Largest multi-academy sponsor AET gets Financial Notice to Improve: EFA has serious concerns about ‘volatility’.

Janet Downs's picture
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The Academies Enterprise Trust (AET), one of the chains barred from taking on any more academies, has been sent a Financial Notice to Improve (FNtI) by the Education Funding Agency (EFA). This follows further Ofsted criticism of AET academies following focused inspections in June: ‘too many pupils in the Trust are not receiving a good enough education.’

AET is the largest multi-academy trust having grown rapidly since the Coalition came to power. In 2011, ex-education secretary Michael Gove said he wanted chains to grow ‘at the fastest sustainable rate’. Even at the time it seemed a reckless comment. In retrospect, it was dangerously foolish.

The EFA noted ‘an improvement’ in AET’s overall financial state. However, the EFA still had serious concerns about ‘volatility’ apparent in financial projections and lack of confidence in AET’s ability ‘to secure finances across the group’. The Agency has revoked all ‘delegated authorities’ listed in the Academies Financial Handbook – all these transactions must now come to the EFA for approval.

This raises a serious question: what action will the EFA take about the proposed contract, worth £400m over ten years, between AET and PriceWaterhousCoopers (PWC) which would outsource all backroom services in AET academies to PWC. Alex Cunningham MP, a member of the Education Select Committee, has already described his proposal has been described as a ‘huge step towards a huge privatization’ over a range of school services. Will the EFA allow this outsourcing to go ahead?

A second question is whether AET will be required to lose some of its academies as E-Act has had to do. This raises yet more questions:

1How much does it cost the taxpayer when academies are shunted from sponsor to sponsor?

2Where is the stability of provision if schools change hands every couple of years or so? New sponsors usually want to stamp their own ‘brand’, culture and ethos on their academies – this costs money and has the potential to interrupt pupils’ education.

Financial Notices to Improve issued since June 2014

July 2014: Royston Academies Trust has a forecast deficit of up to £800,000 over the next three years. The EFA will provide £650,000 ‘deficit funding’ over and above the £150,000 already given to the Trust to avoid insolvency in 2013/14.

August 2014: Visions Learning Trust opened a University Technology College in Burnley in September 2013. The EFA has given ‘substantial repayable support’ of £160,000 for 2013/14 and £230,000 for 2014/15. A further advance of £95,000 would be needed for 2015/16. The Trust was unable to balance its budget and didn’t submit final audited accounts for 2012/13 by the December 2013 deadline.

August 2014. Hadlow Rural Community School. EFA criticised the trust of this free school, which opened in September 2013, for 'inadequate management of the delivery of its capital new-build project' and for not submitting required financial documents.

September 2014: E-Act receives a second FNtL. This requires the Trust to list the actions needed to address continued and additional weaknesses.

October 2014: Enterprise South Liverpool Academy Trust is listed as having received a FNtL on 15 October 2014. But the EFA link goes to a letter dated 24 June 2013. This raises the question of why it took so long to appear on the EFA website*. The EFA identified a ‘significant deficit position of up to £2.578 million over the next three years’. Emergency deficit funding of £265,000 had been provided to avoid insolvency in 2012/13. The EFA will provide further deficit funding of £1,909,000 – the EFA intends to recover £820,000 of this. The academy, which cost £24m, was officially opened by Prince Edward on 8 September.

October 2014: Sawtry Community College (see here).

*NOTE The EFA says it would ‘publish in all but the most exceptional circumstances and may consider not publishing or publishing after a period of time has passed if it is not in the public interest. For example, if publication could prejudice a police investigation or have an acute detrimental impact on a particular individual or group of individuals or risk their personal safety.’ It’s still unclear why the FNtL for Enterprise South Liverpool Academy Trust wasn’t published as soon as possible after June 2013.

The original headline has been amended to make it clear that AET was the largest multi-academy trust. This addition removes any ambiguity.
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Comments

rogertitcombe's picture
Sun, 26/10/2014 - 16:18

There are generally two reasons why a business might fail financially.
1. Not enough income.
2. Spending too much.
The income of Academies is guaranteed on a per pupil basis (as for LA schools) plus a range of generous extras that LA schools don't get. At least some 'converter Academies' appear to have been at least part motivated to 'jump ship' by the prospect of higher levels of funding, at least that's what many parents have been told.

