A financially troubled multi-academy trust (MAT) set up by a grammar school owes £5.8 million to the government’s Education and Skills Funding Agency, new accounts show.

While Bright Futures Educational Trust (BFET) thinks it can agree a repayment plan with the ESFA, the MAT admits that “uncertainty” about the outcome of its negotiations with the agency “casts doubt upon the company’s ability to continue as a going concern”.

BFET is sponsored by Altrincham Grammar School for Girls and runs eight academies in the North West of England. 

In 2016 it was served with a financial notice to improve by the Department for Education. Last year BFET re-brokered one of its schools, Wigan UTC - and it is planning to cut its ties with another, Connel Sixth Form College, because it says the college is “not financially sustainable” within the trust. 

Bright Futures Educational Trust repayment plan

According to BFET’s annual accounts for the year to 31 August 2017, the trust owes the ESFA £5.8 million because of money it has received for capital projects and repayments which it needs to make because it has not been able to recruit student numbers in line with its targets. 

“At the balance sheet date, amounts due to the ESFA total £5.8 million and this includes £2.5 million for capital projects and £2.1 million for pupil number adjustments,” the accounts state. 

“The trustees are in the process of agreeing a repayment plan for these liabilities and for ongoing support to enable the charitable company to continue trading for the foreseeable future.”

BFET admits that this has cast doubt upon its ability to continue as a going concern. 

“Whilst there is currently nothing to suggest that these negotiations will not be concluded successfully, if the ESFA withdrew its support, the charitable company would need to make material changes to its future financial planning,” the accounts state.

“The trustees have concluded that this represents an uncertainty that casts doubt upon the company’s ability to continue as a going concern.

“Nevertheless, after preparing financial forecasts which assume the successful negotiations with ESFA, the trustees have a reasonable expectation that the charitable company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the annual report and accounts.”

‘Overestimated student numbers’

According to the accounts, BFET owes roughly £1.5 million to the ESFA because of overestimates of student numbers at Connell alone.

“The trust is collaborating with the ESFA and the regional schools commissioner to re-broker Connell Sixth Form College as the model within BFET is not financially sustainable with student numbers not achieving targets set, and not increasing from the previous year,” the accounts state. 

“As funding at Connell has been based on overestimated student numbers, the amount of funding over advanced is owed back to the ESFA. This is the biggest single contributing factor to the current financial position of the trust, with circa £1.5 million owed with respect to Connell as at 31 August 2017.”

Similar concerns about money owed to the ESFA - and the impact this would have on its ability to function as a going concern - were flagged up in BFET’s accounts in 2015-16.

However, BFET’s latest accounts says the trust has made progress in cutting its operational deficit through “reduction of overheads”.

“We reduced our cost base by £2.6 million during the year and the financial recovery plan will deliver further efficiencies circa £3.6 million over the next 24 months.”

The accounts add: “The reduction of overheads has led to an operational deficit of £532,000 (2016: £1,645,000) which is an improvement on the prior year.”

Credit card concerns

The trust says that its “financial recovery plan” will “generate surplus contributions” in each year from 2018-19.

In the accounts, BFET’s auditors, UHY Hacker Young, flag up three cases where the trust did not follow internal policies regarding credit card authorisations.

“The Academies Financial Handbook 2016 requires payments to be approved in line with internally set policies,” the auditor writes. 

“We identified that authorisation policies for credit cards were not being consistently applied at schools. Our sample of items tested found three items that had not been approved in accordance with the internal policies.”

BFET’s auditors flagged up the same issue around credit card authorisations in its 2015-16 accounts.

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