What is GAG pooling and is it right for MATs?

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How individual schools in multi-academy trusts (MATs) are funded presents leadership teams with a challenge. Do they allow individual schools to retain allocated funding taking a small percentage for running of the trust, called top-slicing, or do they pool funding centrally and allocate to individual schools, called GAG-pooling?

Increasingly, MATs are looking to pool General Annual Grant (GAG) funding, but there are some considerations MATs must first consider.

Given the extensive guidance offered to schools in the Academies Trust Handbook and the new Schedule of Musts, there is surprisingly little in the way of direction offered on GAG pooling. Two short paragraph – 5.30 and 5.31 – is all schools get.

Paragraph 5.30 simply permits, or encourages, schools to pool funding, suggesting that it can be “integral to a trust’s successful financial operating model”.

Paragraph 5.31 introduces two ‘musts’: “A trust must consider the funding needs and allocation of each constituent academy” and a “trust must have an appeals mechanism” with the ability to escalate an appeal to the Education & Skills Funding Agency (ESFA). Additionally, a trust with a PFI-funded school must not pool those funds.

Given the absence of clear direction on how trusts should approach the pooling of funds, what are the benefits and potential problems?

Benefits of GAG pooling

The primary benefit of GAG pooling is that it gives MATs the freedom to allocate funds how they best see fit. It can encourage a needs-met approach to funding underpinning the ethos that the trust is working for the benefit of all schools and pupils.

It allows MATs to target funding to those areas that need it most, creating the flexibility to respond to the needs of individual academy schools in the trust. That might mean greater financial support for academies that are struggling or have larger populations of supported pupils.

GAG pooling can help ensure more money is being spent on education with reserves held by academies pooled and directed where it is needed. It effectively encourages schools to use those reserves where once they may not have felt the need to do so.

The pooling of funds also offers MATs greater economies of scale, with leadership teams able to think more strategically on staffing and resources, and with increased purchasing power.

The challenges of GAG pooling

GAG pooling is not without its challenges. It is understandable that some head teachers, particularly in high-performing schools, may resist the loss of control over their finances fearing a reduction in their funding.

There is also the fear among schools that their reserves will disappear. This is often a significant barrier in encouraging new schools to join a MAT.

There is the argument that GAG pooling can weaken the accountability of individual academies, with those schools with poor leadership blaming the removal of resources by the MAT rather than addressing root causes.

GAG pooling can lead to resentment within a MAT with some schools believing they are being penalised for being too efficient if others receive greater percentages of funding because of poorly managed budgets. That is why one of the ‘musts’ is a formal appeals process when funding allocations wish to be challenged.

It is not uncommon for MATs adopting GAG pooling for the first time to have to invest in budgeting and financial software with legacy processes unable to cope with pooling demands.

A change in culture

Perhaps the most significant barrier is culture. Schools, understandably, may argue that a MAT is ‘taking their funding’. MATs will need to work to change the culture across their schools, recognising their responsibility for all pupils across the MAT and not just in their school. It is being a community of learners, rather than islands of excellence.

Transparency and good communication will be the key to changing that culture. A MAT needs to explain the reason and approach in its funding decisions. That approach needs to be formulated and agreed by all MAT members.

There needs also to be robust measures to monitor and evaluate the impact of funding and spending decisions and have those clearly communicated. That too will form the basis of the appeals process.

Importantly, schools need to understand and believe in the importance of supporting each other for the benefit of all pupils.

If you are unsure about the best option for you and your trust or have any questions about this please get in touch with Alex Bottom via the details below.

Do you need extra information?

Alex Bottom - Managing Prinicipal for Hillier Hopkins

Alex is a specialist Audit Principal and acts for many of the firm’s larger corporate clients. Alex commonly advises owner managed businesses and also heads up our specialist academies team.

Contact Alexander at alex.bottom@hhllp.co.uk or on +44 (0)1923 634429