The only way income can fall is if the Academy becomes unpopular and parents vote with their feet. We know all about that here in South Cumbria. When that happens to LA schools they risk being closed and/or amalgamated. I can see that may be a problem here in South Cumbria where £millions have been recently spent on a new Academy building and the recently LA multi £million refurbished predecessor school buildings have just been demolished and sold off for housing development.

These business-inspired educational pioneers must have some tricks up their sleeve that dim old fart dinosaurs like me just can't grasp.

Most school spending is on staff salaries, that I do know. Perhaps these financially failing Academies are paying their teachers too much. If not then who are they paying too much?

Andy V's picture
Sun, 26/10/2014 - 17:37

Janet, It appears that the EFA are not quite the quiet lambs they are portrayed as being. The use of improvement notices require the recipients to address the issues and produce tangible satisfactory plans to resolve/remedy the issues raised by EFA. Ergo there is some policing taking place.

From what you describe of the AET - PWC situation seems to me to be a variation of theme on PFI but with the silver lining that the contract is only for 10 years not 30. Nevertheless, and using the right honourable Alex Cunningham's postulation, the PFI was the starters gun for the creeping privatisation programme (including the NHS).

Failure to submit audited accounts and/or company reports by the prescribed deadline places a company in breach of both Companies House and HMRC, which in normal course would lead to further questions, consequences and potential investigations by the latter.

For the purposes of clarity I suggest that the financial issues be dealt with completely separately from any strands arising from section 5 inspections; unless of course the latter is explicitly cited within an inspection report.

Janet Downs's picture
Mon, 27/10/2014 - 07:25

Andy - The Education Secretary is the Principal Regulator of all the educational establishment which are exempt charities. These include academies/free schools (England only), foundation and voluntary schools and sixth form corporations. These total about 9000 (and growing). It is inconceivable that the DfE can regulate all of these. I presume the accounts for non-academy foundation and voluntary schools are included in LA audits. However, having the SoS as Principal Regulator for these because they're charities suggests a split responsibility which could lead to confusion (I certainly am).

The EFA intervened in the cases above because the cases were obvious. Three of the cases above involved small academy trusts which had been baled out by the EFA - it could hardly avoid 'policing' them. Other investigations were triggered by non-submission of accounts by the deadline (these included some of the baled out academies). One was triggered by a whistleblower.

You're right about PFI. It was a Tory idea (mooted by Major, I think) which Labour enthusiastically embraced. It was an enormous folly which lumbers the recipients of PFI largesse with interest payments spanning decades. Yet the Gov't is using PFI to fund some of its school rebuilding.



Andy V's picture
Mon, 27/10/2014 - 08:17

Principal Regulator or not the SoS Educ can be called to attend a Parliamentary Select Committee and irrespective of the latter not having legislative powers the PSCs can bring a great deal on pressure to bear and be the facilitator of further actions (including formal police police investigations). As a taxpayer I am somewhat concerned at the potential for a £multi-million black hole in educational spending across the entire state sector.

"The Committee of Public Accounts is appointed by the House of Commons to examine "the accounts showing the appropriation of the sums granted to Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the Committee may think fit" (Standing Order No 148).

The Committee does not consider the formulation or merits of policy (which fall within the scope of departmental select committees); rather it focuses on value-for-money criteria which are based on economy, effectiveness and efficiency."

NB: Focus on value for money

http://www.parliament.uk/business/committees/committees-a-z/commons-sele...


"The Education Committee monitors the policy, administration and spending of the Department for Education and its associated arms length bodies, including Ofsted.

The Committee is an investigative Committee rather than a legislative Committee: it sets its own programme and chooses subjects for inquiries."

http://www.parliament.uk/business/committees/committees-a-z/commons-sele...

On the basis of one of your posts on Henry's thread (see below) the way ahead as I see it is that either the EFA and LAs are given adequate funding to safeguard public funding expended by state funded schools or, and like association private schools, all schools be required to have their annual accounts fully audited by independent accounts:

“the NAO warned that neither the EFA or LAs had the necessary resources to oversee school finances adequately.”

http://www.localschoolsnetwork.org.uk/2014/10/the-academy-head-the-4500-...

