A school tied into a £20 million PFI contract and with “significant” deficits forecast this year has been ordered by the government to improve its finances and join a multi-academy trust.

Bradfield School in Sheffield, which is expecting to have racked up a deficit of £800,000 by August, has been told to begin the process of moving into a larger sponsor after officials questioned its viability as a standalone school. The school must have kick-started the process by September.

The school has been issued with a financial notice to improve by the Education and Skills Funding Agency for failing to submit audited financial statements – which were due on December 31. The school was already subject to ESFA intervention “due to concerns regarding financial management”.

The trust has been working with school funding bosses to address these concerns, but has not “provided assurances that it can achieve a balanced budget,” the ESFA said.

“Its financial position is poor and worsening, and it continues to operate in both in-year and cumulative deficit positions.”

Despite forecasting “significant” in-year and cumulative deficits for this year, the ESFA said the trust has “failed to provide and implement a satisfactory plan that provides financial recovery.”

The most recent accounts available for the school, for the 2016-17 year, show the school had agreed to receive additional funding from the ESFA in February and June last year, providing it “continues to demonstrate sound financial management and has a viable plan to recover to surplus”.

It is not clear if this funding was ever received.

By August 2017, the academy’s total PFI repayments stood at over £20 million, with more than £700,000 due to be repaid in 2017-18 alone. The contract, which covers facilities management costs, energy costs and renewing fixtures and fittings, will continue until October 2037.

Although the Bradfield School has been told to join a MAT, costly PFI contracts can often deter trusts from taking on struggling schools.

It took Mexborough Academy in south Yorkshire 12 months to find a new sponsor after the collapse of its sponsor, the Wakefield City Academies Trust, due its £1.6 million-a-year PFI contract. The school finally transferred to the Delta Academies Trust in November.

In March 2018, Jon Coles, the head of United Learning, ruled out taking on schools with costly PFI contracts “ever again”. In October, chancellor Philip Hammond said the government would no longer sign off any new PFI deals, describing the model as “inflexible and overly complex”.

A spokesperson for Bradfield School said governors are “working very closely with the ESFA to ensure that the budget becomes balanced in the very near future and we have stability moving forward”.

“The financial notice to improve supports our ongoing work to ensure that tight financial procedures are in place so that we can return to a balanced budget for 2019-20.”

The school was rated as ‘requires improvement’ at its last Ofsted inspection in September 2017. Bradfield School’s secondary progress eight score for last year is classed as ‘below average’, but its A level results came in as ‘above average’.

However, in January the school began consulting on a proposal to close the sixth form. The consultation document said the school is “deeply in financial deficit” and had exhausted its reserves by September 2017.

It said the school ended 2017-18 with an in-year deficit of £400,000, and was forecast to have a cumulative deficit of over £800,000 by the end of 2018-19.

Bradfield School must now submit its financial statements by April 15 and demonstrate to the ESFA what it is doing to lessen its deficit, including a “realistic revised forecast cumulative position for August 2019, clearly showing the financial impact all planned actions are expected to have.”