Local authorities (LAs) discovered 191 cases of fraud concerning maintained schools* worth £2.3m in 2012/13, the first year the National Audit Office (NAO) required LAs to report school fraud. 86 of these involved internal fraud worth £1.9m while 105 were cases of external fraud where schools were victims.
The NAO** said maintained schools may be at greater risk of internal fraud than larger organisations because they may not have the same level of supervisory checks. The NAO expected the number of reported cases to rise once LAs had had time to “embed data collection arrangements for fraud committed against schools”. At the same time, the NAO warned the ability of LAs to oversee schools’ finances could fall because some were planning to decrease staff time allocated to this. It's issued a check list for LAs to help strengthen oversight of their finances including schools.
Education Secretary Michael Gove has claimed maintained schools are not subject to the same rigorous financial accountability as academies and free schools which, he said, were subject to scrutiny through the Education Funding Agency (EFA) and the Charity Commission.
But, as discussed here, the Charity Commission can only become involved if requested by the Principal Regulator of the charitable trusts which run academies, foundation and free schools. The Principal Regulator is the Secretary of State.
So, not only is the Charity Commission powerless to act unless Michael Gove requests it but the NAO recently criticised the Commission for, among other things, not regulating charities effectively and not doing enough to find and confront abuses.
Academies and free schools are expected to submit annual audit accounts to the EFA. The NAO found 13% of academy accounts had not been submitted to the EFA by 31 December 2012 although this was an improvement on the previous year when 17% failed to meet the deadline.
Like LAs, the EFA is subject to “cost pressures” despite an estimated underspend in 2013/14 caused by a high number of unfilled vacancies. It faces an expansion in its workload while simultaneously being required to reduce operating costs. The EFA expects the number of academies to reach 7,000 by the academic year 2015/16. All of these will be directly accountable to the EFA.
So, perhaps the question is not whether academies and free schools are more accountable for their finances than maintained schools, but whether LAs and the EFA can adequately oversee the accounts of their schools. EFA oversight of academies is intended to be “light touch” and relies on academies’ external auditors. The NAO warned that “some inconsistency is inevitable” because about 200 firms audited academy accounts. LAs face a reduction in staff allocated to checking schools’ finances. This raises the question about whether both the EFA and LAs rely too much on whistleblowers to raise the alarm.
This important question is, however, side-stepped in Gove’s attempt to show academies are in every way superior to schools under LA stewardship. Concerns about the proper use of public money by schools, whether academies or not, are too important to be ducked by political point-scoring.
*Maintained schools are those which are not academies, free schools or foundation schools. These three categories of schools are outside the remit of the NAO.
***The four reports cited in this thread are Protecting the Public Purse 2013: Fighting Fraud against Local Government; Performance and Capability of the Education Funding Agency (Summary and Full Report); and The Regulatory Effectiveness of the Charity Commission.