Academy accounts and performance Contents

2Oversight of academies and other schools

14.In March 2018, we recommended that the Department needed to tighten the controls around related party transactions and do more to challenge academy trusts that were paying excessive salaries.27 The ESFA told us that it had subsequently thought hard about how to strengthen the arrangements for related party transactions in a way that would work. It had decided to put in place a more rigorous system from April 2019 – trusts would have to declare every single related party transaction and to seek approval for those transactions over £20,000.28 The ESFA noted that, depending on how this worked in practice, the level at which approval was needed might be reduced or increased. It also said that it was putting together a specialist team to work on related party transactions, and subsequently confirmed that the team would receive appropriate professional training for this work.29

15.On high pay, the ESFA described how it had written to academy trusts that were paying high salaries. The letters were founded on the principles that the ESFA expects salary-setting to be a transparent process, and that salaries should be proportionate and justifiable in the context of academy trusts’ status as charities and public bodies. The ESFA told us that, in light of its letters, about a quarter of the trusts concerned had reduced their salaries.30 It said that it had asked the remaining trusts for evidence about how salaries had been set and the ESFA and Ministers had had conversations with some trusts about their practices.31

Sanctioning academy trustees and leaders

16.We heard that, despite a catastrophic failure of governance, Durand Education Trust had a considerable liability to the executive headteacher of the Durand Academy.32 This arose from a related party transaction whereby a company owned by the former headteacher was contracted to manage the accommodation and leisure facilities on the school site.33 The witness from Durand told us that the previous executive headteacher was entitled to a lump sum payment when the contract was terminated. The witness said that this payment was potentially worth £1.8 million but, after a statutory inquiry by the Charity Commission, the trustees and previous executive headteacher had agreed to reduce the amount to £850,000.34 The witness also told us that most of Durand Education Trust’s income from its assets, approximately £400,000 a year, was therefore going towards covering this payment.35

17.The Charity Commission described to us how it had intervened in relation to the contract with the former headteacher of Durand Academy. Given its concerns that the contract had not gone out to tender, the Charity Commission had directed the trustees of Durand Education Trust to benchmark whether the payments in the contract were reasonable. It had then ensured that the trustees capped the termination payment in line with the benchmarking exercise. It told us that, because of its intervention, the payment that the former headteacher received was £1 million less than it might have been.

18.The Charity Commission said that the consultants commissioned by the trustees of Durand Education Trust had identified a number of options for benchmarking the value created through the contract; they selected the private equity model as the most appropriate. The Charity Commission told us that, after taking professional advice, it had concluded that it could not direct the trustees of Durand Education Trust to use an alternative benchmarking methodology since there were plausible reasons to use the private equity model in this instance. It said that it might have thought that the amount paid to the former headteacher might be lower but, if it was not outside the bounds of reasonableness, it did not have a legal basis on which to challenge the payment.

19.We asked what sanctions the Department or the ESFA could use against chief executives or trustees who had, for example, misused public money. The Department told us that it could ban individuals from teaching, as it had done in the case of the former headteacher at Perry Beeches Academy. It could also ban individuals from being school governors, but the Department admitted that this was very unusual.36 The Department subsequently confirmed in written evidence that it had barred a chair of governors and the chair of a board of trustees from being in a management position in an independent school (including academies and free schools).37

20.The ESFA acknowledged that there was nothing to stop an individual who had been banned from being a school governor from being a governor elsewhere, for example at a further education college. The ESFA told us that it was working to try to stop those involved in malpractice from acting as trustees or governors elsewhere. It was looking for a systematic way of identifying such people in case they joined other boards or set up businesses that might trade in areas that the Department oversees and regulates. It was working with the Charity Commission and the Insolvency Service to see if they could get such individuals disqualified from being company directors. Overall, the ESFA said that it believed that it was using every avenue open to it, but that it would like to test its powers further.38

21.“The Charity Commission highlighted that the Department for Education is the principal regulator of academy trusts, and that in practice this is managed and undertaken by the ESFA; Parliament had determined that academy trusts should be exempt charities and not regulated directly by the Charity Commission. It told us that in October 2017 it had agreed a renewed memorandum of understanding with the Department, which set out their regulatory roles and remits. It had quarterly meetings and training with departmental staff, and was committed to ensuring that they understood their responsibilities in relation to charity law.

