9 things we learned from ESFA's first annual report and accounts

The Education and Skills Funding Agency has published its first annual report and accounts, revealing millions given away in free school sites, investigations into academy trusts and complaints against the agency itself.

The agency was formed out of a merger of the Education Funding Agency and the Skills Funding Agency in April last year.

Here are nine things we learned.

1. Losses of £67 million

Despite underspending its budget by £0.3 billion, the ESFA reported losses of £67 million. Most of this, the report said, came from waiving exceptional support loans for colleges, but there are some other losses of note.

The ESFA made 83 fruitless payments – meaning payments that cannot be legally avoided, even though nothing of use will be received in return, such as buying train tickets that cannot be used – totalling £2.5 million over the year. It waived or abandoned 26 cases, amounting to a total of £64.7 million.

It also counted losses from two free schools which were cancelled – Daubeney Gate Alternative Provision Free School (£488,000) and UTC Guildford (£316,000).

Claims were waived or abandoned at four university technical colleges which closed down: Daventry UTC (£1.3 million), Greater Manchester Sustainable Engineering UTC (£645,000) and Lancashire UTC (£1.17 million).

The agency also waived its claim to recover overpayment of grants at three schools and a council: Theale Green School (£830,000), John Madejski Academy (£987,000), Wakefield Council (£543,000) and Vision Studio School (£342,000).

2. Special payments of £2.76 million

The ESFA made six special payments totalling £2.76 million this year.

In order to move the John Madejski Academy from its original single-academy trust to a multi-academy trust, Reading Borough Council received £800,000. The money settled a “repair liability” back to the council which had been preventing the transfer and was too large for either trust to pay for.

Southall College was given £745,000 for costs incurred in relation to the opening of a proposed new school Floreat Southall School Project.

Saddleworth in Oldham received £545,000 to help build a new school on a rural site, which was described as “contentious, with complex land and planning issues and has been subjected to lengthy delays due to judicial review enquiries”.

And Kingston-upon-Thames Community School received £500,000 in an out-of-court settlement to resolve a legal dispute relating to the property. “In reaching a settlement agreement with the intentions of having the school open in 2019, we intend to relieve the capacity pressure on the school,” the report said.

3. Giving away failed UTC and studio school sites worth almost £15.5 million as ‘gifts’

When UTC Lancashire closed at the end of 2016/17, the site reverted back to the ESFA which identified the University of Central Lancashire as “the most suitable occupier”. The transfer of the site to the university “resulted in a gift of £10.3 million being recognised”.

Future Tech Studio School closed in August 2017, and the ESFA took over the lease of the site – valued at £3.2 million – from the academy trust which had operated the school. As it does not intend to occupy the site, it has been leased to the Warrington Vale Royal College and recognised as a gift.

Finally, the Devon Studio School closed at the end of 2016/17. The ESFA did not own the site, but the total capital refurbishment and equipment costs paid for the studio school were £3.6 million. The report said the ESFA has made a “clawback agreement” with the academy trust, which is valued as a gift of £2.1 million.

4. Money pressures

Like the rest of the sector, the ESFA is not immune to funding trouble, and its report warns that, without more money, “there is a risk that the agency will not have the people resources it needs to be able to effectively deliver all of its priorities and remit”. It says discussions are ongoing with the DfE to review the situation and “seek agreement to fund sufficient skills and capabilities that are needed”.

5. Investigations into academy trusts

Last year, the ESFA brought forward three cases and “triaged” 31 fraud and/or financial irregularity allegations related to academy trusts, down from 36 last year. This resulted in five fact-finding visits, eight formal financial management and governance reviews and four investigations into a total of 17 academy trusts.

There are currently six ongoing cases and 11 that are closed, although four of the 11 closed cases had “evidence of irregularity”. The ESFA identified inadequate governance and financial control arrangements at all four, and made recommendations to fix the issues. Two of the six ongoing cases are near completion, with one “irregularity” confirmed in one of the cases.

The ESFA also received 39 notifications of fraud and theft. Trusts reported losses of £694,573, of which £495,000 was recovered or covered by insurance.

6. Complaints against the ESFA

In 2017-18, the Parliamentary and Health Service Ombudsman received 18 complaints related to the ESFA, but just one of these was accepted for investigation and the complaint was not upheld.

Also this year, the ESFA received 377 complaint cases, a big increase on the 237 received between the EFA and SFA last year.  However, the report said this increase is due to a “more robust process for handling and recording complaints”.

7. More LA’s than predicted asked to change funding formula allocations

The report says the ESFA “undertook an ambitious programme of engagement” with local authorities to deliver the national funding formula, and said it was aware of a risk that LA’s would request changes to their local formulae to allow them to “fully mirror the national funding formula and to address local funding pressures”, resulting in more work for the agency.

However, “it was not possible to predict how many LA’s would want to make changes to their funding blocks”. A total of 233 requests for changes were submitted to the ESFA, although it is not clear from the report how many were successful.

8. Asbestos and contamination

The ESFA is dealing with the costs of 56 schools that have had to employ contractors to remove asbestos or “dark ground” (contamination) during works for the Priority School Building Programme projects. The report said it will be negotiating with the contractors and will “partially meet the costs”, but the agency is still waiting to find out how much this will be.

9. Peter Lauener received biggest bonus

The former chief executive Peter Lauener was handed a bonus of between £20-25,000 when he left the ESFA last November (£20,000 higher than any other staff, even though he didn’t work the full year) and received a total pay package of between £120-125,000.

Mike Pettifer, the acting director academies and maintained schools group from April last year, received between £130-£135,000, including pension payments of £30,000. Eileen Milner, Lauener’s replacement as chief executive since November, had the lowest pay package, taking home between £65-70,000, including pension payments of £19,000.