Agency under fire over free schools’ spending

The damning new report by the Public Accounts Committee (PAC) warns the department does not have sufficient oversight over how public money is being spent in its flagship schools and is too slow to intervene at failing institutions

It also calls for the Government to review whether schools should be able to do “related party transactions” with businesses connected to their trustees.

The report published today assesses the work of the Education Funding Agency (EFA) which is responsible for monitoring free schools and academies which are run autonomously.

The PAC voices concern about the EFA’s ability to be ensure schools are abiding by their funding agreements.

And it highlights the Kings Science Academy, in Bradford, as a case where the EFA did not have good enough oversight over the way in which public money is being spent.

The free school, which opened in 2011, is now subject to a police investigation into alleged fraud.

However the matter only came into the public domain because of a whistleblower leaking the allegations to the media. A DfE audit report alleges that the school submitted fabricated invoices in order to claim just over £10,000 of public money. There was a six month delay in this matter being passed to the police because it was wrongly recorded as being for information only by a national fraud call centre. The matter was only passed to West Yorkshire Police for criminal investigation after it had been leaked to the public.

There has also been controversy over separate issues at the school - including the role of chairman of governors- after the Yorkshire Post revealed that the DfE said it had wrongly believed that Alan Lewis, a vice chairman of the Conservative Party, was the chairman in 2011/12. However it said it had subsequently been told that this was not the case and that infact there was no chairman in place for the school’s first 12 months.

Mr Lewis has consistently denied ever being the chairman.PAC Chairman Margaret Hodge MP highlighted the school as an example of the EFA’s shortcomings. She said: “In a very devolved system, as in the case of academies, a lot of trust is invested in the organisation, chief executive, principal and trustees for managing public money. However, the DfE does not have a process for vetting those appointed as academy trustees or chief executives.

“In the recent high-profile case of Kings Science Academy, the Agency did not even know who the chair of trustees was.”

The EFA is responsible for allocating billions of pounds of taxpayers’ money to schools, colleges and academies. It was set up by the Department for Education in 2012 in order to ensure “efficiency, accountability and transparency” in the distribution of more than £50 billion-a-year in public funding.

But the PAC said that the agency lacked both the systems and the data it needed to carry out its responsibilities effectively.

It found there was no systematic or forensic analysis of the data it did hold in order to identify “at risk” institutions where there were problems of poor governance or financial management.

Instead the agency relied on a combination of whistle-blowers, outside auditors and “broad, desk-based reviews” which were “not sufficiently risk-focused” - with the result that when it did intervene it was often too late.

“Even when the agency is presented with data that should trigger concerns and lead to further investigation, the agency has not always taken action quickly enough,” the committee said.

While almost one in 10 academy trusts had failed last year to submit their annual accounts on time, the agency had only used its penalty powers to issue “financial notices” - removing some financial freedoms or flexibilities - on just eight occasions.

The committee also expressed concern that the agency did not have a “fit-and-proper persons” test for academy trustees and chief executives and it warned of the dangers of conflicts of interests where individuals with links to academy trusts and private firms were able to exploit their position for commercial gain.

While the agency had investigated 12 so-called “related-party transactions”, where there was a potential conflict of interest, the committee said there were likely to be many more cases which had gone unchallenged and it called for a complete ban on such deals.

Mrs Hodge added: “The agency is too reactive and does not spot risks or intervene in schools quickly enough. It is essential that the agency now gets to grips with effective oversight to improve public confidence in the system.”

The general secretary of the Association of Teachers and Lecturers, Mary Bousted, said: “The PAC report reveals the dog’s dinner of a mess the Government has made of holding academies and academy trusts accountable for the huge sums of public money they receive.”