Investigation: Closure fears for London Challenge spin-off plagued by infighting and mismanagement

Formal investigations by the Government Internal Audit Agency and accountancy firm Landau Baker into the London Leadership Strategy raised concerns over the state of its finances

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One of Britain’s best-known school improvement networks, the London Leadership Strategy (LLS), could collapse amid concerns raised by formal investigations into allegations of financial mismanagement of a £2 million government grant, Tes can reveal.

The past year has seen the organisation plagued by bitter infighting among staff and directors at LLS, prompted by claims involving its former managing director, Anita Kerwin-Nye, who stepped down last November.

LLS, a not for profit company largely funded by government grants, arose out of the London Challenge school improvement scheme which was credited with helping to transform the fortunes of the capital’s schools under the last Labour government.

It was awarded a £2,042,857 contract in May 2016, which ends next month, by the Department for Education to develop a SEND Review guide tool to help schools support pupils and promote best practice.

Conflict

However, multiple sources – ranging from current and former LLS directors and staff, as well as leading education figures – have expressed concern over the way in which LLS has been run.

Individuals have been reluctant to speak out openly due to a fear of harming the reputation of the network and casting a shadow over its track record.

But former directors have described the situation at LLS as “like a Greek tragedy” with the organisation in “a mess” and a “lot of acrimony between people”.


Investigation: Auditors found the financial management at LLS in disarray

Investigation: Questions to answer


Fears for the future

They claim that people are frightened of speaking out publicly. One source close to the organisation, echoing concerns expressed by others, told Tes: “The word is that they [LLS] are going to close down, that’s what people are saying.”

The £2m DfE contract that provides much of its funding comes to an end in March this year. LLS has decided not to apply for a renewal of the contract, which is due to start in April and is worth between £2.6-3.4m over the next two years. The organisation has just £3,348 in reserves, according to its unaudited accounts for the year ended 31 August 2017, which were released last week.

It has emerged that mounting unrest on the LLS board, fuelled by fears of financial mismanagement, resulted in several board directors leaving in protest last year.

Tes has established – through a number of sources – that at least three resigned due to concerns over Ms Kerwin-Nye’s management of the organisation. Directors Rob Carpenter, Dame Sue John, Vijita Patel, Isabel Ramsay, Sir Craig Tunstall, Peter White, and Karen Willis all stepped down in May 2017.

Controversy

One former board director told Tes: “There were lots of issues around transparency, the way meetings were run and the feeling that when we challenged rightly, as directors, we were told ‘don’t question this’.”

Another aspect had been the concerns over finances, particularly about how funding that had been provided was actually spent.

Ms Kerwin-Nye joined the organisation as managing director in 2013 and was paid through the company she co-founded, NotDeadFish.

She had previously spent just over a year as chief executive of the My World Charity. Its accounts for the year ended 31 March 2013 show that no income was recorded and the sole member of full-time staff was on an annual salary of around £71,000. Before that, she spent five years as director of a coalition of charities called The Communication Trust, leaving in 2012.

Her remuneration during her time at LLS soared from around £60,000 a year to a six-figure sum, according to sources close to the organisation. Ms Kerwin-Nye has stated that her day rate was £500 and that she worked 16 days a month on average. This equates to remuneration of almost £100,000 a year for working less than five days a week.

Ms Kerwin-Nye has stated that she was supported in the work she did for LLS by a team at her company, NotDeadFish.

Bank account details seen by Tes reveal that her company, NotDeadFish, received more than £118,000 from LLS in just seven months between 25 November 2016 and 28 June 2017. NotDeadFish went into liquidation last November with debts including hundreds of thousands owed in tax and VAT, according to documents at Companies House.

A former director of LLS told Tes how finances “were a constant source of discussion” and claimed: “At the heart of it was the bad value for money that people felt that NotDeadFish and/or Anita were.”

Blowing the whistle

Last summer, a former LLS worker wrote to Stuart Miller, deputy director, special educational needs and disability unit, DfE, alleging that hundreds of thousands in government funding had been misappropriated.

At around the same time, a delegation of former LLS board directors met with Ann Gross, director of life skills, disadvantage and SEND, DfE, to echo the concerns.

The department subsequently commissioned the Government Internal Audit Agency to mount an investigation – the results of which have not been published, although LLS and Ms Kerwin-Nye state that the report made no findings of financial impropriety.

In an email sent to the whistleblower last October and seen by Tes, an official from the DfE’s fraud, error and debt team thanked them for having done “the right thing”. They added: “The Department will now be working to address a number of risks.”

The government’s decision to investigate the allegations of financial mismanagement came just months after Professor David Woods, LLS chair, asked LLS directors Jo Dibb and Terry Molloy to mount an internal investigation into alleged financial irregularities made by a whistleblower at the organisation.

Conducted last April, it concluded that “LLS systems are not secure enough to deal with the level of operational fluidity and speed with which decisions need to be made at key times”. It also found “a lack of clarity in terms of financial responsibilities and practices and a lack of rigour in the oversight of finances by the Board”.

The report recommended that the organisation “conduct a contract review with the MD with a view to improving financial procedures, processes and governance”.

Auditors brought in

LLS also commissioned an external audit done by accountancy firm Landau Baker, the same company used by LLS director Jacqueline Valin to audit the accounts of Southfields Academy, where she is the principal.

Landau Baker’s report stated: “The effective implementation of the company’s financial procedures and policies need to be improved.”

It said: “There is no indication that any misappropriation of funds has occurred,” and no evidence of “any financial impropriety.”

However, it admitted “there was a lack of documentation available to enable an effective review” of financial systems.

The auditors said they were unable to comment whether board or staff members were authorising payments to themselves, partners or relatives due to not enough paperwork. They suggested that LLS bring in a financially qualified non-executive director and have its accounts externally audited.

Responses to claims

A statement by the LLS board said that the allegations “regarding the managing director's conduct of the business” were investigated “through an internal LLS review alongside an externally commissioned financial investigation”.

It added: “Neither review found any evidence of financial impropriety but the independent financial investigation made a number of recommendations where financial management and governance could be improved.”

The board accepted the recommendations and improved financial policies and controls, according to the statement.

It said that when the DfE looked into “similar allegations” regarding the SEND contract, its report made “similar comments to the investigation commissioned by LLS and also cleared the LLS of any financial impropriety”.

Ms Kerwin-Nye said: “These allegations repeat those first raised a year ago by a former LLS contractor, when he was being managed over concerns in his work, and they have been the subject of an LLS investigation – including an external audit, which cleared me.”

She added: “The contractor then took exactly the same concerns to the DfE, who carried out a standard investigation and audit into LLS, which resulted in LLS being cleared and their DfE contract continued.”

In a statement, a DfE spokesperson told Tes: “We have taken swift action in response to concerns that were raised with us, including a robust audit of the contract to ensure we are confident in the service the London Leadership Strategy (LLS) is providing.”

They added: “Our priority remains ensuring children with additional needs to get the support they require and we are continuing to work closely with LLS to achieve this.”

When approached by Tes, Professor Woods said: “This contract is value for money…and there have been very good outcomes.”

But LLS will not be bidding for the next big SEND contract after its current grant ends in March. Professor Woods said: “We don’t think we have the capacity to help manage a big contract going forward.”

Asked whether LLS would be closed down, he remarked: “It’s for the directors to discuss, it certainly won’t be closed down because of allegations from a whistleblower.”

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