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Budget season for academies

The Budget Forecast Return Outturn (BFRO) deadline is slowly creeping up on academies and no doubt some Business Managers have taken advantage of their school being “quiet” this past couple of weeks to begin working on the form.

No sooner has the BFRO been submitted then attention will turn to looking at setting the Budget for 2018-19 and beyond – remember, this year’s Budget Forecast Return is to include 3 years of forecasts. The deadline for the Budget Forecast is Monday 30 July 2018.

There have been comments and rumours in the sector that some Academy Trusts will ensure they submit a Budget Return which shows the Trust in a potentially better light than the truth. This could be either showing the Trust as not entering an overall deficit position or even just incurring an in-year deficit.

Concerns and confusion

The reason for this being that some Trusts are worried about submitting a Budget Forecast which effectively shows the Trust will run out of money unless funding improves etc. Speculatively speaking Trusts are likely to be concerned how the ESFA will react to seeing such a Budget and potentially the questions which will be asked of them.

The Academies Financial Handbook 2017 can also give confusing messages for Business Managers as it clearly states at section 2.2.2 that “the board of trustees must approve a balanced budget”. However, the definition at the back of Handbook is much clearer in that it states Trusts do not have to balance income and expenditure in each year to zero and can draw on unspent funds from previous years i.e. you can incur an in-year deficit.

Should your Trust be in a position where it will submit an overall deficit revenue budget for the current year, the ESFA must be notified within 14 days (section 2.2.5). This should not act as a deterrent though.

Trusts should be producing a Budget Forecast that is accurate as possible and represents their expectations of the Trust going forward. Unfortunately for some, this may mean showing the Trust entering an overall deficit position or an in-year deficit.

The sector is consistently making noises that funding needs to be increased. The Kreston Academies Benchmark Report 2018 further supported this by stating that the sector will run out of reserves in 2-3 years. Therefore Trusts need to support this and show the true picture if they want change to happen. Painting a different picture of the sector will only reduce the pressure on the government to act.

Working together

Trusts should be aware that the Education & Skills Funding Agency (ESFA) are prepared to work with them. However, if a Trust submits a balanced budget and then months down the line informs the ESFA they have no cash to pay the staff salaries, the ESFA will be much sterner in their approach and likely to issue a Financial Notice to Improve (FNtI) or worse. We have worked with Trusts who were honest with the ESFA from the outset and worked with them to support the Trust. This resulted in the Trust avoiding being issued with a FNtI and incurring reputational damage.

Our article from 2015 gave Trusts some examples of how they can be constructive in their response to setting an overall deficit budget and work with the ESFA. We would urge Trusts to re-read this.

It is not easy for the sector at the moment and that is why it should look to work together and be consistent in its approach to give the sector the best opportunity for change.

The Kreston UK Academies Benchmark Report 2018 has now been released. If you would like to ensure you receive an electronic copy of this hugely popular report then please complete the form, here.

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