The MPs also criticised the Department for Education and Education Funding Agency for setting up a weak oversight regime for free schools and said it had relied too heavily on whistleblowers to highlight problems.
Chair Margaret Hodge said: ‘The department and agency have set up an approach to oversight which emphasises schools’ autonomy, but standards of financial management and governance in some free schools are clearly not up to scratch.
‘The agency relied on high levels of compliance by schools, yet fewer than half of free schools submitted their required financial returns for 2011/12 to the agency on time.’
The PAC urged both the department and agency to improve the audit and accountability arrangements of free schools to ensure taxpayers’ money was being used correctly.
Elsewhere the report noted the capital costs of the free school programme were escalating. The most recent approval round had a higher proportion of expensive schools – secondaries, special and alternative schools ¬– located in costly areas such as London and the Southeast.
‘If this mix of approved free schools continues, there is a risk of costs exceeding available funding,’ Hodge warned.
The PAC said tighter management of capital costs was needed and urged the DfE to work with local authorities to identify appropriate sites and help ensure land costs are not inflated.
Teaching unions welcomed the report’s findings. The National Union of Teachers called it a ‘damning indictment’ of the free school programme.
‘It is extraordinary that, as the report makes clear, the department has set no limit on how much it is willing to spend on free school premises,’ said NUT general secretary Christine Blower.
At the Association of Teachers and Lecturers, general secretary Mary Bousted said: ‘It is deeply worrying that for 2011/12 fewer than half the established free schools submitted their financial returns on time to the EFA. How is proper oversight of the spending of taxpayers’ money being achieved with this lack of proper accountability and scrutiny?’
But a DfE spokeswoman said: ‘Many of the PAC's concerns are misplaced. Free schools are subject to greater scrutiny than council-run schools, they are overwhelmingly located in areas with a shortage of places, and construction costs are 45% lower than the previous school building programmes.’
