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MPs criticise government oversight of academy school finances

MPs criticise government oversight of academy school finances
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The government has come under fire over a series of shortcomings in its oversight of academies, including a failure to address excessive salaries paid to senior staff and inadequate rules governing related party business transactions involving £120m of public money.

A hard-hitting report by MPs on the public accounts committee (PAC) said unjustifiably high salaries in academy trusts were depriving cash-strapped schools of vital funds for children’s education.

Academy accounts for 2015/16 revealed more than 100 cases of executives being paid salaries in excess of £150,000. The committee went on to say it was alarmed that in two-thirds of cases where the government went on to challenge these salaries, the academy trusts were unable to provide satisfactory responses.

The report, published on Friday, also calls for changes to the Department for Education’s (DfE) rules governing related party transactions which it says are weak and open to abuse. In such transactions academy trusts pay public money to individuals or businesses with whom they have a prior personal and often family connection.

According to published accounts, in the year ending August 2016 40% of academy trusts engaged in related party transactions worth a total of £120m. The Education and Skills Funding Agency (ESFA), which oversees the finances of academies, requires any such transactions to be disclosed in the academy trust’s accounts.

The report concluded: “The DfE’s rules around related party transactions are too weak to prevent abuse”, adding, “these arrangements between academy trusts and related parties should arise by exception, rather than with the current frequency”.

In a climate of growing financial pressures on schools, the PAC accused the DfE of not doing enough to identify academy trusts at risk of financial difficulty and a lack of clarity around what happens to funds and assets when a multi-academy trust fails.

Academies are state schools that are not under local authority control, but are run by private trusts. Launching the report, Meg Hillier, PAC chair, said: “More than two million pupils are taught by academies in England. The governance and financial management of these schools is fundamentally important to pupils’ educational outcomes and future life prospects.

“The cost of failure where an academy chain runs several schools is hugely damaging for pupils and government needs a better grip of when chains are at risk of failure.”

The committee said academy trusts were being handed large sums of public money and it was crucial they showed the highest standards of governance, accountability and financial management. Too often, however, they were falling short of these standards and the DfE was too slow to react.

MPs welcomed the DfE’s publication of the first academies sector annual report as a step forward in improving transparency and accountability in academies but complained it was not published until nearly 14 months after the end of academies’ financial year.

And they called on the DfE to urgently address concerns arising from the accounts, in particular inflated salaries among senior trust staff. “Excessive trustee salaries deprive the frontline of vital funds and it is alarming that, in two-thirds of cases where government has challenged individual trusts on pay exceeding £150,000, it has not been satisfied by the response,” said Hillier.

“The DfE must assert its authority in this area as part of a more proactive strategy to safeguard pupils’ education and public money across the sector. That means identifying more quickly trusts at risk of financial difficulty, enabling it to intervene effectively.”

Dr Mary Bousted, joint general secretary of the National Education Union (NEU), said: “While most schools face brutal budget cuts, and teachers are experiencing real term pay cuts, this report confirms what we have long known; that some academy trusts appear to be using public money to pay excessive salaries.”

She added: “We have long called for related party transactions to be banned, because of the scope for financial impropriety. Teachers, parents and pupils need real and meaningful oversight and democratic accountability, not the fractured and unstable landscape that the academy reforms have delivered.”

A DfE spokesman said: “Thanks to the hard work of teachers and government reforms, academic standards In England have consistently risen since 2010, with 1.9 million more pupils in good or outstanding schools – and 450,000 of those pupils now study in a sponsored academy that was typically previously underperforming.

“All academy trusts operate under a strict system of financial accountability and have to publish their audited accounts. To ensure all pupils get the excellent education they deserve we continue to scrutinise the system on an annual basis and take action where necessary, such as recently asking all trusts paying high salaries to justify them.”



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