One of the country's largest academy chains has been hit with an official warning by the government over serious concerns about the financial management of its schools, TES can reveal.
E-Act, which runs 31 schools, has become the first sponsor to be issued with a "financial notice to improve" by the Education Funding Agency (EFA) after the government body found a string of "weaknesses" in the reporting of its schools' accounts.
The decision to issue the warning raises further concerns over the rapid expansion of academy chains and their capacity to manage the performance and standards of their schools.
The news comes just weeks after it was revealed that the country's largest academy sponsor, Academies Enterprise Trust, which runs 65 schools, had been barred by the Department for Education from taking on any new schools because of fears around its continued growth.
The notice to improve is not the first time concerns have been raised over E-Act's financial arrangements. In 2008, a government inquiry found that the sponsor had failed to comply with financial management requirements, leading to the resignation of the then chairman Lord Bhatia.
The chain courted more controversy over the pay and expenses of its director general, Sir Bruce Liddington. The former schools commissioner received almost pound;300,000 in 2010-11 in pay and pension contributions, making him one of the highest paid people in education. He was also forced to pay back expenses after it emerged that he claimed for a stay in a luxury hotel.
Sir Bruce stated in 2011 that he wanted to create a "super-chain" of 250 academies within five years, but he was forced to scale back his plan after it led to unrest in the chain's boardroom.
Among the concerns listed by the EFA's warning was that E-Act did not have enough data coming from each of its academies to properly hold its schools' finances to account.
TES understands that the chain has spoken to schools minister Lord Nash, telling him that it will not attempt to take on any more schools until the EFA is satisfied with its response. The chain has three months to respond to the warning.
Mary Bousted, general secretary of the Association of Teachers and Lecturers, said the development called into question the DfE's policy of allowing rapid expansion of academy chains.
"There are very big questions to be answered here," Dr Bousted said. "No chain should be allowed to expand unless it can demonstrate that it has effective systems in place. How did the DfE allow the chain to acquire more and more schools when it had question marks over its financial governance?
"And why isn't this information out in the public domain? The money given to academies does not come from the fairy godmother - it is taxpayers' money so it should be totally transparent when there are issues about a chain's finances."
A high-profile report published by the independent Academies Commission earlier this year raised concerns about academy chains expanding too quickly. Becky Francis, one of the commission's directors and professor of education at King's College London, said warnings such as the one issued to E-Act would become more commonplace.
"The report made it clear that we were concerned about the speed and scale at which some of the academy chains were expanding," Professor Francis said. "The commission had noted how late this kind of regulation was being exercised, so it is encouraging that these notices are now being issued by the DfE."
The DfE has stepped up its monitoring of academies, revealing last month that it had been forced to issue a raft of warning letters to academies over the past two years relating to concerns over standards and performance.
And earlier this year TES revealed that ministers were requesting detailed performance scorecards every six weeks from about 100 secondary academies that they deemed to be in danger of falling below the GCSE floor target.
In a statement, E-Act said it was "confident" that it would be able to meet the concerns raised by the EFA in its financial notice to improve. "Many of the required changes have already been implemented and we are confident we can address and resolve these issues by July," a spokeswoman for E-Act said. "Our focus remains on our mission to provide excellence in education."
An EFA spokesman said: "We have issued a financial notice to improve to the E-Act academy trust. This requires the trust to set out the actions needed to address the weaknesses we have identified. We will consider the response before deciding whether any further action is necessary."
Number of schools run by the big academy players:
65 - Academies Enterprise Trust
34 - Kemnal Academies Trust
31 - E-Act
30 - Oasis Community Learning
23 - United Learning
21 - Ormiston Trust
19 - Harris Federation
18 - Ark Schools.
Photo credit: Alamy
Original headline: Academy chain hit with official warning over accounts