Forty-Seventh Report - Academies Sector Annual Report and Accounts 2019/20

Select Committee

Public Accounts Committee HC 994 25 March 2022

Report Status Government responded

Conclusions & Recommendations 33 items (10 recs)

Source View on Parliament website

Government Response (AI assessment · 17 of 33 classified)

Accepted 11

Acknowledged 1

Not Addressed 3

Rejected 2

Recommendations

5 results

5 Accepted

We are concerned that the Education & Skills Funding Agency’s decision to use public money...

Recommendation

We are concerned that the Education & Skills Funding Agency’s decision to use public money to prop up academy trusts in difficulty fails to address poor financial management within academy trusts. Academy trusts have been set up as charitable companies, … Read more

Government Response Summary

The government agrees with the recommendation to set out the criteria it uses to determine whether it is appropriate to provide additional funding to academy trusts to support financial recovery, or to write-off an academy’s debt and states that this framework is already in place.

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6 Accepted

We are concerned that the Department’s approach to monitoring the skills and experience of academy...

Recommendation

We are concerned that the Department’s approach to monitoring the skills and experience of academy leaders, and the lack of remedial action for leaders of failing academies, risks further failures across the sector. The Education & Skills Funding Agency’s monitoring … Read more We are concerned that the Department’s approach to monitoring the skills and experience of academy leaders, and the lack of remedial action for leaders of failing academies, risks further failures across the sector. The Education & Skills Funding Agency’s monitoring and intervention activities are designed to consider the effectiveness of governance arrangements within academy trusts. However, there is no requirement for trustees to hold financial qualifications, even where these individuals sit on a trust’s finance or audit committee. The number of instances where the independent auditor found some element of income or expenditure may have been incurred outside permitted use, or instances where the trust’s internal procedures have not been complied with, has risen to 9% of trusts in 2019/20, in part driven by the impact of the pandemic on the internal controls of academies and their spending. The Secretary of State has used its ?her powers under Section 128 of the Education and Skills Act 2008 against 10 individuals, suggesting quite a high threshold for debarring directors of academy trusts. There is a risk that the powers available to the Department do not go far enough to prevent leaders 8 Academies Sector Annual Report and Accounts 2019/20 of failing academy trusts from moving elsewhere within the education system. We remain concerned that the Department does not have a sufficiently joined up approach to dealing with misconduct, monitoring the potential re-deployment of leaders of failing academies within the education sector, or capturing insights from poor performance across the sector. Recommendation: The Department should write to the Committee within 6 months detailing how it will better identify and address cases of failed leadership within academies. This should include how it will ensure the necessary lessons are learned to avoid similar incidents from occurring in future elsewhere in the sector. Academies Sector Annual Report and Accounts 2019/20 9 1 D Show less

Government Response Summary

The government will make regulations under section 19(7)(c) of the Skills and Post-16 Education Act 2022 to prevent trust leaders judged to be unfit from moving to elsewhere in the education system and will write to the Committee by September 2022 with a full response.

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31 Accepted

The Academy Trust Handbook requires relevant trust staff to hold appropriate financial qualifications and experience.81...

Recommendation

The Academy Trust Handbook requires relevant trust staff to hold appropriate financial qualifications and experience.81 However, this requirement does not extend to trustees, including for trustees sitting on audit or finance committees. We therefore asked how the Department and ESFA … Read more

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32 Accepted

The Department told us that it collected information about academy trust governance arrangements.

Recommendation

The Department told us that it collected information about academy trust governance arrangements. However, the Department told us that it is more likely to use the information collected from ESFA’s monitoring and assessments over financial performance and other data collected … Read more

Government Response Summary

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33 Accepted

We have previously reported on the limited sanctions at the Department’s disposal to sanction trust...