I wonder how many FoI requests have been made into maintained schools relating to their financial propriety or whether such pursuits are limited to the academy/free school sector.

rogertitcombe's picture
Mon, 27/10/2014 - 10:11

Reply

'As a taxpayer I am somewhat concerned at the potential for a £multi-million black hole in educational spending across the entire state sector.'

While you are right to be concerned it is absolutely clear where any such 'black hole' is located - or more to the point, where it is not. It is not located in widespread 'accounting failures' at LA or LA school level. Most LA schools are sitting on budget surpluses, many very large - itself a cause for concern. LAs have to balance their books - the days of the rebellions in Liverpool and South Yorkshire are long gone.

Any 'black hole' is entirely located within the Academy and Free School sector, not just with regard to incompetence/malpractice/possible fraud in individual Academies/Free Schools and their organisations (Academy Chains) set up to manage and administer them, but also with the costs of the vast state bureaucracy of the DfE that unsurprisingly fails to properly and rigorously administer the out of control monster of its own creation.

I do struggle to comprehend a consistent theme in your persistent arguments. It seems to be a determination to tar LAs and LA schools with the same brush as Academies, Free Schools, Academy chains and the massive DfE bureacracy.

It doesn't stand up. I agree that the Education Select Committee should indeed investigate the misrule and maladministration of the DfE, but it cannot be expected to address individual financial failures.

Janet Downs's picture
Mon, 27/10/2014 - 10:35

Andy - a Principal Regulator is the one responsible for overseeing compliance with charity law in the exempt charities which s/he regulates. The buck stops there.

You are right that neither the EFA or LAs are likely to have sufficient resources to oversee the accounts for schools for which they're responsible. But external auditing where auditors are paid by the school to audit its accounts may not pick up financial irregularities. Independent auditing of Sawtry Community College, for example, didn't pick up the serious financial problems there.

Your question about FoI requests is a red herring. None of the examples above were obtained through FoI. Financial data (income and expenditure) for non-academies is published in the DfE school performance tables (although these wouldn't reveal a head paid an extraordinary salary). Similar data is not available for academies in the same tables.

Academy trust accounts aren't easy to find (although a Google search will sometimes turn them up) and are not easy to interpret. And auditors aren't required to judge expenditure. For example, the accounts of one small multi-academy trust showed it had spent £9000 on 'hospitality'. Why? How can that be justified?

As I've said before, LAs are now legally obliged to report fraud in their maintained schools (although, again, this wouldn't cover sloppy financial management falling short of fraud or disagreements about value for money).

Andy V's picture
Mon, 27/10/2014 - 10:37

"I do struggle to comprehend a consistent theme in your persistent arguments. It seems to be a determination to tar LAs and LA schools with the same brush as Academies, Free Schools, Academy chains and the massive DfE bureacracy."

And there was I happily journeying through life thinking that I was entitled to hold an opinion. This clearly is not the case. I must be in agreement with Roger's perspective or be held to account.

Taken with your preceding paragraph, I have rarely seen such a blatant case of blinkered bias that pays absolutely no regard to an honest, open and transparent approach to the use of taxpayers funding for education. You make it uncompromisingly clear in your post at 10.11 am that in your opinion LA and LA schools are innocent of any financial irregularities, which for me lack any tangible credence.

My position, which you openly admit to struggling with, is that my focused is not on whether there is more or less financial impropriety in one section of state funded schooling or another. Rather I believe that all financial impropriety should be highlighted, challenged and dealt with. That is to say, there has to be a level playing field but if, and for whatever reason, you don't like fairness and even handedness then too bad because I do.

Does this mean you will indulge in more 'projecting' and accuse me of not liking it when people disagree with my views? This forum is about debate and contributors engaging with the topics and what others contribute and if you can't cope with that then don't try and shift your difficulties and issues onto me.

rogertitcombe's picture
Mon, 27/10/2014 - 11:23

Andy - This is getting tiresome.

1. Of course you are entitled to your opinion as others are entitled to disagree with it. I am not 'holding you to account', nor 'must' you agree with me or anyone else.
2. I have never stated that LA schools and LAs are 'innocent of any financial irregularities' - that would be silly - all I said was that I had never personally come across any. I even drew attention to major historic public sector scandals in Labour LAs.

