On 8 September this year, Wakefield City Academies Trust posted an “urgent announcement” on its website, revealing it was to give up all its 21 academies.

The news has, unsurprisingly, resulted in huge turmoil for the schools involved, as well as anxiety for parents who suddenly found the future of their children’s education plunged into uncertainty.  

In recent weeks, reports have also emerged about WCAT extracting money from its academies - money that apparently now won’t be returned.

Has the trust behaved improperly? Or are those who have accused WCAT of “asset stripping” simply labouring under a misapprehension of what belonging to a MAT actually involves?

Tes went in search of answers. In the process, we uncovered issues that go to the heart of how the academy system works, including the level of control trusts exert over their schools, how they shift money around and what happens to resources when academies are re-brokered.

Kevin Swift is the chair of governors at Wakefield City Academy, the school from which WCAT originally evolved in 2013.

Like many of those involved in WCAT’s schools, he was shocked by the trust’s collapse and the news that its academies would be re-brokered to other MATs (the eight trusts expected to take over WCAT’s schools were announced on 10 October).

‘The money was only a loan’

However, Swift tells Tes there’s another reason he and his fellow governors are concerned by WCAT’s demise: they feel they’ve been left three-quarters of a million pounds out of pocket.

Swift explains that, in 2015, Wakefield City Academy entered into what he calls a “loan agreement” with WCAT, which saw £862,000 transferred from his school’s reserves to the trust’s central function. “Over £750,000 is still outstanding,” he says.

Swift claims the nature of the transfer could not have been more clear - he says that the documents confirming the transaction are entitled “acknowledgment of debt”, and that “at no point up to and including May of this year, was there any suggestion from WCAT that this was other than money to be repaid”.

However, following its collapse, he now says the trust is taking the view the money is “not repayable”.

Swift says his school’s transaction is just “one of a string of comparable…transfers of money to the central trust” that are now in doubt.

In the House of Commons this week, Philip Davies, the MP for Shipley, said that High Crags Primary School in his constituency had built up a surplus of £276,000, which had been “transferred from the school’s account, without its authorisation and without its prior consent…to the trust”.

He called on the government to “ensure that the money is reinstated for the benefit of pupils at that school”.

In total, WCAT is reported by The Observer of moving funds out of at least four named schools.

So what’s going on?

The first thing to note is that the claim WCAT has engaged in “asset stripping” - implying that those responsible for running the trust will walk away with money that has been extracted from the schools - appears to be wide of the mark.

Department for Education minister Nick Gibb has confirmed in Parliament this week that “WCAT will not be able to retain any of the reserves that it holds at the point of dissolution”.

‘Schools own nothing’

Matthew Wolton, a partner at Knights Solicitors and an expert on academy law, thinks the claims that WCAT has taken money from the schools reflects a fundamental miscomprehension about how MATs work.

“The issue is a lack of understanding of what is involved in this…the schools may believe it’s their money - it’s not,” he tells Tes. “The fact is there is no school that owns anything independent of the MAT.”

In other words, the trust represents the sole legal entity - its schools do not have an independent status. If it chooses to move funds that are nominally sitting with one of its schools to the central function, or if it transfers money between its academies, then it is perfectly entitled to do so. These flows of money are in effect internal transfers within one organisation.

Wolton argues that there are “very good reasons” why MATs might move money around in this way and choose to operate on the basis that “in a particular year some of its academies will be in surplus and some will be in deficit”. He gives an example of how a trust boss would justify this:

“We’ve taken on a school that’s poorly performing, that doesn’t have the pupil numbers, that we need to invest in and turnaround. We know it’s running a deficit…we’re going to have to put more [money] into it to turn round that tanker.

“Once we’ve turned it around and it’s starting to perform as it should be, we will no longer need to invest all that extra money into it, and it will move financially back into the black. But that can take time.

“And it’s being supported in that time of deficit by our other 10 schools which are all high performing, good schools who are effectively for that period of time subsidising school number 11, so that school 11 becomes a good one and becomes a net contributor to the other 10.

“Then we can do it again, because as a schools-based MAT we are interested in taking in and improving and turning schools around.”

Wolton says this approach “works in the long term” but problems arise “if you stop the process before that’s happened” - as in the case of WCAT’s collapse.

“Suddenly you’ve got schools that think they’re in surplus, where they’re not.”

Fund shifting

At the moment, most MATs still operate by simply taking a “top-slice” from each from academy budget, which is then used to fund central services.

According to the DfE’s 2017 academy survey, only 18 per cent currently redistribute funds between the academies in their trust in the way Wolton describes. However, this looks set to rise - 31 per cent of trusts reported that they don’t currently do this but “intend to in the future”. With more trusts taking a directive approach, there could be more of the sort of disagreements and ill-feeling witnessed with WCAT.

Wolton says the fact that governors at WCAT’s schools feel they’ve lost money probably reflects “a failure of communication” on the part of the trust - it didn’t properly convey that “the family wins and loses together”.

One can understand how some schools would feel particularly hard done by when they have built a surplus prior to transferring to a MAT, only to lose control of it after they join the chain. This was the situation with High Crags, which joined WCAT in September 2016.

