DfE GAG pooling – changes to master funding agreements

The Department for Education (DfE) announced via the 20 March 2023 Education and Skills Funding Agency update, that a new optional clause is available to be included in multi-academy trust (MAT) funding agreements regarding the pooling of General Annual Grant (GAG).

The new clause expressly allows MATs to pool funds for its academies to form a central fund. The ability to pool will not apply to PFI funding (which concerns academies which fall under private finance initiative schemes), where such funding still needs to be ring-fenced. The new clause also makes clear that the Secretary of State may restrict the ability to pool where a MAT has a Notice to Improve. For those MAT’s seeking to include the clause, a deed of variation is required to their Master Funding Agreement (MFA).

Currently, the DfE’s model MFA does not include specific provisions on pooling GAG funding, but provisions for pooling are rather set out in the Academy Trust Handbook (the handbook). 

MATs are required to follow the requirements of the handbook and have regard to the guidance in the handbook in relation to the use of GAG as a term of the model MFA. The handbook also provides that pooling cannot be used for MATs on estimates-based GAG funding. 

The addition of a specific optional clause in the MFA permitting the pooling of GAG creates a contractual right for the MAT which entrenches their right to pool funding. Whilst the handbook currently permits pooling in similar terms to the new clause, it is usually updated each year and so can be subject to change. Changes to the MFA require the agreement of both parties and would be recorded in a deed of variation. Including the pooling provision in the MFA seeks to entrench the right to pool further and so could be beneficial to those MATs that wish to pursue pooling. 

That is not to say that the DfE could not in the future seek to amend the requirements for pooling as set out in the handbook, but it would be more difficult for the DfE to completely remove the ability to pool if the provision is entrenched as a clause in the MFA. Given the potential uncertainty over what provisions there may be in future versions of the handbook, we consider that many MATs will want to take up the opportunity to secure the right to pool their funding. 

If your MAT is interested in including the pooling clause in your MFA, do contact your normal SK contact or Graham Burns GrahamBurns@stoneking.co.uk for more information.