1 Improving the collection and use
of information |
1. On the basis of Reports by the Comptroller and
Auditor General, we took evidence from the Department for Education
(the Department) and the Education Funding Agency (the Agency)
on the performance and capability of the Agency and on the Department's
2012-13 financial statements.
2. The Agency provides funding for educating over
10 million learners aged between 3 and 19, or from birth to 25
for those with learning difficulties and disabilities. In 2012-13,
the Agency distributed £51 billion of capital and revenue
funding to local authorities, academies, further education institutions,
sixth-form colleges and other types of education providers. It
also managed capital building and maintenance programmes for local
authority maintained schools, academies and sixth-form colleges.
The Agency is responsible for ensuring that funds are used properly,
through financial assurance undertaken by itself, or by others.
3. The Department set up the Agency on 1 April 2012
and, since it was established, the scale and scope of the Agency's
activities have both grown. During its first year, the number
of academies almost doubled to nearly 3,000 and it took on new
responsibilities including managing the Youth Contract for 16-
to 17-year-olds. Between 2012-13 and 2015-16, the Agency expects
that the number of all education providers it funds will increase
by a further 50% to almost 12,000, of which nearly 7,000 will
be academies. At the same time, the Agency plans to reduce its
administration costs by 15%.
4. In 2012-13, the Department and Agency consolidated
academies into their group financial statements for the first
time, and laid their accounts just prior to the statutory deadline
of 31 January 2014. The C&AG qualified his opinion of these
accounts on a number of grounds, which related to the methodology
used for consolidating the accounts and issues around the quality
and timeliness of data.
5. We recognised that the Agency has successfully
distributed funding on time and accurately.
The Agency has also reported that changes to specifications and
more standardisation of school designs has meant that the cost
of new school buildings has fallen, on average, by 40% and that
the procurement process for building schools is now quicker than
it used to be. Given
the Agency's responsibility for distributing £51 billion
of public money, however, we were concerned as to whether this
money was being spent properly, especially as the number of academies
continues to increase.
The Department set up the Agency to provide better accountability
and transparency, and improve efficiency, in the education sector.
We repeatedly asked the Agency whether it had achieved this in
practice. Although the
Agency explained to us how it had improved its own administrative
efficiency and how it had reformed the funding system to make
it clearer, it was not able to provide us with a clear picture
of how it had improved accountability and transparency over the
£51 billion distributed.
We challenged the Agency and Department on whether this was due
to a lack of good quality information and systems.
6. The Agency's data, such as on learners, the size
and condition of schools and in some cases on providers' finances
and governance comes from many different sources including academies
and other education providers, local authorities and other government
bodies. The Agency holds the data across various systems and spreadsheets,
so it has found it challenging to establish a 'single version
of the truth'. We were also concerned that the Agency did not
have the capacity to collect and analyse data, especially as it
has faced challenges in recruiting people with the right skills
in the past.
7. We recognised that the Department and Agency were
"on a journey" to improve the quality and timeliness
of their data. But the Department agreed with us that their information
was not as it should be, and said that it was aiming to improve
it. So far, the Agency
had produced a draft data plan, but this had not been published.
The Department also told us that it was publishing more financial
information about academies than in the past.
8. Every academy has a funding agreement, which is
a contract between the academy trust and the Secretary of State
for Education. This agreement sets out funding arrangements, the
obligations of both parties, including the requirement for academies
to submit various financial returns and other information on time
and the conditions under which the agreement could be terminated.
In 2012-13 there were 411 breaches of funding agreements, of which
339 (82%) related to a failure to submit financial returns on
time, including annual accounts.
Academies are required to submit audited annual accounts to the
Agency by 31 December each year, yet 13% of academy trusts did
not submit their accounts on time for 2011-12, and this figure
improved but still stood at a worrying 9% in 2012-13. The Agency
told us that it was not happy with this performance, but that
it was improving.
9. We were concerned about how the Agency dealt with
academies that did not have a good track record of complying with
data requests. The Agency told us that its main penalty for non-compliance
was to issue a financial notice to improve, when some financial
freedoms and flexibilities were taken away from an academy. The
Agency also told us that it was planning to write to 22 academies
that had been late in submitting their accounts to the Agency,
to warn them that they may receive such a notice.
By the end of March 2014 the Agency had issued eight financial
notices to improve to academies.
When we asked the Agency what other sanctions it has, it told
us that it seeks to recover funds from academies when they have
been spent for purposes other than that for which they were intended.
Ultimately, the Agency can appoint additional governors, or terminate
a funding agreement as it had done with the Discovery New School,
a free school in West Sussex.
10. The Agency also told us about its role in enforcing
charity law in respect of academies, although it cannot itself
take regulatory action against individuals. The Agency told us
that if it considered that an academy trustee should be disqualified,
it would need to liaise with the Charity Commission, but it has
not yet done so.
The Agency can also make a referral to the conduct council at
the National College of Teaching and Leadership, which it told
us it has done on at least one occasion. In five serious cases
in the last two years, it has referred a matter to the Police.
11. We were concerned that the Agency relied on desk-based
reviews to identify risks in local education providers in a timely
fashion and whether, without additional local intelligence, that
this was sufficient to identify all issues.
