Finances of thousands of academies ‘not checked’

9th September 2016 at 00:00
Loophole is allowing trusts to ‘disguise the movement of vast sums’, union warns

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.

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.

'Opaque' trusts

“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.”

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.

The news follows a string of high-profile cases involving financial impropriety from academy bosses.

Among them was the probe into the Kings Science Academy, Bradford, which this summer resulted in three members of staff being convicted of a £150,000 fraud.

Such incidents have led the national schools commissioner, Sir David Carter, to order regional school commissioners and their deputy directors to hold annual one-to-one meetings with every MAT chief executive in order to check that their finances are in order.

A senior Whitehall source told TES: “The idea is to ensure they know what is going on in every trust, not just the ones they’re worried about.”

'Failure in the system'

TES has established that the vast majority of cases of alleged financial impropriety in academies that have come to light were not uncovered through standard financial checks and audits.

Of the 26 completed EFA investigations into academy finances and governance, 21 were only triggered because of whistleblowers. The finding has raised questions over how much more financial impropriety has been left undiscovered.

Meg Hillier, chair of the Commons Public Accounts Committee, said: “When a whistleblower is forced to blow the whistle, it shows there is a failure in the system.”

She added: “There should be a much more open approach, with better transparency and accountability.”

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.”

@RVaughan1

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