Academy trust due diligence is a key aspect of schools joining a trust. When a school or academy wishes to join a trust, all parties should undertake a process of due diligence to understand the risk and assets each party is bringing to the trust. In this post, Tim Warneford, Director of Warneford Consulting, discusses the importance of due diligence when merging schools into academy trusts.
How is it that over a decade on from the early rounds of schools converting to academies, many trusts are still sponsoring or merging with other schools, without undertaking adequate due diligence and have, after the transfer, discovered enormous building condition liabilities?
Considering School Assets in Academy Mergers
Given the recent White Paper and the latest push towards regaining the momentum for academisation that has seen conversions drop from highs of over a thousand per annum, to a third of that figure, the risk is heightened that trusts will absorb, merge, or join other trusts without first having fully understood each other’s balance sheet of assets and liabilities.
Many executive heads have achieved their success via turning around ‘’failing schools’’, with the focus on improving the academic outcomes and achieving higher OFSTED ratings.
They would not include asset management within their core competencies, yet the costs involved amount to millions of pounds and can thus undermine the financial wherewithal needed to invest in additional teaching support to deliver improved pupil results.
There is a clear causal link between fit for purpose teaching and learning environments and pupil achievement.
We don’t buy a house premised on the vendors condition survey, local searches, and valuations, so why are so few trusts commissioning their own estate due diligence services?
To fail to collect the data and use it as part of the transfer negotiations, is to lose the opportunity to leverage a better deal before the transfer with the school, local authority, Regional School Commissioner and DfE.
If a trust brings another school into their family and transfers unquantified costs, it threatens the financial equilibrium of all the other schools within the Multiple Academy Trust (MAT) and can undermine the cohesion that sometimes takes years to build.
It is both my belief and experience that the optimum governance arrangements are built on the adage that ‘you are only as strong as your weakest’. The pooling of finances underwrites this structural relationship, if there is a financial liability in the trust then they will.
I am very much in favour of trusts expanding and taking advantage of the benefits afforded through economies of scale and a centralised approach, but this should be a gradual and incremental route to expanding MATs and this would include transparency of assets and liabilities. Undertaking estate due diligence during any potential transfers is very much a part of that process.
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