DfE fails to recoup any cash from “improper” academy trust payments

The department for education has failed to claw back any money from 26 payments between academy trusts and related parties – despite them being deemed improper.

The failure has been revealed under new figures obtained by the Labour Party that show the number of academy trusts making payments to businesses connected to their directors or trustees are rising.

A total of 1,083 academy trusts (more than 40 per cent) made such payments in the 2013-14 financial year – up from 976 in the previous year.

An increasing number of these have also been deemed “irregular” – meaning the payments were not provided at cost, trustees failed to follow adequate procurement processes or the trust did not comply with the Treasury’s off-payroll requirements for its staff.

There were 26 improper related party transactions in the 2013-14 year – up from 17 for the previous year.

The Education Funding Agency is able to recover cash from irregular payments, but the government admitted last week that it has not recouped any.

Lucy Powell, Labour’s shadow education secretary, said: “The Department for Education is totally failing to have a handle on the finances of the thousands of schools that it is trying to run directly from Whitehall.”

The figures followed another scathing report from the spending watchdog the National Audit Office that said the department’s accounts “lack truth and fairness”.

It has prompted further questions about whether the department will be able to cope with the responsibility for another 15,000 schools – under the government’s all-out academisation plans.

Ms Powell added: “It is plain to everyone, except the Government, that the Tory plan to force all schools to become academies will only make this situation even worse.

“It is time that David Cameron U-turned on this top-down, costly reorganisation of our schools system, which nobody wants and schools don’t need, and instead ensure there is proper local oversight of all our schools, so that standards are raised and parents can be sure their child’s school is getting the best deal for its pupils.”

Edward Timpson, children’s minister, in his response to the related-party transactions parliamentary question from Labour, said academies operate under a “robust accountability system which holds them to account for the results they achieve and their use of resources.”

A breakdown of the irregular related-party payments
A breakdown of the irregular related-party payments

He said repayment of improper related-party transactions is considered on a case-by-case basis and “may be sought where there has been a serious breach of requirements of standards of conduct”.

But he added: “Some transactions may be classified as irregular or improper because of less serious procedural and compliance issues, or because of insufficient evidence to form an opinion.

“Repayment may not be pursued in these cases. The 26 related party transactions classified as irregular were assessed on this basis.”

Schools Week reported last week that rules had been flouted regarding related-party transaction at the Perry Beeches Academy Trust.

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  1. The 26 improper payments above are only those ‘confirmed’ by academy trusts. This raises the question how many other such payments have been made which trusts didn’t confirm: payments such as made to Liam Nolan, Perry Beeches, via a transaction via a third party and a company set up by Nolan which didn’t appear in the accounts.
    The judgement over whether related party transactions are proper is made by the trust. But the NAO said this would be difficult to evidence because payments, particularly for services, were subjective. The NAO also said in its report about Durand (still being investigated by the Charities Commission) that complicated structures raised the perception of wrongdoing.

  2. There’s also the question of value for money. Academy trusts may think paying the executive principal an eye-watering salary is value for money, but others may disagree. Similarly, using money meant for education to pay, say, £12k for hospitality, nearly £5k for the principal’s desk or thousands of pounds on consultants (often linked to the trusts) is an acceptable use of taxpayers’ money.