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Boom in controversial payments to related parties by academy trusts

Thousands of transactions are being made every year by academies to individuals or organisations with which senior staff have relationships

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Thousands of transactions are being made every year by academies to individuals or organisations with which senior staff have relationships

The number of potential conflicts of interest, in the form of “related-party transactions”, at academy trusts has soared by 50 per cent in the space of a single year, according to a Tes analysis of the latest government data.

The overall number of transactions rose from 2,005 in 2014-15 to 3,033 in 2015-16. The 50 per cent increase in related-party transactions outstrips the 16 per cent growth in the number of academies, from 4,722 in 2015 to 5,474 in 2016.

The increase comes despite demands from teaching unions for such transactions to be banned and Meg Hillier, chair of the Commons public accounts select committee, said: “Despite previous warnings, it seems that too many still think it’s OK to do business with relatives or businesses with whom the staff or governors have personal connections. It’s not acceptable. Schools aren’t personal fiefdoms”.

The controversial transactions are payments made between people or organisations connected with one another, in which they are in a position to potentially exploit their relationship, such as when awarding large contracts or simply paying individuals for services rendered.

Large increases

The Department for Education’s consolidated annual report and accounts for the academy sector, released last month, reveals how related-party transactions of more than £250,000 have risen by 17 per cent. Academies paid out £61.9 million on these “high value” transactions in 2015-16, compared with £53m the previous year.

Related-party transactions are permitted under the Academies Financial Handbook, provided that open and transparent procurement procedures have been followed, and any potential conflicts of interest are adequately and appropriately managed. The government also requires that any such service valued at more than £2,500 should be carried out “at cost” to prevent anyone from making a profit on the deal.

But the payments are best avoided “to ensure impartiality and avoid any potential conflict of interests”, according to Nick Brook, deputy general secretary of the NAHT headteachers’ union. He said: “Related-party transactions are just not sensible, even if entered into faithfully. NAHT recommends that schools do not buy services from people with personal connections to the school.”

Family connections

The annual accounts of the 121 academy trusts paying at least one employee in excess of £150,000 a year reveal a number of related-party transactions to relatives of trustees, chief executives and other senior figures. Nearly 40 people have been paid or employed by academy trusts in which their relatives were in a position of influence. The list includes husbands, wives and children of academy bosses or trustees.

One trust paid the daughter of a trustee to give dance lessons. Another hired the principal’s daughter to provide teaching support. And at one trust the chief executive’s mother-in-law was on the payroll.

Nearly one-in-five trusts have either employed family members or handed contracts to firms run by relatives or partners of trustees and other senior figures.

There is nothing to suggest any wrongdoing on the part of those concerned, although the Education and Skills Funding Agency’s outgoing chief executive, Peter Lauener, wrote to academy trusts last year reminding them to consider “whether the appointment of family members is giving rise to actual or perceived conflicts of interest”.

A DfE spokesperson said: “Trusts must apply our no-profit rules and publish interests of members and trustees, so that conflicts of interest are avoided. All related-party transactions must be disclosed in their ‎audited accounts, which are published.”

This is an edited article from the 17 November edition of Tes. Subscribers can read the full article here. This week's Tes magazine is available in all good newsagents. To download the digital edition, Android users can click here and iOS users can click here

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