MAT used unapproved loans to cover slow EFA payments

Unauthorised loans with a value of £150,000 were taken out by Chapel Street Schools, a multi-academy trust (MAT) which runs six schools. Another loan of £85,000 was also borrowed around the time the initial loans were repaid.

Chapel Street was issued with a financial notice to improve by the EFA in February 2016. This included a demand that it 'comply urgently with the funding agreement requirement and submit all audited financial statements to the EFA by no later than the end of March 2016, without qualification.'

In its 2014/15 financial statement the trust revealed the details of its loans saying: 'The need for these short term loans stemmed from delays in receiving capital monies (from EFA) and VAT refunds (from HMRC).' (page 43)

The financial statement also shows (page 33) that the trust was lent £59,880 by the Education Funding Agency (EFA) in the form of advances of funding - when trusts get their grant income early to cover immediate costs.

According to the trust the unauthorised loans were provided on an unsecured interest-free basis. It said: 'Two loans totalling £150,000 were received in March 2015 and repaid in April 2015. £115,000 was loaned by Koinonia Limited (wholly owned by a senior member of staff), and £35,000 from Signify Limited (a donor linked to Chapel Street Community Fund).

'A further loan for £85,000 was received from Koinonia Limited in April 2015 and repaid in May 2015.'

The trust acknowledged it was 'technically breaching the Academies Financial Handbook' when it took out the loans, adding that the the trust board was 'aware of this breach and has determined not to repeat it in future years.'

Growth
In 2014 Chapel Street set out a growth programme that would see it triple in size, this was after it took on the Benedict School in Mitcham which was running a budget deficit.
It its recent financial statement Chapel Street said the trust was running a £79,739 deficit 'because of the need to support a specific school within the trust over and above the funding available.'
The note said that it was 'removing financial delegation from the Benedict Primary School local governing body' and 'reviewing the budget set for Benedict Primary School.'
It runs two secondary schools: one in Wigan another in Burnley. And four primary schools; three in London, one in Oxford.