Tuesday, 8 September 2015

'Significant risks' attached to academy accounts warns National Audit Office

From the Local Schools Network LINK by Janet Downs

The National Audit Office has warned of ‘significant’ risks attached to academy accounts in a letter to auditors LINK. These include:

CAPITAL RISKS

1    The expansion of the capital programme in 2014/15 involves different ways of acquiring land such as buying freeholds or leasing.

2    There’s a risk these ‘ownership arrangements’ aren’t identified correctly and are included in the wrong accounts.

OTHER MATTERS

There is an ‘inherent risk’ of ‘material or systematic irregularity’ across the whole academies sector because of the ‘number and variety of providers’. The NAO is particularly concerned that:

1    Academy trusts don’t always seek approval from the Education Secretary for transactions which trusts aren’t delegated to make.

2    Related-party transactions might not be ‘arms-length’ or ‘at cost’.

3    Fraud or misuse of funds, especially at ‘trust level’ in Multi-Academy Trusts (MATs), could take place.

4    Academies with long-standing deficits could become insolvent.

The NAO has listed factors which it wants academy auditors to consider when identifying whether there is a ‘risk of irregularity’. These include:

1    Heads ‘using academy funds for personal gain’.

2    ‘Inappropriate expense claims’ for staff or trustees.

3    ‘Unjustified salary increases’.

4    Weak controls at trust level over activities of individual academies within MATs.

5    Transactions which breach the Academies Financial Handbook.

6    Weaknesses in procurement (including employment or related-party transactions).

The letter to auditors asks them to notify the NAO if they identify ‘significant risks of material misstatement’ in academy accounts.

AUTHOR’S COMMENTS

The number of academy trusts, MATs and sponsors is continues to rise. And Education Secretary Nicky Morgan has pleaded with businesses to run academies. But the NAO already has significant concerns about risks linked to the present ‘number and variety’ of providers.

It appears these serious misgivings are not enough to prompt a rethink. On the contrary, the Education and Adoption Bill will make it easier for the Government to push forward academy conversion. This is despite an earlier NAO report finding formal methods such as academy conversion were less effective in improving struggling schools than informal methods such as local support. And an even earlier NAO report (2010) which warned about potential conflicts of interests between sponsors and their academies.

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