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Academy bosses must face 'fit and proper persons' test to stop abuse of funds

Academy chains should be forced to put in place “fit and proper persons” tests to vet chief executives as the government has “no way of knowing” if they can be trusted, the spending watchdog has said.

In a "damning" report examining the role of the Education Funding Agency, the Public Accounts Committee said the body was too reliant on whistleblowers to point out when abuse of public funds was taking place.

As a result, the EFA, which is part of the Department for Education, is often too late to intervene when it comes to improper use of taxpayers’ cash, the report states.

The document highlighted the case of E-Act, which was one of the country’s largest academy chains before it was found guilty of spending public money on “extravagant expenses” and whose accounts were found to have nearly £400,000 in financial “irregularities”.

The chain has since been stripped of 10 of its schools over concerns around standards.

Margaret Hodge, chair of the PAC, said the EFA had “not yet got to grips” with effective oversight of how money is spent on academies and free schools.

“It does not properly analyse the data it does have to identify risks and, as a result, interventions in at-risk schools can come too late, as in the case of the E-Act Academy Trust,” Mrs Hodge said.

“The agency has no way of knowing whether academy chief executives and trustees are ‘fit-and-proper persons’.

“In a very devolved system, as in the case of academies, a lot of trust is invested in the organisation, chief executive, principal and trustees for managing public money. However the department does not have a process for vetting those appointed as academy trustees or chief executives,” she added.

The Labour MP voiced particular concern over the potential for conflicts of interests in academies, pointing to the practice of individuals with connections to academy trusts and private companies benefitting from their position.

The Association of Teachers and Lecturers (ATL) described the report as a “damning verdict” on the EFA, adding that it was “appalling” that the agency was unable to hold academy trusts to their funding agreements.

“The PAC report reveals the dog’s dinner of a mess the government has made of holding academies and academy trusts accountable for the huge sums of public money they receive,” ATL general secretary Mary Bousted said.

“ATL strongly supports the PAC’s view that allowing board members of academy trusts to be directors of companies that provide services to those same academies risks unacceptable conflicts of interest.

"ATL has been calling for some time for a ‘fit and proper persons’ test for academy trustees and chief executives, and is pleased that the PAC has emphasised this point.”

A DfE spokesperson said the Whitehall department "did not agree" with the PAC. 

"The EFA is in fact faster at intervening in failing schools than many local authorities," the spokesperson said. "The use of whistleblowers is an important means of gathering evidence and is by no means unusual in the public sector. Of course we are constantly trying to improve the EFA’s performance and we will consider the PAC’s recommendations in that light.”

Related stories: 

‘Extravagant’ expenses and £393K ‘irregularities’ - May 2013
Academy chain hit with accounts warning - May 2013 

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