The academy programme will create“significant risks” if the Department for Education fails to strengthen its financial accounting, the government’s audit watchdog has warned.
The National Audit Office has found “material and pervasive” levels of “error and uncertainty” in the DfE’s accounts, published today,for the third year running.
A saysthat in 2015-16 the DfE:
- Overspent against its capital spending budget by £115.9 million -significantly more than last year’s £31.2 million overspend;
- Breached its Resource Annually Managed Expenditure Limit, which includes pension costs, by £175.1 million -against last year’s £101.4 million;
- Partly based its annual returnonacademy accounts covering the academic year ending 31 August 2016, while its own accounts covered the financial year ending 31 March 2016. This was against international financial reporting standards;
- Failed to demonstratethat its estimates for thevalue ofland and buildings held by academies was accurate.
However, the report also identifiessignificant improvements in the department’s accounting for capital projects.
The uncertainty in the financial statements “limits the ability of Parliament to identify the actual spend by the academies sector for the year in question”, saysthe report.
For future years, the DfE has agreed to provide a separate set ofaccounts for academies, and it isexpected toconfirm in February 2017 whether thiswill be possible for its2016-17 accounts.
The report says: “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; and if the financial statements do not present a true and fair view and meet the accountability requirements of Parliament. This will become even more significant in the context of the continuing expansion of the academy sector.”
Amyas Morse, comptroller and auditor general at the NAO, said: “The department has many challenges to overcome if it is to implement successfully its plans to provide Parliament with a better picture of academy trusts’ spending next year.”
It is very rare for the NAO to issue a “qualified” or “adverse” opinion on a public body or government department’s accounts.
A DfE spokesperson said: “Academies are subject to a rigorous system of accountability and oversight, tougher and more transparent than maintained schools. This is reflected in the NAO’s finding that there are no material inaccuracies in individual academies’ statements. However, the consolidation of thousands of those accounts into the format required by Parliament is one of the largest and most complex procedures of its kind.
“All of these accounts are published individually by trusts ensuring they can be held to account by the department and the public.
“We recognise the challenges with the current format and have developed a new methodology for the 2016-17 financial year, which the NAO has said will provide a solution to a number of these issues. With the Education Funding Agency’s rigorous oversight of the academy system and the expanding role of the regional schools commissioners,we are confident that the accountability system for the expanding academies programme is robust and fit for purpose.”
The findingsfollowa heavily critical reportby the NAO on the DfE’s approach to managing schools’ financial sustainability.
EFA finds ‘cases of financial irregularity’
The disclosures were madeas the Education Funding Agency’s (EFA) annual accounts were also published.
They showthat the EFA has issued 13 financial notices to improve to academy trusts, and two tosixth-form colleges, in 2015-16.
The EFA’sreport says that it has found “several cases of financial irregularity” in academy trusts, including:
- Some 25 related-party transactions where academy trusts were “unable to demonstrate full compliance with our requirements”, and
- Some 25 severance payments by two trusts thatwere made without prior approval from the EFA and Treasury, as required. The trusts were under a financial notice to improve, and so their normal delegated authority to make these payments had been revoked.
It also reveals that, since April 2012, the EFA has received 195 reports from whistleblowers about “allegations of a financial and or governance nature”. The EFAsays there was not enough evidence for a formal investigation in “a number of cases”, but adds thatit willpublish reports on any formal investigations.
The report also shows thatthe EFA is still considering the Durand Academy Trust’s response to anotice to terminate its funding.
Local authority funding revealed
Separately, the amount of governmentfunding being allocated to each local authority in 2017-18 was also this afternoon. An additional £130 million for the “high needs block” of funding was announced.
The government confirmed at the same time thatlocal authorities will receive transitional funding, while theEducation Services Grant is being phased out,at arate of £66 per pupil.Aspreviously announced, this will bepaid fromApril to August 2017, before being scrapped.
Detailed proposals on thenew national schools funding formula, which will standardisethe way schools are fundedacross the country, were published last week.
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