The DfE have, this week, released guidance on Academy Reserves
- Ian Buss
- 6 days ago
- 2 min read
This is a question I get asked a lot by my Academies and the guidance is a welcome addition from the Department.
In summary it clarifies what are classed as reserves and gives (a small amount) of clarity on what is an acceptable level of reserves as well as what to do with them.
1) Reserves are classed as the sum of unspent GAG and any other unrestricted funds.
Whilst GAG is ‘restricted’ funds, the unspent portion of it is still usually classed as reserves. This is interpreted that your total cash position (of unrestricted funds and unspent GAG) at the 31st August is your reserves position.
2) The DfE does not specify how much should be held as reserve.
Whilst a positive budget should be expected, there is not a specific level of reserves that should be held. It is, however, noted that reserves of 20% of income or above would be classed as a high level of reserves and may require an explanation as to why this level is there (e.g. for a specific future project). It is also noted that a reserves position of less than 5% may be an indication of financial vulnerability.
3) Considerations for the Board.
If funds are not needed now, consideration should be made as to how the trust might be able to invest them to generate some extra income by reviewing current trust bank and saving accounts, cash reserve locations and interest rates available to establish where or how investment returns may increase, including:
reviewing type and amount of accounts
avoiding capital at risk investments
ensuring funds are deposited with banks or financial institutions that are registered and regulated by the Financial Conduct Authority (FCA) in the UK
(Section 3 is lifted directly from the DfE guidance)
In summary, if you have too much money in your bank accounts, you should look at other options. These can include “Easy Access” accounts (so you can get to the funds if needed), Notice accounts and Fixed Rate accounts.
This is the clearest guidance yet that Academies are actively encouraged to look at using multiple banks and institutions to hold their cash to make their surplus cash generate more income and that “Capital at Risk” products (Stocks, Shares, Bonds, etc.) should not be used.
It is also good to see the Department giving guidelines that the institutions should be registered and regulated by the UK FCA.
My draft Investment policy for Schools and Academies covers all of these areas and is available for schools and Academies to use without charge. Let me know if you’d like a copy and I’ll be very happy to walk through Deposit Strategy ideas with you.
Ian
Comments