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Opt-out sector in spending spree

Grant-maintained schools have been rushing to spend stockpiled cash surpluses before their sector is abolished, the independent public spending watchdog has revealed.

They have slashed their reserves by almost Pounds 28 million in three years, analysis of the accounts of opted-out schools by the National Audit Office has disclosed.

It shows a turnaround on the way the 1,161 GM schools in England use their money. Income exceeded expenditure by just Pounds 2m in 1995-96 - a drop of 95 per cent, or Pounds 44m, on 1993-94.

The investigation into the financial health of opted-out schools, responsible for educating more than 716,000 children, shows that GM heads and governors have been spending the cash on capital development.

The analysis by the NAO shows that during 1995-96 GM schools spent Pounds 26m on capital projects funded from their surpluses.

Labour has pledged to abolish the sector, which receives an annual government grant of Pounds 1.9 billion, and introduce a new framework of foundation, aided and community schools in 1999.

And the NAO now believes that there are lessons to be learned for the whole of the state sector from GM schools in financial difficulty.

In its report this week, the NAO said the sector was generally financially sound - but it discovered that yearly deficits had increased from Pounds 5.7m in 1993-94 to Pounds 19m in 1995-96.

The number of schools with surpluses had dropped from 665 to 618, and those in the red had risen from 149 to 482. But the NAO said: "Most of these deficits for the year were not a cause for concern."

In January, however, when the NAO conducted its inquiry, 32 GM schools were deemed to be in the greatest financial difficulty. The Funding Agency for Schools, which administers GM finances, estimates this will drop to 17.

Most had produced recovery plans which included a complete block on all but essential spending, the loss of teaching and other posts, and postponing planned maintenance.

Two of the key reasons for their problems were above-average teaching costs - three schools had a head suspended on full pay - and pupil numbers that were lower than forecast.

The NAO gives no details of individual schools, nor does it name the 80 that it put under the spotlight.

It said schools needed to review policies which underpin the cost of teaching staff, to set realistic targets for pupil enrolment, and to react quickly to a decline in numbers. Heads and governors should actively market their schools to parents and maintain a high profile in the community to attract more pupils.

Eleven GM schools previously inspected by the watchdog have achieved financial savings totalling Pounds 181,000 as a result of following NAO advice. One secondary saved Pounds 50,000 annually as a result of re-tendering its catering contract.

The NAO said schools also needed to think about their new technology requirements now that IT was at the heart of the national curriculum, and with schools increasingly having to spend significant sums of money.

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