Councils accept ‘referral fees’ for schools’ MIS switch

Councils have received thousands of pounds in “referral fees” by a tech company in return for their schools switching to its management information system (MIS).

Three councils have received cash from Arbor Education, one of England’s biggest MIS providers.

One has received more than £10,000 since 2022 – while another described the cash as an alternative source of income used to ease “significant financial pressures”. 

Conflict concerns 

Some councils run MIS support units, which can include advising schools on procurement decisions. 

Consultant Duncan Baldwin said: “If the local authorities are organising an event or process [for schools to choose MIS] and may know that a payment may be received for schools choosing a particular system rather than another, the risk remains that there may not be full impartiality. 

“The knowledge of a fee might influence conversations.”

However, the councils have distanced themselves from schools’ MIS decision-making, with many council support teams either disbanded or spun out in recent years.

The level of advice from units still controlled by local authorities also varies. Some act as sounding boards during procurement, others leave decisions to schools. 

‘Alternative income’

Buckinghamshire revealed through Freedom of Information that it had received an “annual recurring referral fee” from Arbor. 

The council would not reveal the amount as it would “affect its ability to generate income to support the provision of public services”.

But “significant financial pressures on local authorities” have prompted “the exploration of alternative sources of income”. 

Anita Cranmer, Buckinghamshire’s cabinet member for education, stressed schools decided which MIS to use, not the council. Referral cash was given to heads. 

The council has also received an “annual entitlement rebate” from one company for the support it provided to schools. This, too, was passed on to leaders. 

Nottingham’s MIS support team helps schools using ESS SIMS, Arbor and ScholarPack, which is part of Arbor, by arranging demonstrations of the tech and promoting it. 

Leaders “are free to choose any solution”, but they must choose from one of these three to get support. 

Some companies “offer a revenue share for products purchased by schools if they are referred by the local authority, but not if they go directly to the supplier”, a spokesperson said.

Nottingham received just over £11,000 over 2022 and 2023. 

A council spokesperson said “the switch in MIS was driven by schools … after seeing demos of a number of systems”. The cash supports delivery of its IT service “for the benefit of all schools”. 

Companies also pay towards council support units

SIMS said it occasionally offered fees to support units for work “over and above” their normal activities. Nottingham received just over £20,000 for what it said was “a rebate on additional products purchased by schools using SIMS”.

But SIMS said the money was given to the council after schools opted to receive support from the authority, rather than the company itself. 

Meanwhile, bursars asked Wokingham council “to organise a marketplace event with online presentations to see what systems were available to them as part of the support we offer to schools”. 

It “arranged for a group of leading providers to take part”, with leaders “able to make their own decisions, based on information from the event and their own research” as the authority did not offer “specific MIS support”. 

It received a payment of about £9,000 from Arbor earlier this year after 23 of its schools signed with the company. The money was reinvested into “supporting local schools and the children that attend them”. 

The Wisdom Partnership, an MIS consultancy, said while such fees were “widely accepted in the commercial world, it doesn’t sit comfortably when advising a school on one system over another”. 

The findings come amid massive change in the MIS sector, worth about £200 million.

Following the emergence of cloud-based providers, the market share for ESS SIMS – which has long dominated the MIS world – fell below 50 per cent. 

Referral fees ‘inappropriate’ 

Lewis Alcraft, the chief executive of ParentPay Group, an organisation that runs SIMS, said referral fees were “inappropriate”. 

But James Weatherill, the chief executive of Arbor, said his company’s fees were based “off those offered by others in the market to ensure a level playing field”. 

For instance, Bromcom, another provider, does not offer referrals, but does charge schools less if support units – as opposed to the company – provide helpdesk services.

Weatherill said councils could also opt for a discounted rate, adding the companies had always been transparent with how service fees were paid. The fees ranged from £159 to £396.77 for each school.