An academy trust has been reprimanded for “significant failings and weaknesses in financial management and governance arrangements” following an investigation of alleged financial irregularities.
The probe into DRB Ignite Multi Academy Trust, which runs eight primary academies in the West Midlands, followed allegations made in July 2016 about the procurement of IT hardware at one of its academies, Bromley Pensnett Primary.
A report by the Education and Skills Funding Agency (ESFA), published today, says Ignite’s model of directly using commercial companies closely connected to it to provide the majority of central functions, without following a proper procurement process, is “inherently irregular”, and breached its academies financial handbook (AFH).
The report says: “Directors were unable to fully demonstrate they were solely acting in the interests of the trust. This was due to inadequate separation, and management of conflicts of interest, between the trust and connected parties.”
The authors write that the role of accounting officer at the trust had "rotated" between three of its members/directors since it was incorporated, and "at no time was any person occupying the trust’s central function roles (including the accounting officer) on the trust payroll".
They say this breaches Treasury guidance about the employment and contract arrangements of individuals on the avoidance of tax.
The ESFA found “limited evidence” to show there was a robust procurement exercise for the lease of smartboards at Bromley Pensnett Primary, and the report adds “there was little evidence that conflicts of interest were managed or the arrangement represented value for money”.
A separate financial notice to improve, also issued today, says Ignite had entered into contracts worth £439,000 with related parties, and that these “did not comply with the ‘at cost’ requirements of the AFH as they did not contain the statement of at ‘cost assurance’”.
The report criticised a lack of separation of roles between members, trustees and the senior leadership team, and said the trust did not have a functioning audit committee, and the testing of internal financial control “was not independent”, as required by the financial handbook.
The financial notice to improve revokes the trust’s delegated authorities and requires all transactions previously made under these to be approved by the agency.
According to Companies House, the appointments of five of the trust's directors were terminated last week, while another's was terminated last month.
In a statement, the trust said: "DRB Ignite Multi Academy Trust was recently subject to an inspection by the ESFA, which highlighted areas for improvement.
"Prior to the notice being published, the trust board has already been working diligently with the ESFA to urgently respond to this serious situation."
Chairman Richard Martin added: "We're fully focused on ensuring our governance and financial processes are fully compliant with recommendations made in the report. We aim to complete this process by the end of August when we will report back to the ESFA."