St. Hilda S Catholic Academy Trust

St. Hilda’s Catholic Academy Trust

Policy on Financial Reserves

INTRODUCTION

1.There are a number of constraints placed upon academies in terms of financial management. One of these constraints is the inability to borrow funds. This constraint represents a key risk to St. Hilda’s Catholic Academy Trust in relation to financial planning and monitoring.

2.One of the ways in which the Trust mitigates this risk is through the effective management of reserves, which provide alternative temporary funding streams should there be a delay in grant receipts or a sudden unforeseen increase in expenditure.

3.Setting a reserves policy helps inform the way in which the Trust manages its cash, liquid assets and debt.

LEVEL OF RESERVES

4.The financial risks have been reviewed in terms of impact and likelihood as part of the strategic risk management process. The main financial risk to the Trust is that of managing its short-term cash flow effectively. Other risks include the requirement for urgent major capital repairs to part of the Trust’s estate and the ability to be able to utilise reserves to ensure a sustainable financial position for the Trust over the medium term, given the current and forecasted funding position.

5.The Board has agreed, to ensure a level of flexibility for individual schools, a minimum and maximum range of reserves. This is based on a minimum level that each school must maintain and a maximum level over which the school must demonstrate to the Trust its plans for use. The range is based upon annual GAG income and exact values will be calculated and communicated each year as part of the annual budget setting and year-end closedown process.

6.As a minimum each school and the Trust overall must maintain a reserve equal to 4% of its annual GAG income. For clarity Pupil Premium Grant is not part of GAG income. Where a school is not currently meeting the minimum level required then it must have a plan to achieve the target as soon as possible and within a timescale no greater than 3 years. Minimum levels will be set annually as part of the budget setting process.

RESTRICTIONS

7.The EFA are able set limits on the sum of GAG that can be carried forward from one year to the next, however there are currently no limits in place.

8.The DfEdoes expectTrusts to use their allocated funding for the full benefit of their current pupils and therefore, the Trust will not build up a substantial surplus without having in place a clear plan for how it will be used to benefit our pupils. The maximum level of reserves a school can hold without detailing its plans for use to the Trust is set at 8% of annual GAG funding. If at year-end a school does exceed this upper range the Trust will require further information in respect of how these reserves are to be utilised.

REVIEW OF POLICY

9.The Reserves Policy will be reviewed by the Board on an annual basis.