Is 3 the magic number for MAT budgets?

They say three is a magic number, but the ESFA’s announcement that academy trusts must now provide three-year budget forecasts (instead of one-year) may not have left MATs feeling too lucky.

The change will be brought in this year, and trusts must provide the DfE with ‘details of income and expenditure, as well as some capital spending and “non-cash elements’’’ by the 30^thJuly. Academies that miss deadlines for ‘two or more of the annual financial returns in any year’ will be placed on a public ‘naughty list.’

The measure is supposed to reassure the DfE that MATs are planning ahead and, with worries over academy finances continuing to cast an ESFA-shaped shadow over the sector, you can’t really argue with the sentiment.

With that said, the forecast extension will no doubt be causing a few additional grey hairs for MATs which are already predicting budget deficits. That, on top of the age old question about how can you budget when the goal posts aren’t just moving but sometimes leaving the field of play all together, means that news has understandably been met with some concern.

So how do you address this new requirement effectively?

• Firstly, don’t think numbers – think governance. It doesn’t matter what your financial situation is, if you don’t have the structures in place to ensure that public money is being spent transparently and correctly then the ESFA will coming knocking on your door long before your finances reach “critical”.
• Ensure consistency. Across a trust there should be clear guidelines as to how to set budgets. It may sound simplistic, but academies in a trust should have one rationale and one way of doing things when it comes to budget setting.
• Be strategic, not just stressed. Three year budget setting should encourage trust boards to think creatively about how to manage budgets. How can the trust work collaboratively to ensure greater savings? Can trusts partner with other trusts to ensure greater economies of scale? These are questions that are sometimes lost in the day-to-day management of an organisation.
• Three year budgets are a little like Ofsted reports. They give a great picture of what is happening at that moment in time, but things can quickly change. Make the budget something that your regularly review and discuss – don’t let it creep up on you once a year and scare you (much like your birthday after you get to a certain age)!

Finally, while academies need to be transparent about the finances – the DfE needs to be transparent about why they are asking for this. Is there a hidden rationale behind this? Is the ESFA prepared for what might come back?

Our big concern is that with a clear understanding of the whys smaller trusts may feel the pressure either grow before they are ready or withdraw at the fear of the future. As a result, the bigger trusts could be waiting in the wings to gobble up lots of smaller trusts deemed non-viable.

As with most things in life, balance really is the key. Done well, three-year budgeting forecasts could help MATs to think more strategically, giving themchance to find opportunities to generate revenue, work collaboratively with others to bring economies of scale, and possibly to consider merging sooner and restructuring the workforce to drive as much money as possible to T&L.

Planning ahead is something we know a bit about, having introduced MAT MOTs to help trusts to identify strengths and weaknesses across key areas such as finance, risk, growth, standards and people. Typically conducted over three years, we build a deep understanding of your organisation, offering considered guidance, support and external challenge to improve performance.

If you want to find out more about how we help trusts achieve their ambitions, just follow this link.