A local authority has revealed it has significant concerns over financial malpractice in six in 10 of the schools it has checked, and is warning that the national growth of academies is a recipe for more fraud and mismanagement.
Brent Council's "robust" approach to auditing has revealed that some of its primaries - tempted by cash-back offers of up to pound;60,000 a year - have signed "toxic" leasing deals for office equipment worth a fraction of the pound;800,000-plus they can end up owing (see below).
Others are breaking the rules by paying heads an average of pound;10,000 a year more than they should. A failure to tender for purchases worth more than pound;150,000, poor record keeping and the transfer of public funds to unofficial accounts are among further financial wrongdoing uncovered by the West London authority in its schools.
It decided to increase its vigilance after an alleged pound;2.7 million fraud case - due to reach the Crown Court in October - emerged at Copland Community School, Wembley, in 2009. Today, Brent spends more time checking its schools' finances than any of the 20 other London councils with published audit plans for 2012-13. The Labour-run authority said its tougher stance is the reason behind four more, already publicised, cases of alleged financial irregularity in Brent schools.
Now a report seen by TES reveals that they were only the tip of the iceberg. Of the 44 schools audited by the council since September 2010, none received a completely clean bill of health and four were deemed to have "nil" financial "assurance" after serious concerns were uncovered.
Another 22 schools only had "limited" financial "assurance", which meant the authority had "some concerns" including some that were "high priority". Another 18 had "basically sound" systems but with weaknesses creating some risks.
Clive Heaphy, Brent Council's finance director, argues that the current vast expansion of academies is going to make the problem much worse.
"Inevitably there is a recipe there for difficult times ahead and potentially for some mismanagement issues and possibly some fraud issues," he told TES, adding that increased autonomy for local authority schools had already made it much harder for town halls to guard against them misusing public money.
"I still retain personal accountability for schools' finances and yet I see less and less data and have fewer and fewer levers to be able to do anything about it," Mr Heaphy said. "There is very little action in reality you can take."
On academies he said: "The only watchdog over them is the Department for Education itself. We have no relationship with them, but who does?"
Brent has found that about six of its primaries are paying their heads more than the maximum level allowed for the size of their school. This could amount to more than pound;10,000 extra per year for the leader of a small primary.
Hank Roberts, the Copland geography teacher who first drew attention to the financial problems at the secondary, said there was nothing unusual about Brent's schools. "This means without doubt that this abuse of taxpayers' money is much more widespread than anyone suspects," said Mr Roberts, the incoming president of education union ATL. "It will amount to millions upon millions and, with more schools becoming financially autonomous academies, will get infinitely worse."
The Department for Education was not available to comment.
Millions of pounds lost in `toxic' equipment deals
Expert warnings that hundreds of millions of pounds of public money are being lost in "toxic" office equipment leases are being borne out in Brent primaries. The West London authority believes that as many of nine of its 81 schools have signed such contracts. It argues that they are invalid because schools are not legally entitled to enter the deals and it has advised them to stop making the hefty repayments.
This has started to result in High Court cases laying bare the enormous sums involved. Furness Primary is being sued by a finance company for pound;301,083 plus interest calculated at pound;14,579 in April and still rising. But Brent Council said the equipment involved was worth just pound;9,150 when it was sold off by the finance company in February.
Kensal Rise Primary is being sued by the same company for pound;287,000. Both schools have made counterclaims for money they say they have already paid "in error" - pound;805,000 in the case of Kensal Rise. The same school has also received a more recent claim from a second finance company for pound;253,000.
Brent says schools have been tempted into such deals by offers of up to pound;15,000 "cash back" a quarter from equipment suppliers that make initial lease repayments appear more favourable than the real long-term cost. Clive Heaphy, the authority's finance director, said that primary heads were not always "business savvy" and cannot always "see through" such offers.
National experts say that 10-15 per cent of England's schools are caught in such "toxic" deals, often worth more than pound;200,000 each.
The first two Brent cases are expected to reach the High Court in a year's time. Former Furness head Alan King was dismissed in 2010 after allegations of "serious mismanagement". Kensal Rise head Joyce Page resigned earlier this year after alleged breaches of financial regulation.
Photo credit: Alamy
Original headline: Financial malpractice rife in schools, says council