The National Audit Office (NAO) isn’t happy. It’s issued an ‘adverse opinion
’ about the financial statements of the Department for Education (DfE). In layman’s language, this means the Auditor General is deeply concerned about ‘error and uncertainty’ in DfE accounts. It could be said that the NAO has given the DfE a Financial Notice to Improve – the kind of warning given to academy trusts when told to sort out their finances.
The Auditor General qualified the DfE accounts last year. He has done so again. But this time he’s even more damning.
The NAO found:
1The DfE had exceeded the limit on expenditure set by Parliament.
2It had overspent by £166m. This was primarily caused by the DfE underestimating pension increases relating to the academy sector.
3Although the DfE has made improvements in the consolidation process*, the rise in the number of academies increases the possibility and amount of error.
4The ‘reporting periods’ of academy trust and the DfE don’t coincide. The former ends on 31 August while the latter ends on 31 March. This presents a ‘significant challenge’ in providing financial statements which present ‘a true and fair view’ of financial activity.
5The DfE believes it is sufficient to adjust academy trust accounts using ‘centrally collated information’ because the Department thinks the financial data of academy trusts ending in August wouldn’t be much different from the ‘equivalent to the end of March’ once adjustments had been made. This approach doesn’t give a true or fair view of the DfE’s financial performance.
6The DfE’s strategy outlined above doesn’t meet the standards of accountability required by Parliament. However, no ‘material inaccuracies’ had been found in financial statements of the agencies and ‘individual bodies’ within the DfE.
It appears, then, the Government’s much-lauded academies programme is causing significant problems for the DfE.
It can't satisfy the NAO that its consolidated accounts and financial reporting are accurate. The academies programme continues to contribute to DfE overspending as it did from April 2010 to March 2012 when the academies budget was exceeded by £1 billion
. And yet we are constantly told the DfE’s Education Funding Agency (EFA) can cope with monitoring the accounts of thousands of academies and trusts.
If the DfE can’t satisfy the NAO that its financial statements are accurate then how can the taxpayer be confident the EFA can oversee academy trust accounts effectively?
*Consolidation allows the accounts of academy trusts, DfE agencies and DfE non-departmental public bodies (NDPBs) to be merged in the DfE’s financial statements as one group.