Academy governance ‘weak and meaningless’, probe finds

17 Sep 14

Academy trusts are not doing enough to mitigate the risk of conflict of interest between schools and sponsors, while some rules intended to protect public money are ‘largely meaningless’, according to a report compiled for MPs.

 

The Conflicts of interest in academy sponsorship arrangements report, undertaken by the London Centre for Leadership in Education and the Institute of Education, found potential conflicts were common in academies.

These can include individuals on the board of academy trusts benefiting personally or via their companies from procurement decisions, as well as providing services under a license that prevents the school from changing provider.

The report for the education select committee stated that in a small number of cases, these had not been appropriately managed. This meant academy trusts, individuals or both have been found in breach of the guidelines.

Although the large trusts surveyed for this research are generally adhering to regulations set out by the Department for Education, the finance, audit and governance systems in smaller, emerging trusts were much weaker.

‘Indeed, the governance of many trusts remains problematic, with too much executive influence and an inappropriate focus on small governing bodies,’ the report stated.

‘There is a requirement in the financial handbook for academies to undertake competitive tendering but it is hard to find evidence that this is happening or that it is being monitored by auditors or the Education Funding Agency,’ it stated.

There is a requirement for trusts to report on the extent to which they provide value for money, but the survey of annual reports suggests that these statements are largely meaningless. There is nothing in the financial handbook to stop academy trustees from contracting out operations and services to profit making companies and there are examples where this is happening.’

Such deals could fall within the definition of a conflict of interest set by the National Audit Office, the report added, but have been signed off by auditors and the Education Funding Agency because they are legitimate within the existing framework as long as they are provided on an ‘at cost’ basis.
‘We could not find evidence of whether or how the “at cost” rule is assessed, but it is clear that very large sums of public money are being paid to trust board members and their companies as well as the trading arms of academy chains via this route.’

Publishing the report, education select committee chair Graham Stuart warned there were a number of loopholes in current academy funding rules that could work against the best interests of students.

‘We will question the new secretary of state [Nicky Morgan] when she gives evidence to the inquiry next month and ask what will be done to tackle these concerns. The public need to be sure that academy sponsors act only in the interest of their schools and never for other purposes.’

Responding to the report, a DfE spokeswoman said: ‘As the report recognises, the vast majority of academy trusts are focused on raising standards of education – often in our most challenging areas.

‘All academies are subject to a strict oversight and regulatory regime which has been further tightened since 2010. We are clear that no individual or organisation with a governing relationship to an academy can make a profit from providing it with services. We have also made clear to all academies the consequences of breaching those rules and will not hesitate to take action where we think that has happened.’ 

Kerry Ace, CIPFA’s policy lead on academies, said the report reiterated many of the concerns over the management of public resources and governance within academies that CIPFA and others have been raising for a long time.

‘With the significant increase in the creation of academies, and the consequent fragmentation of oversight and accountability arrangements, we need to see improved oversight of their financial management and governance,’ she added.

‘We hope that this is fully recognised within Government and that academies will now work with bodies such as CIPFA to make sure that appropriate structures are in place and that accountable staff and governors in academies have the knowledge and skills required.’

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