Academies are increasingly under pressure to generate their own income to overcome a shortfall in grant funding, according to a new study of the Academies sector from Xeinadin, the UK and Ireland-based business advisory and accountancy group.
The group’s Academies Benchmarking Report reveals that as funding and budgets tighten up, on average primary schools are spending just over £5,400 per pupil per year with secondary schools recording a figure of just under £7,800. Multi-Academy Trusts (MATs) recorded a figure of £6,200 – representing their mix of primary and secondary schools.
Xeinadin, which provides a wide range of consultancy, audit, cloud accounting and payroll services for academies, says these figures are higher than the average level of grant funding in each category, meaning an academy must generate an element of its own income to subsidise a shortfall in grant funding.
The majority of income to academies comes in the form of Government Grants provided through the Education and Skills Funding Agency (ESFA). Predominantly, this is the General Annual Grant (GAG) and Pupil Premium. With funding and budgets becoming increasingly tight, there has been a need for academies to generate their own income, generally in the form of Trading Income.
In the primary schools and secondary schools surveyed, this represents 5% and 4% of total income respectively compared to 3% in Multi-Academy Trusts.
Academies often have sizeable estates that can be used out of school hours to generate lettings income as well as a staff base that can provide services to other schools for a fee.
The study argues that many primary schools have become part of Multi-Academy Trusts in order to share Trust governance and senior leadership team (SLT) costs, which can be extremely challenging for smaller schools, particularly in the primary sector, as the majority of funding is provided on a per pupil basis. Xeinadin says that primary schools receive on average around £4,000 Grant Income per-pupil compared to just over £6,300 per pupil for secondary schools. On this basis, a primary school with 150 pupils would have an annual grant income of around £600k.
Alex Ffrench, Hub Director at Xeinadin Group, commented: “The importance of self-generated income cannot be overstated for Academies. With ever-increasing pension costs and concerns over the future of funding, it is vital that Trusts maximise returns on their assets to ensure it is possible to set a balanced budget. For example, in an £8m income secondary school, increasing the Trading Income to 7% of the total income rather than 4% could amount to an additional £200,000 revenue a year.”
The report finds that unsurprisingly, staff costs account for the majority of academies’ expenditure. Ever-increasing pressures on budgets have resulted in a reducing staff cost base, with primaries averaging 68% of total cost, secondaries 73% and MATs 69%, substantially less than days gone by when staff cost ratios of over 85% were commonplace.
Despite MATs also including special and alternative provision schools which typically drive up average staff costs, these are lowered due to Senior Leadership Teams (which tend to have comparatively highly paid members of staff) being split across a number of academies. This structure is evidenced by analysis of staff numbers disclosed in financial statements, which reveals that just 4% of staff in MATs being in management roles compared to 6% in secondary schools and 8% in primary schools.
Primary schools incur costs of just over £27,000 per staff member whereas secondary schools show costs of £40,000 per staff member, reflecting the greater number of senior staff within secondary schools.
Alex Ffrench continued: “Controlling staff costs is key to successfully managing a Trust’s finances. Timetabling is key to this, and as budgets become tighter, more and more academies are reducing the number of subjects offered, making efforts to reduce agency costs, and carrying out Integrated Curriculum and Financial Planning reviews to help schools plan the best curriculum they can for the funding they have.”
As of April 2020, 36% of primary schools and 77% of secondary schools in England were Academies or Free Schools, of which the majority were Converter Academies. Since converter academies were launched in 2010, over 6,000 schools have opted to convert to academy status. In the years since, the Department of Education, along with the Regional Schools Commissioners, have encouraged Academies to form or join Multi-Academy Trusts. Now the vast majority of schools converting to academy status are joining existing Multi-Academy Trusts, where the significant costs of running Trusts are shared.
Individual Trusts seeking to compare their data to Xeinadin’s survey results across 10 Key Performance Indicators can do so by visiting https://xeinadin.com/academies-benchmarking-report/.