Doomed free school handed £250k to help it close

The government gave more than £250,000 to a doomed free school to help it close down, new documents reveal.

The annual accounts of the Collective Spirit Free School in Oldham, Greater Manchester, show the Education and Skills Funding Agency paid £254,819 “to assist in the close-down of the academy” in 2016-17. The funding meant that the academy shut last year with a £192,710 budget surplus.

According to the documents, the government also handed more than £150,000 to the school to pay another academy for support. School funding bosses also wrote off debts of at least £300,000 in the school’s final year.

The school, opened by charity boss Raja Miah in 2013, was placed in special measures in 2016 following a damning ‘inadequate’ Ofsted report. Its leaders announced last June that it would close, and its doors shut for the final time in September.

The school’s 2016-17 accounts show that general debts of £51,105 owed back to the public purse were written off by the ESFA as “donations”.  This is on top of almost £250,000 written off as a result of the school having overestimated its pupil numbers.

Free schools are funded based on their predictions of pupil numbers. Those which receive more than they needed because they overestimated their roll are supposed to pay the extra money back.

But data obtained under the Freedom of Information act earlier this year shows that debts of £248,660.66 accumulated by Collective Spirit as a result of this “pupil number adjustment” were written off by the ESFA in 2016-17.

Free school spent £339k with linked company

The Collective Spirit Free School paid out £339,261 in related party transactions to Collective Spirit Community Trust Limited, a company part-owned by one of its trustees, in 2016-17.

Payments included £120,000 for “extended curriculum” services, £57,760 for catering supplies, £39,134 for transport, £28,167 for educational consultancy and £20,266 for “educational boosters”. The school even spent £16,666 on “marketing” in its final year of operation.

This is on top of £419,028 paid by the school to the Collective Spirit Community Trust in 2015-16, of which only £139,676 was declared at the time. Alun Morgan, a former director at the school, owns a 50-per-cent share of the Collective Spirit Community Trust.

Auditors were also unable to conclude that the disclosure of related-party transactions was “fairly stated” because they were unable to get hold of all invoices issued to the school by the trust.

The school also paid Consilium Academies Trust, an organisation run by its chair Martin Shevill, £4,000 for work on HR support and safeguarding in 2016-17.

The Department for Education also gave Collective Spirit an additional £154,500 to pay a neighbouring academy, Oasis Academy Oldham, to support Collective Spirit Free School in its final year.

Auditors for the school also reported that they were unable to access statements for two of its three bank accounts, which contained £1,006 and £217 respectively when the school closed. As a result, they were unable to confirm if any adjustments to the bank balances were necessary. They were also unable to account for £33,512 in donations given to the school through its ParentPay online system because they could not gain access to it.

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  1. Mark Watson

    This is precisely the type of related party transactions that DOES need investigation and a massively bright light shone on it.
    The Trust paid over £750k to a company where one of the Trustees owns half the business. I don’t know whether this represents value for money (and a saving for the public purse) but frankly that’s irrelevant at this stage.
    It is simply not acceptable for transactions like this to entered into under cover of secrecy.
    If I was a Trustee of this free school I wouldn’t begin to think about entering into this sort of deal unless I had overwhelming and irrefutable evidence that this represented a good deal, and then I would insist on this evidence being published openly online. I’d also make a strong suggestion that given this level of contract the relevant trustee should seriously consider their position on the Board before the vote was taken.

  2. Mark Watson

    I’ve set out before why I think related party transactions can be a good thing, and I still don’t think they should be banned entirely.
    However as a result of stories like this I would totally support a system where related party transactions with an expected value over a set figure (be that £100k, £50k, £25k or whatever is agreed) could only be entered into if pre-approved by any external body.
    I think you’d find this would actually be welcomed by most Boards of Trustees.

  3. When Collective Spirit was proposed, the impact assessment (not published until after Collective Spirit had opened) showed there were already a large number of surplus places at some nearby schools. The Council also objected to what they described as a ‘land grab’ by the DfE of a closed school site earmarked for housing. Oldham council estimated it would lose £4m in ‘land value, lost council tax and reduced economic activity’.
    It’s hard not to think that the free school programme in its early stages aimed for quantity not quality. And the non-publication of impact assessments since 2015 suggests the DfE still has something to hide (see my LSN post dated 1 May 2018).

    • Mark Watson

      I googled “Collective Spirit impact assessment” and came up with this:
      It shows there are 7 secondary schools within a 1 mile radius that could be affected.
      The potential impact on 4 of them was deemed moderate, and for the other 3 it was deemed minimal.
      For the 4 where the impact was potentially moderate:
      One had no Ofsted but results were “well below average”
      One was Inadequate with results “well below average”
      One was Inadequate with results “below average”
      One was Good with results “below average”
      For the other 3 schools where the impact was minimal:
      One was Outstanding with results “well above average”
      One was Good with results “below average”
      One was Good with results “average or close to average”
      Only one school did better than average – unsurprisingly this school was oversubscribed. The school with “average or close to average” results was also oversubcribed, as was one of the three schools with “below average” results.
      So there were four schools that were undersubscribed – two had “below average” results and two had “well below average” results – with two being rated as Inadequate.
      I suspect that if you talked to the parents in the proposed catchment area for the free school back in 2012 they would not have been overwhelmingly supportive of the status quo given the above.
      I also don’t think anyone could realistically frame an argument that this community was being provided by quality education.
      Quite obviously the Collective Spirit school didn’t work, and the reasons why should be reviewed and made public (especially the business about the £750k related party transaction I referred to above).
      However I don’t think it fair to claim the free school programme was only interested in quantity when we look at this background – clearly this area was crying out for quality that wasn’t being provided by the schools then in place.

      • Mark – I had read the impact assessment. There was no need to waste your time reproducing it. Whatever your opinion of the undersubscribed schools, there were still surplus places (over 1000 according to Oldham council including Collective Spirit). It would surely have been more cost-effective to help the poorly-performing schools improve or even wait until they did so. And that’s what’s happened to two of the three schools identified by the impact assessment as underscribed and poorly performing/inadequate Ofsted:
        Oldham Academy North – now good, progress 8 2017 well-above average
        Blessed John Henry Newman – now good, progress 8 2017 average
        Oasis Academy Oldham – requires improvement, progress 8 2017 well-below average
        However, I’ve since discovered that the situation in Oldham is confused (or rather the Council may be confused). The local paper says the Council recently approved expansion of some secondary schools to cope with rising numbers while at the same time receiving a report about over-capacity!

        • Mark Watson

          You read it, but not everyone else reading this page would have done.
          I pulled out the statistics from the Impact Assessment because they made it clear that at the time the free school was considered the educational provision in that area was not acceptable. Your post about there being available places could have been interpreted as meaning alternative school places were not wanted by the community but that needed to be put in context of what those available places were.
          Whether it would have been more cost-effective to start a free school or invest in existing schools would be difficult to prove either way. I do however think your reference to “waiting until the poorly-performing schools improve” shows a mindset that puts political principles above the specific needs of the local community. How long would you have been prepared to wait? One year, five years, ten years?
          In any event, as you pointed out it seems that leaving things to the local authority wouldn’t result in a change of approach as they too invest in building more spaces rather than investing in schools with capacity.
          If everyone of every political hue takes the same approach what’s the alternative?