What is GAG pooling and should your MAT start doing it?
- 26th August 2022
So what is GAG pooling? GAG stands for General Annual Grant and is typically the main source of Government funding academies receive each year. A MAT stands for Multi Academy Trust, which just means a group of schools. The funds (or reserves) a school has available is different to the amount of cash it has in the bank.
GAG pooling is a method available to MATs which enables them to move all of their in year GAG income to one place, in a central fund. Then the central finance team can allocate this fund fairly amongst the academies within the MAT. The academies can then use the GAG income received to cover their schools’ running costs, the main cost being staffing costs.
Some Trusts don’t just pool GAG income, they also pool other ESFA or Local Authority income streams as appropriate, as well as non-government income (self generated income). Although GAG pooling is encouraged by the ESFA, they haven’t provided any detailed guidance on how to manage this practically, however they may do so in the future. There is therefore no strict rule on what income streams you should and shouldn’t pool. However, the ESFA do state in the Academies Trust Handbook that you should not pool PFI (Private Finance Initiative) funding, as per the academy’s funding agreement.
If a Trust chooses to pool their GAG, they must ensure there is an appeals process in place.
Pooling of funds (reserves)
Some Trusts are taking the first step into choosing to pool some of their funds centrally so perhaps GAG pooling is the next step for them in the future. This can be done in a number of different ways, such as; pooling all funds centrally, pooling a certain percentage of income or pooling a certain amount of funds above an agreed amount.
At the end of the day a MAT has one big pot of funds/reserves, it is one Company (legal entity) and one set of financial statements are prepared each year containing the results of all of the schools within the Trust. A MAT’s purpose should be to ensure that every child at every school has the best education and start in life that they can, and pooling gives the freedom to allocate income in the best way to achieve this across the whole MAT.
Reasons why some MATs are GAG pooling or pooling funds
- More economies of scale can potentially be achieved through better procurement as the Trust centralises its income or funds more.
- It increases the consistency of the income each school in the MAT receives each year. Some schools that are struggling financially may benefit more from GAG pooling and this in turn could potentially eliminate individual school level deficits.
- It provides the opportunity for central services to retain more income in order to spend it on Trust wide projects, or central resources such as staffing or software, which could benefit all schools in the MAT.
- Pooling of funds leads to a higher amount of rainy day reserves held centrally from which schools can receive emergency funding if needed.
- GAG pooling or pooling funds could help to ensure more money is being spent on the children’s education rather than some schools in the past sitting on a large amount of funds if they haven’t felt under pressure to spend them.
- Tighter control over the finances Trust wide especially if funds are pooled. This can encourage the schools to budget more and think about their spending on staffing and resources.
Challenges MATs face when GAG pooling or pooling funds
- Resistance of some members of staff, who don’t like change or perceive it to be a loss of autonomy over their school, e.g. Headteachers. It could even result in some staff leaving but a long term view will need to be taken.
- The MAT may not be ready for GAG pooling if it doesn’t have the correct organisational culture in place. The Trust should have the belief that the education and funding is important for all children in all schools across the Trust.
- There is an appeals process the MAT must follow if schools are not happy, per the Academy Trust Handbook. The ESFA have the right to stop a MAT using the GAG pooling method if, after the appeals process, they believe the school has not been fairly treated.
- The MAT may face practical budgeting software issues if the software isn’t designed to cope with GAG pooling.
- It could deter new schools from joining a prospective MAT. If they feel like they are already strong financially, the school may not want to go down the GAG pooling route.
- If a school wants to leave a MAT then there may be some additional work required in calculating the individual school’s reserves due to GAG pooling.
Should you wish to speak with one of our education specialists about GAG pooling or pooling funds please do not hesitate to contact us.
Any news or resources within this section should not be relied upon with regards to figures or data referred to as legislative and policy changes may have occurred.