Academy schools stockpile £2.5bn of education funding

http://www.theguardian.com/education/2015/jan/18/academy-schools-stockpile-education-funding-england

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Academy schools in England are hoarding cash balances worth nearly £2.5bn – more than £550,000 per school and draining the education sector of funds that could be spent on learning.

Figures released by the Department for Education in response to parliamentary questions show that the 4,400 academies in England held cash reserves of £2.47bn at the end of the last financial year. That is more than the remaining 18,700 local authority maintained schools put together, which held a combined £2.18bn.

The figures suggest converting state schools into academies, which has seen power removed from local authorities and invested in individual schools, has led to academies saving money to recreate the financial safety net the councils used to provide .

The statistics emerged in response to a written parliamentary question from Labour MP and former health secretary Frank Dobson. “It’s a ludicrous situation,” he said. “We have £4bn which should be spent on education just lurking in bank accounts.

“When the money went through local authorities, the local authorities would have a contingency fund which, from years of experience, they knew they might need if schools got into trouble and they might have to bail them out.

“If you individualise the system, it’s perfectly prudent and sensible for each individual school to want to have some reserves because they know they are on their own. It’s the system that’s crackers, not the schools.”

As a result of academies’ rising bank holdings, the total cash reserves held by state schools have more than doubled compared with when Labour was last in government. They stand at £4.65bn, compared with less than £2bn in 2010.

Education minister Edward Timpson, responding in a written answer to questions about reserves held by academies, said: “We regard academy trusts’ cash holdings as reasonable, typically representing enough to fund one month’s operations after deducting current liabilities.

“Academy trusts cannot borrow and need to hold enough cash to manage their solvency prudently.”

Soon after coming to power in 2010, the coalition loosened rules allowing schools to convert to academy status, which gives them more freedom over budgets.

Many schools jumped at the chance and the funds held by individual academy trusts – the legal authority for academy schools – rapidly increased. While the surplus held by maintained schools has remained at about £2bn, academy trusts have held increasingly deeper reserves.

One reason is that academies set money aside for capital projects themselves, rather than it being held by the council. Also, they are subject to company law and cannot operate while insolvent, so they or their trusts hold higher reserves to reduce that risk.

A DfE spokesman said: “There is no evidence that cash balances in academies are excessive or that the reserves have any impact at all on the standard of education offered. Local authorities build up similar reserves and, as academies do not have local authorities to fall back on, it is only prudent that they keep a portion of their finances in reserve for the future.”

The DfE figures show that the average balance of each academy bank account is £586,000, nearly five times more than the average maintained school, which has £116,000.

Chris Keates, general secretary of the NASUWT teaching union, said parents should be concerned that money allocated for the education of their children was being held back by schools. “We’ve been expressing concern for some time about what essentially is stockpiling of public money. We are not in a cash-rich situation in terms of education funding,” she said.

“Although the government claims it has protected funding, the education budget has not grown in real terms. If a school, or a group of schools, have put away these amounts of money, what are they stockpiling it for? Are they making money off the interest? Are they saving it for a rainy day? The amounts we are talking about are staggering, according to these figures.”

She said parents had a right to know at a time of austerity how schools have been able to put this type of money to one side. “What have they cut in children’s education to do this?”

Christine Blower, general secretary of the National Union of Teachers, called for greater oversight of academies. She said: “These figures underline the need for academies to be subject to clear democratic accountability and scrutiny to ensure equitable funding between academies and local authority schools.

“The government must ensure appropriate oversight of academies, including addressing the serious concerns about the transparency and accountability arrangements for the academies programme previously raised by the National Audit Office and public accounts committee.”