The Department for Education does not know the extent of academy trust pension liabilities, auditors have warned.
Academy conversions are also returning to pre-pandemic levels as the government opts to rely less on trusts to turnaround struggling schools, a new government report on academy finances states.
The DfE has today published the academy sector’s annual report and accounts for 2022-23. The report is always lagged (as trusts have now individually published their accounts for the 2023-24 year), but it includes comprehensive, sector-wide findings in relation to academy finances.
Here’s what you need to know…
1. Pension liability unknown (and a solution is tricky)
Trusts estimate they have a total net pension liability of almost £2 billion by the end of 2022-23.
But in his notes attached to the annual report, published this morning, National Audit Office boss Gareth Davies stated he was “unable to obtain sufficient appropriate evidence regarding the valuation of the sector’s net pension liability”.
To obtain “assurance over these balances… would have significant cost and capacity implications for the academies and local government pension scheme entities which management have deemed to be impractical in the circumstances”.
Davies was unable to employ “alternative means” to satisfy himself over net pension liability levels.
He believes there is a “significant risk of material misstatement in… pension liability balances because the balances are highly material and there is a high level of judgement required in calculating them”.
He is working with “DfE to consider the feasibility of obtaining the necessary assurances” for 2023-24.
A 2016 investigation by Schools Week first revealed the rising size of pension deficits.
2. Academy conversions bounce back to pre-Covid levels
The number of schools converting to academy status in 2022-23 “continued to be lower than pre-Covid”.
Over the period 391 made the switch, compared to 371 the previous year.
But initial data for 2023-24 shows “conversions are returning to pre-Covid levels”, the report added.
3. More trusts in deficit (but more get richer, too)
Fifty-five trusts racked up cumulative deficits in 2022-23. This represents 2.2 per cent of all academy chains.
The figure is up from 1.8 per cent (46 trusts) in 2021-22. Forty of those in the red were standalone trusts, while only one had more than 11 schools.
In all, 10 trusts had deficits of more than £500,000.
The report noted that any trust reporting a cumulative deficit “will be supported by the ESFA which must also agree a recovery plan… to help it return to strong financial health”.
Despite this, 423 chains had surpluses of more than £3 million, equating to just over 17 per cent of the sector. The figure stood at just under 16 per cent the year before.
4. Less reliance on sponsorships
The report stated that the DfE’s “approach to school improvement has developed since 2022-23, with less reliance placed on sponsor bodies to support underperforming schools”.
It suggested that this was one of the reasons behind the government’s decision to axe the trust capacity fund (TCaF) in November.
TCaF used to provide cash to help MATs take on underperforming schools, particularly in so-called education investment areas.
5. Fraud and data breaches rise
The value of fraud reported rose to almost £1.8 million in 2022-23, from £795,000 the year before. But £1.7 million (96 per cent) was recovered.
In comparison, the “value of fraud reported to the department… relating to local authority-controlled schools was £2.3 million” for the 2022-23 council year.
Meanwhile, the number of academy trust data breaches hit a record high. There were 278 incidents across 130 trusts in 2022-23, the highest since 2018-19.
6. Huge £200k exit deal revealed
The number of trusts with at least one member of staff earning over £150,000 – including pension contributions – climbed to 775, from 594 in 2021-22.
DfE attributed the rise to “salary increases following pay rises”.
The papers also show an employee at an unnamed trust was handed between £200,000 to £250,000 as part of an “agreed” exit package. Two others received a sum of between £100,000 and £150,000 following compulsory redundancies.
7. Consultancy payments hit £400m
Academy consultancy spend also rocketed up to £412 million. About £70 million went toward “non-educational” advice.
The figure was the highest seen over the previous four years, rising from £342 million in 2021-22.
