Exclusive: Loophole means thousands of academies' accounts are 'not checked'

9th September 2016 at 06:02
academies, MATs, justine greening
News comes as TES investigation reveals that four-fifths of Department for Education probes into academy finances would not have happened without whistleblowers

A loophole is allowing the accounts of thousands of academies to go without official checks, because government rules stipulate that only their controlling trusts must be audited, TES has learned.

Critics are claiming that the technicality, which has been highlighted by one of the country’s biggest academy auditors, is enabling multi-academy trusts (MATs) to "disguise the movement of vast amounts of money" between academy accounts.

The disclosure comes amid growing concern about the lack of financial oversight of England’s rapidly growing academy system, following a series of scandals. This week, TES can also reveal that:

  • The Department for Education’s regional schools commissioners have been told to haul in every MAT chief executive in the country for one-to-one meetings to check their accounts.
  • A TES investigation has raised serious questions over the effectiveness of official checks, revealing that four-fifths of probes into academy accounts by the DfE’s Education Funding Agency (EFA) would not have happened without whistleblowers.
  • The findings have led the chief executive of one of the country’s biggest MATs to warn that the EFA is "asleep at the wheel" when it comes to academy oversight (see analysis in today's TES).

Financial irregularities

Meanwhile, one of the largest auditors of academy trusts, accountancy firm UHY Hacker Young, has highlighted a major loophole in the system for picking up financial irregularities in academies.

Allan Hickie, partner at UHY Hacker Young, told TES that MATs only needed to provide a sample of their academies’ accounts each year and there was no requirement for every school within a trust to have their individual finances scrutinised.

He said it was left up to the trusts to ensure that their financial systems were working properly to prevent any possible abuses.

"We work at a trust level, so if something is going on at a school level, it is difficult to pick up," Mr Hickie said. "There are no guarantees."

Mary Bousted, general secretary of the ATL teaching union, said that by not auditing individual academies’ accounts, the government was being left in the dark about how the money was being spent.

"The reason why MATs are so opaque is because it is difficult to discover what is going on in individual schools," she said. "Individual academies don’t have to submit their own individual accounts and this allows MATs to disguise the movement of vast amounts of money."

Oversight questions

The DfE responded by claiming that it has sufficient oversight of individual academy accounts because each MAT is required to provide the department with a breakdown of finances for every academy.

But Mr Hickie said that the requirement for MATs to "provide a breakdown of certain costs, such as staff costs" for each individual academies was "something very different to an audit” and a “small and relatively minor part" of checks on MATs.

A DfE spokesperson said: "Every MAT must submit annual accounts, which include a breakdown of the finances of each individual academy within the trust.

"Regional schools commissioners can and do discuss financial matters with MATs if they deem necessary. This is over and above the official oversight of the annual accounts by the Education Funding Agency."

This is an edited article from the 9 September edition of TES. Subscribers can read the full article here. This week's TES magazine is available in all good newsagents. To download the digital edition, Android users can click here and iOS users can click here

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