Recommendation

We have previously reported on the limited sanctions at the Department’s disposal to sanction trust leaders who may be responsible for malpractice, including misuse of funds, across the sector. In our 2019 report on academy accounts and performance, we were … Read more We have previously reported on the limited sanctions at the Department’s disposal to sanction trust leaders who may be responsible for malpractice, including misuse of funds, across the sector. In our 2019 report on academy accounts and performance, we were concerned that the Department did not have an effective regime to sanction the academy trustees and leaders who were responsible for serious failings at trusts.85 The Department has since set out the powers available, including through other regulators, notably the Charity Commission and Insolvency Service.86 However, as the Charity Commission highlighted to us previously, the Department is the principal regulator for the academy sector, which is in practice managed and undertaken by the ESFA.87 The Department has its own powers under section 128 of the Education and Skills Act 2008, to sanction individuals engaged in misconduct by barring them from involvement in the management of education institutions.88 The Department told us that it took very seriously any instances of individuals acting inappropriately as a trustee of an academy trusts and that it had used its section 128 powers against 10 individuals. The use of these powers therefore appears to require quite a high bar and we asked the Department what other levers it had available to it to prevent an individual from moving from one trust to another where there had been concerns about their performance as a trustee. The Department and ESFA confirmed that the main mechanism for this was its section 128 powers, but that it could also work with the Charity Commission. They told us that they considered trusts were required to be very transparent in terms of who was on their board, and a high level of diligence in appointing trustees.89 83 Letter from Susan Acland-Hood, Permanent Secretary, Department for Education, to Dame Meg Hillier Chair of Committee of Public Accounts, PAC: 2019–20 Academies Sector Annual Report and Accounts, 1 February 2022; referencing t Show less

Government Response Summary

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Conclusions (6) Observations and findings — click to expand

23 Conclusion Accepted

The Department told us that many trusts actively explain their use of budgets to parents. We asked the Department whether the current arrangements should be more transparent, so that parents can see what academies are spending per-pupil. The Department told us that its online benchmarking service allowed viewers to identify …

Government Response Summary

The government states that the primary responsibility for financial management rests with the academy trust and accountability is rigorous via audited accounts.

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26 Conclusion Accepted

ESFA’s responsibilities include funding education and training for children, young people and adults; providing assurance that public funds are properly spent, achieve value for money for the taxpayer, and deliver the policies and priorities set by the Secretary of State; and intervening if there is a risk of financial failure.69 …

Government Response Summary

The government states that the primary responsibility for financial management rests with the academy trust and accountability is rigorous via audited accounts.

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27 Conclusion Accepted

An academy trust reporting a cumulative deficit must agree a recovery plan with ESFA to put the trust back on a financially sustainable path. Where an academy trust is reporting a cumulative deficit, it may require financial support, as part of that recovery plan. The SARA reported that non-repayable funding …

Government Response Summary

The government states that academy trusts are responsible for managing finances, and the ESFA provides support and challenge; additional funding is a last resort and is expected to be repaid with frameworks for financial support already in place.

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28 Conclusion Accepted

The ESFA may also provide loans to academy trusts for new academies that had converted from maintained schools to settle any local authority deficit, which should be repaid over an agreed period of time. These loans may be impaired and written-off where ESFA judge the trust to be in financial …

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29 Conclusion Accepted

Each academy trust as a charitable company is required to produce annually its own audited accounts.77 External auditors are appointed by the local academy trust in accordance with the Academy Trust Handbook. Auditors are required to provide an opinion on ‘true and fair’ of the accounts in addition to a …

Government Response Summary

The government states that the primary responsibility for financial management rests with the academy trust and accountability is rigorous via audited accounts.

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30 Conclusion Accepted

In 2019/20, 9% of trusts received a modified regularity opinion i.e. a regularity exception was identified, compared with 7% in 2018/19. A regularity exception means that the auditor found some element of income or expenditure that may have been outside its permitted use, or where the trust’s own agreed procedures …

Government Response Summary

The government states that the primary responsibility for financial management rests with the academy trust and accountability is rigorous via audited accounts.

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