Just two of the 41 councils given 鈥渉ealth checks鈥 by the government over their preparedness to exit private finance initiative (PFI) school deals were deemed to be on track, Schools Week can reveal. Sector leaders fear schools will be left to 鈥渟houlder the storm鈥 of councils not being ready to take back public control of the schools, as contracts start to come to an end. In one case, a secondary school facing a 拢1 million 鈥渂ullet payment鈥 to get rid of its PFI contractor has written to ministers asking for help to foot the bill. 鈥楳ajor work鈥 still needed Successive governments have used PFI to fund new schools since the late 1990s. Private firms build and maintain sites in exchange for mortgage-style payments normally over 25-year contracts 鈥 which rise beyond inflation 鈥 before handing them over to taxpayers. In 2021, the Cabinet Office started , the point at which authorities are told to start their preparations. Julia Harnden Officials use the assessments to help councils 鈥渋mprove their readiness鈥 and identify projects that may require more support from the Infrastructure and Projects Authority. But our freedom of information request shows that, of the 41 checks completed in the schools sector, eight (19.5 per cent) were rated 鈥渁mber/red鈥, meaning 鈥渕ajor鈥 additional work is needed. Another 18 (44 per cent) were 鈥渁mber鈥, meaning 鈥渕oderate鈥 work was still required. Just two were rated 鈥済reen鈥, meaning they were 鈥渁t target readiness given the time to expiry鈥. Julia Harnden, a funding specialist for school leaders鈥 union ASCL, said: 鈥淥n an administrative level, the length of time that has passed since these contracts were signed and the shrinking capacity at local authority level, as a result of funding cuts from central government, are providing further complications for schools. 鈥淚t is a perfect storm and 鈥 schools should not be having to shoulder this risk.鈥 Local authorities often negotiate exits on behalf of schools. 鈥楽hrinking鈥 council capacity Ian Denison, the director of PFI consultancy Inscyte, said this leaves schools鈥 fates in the hands of others. 鈥淭he party with the least ability to influence the status of expiry is the one that鈥檚 going to pick up all the consequential impact,鈥 he explained. The first PFI school to reach the end of its contract was handed back last year. The second, Barnhill Community High School in west London, will come into public ownership in September. Middlesex Learning Partnership Trust CEO Ben Spinks, whose chain runs the secondary, said that negotiations, which began in 2019, with PFI operator Bellrock were ongoing. He stressed that 鈥渁ll of the parties are genuinely trying to work through this constructively鈥, with the final set of site surveys completed last month. Despite this, Spinks fears that large chunks of his budget will be swallowed up by a 拢1 million 鈥渂ullet payment鈥, should the trust replace Bellrock as facilities manager. 鈥淲e鈥檙e making the moral argument that we should be assisted in making the payment because we are, to the best of our knowledge, the only PFI school that has such a condition attached to it. 鈥淭he impact will be substantial. It impacts the educational opportunities we can provide our young people.鈥 Accounts show that the three-school trust鈥檚 free reserves stood at 拢1.04 million in August. Spinks estimated that the payment 鈥渞oughly equates to two years鈥 pupil premium funding鈥. Surveys still not completed In Stoke, which has the largest school PFI contract in the country, city council chiefs are negotiating the expiry terms for 88 schools before their contract ends next October. One leader said the lack of certainty around the arrangements has left them feeling 鈥渘ervous鈥 about how it will impact their bottom line. 鈥淲e feel, with these big private organisations, schools and trusts are just quite small in comparison,鈥 they added. A confidential meeting was held by the city council last month to discuss contract expiry obligations. Denison has since begun talks with some of the schools. He believes that some work needed to take place before the end of the contract is 鈥渘ever going to happen鈥 as surveys on the buildings have not yet been completed. PFI schools are expected to be handed back in good condition. 鈥淯nless you start in year seven all the way through to expiry, you鈥檒l never get the investment into the school that you need to get the estate to reach the standard it should,鈥 Denison said. 鈥淭he only party that benefits by dragging expiry into a later stage is the [PFI firm].鈥 ‘Critical time’ Sheffield , released in December, show it has in place a 鈥減roject team鈥 to manage the expiry of three separate contracts. The first will end in 2026. Council officials said they have been working on this since the end of 2021. In the same year, it received an 鈥榓mber鈥 rating following an initial health check. The authority is expecting to have a follow-up assessment shortly. And in Calderdale, stated that it was unlike most councils, which 鈥渆mploy an officer with a dedicated role for management of PFI, Calderdale does not. This now needs to be reconsidered鈥. 鈥淚t is seven years to the expiry of the PFI contract. This is a critical time for the authority and for those schools 鈥 to be planning for life after PFI. This is a huge undertaking.鈥 In all, there are 172 PFI school projects in England. Just two will have finished their contracts by the end of 2024. A further 43 will come to a close over the next six years.聽聽 The total capital value of the primaries and secondaries built under the agreements stands at 拢8.5 billion, while the amount that schools will pay the private firms is estimated to be more than 拢32.7 billion in total. Shareholders rake in huge dividends The Treasury has published finance details for a handful of PFI contracts. They show shareholders across just five schools projects will rake in 拢35 million in dividends over the course of the contracts. In a , the NAO noted that councils 鈥渕ay not be incentivised 鈥 to manage the expiry process effectively, knowing they will not retain ownership鈥. Those with a single PFI deal lack capacity or expertise for expiry talks, it added. The government stressed the Infrastructure and Projects Authority 鈥渋s already working with a large number of local authorities to ensure they get value for money” from their school deals, with preparations “beginning up to seven years” in advance. Vercity Management Services Ltd, the firm listed as Transform Schools (Stoke) Limited鈥檚 secretary on Companies House, and Bellrock have been contacted for comment. Preparing to leave a PFI contract? What you need to know said 鈥渆ffective management of the expiry process 鈥 [is] essential to help protect value for money and ensure the continuity of vital public services鈥. Councils 鈥渟hould not simply devolve management of the PFI contract expiry process onto an operational contract management team鈥. Instead, ongoing senior leadership will be needed to provide decision-making and governance, allocate budgets and involve additional staff. IPA believes planning should start 鈥渁t least seven years before鈥 the contract鈥檚 end date. At this point authorities need to 鈥渦nderstand the exit provisions and requirements鈥, as well as the condition of the buildings. Over the next two years they are expected to engage with the PFI to initiate joint planning, develop their strategy for future services and start early condition surveys. Final asset surveys and remediation should then be delivered in the three years before handover to ensure the school is handed back in an appropriate condition. Future services must also be procured at this point, along with reviews and transfers of data. At the end of the agreement, 鈥渁ll handback certification鈥 should be completed, with accounts finalised and residual contract issues closed.