New Best Practice Guide for Academy Trusts

Focused on the topic of Academy trust reserves, new correspondence from the Government outlines what trustees and trust leaders need to know moving forward with the new guidance setting principles for an effective approach to managing academy trust reserves.

1) Academy trusts are required by the academy trust handbook to have in place a reserves policy and to explain their plan for surplus funds in their annual report and accounts. Trusts will hold reserves for various reasons including cashflow, contingency (including future change and uncertainty), planned investment and improvement, strategic development and growth.

2) ESFA does not set a required level of reserves. Trustees decide the level of reserves to hold that is appropriate for the individual circumstances and priorities of their trust – and should review this regularly to ensure that they continue to meet the needs of pupils. A well-developed reserves policy will help trustees mitigate financial risks – first by encouraging trusts to identify what those risks might be, and then by deciding how much the trust needs to hold to address them.

3) For trusts actively choosing to hold low levels of reserves, trustees should ensure there is sufficient contingency in case of anything unforeseen, as for some trusts, low reserves could suggest financial vulnerability. For trusts choosing to hold high levels of reserves, trustees should have a plan and be clear on the purpose for these funds, and how they will improve the education for pupils. In both scenarios, ESFA will engage with the trust to understand the trust’s circumstances and discuss potential support if appropriate. ESFA will provide advice to the relevant Regional Director on the financial health of the trust, and the level of reserves will be part of ESFA’s advice to Regional Directors about commissioning decisions such as where trusts are looking to take on new academies to join their trust.

This guidance is intended to support trustees and trust leaders to make the best strategic financial decisions in the interests of their pupils. It makes suggestions for things they should consider as they come to these decisions including identifying their improvement and estates priorities, as well as understanding their area local context and communities, and the potential issues and opportunities these present.

To read the guide in full, please click here.

If you need help or would like to discuss your options in relation to converting to an academy or joining a MAT, please do get in touch with us. Email: academies@forrester-boyd.co.uk