Lubavitch Multi-Academy Trust has been warned that failure to address its finances “may even result in its insolvency.”

The Education and Skills Funding Agency (ESFA) has issued a second financial notice to the trust.

After the first last year, the JC reported that the trust, which oversees the Lubavitch senior girls’, junior boys’ and junior girls’ schools in Hackney, had a deficit of nearly £1.5 million in 2019.

The latest notice, signed by Academies and Maintained Schools Directorate director Warwick Sharp, recognised “the progress that has been made”.

However, “several important actions are outstanding and concerns remain in relation to the continued weak financial management and control at the trust.

“Unless these matters are addressed in a timely manner, this may prevent the trust from returning to sustained financial health, and may even result in its insolvency.

“Consequently, I feel this is an appropriate point to review and revise the conditions attaching to the notice.”

The letter detailed transactions, such as special staff severance payments, compensation payments, and writing off debts and losses, that must be approved in advance by the ESFA.

Some of the 18 outlined conditions to lift the notice, some of which have already been completed, include achieving a surplus budget from 2020/2021 onwards, providing an “unqualified audit opinion for the current year and beyond” and a “realistic timeline” to carry out a pay structure review.

The letter continued: “We reserve the right to issue a revised notice and add further specific conditions if required, should the trust fail to make sufficient progress against the conditions.

“Should it become evident that the trust is unlikely to fulfil the conditions and/or requirements set out in this notice and/or within the agreed timescales, we will explore the contractual intervention options available.

“In the event that the trust fails to meet the requirements of this notice to the satisfaction of the Secretary of State, the trust will be considered to have failed to comply with the terms of the AFH [Academy Financial Handbook].

“This will amount to a breach if the terms of the FA [funding agreement] and may lead to termination.”

In a statement to the JC, Fiona Bulmer, the trust’s chair of trustees, said: “As the financial notice to improve recognises, the trust has made very significant progress in stabilising our financial position in recent months.

"Our agreement with the Lubavitch Kodesh Club has provided a very positive way forward and we have a clear recovery plan in place which is allowing us to repay our loans from the ESFA. 

“We are continuing to build on the good work of recent months and are optimistic the financial notice to improve will be lifted soon.”

According to the latest accounts up to August 2020, the trust managed to reduce its overall deficit from £1.49 million in 2019 to £1.36 million. It is due to repay the ESFA loans of around £1.2 million in 2025/6.

It reported a significant loss of income as parental contributions for Jewish studies did not reach the expected level. 

Since last September, however, a separate entity, the Lubavitch Kodesh Club has been responsible for collecting parental donations for Jewish studies and receives a fixed fee from the trust.

The Lubavitch Multi- Academy Trust is legally separate to and managed independently of Chabad Lubavitch UK, although it is the designated religious authority for the schools.

A statement from Chabad Lubavitch UK read: "We firmly believe that the path to the schools flourishing in the future is through the Lubavitch community having an active role in the direction and control of the Trust.

"Two of the most significant positives in recent months have resulted from the direct involvement of the community and community trustees of the MAT; the appointment of a new Executive Head and the establishment of a separate trust to support Kodesh (Jewish Studies), the majority of which is funded by parents.

"This illustrates the importance, as we have said all along, of this kind of open and transparent engagement and, conversely, what is lost when these essential ties are weakened."

Judith Nemeth, the former director of the National Association of Orthodox Jewish Schools, has been appointed executive head. Steven Isaacs, interim head of the two junior schools for the past year and a half, is leaving at the end of term for a new leadership post outside the Jewish community.