The Department for Education has published its delayed annual accounts for the whole academy sector.
The report reveals the sector’s increased reserves, more trusts breaching spending rules and a growing list of trusts facing scrutiny over high pay.
It covers the financial year up to September 2020, and so partially reflects the impact of the early phase of the pandemic. The report would usually be published in the summer.
Here is what we learned.
1. Sector more than £3 billion in surplus
Trusts reported a combined £3.2 billion of surpluses, up around £400 million on the previous year. 227 trusts had surpluses of more than £3 million. The DfE said cash levels held by the sector overall had also increased.
Meanwhile the 110 trusts reporting a cumulative deficit recorded a combined £42 million shortfall between income and spending. This marked an improvement on the £64 million gap the previous year, however.
Deficit levels vary widely by region. 8 per cent of trusts in the north of England regional schools commissioner’s patch received less income than they spent. In the south-east England and south London region, just two per cent of trusts recorded deficits.
70.3 per cent of trusts in deficit are single-academy trusts. They face growing DfE pressure to join larger trusts, and warnings their model is “not viable”.
2. Trusts quietly named and shamed over CEO pay
The accounts reveal a 39 per cent jump in trusts paying at least one employee £150,000 or more in both pay and pensions contributions.
Last year 473 recorded having staff in this bracket, up from 340 in 2019 – and they have been quietly “named and shamed” online in the sixth annex to the report.
The rises are “due to salary increases” as well as a leap in employer pension contribution rates.
Fresh details have also emerged over the data problems which have derailed the DfE’s high pay clampdown in recent years, though accounts also blame Covid.
Issues arose because the DfE began asking trusts to include not only salaries but pension contributions in reported pay in 2018-19, but not all trusts did so. The previous year’s data had be to recollected because of errors.
The accounts note an employee earning £77,000 would have been recorded as having a £93,000 package in 2019 with pensions included. After a pay rise to £80,000 and pension contribution hike, their package would be reported this year as £101,000.
3. Covid blamed as more trusts break spending rules
Independent accountants have to reveal in trusts’ accounts when they find any spending outside permitted use or agreed procedure. The number of trusts reporting such “regularity exceptions”, as they are known, leapt to 234 in the year to last September, up from 202.
An ESFA review found failures to comply with financial rules included having no independent checks of internal controls and issues with related party transactions. Covid “was the cause” for 14 per cent of rule breaches, making it a “contributory factor” to the increase.
But the number of “unqualified” accounts, signed off as correct by auditors, increased. The 14 “qualified” mainly reflect inadequate accounting records and issues with pension scheme valuations or land and building recognition.
4. Fall in fraud reports, financial notices and data breaches
Only nine financial notices to improve were issued, down from 15 the previous year.
Reports of fraud by trusts and others also both fell, though the value of confirmed fraud soared from £227,697 to almost £5.7 million. Most “relates to two historical cases”, though no more information is given.
Meanwhile there were 145 incidents where “personal data breaches occurred,” affecting 112 trusts. It too marks a decline on the 177 a year before. “The majority of these were low-level incidents, often involving administrative errors.”
5. 50 trusts pay £250,000+ to related parties
Trusts are forced to report deals with related organisations or individuals, because of the risks from conflicts of interest.
Some 1,807 payments made to such parties were recorded, an 18.2 per cent drop on 2018-19. They include 50 payments worth £250,000 or more.
“The department is actively managing governance risks around related parties,” the accounts state.
6. Converters receive more warning notices than sponsored academies
Regional schools commissioners issued 26 notices to converter academies, more than the 22 issued to sponsored academies.
The previous year had seen 19 “minded to terminate”, “pre-warning”, “termination warning” or “termination” notices to converters, and 20 issued to sponsored academies.
It comes in spite of converter academies being “usually strongly performing schools,” as the report puts it, prior to voluntary conversione. By contrast sponsored academies were “usually underperforming” prior to compulsory academisation.
However, there are currently more than twice the number of converter academies as sponsor academies in England.
Meanwhile the risk of having an “insuffiicient number of high quality sponsors and MATs available, in the right geographical areas” is described as one of the major risks facing the academies policy.
But the report highlights funding pots and advice provided to help trusts grow, as well as sponsorship being restricted to trusts with “a track record of helping other schools to improve”.
7. Free school growth misses previous targets
The Conservatives’ 2015 manifesto vowed to open at least 500 new free schools by 2020. The 2017 manifesto similarly pledged at least 100 a year.
But the accounts show just 63 opened in 2019-20, only a slight increase on the 59 opened a year previously.
Fortunately for the party however, by then its free school pledges had been watered down by the authors of its most recent manifesto, in 2019. The party committed only to “build more free schools”, with no target numbers – so it cannot be accused of failing to honour that pledge at least.