The latest accounts for the Perry Beeches Academy Trust, which runs five academies in Birmingham, including four free schools, show it had a net deficit of £2.509 million in 2015-16.

At the end of that financial year, its current liabilities exceeded its current assets by £1.622 million, and auditor John Golding wrote this indicates “the existence of a material uncertainty which may cast significant doubt about the charitable company’s ability to continue as a going concern”.

The trust previously hit the headlines when it was revealed that then-chief executive Liam Nolan had received a “second salary” of £160,000 on top of his £120,000 pay packet as executive head.

The trust has been the subject of two highly-critical reports by the Education Funding Agency (EFA), published in March 2016 and December 2016.

And in November last year, Perry Beeches the Academy was rated “inadequate” by Ofsted. It had previously been judged “outstanding”.

Its accounts for 2015-16 showed that four of its five schools recorded a deficit, with the highest, at Perry Beeches the Academy, standing at £1.138 million.

The accounts blamed the overall deficit on “volatility in student numbers together with poor control over costs”.

They also show the trust has to repay the EFA £392,000 because of pupil under-recruitment in 2014-15, and a further £827,000 for 2015-16.

The notes to the accounts say the directors concluded there was “significant doubt” about the company’s ability to continue as a going concern.

However, they add that a review had saved £750,000 in costs, and say increasing numbers of pupils at its free schools meant it had set a balanced budget for 2016-17, and the deficit “will be recovered over a four-year period”.

The accounts also confirmed that plans for the trust to open two new free schools, Perry Beeches VI and Perry Beeches Primary I, are “on hold, pending a strategic review of the trust”.

All the trust’s directors resigned in April 2016, following the first EFA report about the trust, and a new board was appointed the following month.

The accounts said the board is “reviewing the capabilities and capacities within the trust”, and added: “The review is also considering whether the trust should remain in its current structure or if it would be more beneficial for students and staff for some or all of the schools to be re-sponsored.”

Paul Wheeler, acting chief executive of Perry Beeches, said the money it had owed the EFA after failing to hit expected pupil numbers had put the trust’s future at risk.

He told TES: “What we did was write to them, and said ‘Please don’t take the money. We have got a deficit and you will just tip us over and bankrupt us’. We are not asking them to write it off, but are asking them to put a payment plan in place.”

He said Perry Beeches Academy Trust had agreed to start repaying the money in monthly instalments of about £100,000 from September 2017.

He said the trust was now making a surplus, and the auditor’s concern about its future was driven by the possibility its schools could be transferred to another organisation.

Mr Wheeler said potential sponsors were currently undertaking due diligence exercises, but a sticking point was likely to be who would pay off the deficits.

He told TES: “What we have made quite clear is that because of the financial situation we are in, we are able to trade out of it if we have got all the live schools. If we start to drop one or two off, we no longer have the economies of scale to generate surpluses that would clear the deficit.

“It either stops, or it goes. There’s no half way house.”

An Ofsted report on Perry Beeches III free school, published on its website this week, has taken it out of special measures, and rated it ‘good’ across the board.

“The trust has turned its financial position around, and has stopped the losses in some respects, and with the Ofsted report has demonstrated its capacity for school improvement,” Mr Wheeler added.

TES asked whether the EFA believed the academy trust could continue as a going concern, whether the EFA would re-schedule payments of the money Perry Beeches owes the EFA to help it survive, and whether there was an update on whether any of the trust’s schools would be re-brokered.

In a statement, a Department for Education spokesperson said: “The EFA is committed to working with The Perry Beeches Academy Trust (PBAT) and continues to monitor progress against the trust’s action plan following the Financial Notice to Improve. Our priority is to deliver the best educational outcomes for the pupils and parents while ensuring good value for money for the taxpayer.”    

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