Durand Academy Trust’s governors signed a £2.64 million deal with a company owned by former head Sir Greg Martin, without putting it to tender, because he was seen as “priceless”, it has been revealed.

The Charity Commission’s findings come as Sir Greg battles the Education Funding Agency (EFA) over its plan to withdraw funding from the academy over concerns about potential conflicts of interest.

Sir Greg, who was executive headteacher until 2015 and is now its chair of governors, previously faced criticism after it emerged that he had been paid nearly £400,000 in a single year, including payments from the businesses he ran from the school site.

The Charity Commission’s inquiry focused on Durand Education Trust, the charity that owns the academy’s land, for which Sir Greg was a trustee between August 2010 and September 2014.

It found that a decision was taken in 2012 to award a contract - for managing accommodation and leisure facilities on the school site - to GMG Education Support (UK) Ltd, a service company wholly owned by Sir Greg.

Against advice received from the EFA, the academy did not put the contract out to tender, or test the market.

Under the first two years of the deal, GMG was paid £336,375, which would have increased to £840,936 after another three years. A “special termination” payment due at the end of the contract term was projected to be £1.8 million.

The commission’s report says: “Based on the original 2012 contract terms, the total remuneration under this contract would therefore have been at least £2.64 million, and would have been higher if turnover increased or the contract ran beyond the minimum term.”

It adds: “The former executive headteacher has in the past received under the contract significant financial benefit from the remuneration for the development and management of the income-generating activities from the accommodation and leisure facilities.”

Academy trustees told the commission they were happy with a previous 10-year deal they had with GMG, and were concerned about changing to an untested provider.

The report says this did not justify their decision not to put the contract out to tender, or to set payments at the level they did.

Minutes from a school governor meeting in 2010 reveal that governors considered “it was very important that the school thinks about securing Mr Martin for the future, as without him it would be impossible to build [a new boarding school] as his expertise and experience was priceless”.

However, no separate meetings were held by DET to consider the contract or to authorise remuneration to Sir Greg, the commission established.

The commission found that “DET should have, but did not, authorise the remuneration to the former executive headteacher”.

In line with an action plan agreed with the commission in February 2015, the trust has imposed a cap of £850,000 for the special payment.

The report concludes: “Whilst recognising that those involved did what they considered at the time to be in the best interests of the academy, the then trustees did not fully discharge their duties and responsibilities as charity trustees.”

In some cases, the report says, conflicts of interests were not properly identified or adequately managed.

‘The risk of a conflict of interest’

The commission acknowledged that Durand’s pupils had benefited from the facilities held by DET, which have also generated £3.7 million for the school.

But, it added: “Over time, these arrangements have resulted in a significant reliance on a single individual and service provider, and this presents the trustees with a business continuity risk that has not yet been addressed by DET.”

The commission had no objection to DET using the income from the land it holds to build Durand’s free boarding school in West Sussex.

However, it found that there was no lease agreement between DET and DAT for the use of the South London site or the St Cuthman’s site used by the boarding school.

In addition, school staff have been using flats belonging to DET without any form of tenancy or rental agreement, the report says.

The arrangements do not “adequately safeguard” DET’s interests or demonstrate that the trustees have adequately discharged their duties, the report said.

Michelle Russell, the commission’s director of investigations, monitoring and enforcement, said: “This case is a reminder of the importance of trustees being aware of their duties and responsibilities when making decisions and the need for clear governance processes to be in place.

“Where there is a complex arrangement of interconnected bodies, the risk of conflict of interests needs to be recognised, addressed and subsequently monitored by the charity and its trustees.”

In response to the Charity Commission’s findings, Sir Greg said: “I am puzzled and bemused that after a two year forensic investigation conducted by 10 investigators, the Charity Commission has failed to address the pivotal role of the EFA and failed to address the fact that the trustees of DET, as lay people, should have been able to rely upon the role, advice and oversight of the EFA as regulators. In this they have been let down.”

He said he was “disappointed and confused” as to why the Charity Commission had “failed to fully reference” the findings of the independent report into his remuneration which “concluded that this remuneration represented value for money and was reasonable and fair”.

Sir Greg also said that he decided to accept a 65 per cent cut in his remuneration and to donate the balance to the trust before the enquiry was started, “unprompted by any agency”.

He stressed his disappointment at being “subjected to a campaign of vilification”.

DET said that the commission’s report supported its own understanding of several points, including that all three Durand sites are the charitable property of DET, and  that the trustees of DET acted within their powers in using the Hackford Road site to generate charitable funds that were used to buy the St Cuthman’s site in Sussex.

DET blamed “general confusion” relating to DET’s charitable status, for DAT deciding to re-award the commercial development contract to Sir Greg Martin’s company in 2012, when the deal should have been signed by DET.

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