It is however abundantly clear that LA schools and LAs are better regulated than Academies, Free Schools, Academy Chains and the DfE. This being the case it might be expected that financial irregularities are more of a problem in the latter sector than they are in the former. That is my view. There is considerable evidence to support it, much of which emerges regularly on this forum.

'Rather I believe that all financial impropriety should be highlighted, challenged and dealt with. That is to say, there has to be a level playing field but if, and for whatever reason, you don’t like fairness and even handedness then too bad because I do.'

The first part of this is fine - who could disagree? Certainly not me. But where did the second bit come from? The fact is there is not a 'level playing field'. LA schools and LAs are well regulated. Academies and Free Schools are not. Therefore any 'even handed' approach must be to concentrate on the failures of regulation of Academies and Free schools and suggest ways in which they could be fixed. That is what I, Janet and others contributors are trying to do. Every time someone posts such a comment you pop up arguing that it is misguided because both sectors are as bad as each other when it comes to financial mismanagement. My belief is (frankly it seems obvious) that this is not the case.

I don't have any 'difficulties' or 'issues' with you. I am not 'accusing' you of anything. I just disagree with you. That's all. However I admit to being puzzled by the tone of your replies to my posts. Your last paragraph is an example.

Janet Downs's picture
Mon, 27/10/2014 - 11:35

Andy - you're right that all misuse of public funding should be challenged. And such misuse is found in local authorities (see Private Eye's 'Rotten Boroughs' page) as well as in academy trusts. But it's arguable the way academy trusts are set up and the way their accounts are audited could result in more misuse of public funding than in non-academies.

Three academy chains - E-Act, Barnfield Federation and AET - have been found wanting. One (E-Act) was found to have operated in a culture of extravagance; another (Barnfield) charged £1m for non-existent students; the third (AET) has been criticised for problems which may have been caused by its rapid expansion. Such speedy growth, remember, was encouraged by Gove. It could be argued that Gov't policy encouraged people to think they had the expertise to run schools when in reality they hadn't. A case of over-confidence caused by reckless encouragement from the Gov't and its media supporters.

There may well be LA schools somewhere that are similarly operating in a culture of extravagance or charging for pupils who don't exist. There may be some who are bunging contracts to companies linked to governors. If they come to light I will certainly publicise such examples.

Andy V's picture
Mon, 27/10/2014 - 11:51

Janet, I am in general agreement with the gist and thrust of your position.

I am also mindful that the type of extravagance Henry highlighted (e.g. the desk) could be indicative of schools being seen as corporate entities and hence a need to have impressive furnishings. Clearly school budgets are such that they need to be operated along business lines but that is not the same as running a school as if it were an educational factory with an end product: qualifications are simply not the same as cars, dishwashers, Black and Decker tools.

From my perspective the Barnfield case should have been investigated further (i.e. the Serious Fraud Squad) because of the amount and the number of ghost pupils claimed to be on roll. It should have been an imperative to ascertain the who (was behind the numbers) and the how (whether they inaccurate numbers were knowingly submitted). In any event it is to be hoped that the overpayment has been reclaimed and refunded.

Andy V's picture
Mon, 27/10/2014 - 11:30

Now we can agree absolutely agree on the 'tiresomeness' of the interactions.

I can only repeat what I have said before. I suggest you take time and care to read what you have written before you post it. Finally, and this is from some months ago now, it may be better if I simply ignore - do not reply to - your comments and you do likewise with mine.

I'm going to implement that starting now.

rogertitcombe's picture
Mon, 27/10/2014 - 14:53

Andy - You must decide to respond to whatever posts you wish. I will of course do the same. However I will make my decisions on the basis of what's in them, not who wrote them.


Andy V's picture
Mon, 27/10/2014 - 18:01

Contributors who engage with others must accept the responses they receive and not complain or whinge about robust responses should they arise.


Janet Downs's picture
Tue, 28/10/2014 - 08:01

Andy - I was surprised the Serious Fraud Office wasn't asked to investigate the £1m overcharge. Perhaps investigations are going on but we just don't know about it (unlikely). However, these investigations seem to drag on. The police inquiry into the Priory Federation in Lincolnshire took 20 months before the police handed the case to the Crown Prosecution Service in August despite the EFA finding serious financial irregularities.


