The Educator Magazine U.K. Jan-April 2025 issue - Magazine - Page 28
Managing academy
trust reserves and
estates from the
ground up:
How trusts can cement their future
Every academy trust walks a tightrope: balancing
the urgent need to maintain safe, welcoming
learning environments with the ever-present
pressure of financial uncertainty. In recent years,
we’ve certainly seen this to the nth degree.
With reserves shrinking and funding streams
unpredictable, the stakes have never been higher.
When should trusts invest boldly, and when
should they hold back? How can they prepare for
the inevitable surprises that lie ahead?
detailed resources to help trusts develop
long-term plans.
Key actions for estate planning:
1. Audit the estate: Assess the current condition of
buildings and infrastructure.
2. Set a vision: Develop a 5–10-year plan that
outlines goals for estate improvements.
3. Establish a strategy: Create a 3–5-year action
able roadmap for addressing priorities.
To address these issues, we must first explore the
heart of these challenges to uncover practical
insights into strategic reserve management,
estate upkeep and navigating the evolving
regulatory landscape to ensure a resilient and
sustainable future for academy trusts.
4. Develop a management plan: Focus on the
next two years with detailed budgets for
maintenance and upgrades.
Understanding reserve levels
Academy trusts must maintain a reserves policy to
ensure financial resilience. Typically, this equates
to one month of normal expenditure, though the
Department for Education (DfE) does not
mandate specific levels. Trustees should
determine a level that suits their trust's
circumstances and document it in the annual
financial statements. The DfE defines reserves as
low when they are 5% or less of income and high
when they exceed 20%. According to the Kreston
Benchmark Report 2024, most trusts have
sustained or increased their reserves in recent
years, except for primary schools, which face
declining enrollment and less flexibility in
managing overheads.
Reserves: planning and spending wisely
However, high levels of reserves could also
indicate delayed spending - rather than excessive
caution. Designating funds now for trusts holding
more than 20% of income in reserves, due to
postponed projects, demonstrates that reserves
are intended for necessary estate investments,
improving transparency and compliance with DfE
expectations.
This recent increase in reserves however, has
often been due to delayed repairs or capital
projects due to the pandemic and supply issues,
unanticipated funding or caution in light of
uncertain government policies and rising costs.
Trusts have also started designating reserves, with
6% doing so by August 2023. Designated reserves
indicate a clear plan for future use, which
demonstrates accountability and foresight.
Estate maintenance and strategic planning
The condition of school estates is a key risk for
academy trusts. Delayed maintenance can lead to
significant deterioration, escalating future costs.
The pandemic exacerbated this issue by halting
many capital projects due to rising costs, supply
shortages and logistical challenges
Trusts must now catch up on these delays,
prioritising essential projects to ensure students
learn in safe, well-maintained environments.
This aligns with DfE guidance, which emphasises
strategic estate management. The Academy Trust
Handbook and the Good Estate Management for
Schools framework (updated April 2024) provide
5. Review regularly: Conduct strategic reviews
to adjust plans based on changing needs and
resources.
Larger trusts eligible for School Condition
Allocation (SCA) funding often have more
flexibility and higher reserves, enabling them to
plan strategically. However, these trusts must still
monitor reserves closely and align spending with
long-term estate plans.
For smaller or single academy trusts, relying on
CIF (Condition Improvement Fund) funding
introduces challenges due to the competitive
nature of the bidding process. To strengthen bids
and prepare for unforeseen needs, academies can:
• Prioritise projects: Identify critical areas for
investment.
• Designate reserves: Allocate funds to
demonstrate financial commitment.
• Consider CIF loans: Explore options to enhance
bids and support essential projects.
And even after all of this, as we can see from
recent reports, there have been some question
marks over the competitive nature of funding,
resulting in what were originally thought to be
secured bids now leading to investigation.
On 10 December, the Competition and Markets
Authority (CMA) launched an investigation under
Chapter I of the Competition Act 1998 (CA98) into
suspected anti-competitive conduct. This was in
the form of bid-rigging in connection with the
supply of roofing and other construction services
to schools eligible to apply for funding from the
Department for Education’s CIF.
Rachel Barrett,
Head of Academies at Duncan & Topli
When reserves are insufficient, trusts may need to
apply for Urgent Capital Support (UCS). However,
UCS is only intended for emergencies and should
not replace proactive planning. Trusts relying on
UCS should expect probing questions about their
estate management and financial oversight.
The role of compliance
Compliance with regulatory frameworks is crucial
for all trust spending, including capital projects.
Particular attention is required with the upcoming
Procurement Act 2023, which takes effect on 24
February 2025. This legislation introduces
significant changes to procurement practices,
which trusts must incorporate into their policies
and procedures to ensure compliance.
The Academy Trust Handbook 2024 further
emphasises the importance of estate
management, listing poor oversight as grounds
for a Notice to Improve (NtI). Trustees must
proactively manage their estates to avoid
financial or operational penalties.
Challenges for trusts with limited reserves 75% of
trusts expect reserves to decline or run out within
three years, according to The Kreston Benchmark
Report 2024. For trusts with limited reserves,
careful prioritisation is therefore essential.
Steps to mitigate risks with low reserves:
1. Focus on essential maintenance:
Address urgent issues that could compromise
safety or functionality.
2. Leverage external funding: Explore CIF, SCA or
other funding opportunities.
3. Engage stakeholders: Communicate the
importance of estate management to staff
and governors to secure buy-in for long-term
strategies.
Time to put proactive planning on the curriculum
Effective estate management requires a clear,
actionable plan tailored to the trust’s financial
position. Trustees must ensure they audit and
prioritise estate needs and align reserve spending
with strategic goals, whilst also remaining
compliant with evolving regulations, including
the Procurement Act 2023.
By following DfE guidance and proactively
addressing estate challenges, trusts can create
safe, welcoming learning environments while
safeguarding their financial future.
Whatever the level of reserves, inaction is not
an option. Trustees must act now to ensure their
estates and finances are prepared to meet future
challenges.
To find out more about Duncan & Toplis, please
visit www.duncantoplis.co.uk.
