The Department for Education must act over “excessive” academy salaries that “deprive the frontline of vital funds”, an influential group of MPs has urged.

The Public Accounts Committee has also said today that too many academies are falling short on financial and governance standards, and the DfE is often “too slow to react” to these failings.

Addressing these concerns is particularly important given that academy trusts are educating increasing numbers of children and handling large amounts of public money, according to a report on academy trust finances published by the committee today.

The criticism of academy pay comes as leaders have been revealed to be receiving as much as £550,000 a year.

In November 2017, the ESFA wrote to 29 single academy trusts where a trustee was paid in excess of £150,000, requesting justification for the salaries. In two thirds of the cases, the ESFA was not satisfied with the trust’s response.

Today’s committee report states: “Unjustifiably high salaries use public money that could be better spent on improving children’s education and supporting frontline teaching staff, and do not represent value for money.

“If the payment of such high salaries remains unchallenged, it is more likely that such high salaries become accepted as indicative of the market rate. This could then distort the employment market in the sector for senior staff.”

This, the MPs warn, only adds to the financial pressures already being faced by many schools.

‘Uncertainty’

Despite these funding pressures, the department is not doing enough to identify academy trusts that are at risk of getting into financial difficulty, the report states.

It says: “We were concerned that...the department could not tell us how many trusts were currently in deficit, and that it did not expect to have this information until October 2018.”

This uncertainty “does not instil confidence in the effectiveness of ESFA’s financial monitoring and its timely intervention to support schools at risk of getting into financial difficulty”, it adds.

‘Not robust enough’

The report also calls for tighter rules around related-party transactions, which involve payments from an academy trust to an organisation or person connected to the trust.

It says: “The [DfE] told us that related party transactions can beneficial to academy trusts, for example, where a trustee provides goods and services free or at a reduced cost. We are not convinced that this is always the case.”

The department’s processes to check these transactions are currently “not robust enough to prevent abuse”,  according to the report, which says all related party transactions should have to be approved by the ESFA.

The report highlights some of the most high-profile multi-academy trust (MAT) failures such as the Wakefield City Academies Trust and says the DfE was unable to properly explain what happens to a school’s funds when its academy trust fails.

It has told the DfE to explain this in more detail, in writing, by July. It also says the department must develop a “risk strategy” for how to tackle MAT failure.

‘Dangerous problem’

The committee also raises concerns about the level of information the DfE holds about the extent of asbestos in schools. Not enough is known about this “significant, and potentially dangerous, problem”, the report says.

Summarising the committee’s overall findings, chair Meg Hillier 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.

“We also see too often a disregard for financial probity in related party transactions.”

Ms Hillier welcomed the government’s decision to publish a separate annual report for the academies sector, but said this report needed to be more detailed. And, she said, the DfE needed to address concerns arising from the accounts published to date.

She added: “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. 

“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. It must also demonstrate it has a coherent plan to protect schools’ assets and pupils’ interests should a multi-academy trust fail.”

‘Not helpful’

But, responding to the report, a group representing the academies sector said some of the language used by the committee was “not helpful”.

Leora Cruddas, chief executive officer of Freedom and Autonomy for Schools National Association (FASNA), said: “The Public Accounts Committee is right to report on academy finances. In particular, we welcome the recommendation that the department should tighten the rules in the next version of the Academies Financial Handbook, expected in July 2018, to prevent academies from entering into related party transactions without approval from ESFA.

“However, the language of ‘excessive salaries’ related to CEO pay is not helpful as it creates the impression that executive pay in the academies sector is out of control. It is not.”

The report acknowledges that 96 per cent of academies pay no-one over £150,000, she highlighted.