In my last post I started looking at the accounts of three Multi-Academy Trusts to glean whatever information I could about the governance of those trusts. You can read that here. This post follows on from that and will look primarily at the money.
At the start I will say I am looking at this with a purely financial eye so please don’t accuse of being a penny-pinching bean counter just because I suggest its possible to save some money. Context is everything and not everything that any of these MATs are doing may necessarily be transferrable to others.
A brief recap:
I am looking at these three trusts:
MAT A – Total of six schools (five primary and one secondary according to the 2015 accounts) based in the West Midlands. Now has eleven (eight plus three).
MAT B – Total of eleven schools (seven primary and four secondary) based in the South East. Now has thirteen (six plus seven)
MAT C – Total of eight schools (four primary and four secondary) based in the South East. Now has nine (five plus four).
So even in a fairly short period of time we can see that these MATs are all changing. MATs A and B also state on their websites that they are in the process of having more schools joining in coming school year.
Below is a summary of some of the more useful numbers in their accounts (all figures £’000s except for the percentages).
|MAT A||MAT B||MAT C|
|Number of Schools||6||11||8|
|Income (from EFA)||12,381||41,015||20,805|
|Income per student||4.3||5.5||5.1|
|Restricted Reserves (Excl Pensions)||1,014
|Staff Costs (of EFA funding)||81%||83%||78%|
|Highest Paid Member of Staff||130-140||140-150||190-200|
|Higher Paid Staff Total||530||2,690||805|
|Average Cost Higher Paid Staff||88||79||89|
|Average cost of all staff||32||39||36|
|Number of staff:
|Top Slice||Not provided||2.5%
I’ve provided these to give a sense of the scale of these organisations. You can also see where there are differences between the MATs in terms of cost of staff for example.
The first thing to notice is the range of income per student. Yes, part of this will be due to the primary/secondary split but predominantly it is due to the differences in funding in different regions. Even when aggregated across a number of schools this is apparent. If MAT A were funded at the same level as MATB then they would have an additional £3.4m to spend on students. If it were the other way around then MAT B would have £8.9m less. So the coming decisions on a national funding formula are potentially have a significant impact on MATs. The government has suggested that they will keep any loss below 1.5% – looking at these figures this will be a challenge.
The reserves figures for the schools are not unhealthy, though obviously above 10% is better than below. Whilst in pure pound terms they appear to be large, in the context of the size of the organisation in the current schools financial climate they are fairly minimal.
One of the things that will probably surprise people outside of education is the relative proportion of the staff. In two of the MATs the number of teachers is considerably less than 50% of the total staff. The other MAT doesn’t separate teachers from support staff, but it is likely they would have a similar percentage. This shows how complex the operations of a school can be. More so the operations of a groups of schools. As a comparator, the Department for Business, Innovation and Skills estimates there are less than 7,000 organisations in the UK employing more than 250 members of staff. MAT A is quite a small MAT in the scheme of things. It is likely that any MAT with a secondary and five primaries will go over this staff total.
So the big issue about MATs is “How do they save money over what an LA can do?”
Firstly, because the size of an organisation will generally determine its buying power. This is slightly different for schools than some other organisations because the main resource they use is staff, leaving maybe only 20-25% of their expenditure on non-staff items. But as you can see, in the case of each of these organisations this is still a considerable sum of money. As soon as you can say to any supplier that you want ten times the amount that another buyer wants of their goods, then they will offer larger discounts.
A question has always been why is this any better than an LA can do with central buying? There are a number of points to make here:-
- For some generic commodity items, such as paper for example, a MAT is unlikely to beat the discounts an LA can get.
- For most other items an LA could only get a bigger discount if it can buy for all its schools. With the autonomy schools already have this is unlikely. A MAT is more likely to be able to say “We want X items and can guarantee that number.” This is what suppliers want to hear, not “Give us a discount and we’ll try and get as many of our schools to buy one”.
- The other reason is that often a public body will make the cost of selling to it too high by the imposition of requirements that an individual or smaller group purchaser make not make. This will also tend to limit the level of discount.
An example of this is where one of the trusts has said in its value for money statement that they have been able to make a saving of 13% on a stationary contract over what they previously paid as separate schools. They are also getting better interest rates at the bank because they can put larger sums of cash on deposit. Another gave the example of moving to a single provider for Finance, HR and payroll services, both saving money and becoming more efficient.
Secondly, these trusts have started to rationalise senior management. People usually point to the appointment of Executive Heads and suggest this must just be an extra cost. What is rarely considered is that in most cases the schools in the Mat do not then each have a Head Teacher, they have a head of school, usually at a lower salary than the original head. In a large enough MAT this will end up being an overall cost saving.
These trusts are also using their staff differently. Remember, staff are now employed by the trust, not by the school. They will often have contracts that enable them to be used in multiple schools. Older readers will remember LAs having this power. So where a school may only need a person one day a week, a MAT can employ them for the whole week, which can be more efficient but moreover reduces the cost of finding employees. This work particularly well for specialist staff, such as counsellors, who an individual school may have to buy in a day a week at high cost. A MAT can employ one or more of these full time.
Further examples of cost saving relating to staffing occur when, in larger trusts, the number of subject leads is restricted in some subjects so there wouldn’t, for example, be a head of every department in every school. I suspect that this will become the de facto standard model in MATs.
The mix of staff is quite important. If MAT B could get its average cost of staff down to that of MAT A then it would save around £6m. Clearly the mix and location of schools is an element of this but I suspect there could be some savings in there.
One of the MATs looked at also moves students around to ensure that the number of classes are reduced where feasible (it mirrors the example in some areas of rural France where each of the local villages schools a single year group at primary level and the students are bussed around the country side). . This obviously works best at sixth form level and many schools already do this by way of consortia arrangements. You can see that this would be even more efficient when one organisation has complete control over the process.
These latter methods involving staff and students are not saving mechanisms that LAs can easily adopt. Well, not anymore they can’t.
Knowing quite well how the finances of a single schools works I can see how a group of schools could be made much more financially efficient, especially when you have complete control over each school. I have no doubts that the money saving arguments hold up for MATs, even at the size of those I have looked at in this post.
In larger trusts there will be even greater scope for savings over the costs of individual schools. To give a sense of the scale, the largest trust (AET) has income of around £275m and employs over five thousand members of staff. Irrespective of what happens to the education white paper, such MATs will become commonplace and we need to understand them a lot better than we already do.
It’s not all sweetness and light, however, as we shall see when I get to the third post when I will be looking at what other lessons the accounts can show us.