The Agency told us that it collected information on pupil numbers
and academies' budget forecasts, which meant that it was aware
of academies that were in, or at risk of being in, financial deficit.
The information it collects on academies also helps the Agency
to identify other issues of concern, and it compiles a list of
academies of national concern each month which it shares with
the Department and Ministers. The Department told us that there
were currently 37 academies or academy trusts on the list, as
concerns can be at a school or trust level, and wrote to us after
the hearing to say that 98 institutions had appeared on the list
at some point since October 2012.
12. Although the Agency had started to develop its
data analytics, it had made slow progress updating its information
and systems. We therefore questioned the value and effectiveness
of the Agency's current analysis if the data it is interrogating
is of poor quality.
Due to a lack of 'horizon scanning', the Agency had been vulnerable
to missing risks during the first 18 months of its operations
and not just those related to its oversight of academies. For
example, it had missed the risk of receiving inconsistent data
from local authorities as part of the Property Data Survey Programme,
through which it planned to collect data on the condition of around
23,000 schools by October 2013, to support future capital spending
decisions. The Department accepted that its ability to horizon
scan was something that it was looking to improve in future years.
13. The Agency has relied on whistleblowers to raise
concerns and we asked the Agency about its systems for protecting
and encouraging them. The Agency told us that it provided staff
training, and publicises whistleblowing arrangements on its website.
The Agency said that it also insists that all academies have whistleblowing
arrangements in place; however, the Academies Financial Handbook
suggests that this is recommended best practice rather than a
The Agency assured us that it takes whistleblowing seriously and
that information from whistleblowers has led to investigations,
although these may also have been triggered by information reported
in academies' financial statements. The Agency has published the
results of six investigations to date.
14. The Agency also placed considerable assurance
on the work of over 200 external auditors of academy trusts. It
told us that it does not have a role in choosing these auditors,
but assured us that these auditors must be licensed practitioners
and were responsible to the Agency for providing an opinion on
the regularity of expenditure.
The Agency told us that auditors should not be connected to academy
trusts through personal or professional relationships. It later
confirmed to us in a note that auditors were bound by the ethical
standards produced by the Financial Reporting Council, covering
any financial, business, employment and personal relationships
with academy trusts. 
Relying heavily on audited accounts makes it more difficult to
intervene early on issues of concern developing in a particular
school or a particular trust. Even when the Agency receives information,
such as from whistleblowers, that should trigger action it does
not always investigate or publish the results of investigations
quickly enough, such as in the case of Kings Science Academy.
The Agency told us that it was aiming to speed up its investigation
processes, and highlighted that it had concluded its recent investigation
of Barnfield College more quickly than in the past. However, it
also stressed that publishing reports on investigations can be
delayed at the request of the police. After the hearing the Agency
told us that it had published five investigation reports, of which
the police had requested a delay in publication in two instances.
1 C&AG's Report, Performance and capability
of the Education Funding Agency, Session 2013-14, HC 966,
29 January 2014. Department for Education, Consolidated Annual
Report and Accounts 2012-13, HC 49, 16 January 2014 (which
contains the C&AG's Report on the accounts). Back
C&AG's Report paragraphs 1, 2 and 6 Back
C&AG's Report paragraphs 2, 1.5, 2.4 and 2.8 Back
C&AG's Report paragraphs 1.26 and 1.28; Department for Education,
Consolidated Annual Report and Accounts Back
Qq 7, 9; C&AG's Report Figure 5 Back
Qq 6, 7; C&AG's Report paragraph 1.17 Back
Qq 7, 125, 177 Back
Qq 1, 3, 5-11, 15-16; C&AG's Report paragraph 1.2 Back
Qq 3, 5-6, 8-11, 34, 134, 139 Back
Qq 17, 28, 120 Back
Qq 28, 38, 44, 74, 156; C&AG's Report paragraph 2.39 Back
Qq 17, 20, 34, 134, 136-139 Back
Qq 16, 20; C&AG's Report paragraph 2.40 Back
Q 99 Back
Qq 82-83; C&AG's Report Figure 5 Back
Qq 27, 42 88, 92-93, 158; C&AG's Report paragraph 1.25 Back
Note from Department to Committee dated 8 April 2014 Back
Qq 27, 87, 90, 177-178 Back
Qq 13, 15, 94-96, 100-104, 107 Back
Qq 52-54, 97-99, 177 Back
Qq 16, 65, 81-82 Back
Qq 16, 27, 73 Back
Qq 38; C&AG's Report paragraph 1.25; Note from Department
to Committee dated 8 April 2014 Back
Q 84; C&AG's Report paragraph 2.31 Back
Q 37; C&AG's Report paragraph 1.18, 2.17 Back
Qq 65, 69; C&AG's Report paragraph 1.25 Back
Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/255052/Academies_Financial_Handbook_Oct_2013_FINAL_041113.pdf Back
Q 27, 69 Back
Qq 28, 81-82, 124-126; C&AG's Report paragraph 1.24 Back
Qq 127-129; Note from Department to Committee dated 8 April 2014 Back
Qq 51, 52, 107, 180; Note from Department to Committee dated 8
April 2014 Back