NAO pans DfE accounts for third year running: threat of 'significant risks' re DfE and academies
We’re told academies have more financial scrutiny than local authority (LA) maintained), but the National Audit Office (NAO) appears not to agree. For the third year running, the NAO has issued an ‘adverse opinion’ on the Department for Education’s accounts:
‘The Department’s policy of autonomy for academies brings with it significant risks if the financial capability of the Department and academies are not strengthened…This will become even more significant in the context of the planned expansion of the academy sector’.
The words ‘significant risks’ don’t resonate with DfE assurances that oversight of academy trusts’ finances are robust.
First, the DfE couldn’t submit the 2014/15 accounts on time. They were due with the NAO by 30 November but the DfE couldn’t comply.
This delay was ‘largely due to the scale and complexity of consolidating 2,824 academy trusts’ with different accounting year-ends, the NAO said. Academy trusts’ accounts end on 31 August; DfE accounts end on 31 March. The DfE circumvented this by using trusts’ accounts to 31 August 2014 and commissioning a ‘comparison study’ to prove there was no difference between financial data in accounts ending 31 August 2014 and information which would have been included if accounts had run to 31 March 2015.
The NAO wasn’t convinced: ‘the comparison study has not provided sufficient, appropriate evidence’ to support claims there would be no material difference in the data. The DfE accounts, therefore, didn’t comply with International Financial Reporting Standards 10. The accounts ‘do not present a true and fair view.’
Second, reporting was compounded because academy trusts opening during the 2014/15 financial year and new ones joining existing academy trusts between 1 September 2014 and 31 March 2015 hadn’t been included in audited academy trust statements. These 468 academies/academy trusts had to send unaudited accounts to the DfE. The NAO found these recorded £662m expenditure, £622m income, £364m assets and £104m liabilities but there was ‘insufficient evidence to support the accuracy and completeness of these balances’.
Third, problems were caused by the ‘significant expansion’ of capital spending by the Education Funding Agency (EFA) which ‘challenged’ the EFA’s record keeping and financial management. ‘Inadequate information-sharing’ between the DfE and EFA meant finance teams weren’t fully prepared to deal with rapidly rising capital spending on free schools and the Priority Schools Building Programme.
The EFA had to get retrospective Treasury approval for some types of capital spending. This should have been sought before contracts were signed, the NAO said.
Fourth, there were ongoing concerns about the value of land and buildings used by academy trusts.
Delayed accounts, non-compliance with international financial reporting standards, poor record keeping and financial management, uncontrolled capital expenditure and being unable to value land and buildings used by academy trusts. This is what’s happening now. Yet the Government expects all schools to become academies and 500 more free schools to be established during this Parliament.
It’s difficult to see how quadrupling the number of academies will make the DfE more efficient. On the contrary, it presents, as the NAO said, ‘significant risks’.
But it appears the Government is ignoring these risks.
ADDENDUM: The Government’s sufficiently concerned about opposition to mass academisation that it’s provided a standard letter for MPs to use to placate constituents disagreeing with the proposal. I received one last week. It’s almost word-for-word the same as the one which appears, in whole or in part, on the websites of many Tory MPs (click here for example). Regular readers will immediately spot the dodgy data.