Audit office warns of ‘significant’ risks in academy sector

Janet Downs's picture
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The National Audit Office has warned of ‘significant’ risks attached to academy accounts in a letter to auditors. These include:

CAPITAL RISKS

1The expansion of the capital programme in 2014/15 involves different ways of acquiring land such as buying freeholds or leasing.

2There’s a risk these ‘ownership arrangements’ aren’t identified correctly and are included in the wrong accounts.

OTHER MATTERS

There is an ‘inherent risk’ of ‘material or systematic irregularity’ across the whole academies sector because of the ‘number and variety of providers’. The NAO is particularly concerned that:

1Academy trusts don’t always seek approval from the Education Secretary for transactions which trusts aren’t delegated to make.

2Related-party transactions might not be ‘arms-length’ or ‘at cost’.

3Fraud or misuse of funds, especially at ‘trust level’ in Multi-Academy Trusts (MATs), could take place.

4Academies with long-standing deficits could become insolvent.

The NAO has listed factors which it wants academy auditors to consider when identifying whether there is a ‘risk of irregularity’. These include:

1Heads ‘using academy funds for personal gain’.

2‘Inappropriate expense claims’ for staff or trustees.

3‘Unjustified salary increases’.

4Weak controls at trust level over activities of individual academies within MATs.

5Transactions which breach the Academies Financial Handbook.

6Weaknesses in procurement (including employment or related-party transactions).

The letter to auditors asks them to notify the NAO if they identify ‘significant risks of material misstatement’ in academy accounts.

AUTHOR’S COMMENTS

The number of academy trusts, MATs and sponsors continues to rise. And Education Secretary Nicky Morgan has pleaded with businesses to run academies. But the NAO already has significant concerns about risks linked to the present ‘number and variety’ of providers.

It appears these serious misgivings are not enough to prompt a rethink. On the contrary, the Education and Adoption Bill will make it easier for the Government to push forward academy conversion. This is despite an earlier NAO report finding formal methods such as academy conversion were less effective in improving struggling schools than informal methods such as local support. And an even earlier NAO report (2010) which warned about potential conflicts of interests between sponsors and their academies.

Yesterday I reported how schools minister Nick Gibb admitted that academies weren’t necessarily better than other types of school. Faced with this admission together with NAO concerns, it raises the question why the Government should be so keen to expand the number of academies and sponsors, particularly from the business world. One possible answer is that it paves the way for education in England to be run by for-profit providers. Remember, ex-Education Secretary Michael Gove said before the 2010 election that he’d be happy to let groups like Serco run schools.
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