial stability that could not be achievable using unfunded options Academy trusts:

must not be eligible for funding from their local authority (LA) falling rolls fund

must have an ESFA-agreed repayment plan showing full recovery, ideally within 3 years

must have reliable pupil forecasts (including LA opinion) demonstrating return to sustainable pupil numbers

must have met the requirements of the Academy Trust Handbook on compliance and financial management requirements.

Facilitating transfer - financially triggered

Strategic aim Eligibility criteria
To secure for pupils the rapid transfer of academies out of a closing trust, into a trust that will stabilise the school’s financial position Eligibility for this funding is dependent on:

• the Regional Director (RD) identifying an appropriate academy trust/sponsor for the best interests of pupils, parents and local community

• standard transfer funding alone not being sufficient to stabilise the transferring academy financially

• the incoming trust agreeing to a repayment plan for recoverable elements of the funding (within 3 years)

• the outgoing trust committing to providing full financial reporting to meet assurance requirements through the trust’s closure process

ESFA may consider other measures to ensure wind up of the closing trust is completed properly.

Facilitating transfer - educationally triggered

Strategic aim Eligibility criteria
To secure for pupils the rapid transfer of academies by protecting the financial stability of the incoming trust, enabling prioritisation of school improvement Eligibility for this funding is dependent on:

• the RD identifying an appropriate academy trust/sponsor for the best interests of pupils, parents and local community

•standard transfer funding alone not being sufficient to stabilise the transferring academy financially

• the outgoing academy trust agreeing repayment if remaining operating

• the incoming academy trust agreeing to a repayment plan for repayable elements of the funding (within 3 years) if outgoing academy trust is closing

• other non-funded options not enabling the financial stability required to deliver school improvement.

Potential conditions of financial support

ESFA may apply any or all of these conditions to repayable or non-repayable financial support. The conditions applied will be proportionate and in line with the severity of the case.

  • require the academy trust (or incoming academy trust where it is a facilitating transfer) to undertake Integrated Curriculum and Financial Planning analysis and produce a report on potential savings/benefits
  • require the academy trust (or both academy trusts) to agree to a deployment of a school resource management adviser (SRMA)
  • require the academy trust (or both academy trusts) where to implement reasonable recommendations from an SRMA and explore DfE frameworks for schools
  • require the academy trust to review executive salaries ensuring approach is transparent, proportionate and justifiable and/or consider re-structuring of staffing
  • require the academy trust to implement new policies on leadership pay that demonstrate value for money and trustee scrutiny
  • observe meetings of the board of trustees
  • require the academy trust to review board and executive team capability, and consider leadership change to build the ESFA and RD confidence
  • require the academy trust to demonstrate how they will address any skills gaps within trustees
  • undertake an external review of governance arrangements
  • request latest internal audit findings and actions taken in response to the results
  • require the trust to hold board and finance committee meetings at least 6 times a year, and provide agreed management accounts and meeting minutes to the ESFA after each meeting
  • require the trust to hold an Annual General Meeting (AGM) of members
  • undertake a review of financial management arrangements and produce a plan in response to results
  • require enhanced financial monitoring with agreed regular submission of additional financial information. Or enhanced financial monitoring of the outgoing trust in the case of a transfer
  • require the academy trust to consider moving to the latest model funding agreement
  • require the academy trust to consider joining another academy trust
  • seek to apply qualifying floating charge on any repayable financial support.