Audit Office refuses to sign off DfE and YPLA accounts

Janet Downs's picture
 7
The Department for Education (DfE) breached its annual spending limit set by Parliament by £63 million, the National Audit Office (NAO) has discovered. The NAO didn’t give reasons for this overspend but perhaps if the DfE hadn’t flung money at free schools in areas where there is no need for further school places then some of this £63 million could have been saved.

The NAO also refused to sign off the accounts of the Young People’s Learning Agency (YPLA) which was responsible for funding academies and ensuring that grants were spent properly. The YPLA had found 14 cases in nine academies where extra-contractual severance payments had been made – these should have had advance Treasury approval. The Treasury provided retrospective permission but the NAO was concerned that other such payments had gone undetected. NAO found that the YPLA’s assurance framework was not robust enough to find all such cases and concluded, “The assurance framework does not cover the full requirements for regularity set out in Managing Public Money.”

NAO found that 21% of the academies which were required to prepare audited financial statements by 31 August 2011 had not done so although all had been received by the end of June 2012 (nine months later). 54% of the expected Financial Management and Governance Evaluation (FMGE) self-assessment forms were also submitted late.

The YPLA closed earlier this year and its functions have been taken over by the Education Funding Agency (EFA). NAO said the number of open academies had grown significantly in 2011/12 and expects this expansion to continue. It recommends improvements that the DfE should consider in order to manage this future growth more effectively:

1. The EFA should discuss with the Treasury how to ensure compliance with rules surrounding the management of public money. NAO warns that it will not sign off EFA accounts next year unless the EFA resolves this issue.

2. The EFA must consider how to make sure that academies submit their financial paperwork on time.

3. The Academies Financial Handbook requires academies to have their accounts audited. However, the NAO is concerned that the auditor’s opinion only need cover whether academies have complied with their funding agreements. This does not take into account other important considerations such as managing public money properly. NAO recommends that the EFA should consider demanding a more robust audit code.

It is clear that proper arrangements were not in place for the YPLA to manage the rapid growth of academies and that the problems found by the NAO will continue as more schools convert. The extra responsibilities which academies have to take on are not minor – these were highlighted in an earlier LSN thread.

I wrote before, “They create a prison and call it freedom.” Now it appears that they didn’t even put sufficient monitoring in place to make sure the “prisons” manage their grants properly.

The NAO summary and links to the longer NAO report are available here.

 
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Ricky-Tarr's picture
Thu, 02/08/2012 - 14:26

The NAO didn’t give reasons for this overspend but perhaps if the DfE hadn’t flung money at free schools in areas where there is no need for further school places then some of this £63 million could have been saved.

Oh Janet! The NAO certainly DID give reasons for it... and they had nothing to do with free schools or reckless overspending. The reason given was a shift in accounting conventions such that contingent liabilities ... such as pension and severance pay have to have money set aside for them in advance. The NAO state very clearly in one of the docs you link to:

My audit identified that the Department made payments of over £12 million during 2011-12 in relation to the premature retirement compensation of teaching staff of ex-Grant Maintained Schools and Colleges and pension payments mostly relating to the staff of former non-departmental public bodies. In previous years the Department has accounted for annual compensation and pension payments as expenditure at the point payments are made but it has not recognised a liability in the Statement of Financial Position equal to the future payments required as a result of retirements taking place. However the Department has a legal obligation to pay these amounts in the future. This means that a provision is required to be recognised under IAS 37, Provisions, Contingent Liabilities and Contingent Assets.The Department has created a provision in its Statement of Financial Position of £68 million in 2011-12 to recognise this liability in accordance with the requirements of IAS 37. The creation of provisions represents a charge to Annually Managed Resource Expenditure. When the Department requested resources from Parliament through the Estimates process, it had not forecast that these provisions would be required, and therefore did not request Annually Managed Expenditure to cover these costs.

Janet Downs's picture
Thu, 02/08/2012 - 16:38

UPDATE: since the May 2010 general election the DfE has spent at least £337.2 million* in support of the Government’s academies and free schools’ policy since the May 2010 general election.

The DfE wouldn't have overspent if it hadn't been so intent on funding its pet projects. It didn't even realise it had responsibilities to set money aside for its legal obligations. It's hardly surprising that the NAO refused to sign off the accounts.

*Figure only includes payments above £25,000 which appear on DfE spreadsheets under the "Open Government" commitment.

Ricky-Tarr's picture
Thu, 02/08/2012 - 17:44

since the May 2010 general election the DfE has spent at least £337.2 million* in support of the Government’s academies and free schools’ policy

Since >half of secondary schools have become academies, is this a lot?

The DfE wouldn’t have overspent if ...

It didn't overspend (in the normally accepted meaning of that phrase). It had to make an accounting provision for £68million that it had not anticipated when it drew up its budget. This resulted in a (technical) overspend of £63million, which, by my calculation means that it UNDERSPENT by £5million on original budget spending.

Rebecca Hanson's picture
Tue, 14/08/2012 - 07:39

Janet:
"since the May 2010 general election the DfE has spent at least £337.2 million* in support of the Government’s academies and free schools’ policy"
Ricky:
"Since >half of secondary schools have become academies, is this a lot?"

Er, cough, er, yes it is Ricky.

Let's put it this way. If we say it costs around £1000 to offer a student from a seriously disadvantaged background where they have no role models they can draw on to guide them through life the kind of personal support/mentoring which would transform their ability to engage with education....

Then that's 337200 children who could have received that kind of support but instead have seen their schools subject to dubious and chaotic rebranding. The video is now up of Jo Shuter describing how normal schools transform prospects if they have access to this kind of level of extra resource:
http://www.thersa.org/events/video/vision-videos/is-education-the-answer...
(from 07:10)

rodger123's picture
Tue, 07/08/2012 - 14:07

Janet,

Have you taken a look at the academies' income per student data:

http://www.education.gov.uk/schools/performance/academies.html

Janet Downs's picture
Tue, 07/08/2012 - 14:51

Thanks, rodger123 - I'll look at the worksheets later.

The £337.2 million cited above was not, however, for school funding. The bulk of the money, £305.6, million was spent by the DfE in the form of total spending by the School Formation and Investment Group, the Academies Delivery Group, the Academies Policy and Schools’ Organisation Group and the Free School Group between April 2010 and February 2012.

In addition PfS made payments of £22.3 million in respect of free school capital costs and technical, legal and property services for free schools for the 14 month period spanning 2011 and the months of January and February 2012 and the YPLA paid out £9.3 million in the five month period July-November 2011 to the 24 free schools that opened in September 2011.

Janet Downs's picture
Wed, 08/08/2012 - 06:59

rodger123 - the blurb accompanying the info re the income/pupil data seems at pains to explain why spending in academies might be more than in neighbouring LA schools eg academies have more money because they have to pay for items provided by LAs in LA schools. But this extra money is only supposed to be the equivalent of the amount top-sliced by the LA (somewhere between 16% and 8% depending on LA). If, say, 16% were taken off the income/pupil amount for, say, Mossbourne, would this be the more or less than the amount in an LA maintained school in Hackney (presuming Hackney top-slices the maximum of 16%)?

The blurb also says that academies may have received money from sponsors (although this is no longer required) or donations. In the case of the Lincolnshire-based Priory Federation the amount under other income/donations came to a wopping £13,824 per pupil making the total income per pupil £19,848. This is compared to a Lincolnshire median income of £5292 per pupil and national median of £5411.

The Priory Federation was at the centre of a school funds scandal earlier in the year. The police are investigating.

http://www.guardian.co.uk/education/2012/apr/27/inquiry-academy-chief-sc...

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