Inquiries into concerns about the financial management and governance of academy trusts

22.Where it has concerns, the ESFA conducts investigations and reviews into academy trusts’ financial management and governance.39 For example, it conducted two investigations into the Wakefield City Academies Trust. It published the reports of these investigations in November 2018, even though the first investigation had been completed in November 2016. We asked why it had taken two years to make these investigations available to the public. The Department said that its priority had been to complete successfully the transfer of the Wakefield City Academies Trust schools to new trusts; and the ESFA said that it considered that the content of the investigation reports would not necessarily aid the transition of the 21 schools. The ESFA said that it had committed to publish the investigations once the final school had been re-brokered.40 It also explained that, while it published investigations and financial notices to improve, it would not normally publish the results of its monitoring work or internal reports into financial management and governance following visits that it undertook.41

23.We heard from the interim Chief Executive Officer of Bright Tribe Academy Trust that the trust and the ESFA had commissioned a number of investigations into spending by the trust.42 She told us that two investigations commissioned by the trust into spending on LED lighting and boilers at Whitehaven Academy and Fowey River Academy had been completed. She expected that the remaining investigations, into the use of capital grants and loans, would be completed by Christmas 2018.43 The interim Chief Executive Officer said that she was sure that, once those investigations were completed, the trust’s board and the ESFA would take any steps necessary.44 The Department also confirmed that, if there was evidence of malpractice at Bright Tribe, it would try to get the funding back.45 We asked if the investigations into Bright Tribe would be published. The trust’s interim Chief Executive Officer did not commit to publishing the reports, stating that this was a matter for the trust’s board and the ESFA.46

Impact of funding pressures on the quality of education

24.We first asked the Department in 2017 about the impact of funding pressures on the quality of education and the outcomes that schools achieve. The Department told us then that it would gain assurance, in part from Ofsted inspections, that schools were achieving ‘desirable’ efficiency savings, and that educational outcomes were not being adversely affected by the need to make savings.47

25.When we took evidence on Ofsted’s inspection of schools in June 2018, HM Chief Inspector told us that responsibility for school funding sat with other parts of government. She explained that Ofsted looked at educational outcomes, and that her brief did not include matching for every school outcomes against the amount they are spending. We asked HM Chief Inspector to write to us with her reflections on the main risks to schools’ effectiveness and the systemic causes of poor performance, including the impact of funding pressures.48

26.In her reply in October 2018, HM Chief Inspector told us that in recent years, as funding growth has slowed, school leaders have had to work harder to balance their budgets and this had necessitated some difficult choices. However, Ofsted inspectors had not seen an impact on education standards. HM Chief Inspector also noted that the current inspection framework was not designed to capture the effects of curriculum narrowing, which was one of the reasons why Ofsted was proposing to revise its framework. HM Chief Inspector committed that Ofsted would continue to monitor the situation.49

27.In June 2018, HM Chief Inspector also told us that she had begun to have conversations with the head of the ESFA to ensure that their respective work was joined-up, but that these discussions were at a very early stage.50 The ESFA told us that where it had financial or governance concerns, it would routinely have conversations with Ofsted about its assessment of risk for a particular academy trust or school. The Department said that it had regional teams that liaised closely with Ofsted and the ESFA; they worked collaboratively with each other where they had concerns about academy trusts’ performance or finance.51

