Preparing for growth: is your MAT structurally and operationally aligned?

Growth is firmly back on the agenda for multi-academy trusts (MATs). We have seen, through our customer base, more and more schools joining MATs we work with – in fact, more in the last three months than in the previous 12 months combined – there has been a real uptick.

Whether this is related to March’s announcement by the Secretary of State on getting every school into a MAT and emerging evidence of the increase in merger approvals, or due to MATs coming of age during the pandemic (being an anchor of support and guidance and allowing schools to ‘do school’), I don’t know. But there is a growing consensus that a White Paper is coming for the sector, of which greater academisation through MATs will be a major part, and we want to help MATs manage that growth with new schools or through Trust mergers.

I can remember the previous academy rush, when there was a huge amount of growth, and we saw one MAT grow from three schools to 20 schools in 18 months and another add 15 schools at the start of one year. Opportunities were put to Trusts, and Trusts took them. Today the whole sector seems to have matured and is much better placed to accommodate growth now than it was five to eight years ago when organisations, evidence, systems, processes and guidance were developing at a rate of knots.

Risks will always be talked about, and they are still there, but if there is another significant period of growth, Trusts are in a much stronger position. However, to minimise risk, there are structural and operational areas of alignment which enable a MAT to be in the best position to onboard new schools through growth or merger, and this is where we see the sector evolving.

A clear majority of MATs are still the processing hub for transactional processes across their schools. This means that accountability is still very much at school-level for financial management, setting their budgets, reporting on their budgets, and choosing what they spend and where, but all transaction processing is done centrally (purchase ledger payments, bank reconciliations, VAT returns etc). Those processes are not being done in every single school, which means Trusts are able to centralise control around banking, payments and processing.

More and more MATs, however, are moving towards accountability of finances at a management-level. Here the ultimate accountability is with the Headteacher, but there may not always be a person on the ground who is then responsible for financial management within a school. We are seeing more and more Trusts adopting a finance business partner model where, across say 15 schools, there might be three to five business partners responsible for budgeting, management accounting and reporting, and liaising with the Head to ensure they have the support they need to do what they want to do educationally. That is a more centralised role that reports into the central team.

Then there is the GAG pooling model – and we are seeing an increasing number of Trusts considering, if not necessarily implementing this, because they can see benefits. There are lots of different approaches, but the most common we see is needs-based. Schools do not have income as a consideration within their budget, and instead work is undertaken with Headteachers to define an expenditure budget e.g. what is the most suitable staffing structure we need to deliver our school improvement plan? Trusts can manage that across their schools, the peaks and troughs that just happen such as IT replenishment, estates work or drop in pupil numbers, for example, and are much more effective at managing those across one organisation than balancing lots of individual budgets.

More operationally, chart of accounts alignment is absolutely fundamental. The best way to reduce risk is to onboard a school in a MAT’s reporting programme as soon as possible and alignment of chart of accounts (nominal codes and departments) before a school joins is a must. The approach that we see working best is to present the Trust’s chart of accounts which schools need to map into, see what does not fit, and then the only review is around the things in the joining school that do not fit. There are then two outcomes: either the chart of accounts evolves to make sure those things fit because they need to be reported, or for the Trust to say ‘we do things this way and you no longer need to do things that way’. It is not about throwing all codes together and making a new chart of accounts.

This can vary if you are thinking about merger, and that will depend on what that merger looks like. If I have a 15-school MAT and I am merging with a three-school Trust, it is probably not going to look very different from the discussion around what does not fit. But if I am a seven-school Trust merging with another seven-school Trust, the chances are that a new Trust of 14 schools is going to operate very differently. In that case, a conversation is needed about what the operating model looks like, what the accountability and budget management model looks like, and build the chart of accounts around that vision. If a MAT is designing a new chart of accounts, such as through a merger, they are well advised to follow the DfE’s chart of accounts.

I try not to preach too much, but I would also draw the line on centralised bank accounts – it is my second must. You must move towards centralised bank accounts in terms of reducing risk when schools join the Trust. There are a number of efficiency arguments around that, but also in relation to mitigating against fraud. If you are a 15-school Trust, by not having centralised bank accounts, you are giving fraudsters the opportunity to check your processes 15 different times as opposed to one process that they can have a crack at. The arguments against centralisation are generally around people being protective of their money: but there is no link between cash and reserves, so centralising the bank accounts does not encroach on the ‘school’s money’.

In my next blog, we will look at the specific risks facing MATs around growth, but one way to minimise financial risk is not to bite off more than you can chew. Some of the biggest Trusts we work with say they will not grow beyond four or five schools a year, and these are organisations with 15-20 person central finance teams. They cannot onboard more than four or five schools, therefore can a Trust with two people in their central finance team onboard six, seven or eight a year? Regardless of how good a Trust’s processes are, there is an upper limit on what is achievable. Sustainable growth should be the real aspiration.

Will Jordan is Co-Founder of IMP Software, specialists in MAT budgeting, forecasting and reporting

 

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