Janet Downs's picture
Tue, 28/10/2014 - 08:52

The EFA doesn't just have responsibility for issuing Financial Notices to Improve to academy trusts after concerns have been raised. It's also responsible for undertaking investigations into possible financial malpractice. A list of investigations is here.

Oddly, this list doesn't include investigations into Park View Educational Trust and Oldknow Academy Trust. These are described as a 'Review' and there doesn't seem to be a central list of these reviews.

And not all Financial Notices to Improve appear in the list.

The EFA reviewed the Education Fellowship Trust in April. This 'highlighted a number of highly unusual and potentially significant issues.'

But the FNtI for Education Fellowship Trust doesn't appear on the FNtI list.

It appears, then, the EFA is discovering malpractice in some academy trusts despite being under-resourced. However, it's difficult to discover the scale of the problem because the info isn't in one place. No doubt the Gov't prefer it that way.

CORRECTION 09.13 The FNtI for Education Fellowship Trust does appear on the FNtI list. But the review doesn't appear on the Investigations List. Sorry for the confusion.

Andy V's picture
Tue, 28/10/2014 - 09:01

Janet, If, as it appears, the EFA are failing in the conduct and performance of their role/duties then surely the appropriate authorities should review/investigate (e.g. PAC and/or Education Select committee).


Janet Downs's picture
Tue, 28/10/2014 - 09:26

Andy - the Education Select Committee is currently investigating Academies. PAC recently commented on related-party transactions in academy trusts ('Just wrong' is how Margaret Hodge, PAC chair, described them).

However, though these committees are very important in calling ministers to account, their conclusions can be ignored (eg the Education Select Committee's findings re the introduction of EBac). And if the media doesn't publicise Select Committee's findings, especially when they criticise ministers who are looked upon favourably by parts of the media, then their influence is much reduced.

Andy V's picture
Tue, 28/10/2014 - 09:27

Janet, Thank you for sharing this information. With regard to Priory I suspect that the police took the EFA investigation into account to sit alongside those that they would necessarily have to have undertaken and the combined information used to decide whether there was sufficient weight of evidence to pass to the CPS. The latter are charged with determining whether a case should go forward to trial.


Andy V's picture
Tue, 28/10/2014 - 09:32

Janet, It strikes me that in these circumstances alternative lobbying strategies would be appropriate e.g. the online petition forums, to call for accountability and change. It only takes I person to start a petition, which once it takes hold gets a lot of attention and the run to a general election is a good enough reason for incumbents to sit up and take notice.


agov's picture
Thu, 30/10/2014 - 10:36

Andy - I'm sure I tried that without success except on maybe one or two occasions (but I'll definitely give it another go next time). Thanks for the tip.


Janet - totally understand the reasoning and purpose but I have experienced CAPTCHA a lot on other sites without this problem occurring. The usual problem
is that it is difficult to read the characters so CATCHA goes off to verify the guess you made and then comes back allowing another attempt to be made - that can happen multiple times. What is happening here is that the characters are generally quite clear but neither CAPTCHA nor anything else does anything. It's like the 'Submit' button isn't there: nothing happens. I speculate that either you are using an old version containing a bug or there has been a new release that has introduced a problem or else there is something wrong with the way it has been implemented on this site. The fact that Andy (and Roger) have also had difficulties seems to confirm it isn't a problem specific to my pc, so suggest you refer it to whoever supplied you with CAPTCHA.


And it's happened again! (29 October 15:37). Have followed Andy's advice and closed LSN completely etc and tried again. But it didn't work. So will keep trying off and on until it does.


30 October 10:30 - Despite multiple attempts at various points during day and evening it still will not work. As a test I will try posting this on a different page.

Andy V's picture
Thu, 30/10/2014 - 11:14

agov - not that it helps but I empathise and share in the frustration :-(

PS Oh the irony, it has taken several attempt to sneak this past the CAPTCHA rottweiler ...

rogertitcombe's picture
Thu, 30/10/2014 - 12:46

agov - My experience was exactly as you describe. Changing to Google Chrome solved the problem completely for me


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