However, Wolton says he’s worked with MATs in a similar position who take a “very, very clear” position about this with transferring schools.

“They’ve had schools join them with surpluses, and the school’s initial position is to say, ‘right we’re going to join you, but you know this £250,000 surplus that we’ve got? That’s ours - we want that ring-fenced.’

“These MATs have said ‘absolutely not’… because otherwise where does it stop with individual schools looking after themselves and not looking after the wider family?”

Lack of transparency

Unfortunately, not all MATs are so candid when schools join their chain, which explains why the trust’s expectations about financial management and the expectations of the local governing board can dramatically diverge.

“I think the problem - and this is a problem that is reasonably common - is that MATs are not clear enough at the outset when schools join them as to what it entails,” says Wolton. “Some MATs are too worried about getting the schools onboard in the first place and therefore soft sell the implications and the consequences of joining a MAT.”

David Moran, the chief executive of E-Act, which redistributes funding between its 25 academies, agrees. “I think this problem has been exacerbated by the lack of transparency about what it means to be part of a MAT,” he tells Tes.

“If I think about E-Act’s history, the raison d’etre about joining E-Act used to be that you would be left completely alone and you would have autonomy.

“That’s not the case; we’re one organisation.

“Let’s just be honest about who we are, and what we are, and what we’re part of.”

Moran says this was the rationale for his decision after taking over as CEO in 2013 to replace E-Act’s local governing bodies with advisory bodies. “You can’t have two independent groups of trustees setting different strategic directions,” he says.

“I think other MATs could be more transparent in that fundamental part of what it is like being in a MAT.”

While some think the disagreement over money between WCAT and its schools reflects a lack of understanding about the realities of belonging to a MAT, others think the situation is more nuanced.

One of the cases of money being moved to WCAT’s central function was at Hemsworth Arts and Community Academy, which reportedly saw £220,000 raised by volunteers transferred to the trust’s accounts.

Question of morals

Robert Hill is an academies expert who served as a policy adviser to prime minister Tony Blair and now works as an education consultant. He thinks where parents or the local school community have engaged in fundraising, the proceeds should be retained by the school.

“Irrespective of the technicalities, it seems to me that morally where that has been raised for the school, it ought to, as it were, belong to the school,” he says.

For his own part, Swift doesn’t feel like he was “duped” by WCAT or that he and his fellow governors failed to understand what belonging to a MAT entailed.

“I understand the position that the trust is now adopting. Obviously, it is correct that at all times both the central trust organisation and the individual schools were legally part of the same corporate body.”

However, he doesn’t think this absolves WCAT of what he views as poor governance practices - making commitments and then failing to honour them. “What we’re actually talking about is not separate contractual relationships,” he says. “What we are talking about though are pretty clear undertakings in the context of good governance of how things would be conducted.”

Hill has sympathy for this attitude. “Governors will feel as custodians of the affairs of the school that they want assurances that money is going to be spent for the most part on their school.

“The governors who feel they lost out - I’m sure if I was in their position I would feel aggrieved.”

‘Deals get done’

What now lies in store for WCATs schools? They will be re-brokered to new trusts, but exactly how much money they will take with them is still a mystery.

Wolton says that deciding how to divvy up resources when schools leave a MAT is a “genuine problem”. While the collapse of a large chain is thankfully rare, the problem happens in microcosm whenever a school is prised out of a MAT and re-brokered.

“The difficulty is that once you have a pot that has, for the sake of argument, a surplus of £2 million in it, how do you then distribute it?

“Does it get distributed equally amongst the schools or proportionally according to the contribution each school made towards this aggregate surplus?”

Wolton says “there is no formula” for how this is managed. “In practice, a deal just gets done” between the MATs involved, with the DfE and regional schools commissioner holding the ring.

WCAT declined to comment in relation to this story. However, a spokeswoman for the DfE said: “When schools join a MAT, the responsibilities assumed by the MAT are made clear and agreed by both parties, and the department provides support and expert advice throughout the process.”

“A failing academy trust must never profit from the re-brokerage of its schools. We are working with WCAT to transfer its schools to new sponsors ensuring each one has a secure financial basis, as well as the necessary funding to move forward and improve.”

Understanding about MATs is ‘fuzzy’

The fallout from WCAT and the row over money appears to reveal a fundamental truth about the MAT system. This can be boiled down to a single quote from Swift: “The vast majority of parents have only got the fuzziest idea, if at all, about the existence of MAT,” he says. “To them, a school is a school.”

Ultimately, parents choose their children’s school. They drop them off there in the morning and wait for them at the gates at the end of the day.

The English academy system might be increasingly mature, but parents continue to identify their children’s education with a single school, and local communities continue to owe their loyalties to this institution - not a dimly conceived and seemingly far-off MAT.

While this remains the case - and irrespective of the legal nitty-gritty - it seems that future conflict of the like witnessed with the collapse of WCAT is inevitable.

Want to keep up with the latest education news and opinion? Follow Tes on Twitter and Instagram, and like Tes on Facebook