Asbestos in school buildings

28.We recommended in 2017 that the Department should fill gaps in its knowledge about the school estate; specifically it needed to understand the prevalence, condition and management of asbestos.52 And in March 2018, we concluded that the Department still did not have enough information about the extent of asbestos in schools to ensure that the risks were being properly managed.53

29.The Department launched its ‘asbestos management assurance’ process on 1 March 2018 – this involved a survey to seek assurance that academy trusts and local authorities are complying with their duties under the Control of Asbestos Regulations 2012.54 The Department confirmed that, through this process, it required evidence that the responsible body, usually the academy trust or local authority, had sought professional advice on asbestos in its school buildings and had an up-to-date action plan that was reviewed every two years.55

30.The Department originally asked schools to respond to its survey by 31 May 2018. However, due to the poor response rate, it extended the deadline to 25 June 2018 and again to 27 July 2018.56 Despite this, only 77% of schools responded to the survey.57 The Department said that it was disappointed with the response rate. We asked the Department what action it had taken with the 23% of schools that had still not provided the information requested. The Department said that it had re-opened the survey and extended the deadline for the third time, to 15 February 2019, to allow the remaining schools to respond. It also told us that those schools that still failed to respond would be picked up in its school condition survey.58 However, this survey will not be completed until autumn 2019.59

31.In September 2018, the Department told us that it expected to publish its overall assessment of the state of asbestos in schools, with a list of responsible bodies that had provided an assurance declaration, in December 2018.60 It said that it now planned to publish its overall assessment in April 2019.61

32.We asked the Department why schools had not responded to its survey. The Department told us that schools might not have responded as this was something they had never done before.62 We asked if publicly identifying asbestos, without the necessary funds to deal with it, might be a contributory factor. The Department told us that it had not identified this as an issue and that funding to deal with asbestos would be a top priority.63

33.The witness from Durand Education Trust said that asbestos only came to the top of its agenda in 2017–18 through the due diligence work that the Harris Federation carried out when it was considering taking on the school.64 The witness from Dunraven Educational Trust told us that it had mainly new buildings, but that it had up-to-date surveys and knew what needed to be done for the former Durand Academy building and for another school that it was taking on in December 2018.65 The interim Chief Executive Officer of Bright Tribe Trust told us that asbestos management in the trust’s schools was not as it should have been. She said that up-to-date and rigorous asbestos management plans were now in place across all of Bright Tribe’s schools.66

27 Committee of Public Accounts, Academy school finances, Thirtieth Report of Session 2017–19, 30 March 2018

28 Qq 300–303

31 Qq 278–284

32 Qq 168; 49–50

33 Charity Commission for England and Wales, Inquiry Report Durand Education Trust, 21 October 2016

34 Qq 50–51; Charity Commission for England and Wales, Inquiry Report Durand Education Trust, 21 October 2016

35 Qq 48–50

36 Qq 352, 360–361

39 Qq 265–266, 430–433

40 Qq 428–429; 433

41 Qq 430–431

42 Q 55

43 Qq 75–77; 119–120

44 Q 55

45 Qq 349–350

46 Qq 127–128

47 Committee of Public Accounts, Financial sustainability of schools, Forty-ninth Report of Session 2016–17, 28 March 2017

48 Committee of Public Accounts, Ofsted’s inspection of schools, Sixtieth Report of Session 2017–19, 18 July 2018

49 HM Chief Inspector, 30 October 2018

50 Committee of Public Accounts, Ofsted’s inspection of schools, Sixtieth Report of Session 2017–19, 18 July 2018

51 Qq 335–336

52 Committee of Public Accounts, Capital funding for schools, Fifty-seventh Report of Session 2016–17

53 Committee of Public Accounts, Academy school finances, Thirtieth Report of Session 2017–19, 30 March 2018

54 Q 398

55 Qq 410–411

58 Qq 398–400

59 Q 395

61 Q 406

62 Q 401

63 Qq 402–404, 410

64 Q 145

65 Qq 146–147

66 Q 140

Published: 23 January 2018