A secondary school's deficit has cast “significant doubt” about the future of an academy trust that also includes three first schools, its auditor has warned.
Avonreach Academy Trust in Worcestershire was formed in 2017, when three 4-9 first schools joined Pershore High School, which currently takes 12-18 year-olds.
The trust’s financial accounts for 2017-18 show that the high school had a £322,000 deficit in the year – up from £17,000 the year before.
In contrast, each of the first schools had increased their surpluses, to £125,000, £39,000 and £59,000.
The accounts say these surpluses “are not sufficient to offset the deficit position of the high school”, which it says has “exhausted its built-up reserves”.
The accounts blame a historically low birth rate, reduced sixth form funding and unfunded cost pressures from government.
Citing the financial position, the trust’s independent auditor Robert Stokes wrote: “A material uncertainty exists that may cast significant doubt on the group’s or the parent academy’s ability to continue as a going concern.”
The trustees themselves said that the trust would need to “obtain support from the ESFA [Education and Skills Funding Agency] regarding a drawdown of future funding”, which they said would be repaid from future surpluses.
They added: “The academy is expected to continue as a going concern.”
The trustees’ report says Pershore High had built up financial reserves before the multi-academy trust was formed to cover the changes in local demographics
It adds: “Governors were determined to do everything possible to maintain the curriculum offer for the sake of pupils, something that can no longer be sustained.”
The accounts say the trustees have prepared a recovery plan, adding that the funding position should improve with rising pupil numbers at the high school from 2019, and plans for the first schools to take on year 5 and 6 pupils, and the high school to take on year 7 pupils.
In a statement to the Malvern Gazette, the trust said the trustees had been aware of the deficit situation for some time, blaming low levels of government funding and the fall in secondary school pupil numbers.
It added: “This is not an uncommon situation, with recent reports suggesting that almost one-third of local authority maintained secondary schools and 55 per cent of trusts across the country are working with deficit budgets.
“The trust finance team have been working with the DfE for many months on a plan to cover this period, with an in-year surplus position expected during the financial year 2019-20.
“This plan, which affects the high school only, endeavours to ensure that this does not impact on the education of the children within all of the Avonreach schools.”