Government investigates severance payouts in academy trusts

Government investigates severance payouts in academy trusts

Government finance bosses are investigating several unnamed academy trusts that failed to get Treasury approval for hefty payments made to staff.

The Education and Funding Skills Agency has launched investigations into three “special severance payments” worth £184,000 that were paid to staff after they resigned or were fired.

According to one trade union, some of these will have been legitimate payments to staff who were unfairly dismissed, but others are likely a “bung” for friends of the trust.

Schools Week has also found that one disgraced trust made severance payments but failed to record them properly, meaning they couldn’t be investigated at the time.

According to Academies Financial Handbook (AFH) rules, special severance payments are made on top of the amount staff are paid when they resign or are fired. If the sum involved is £50,000 or more, trusts must get approval from the Treasury via the ESFA.

In fact, the AFH stipulates that special severance payments of £50,000 or more should only ever be offered if there’s a chance the trust will be taken to an employment tribunal and made to pay even more.

But five trusts have broken these rules, according to the Department for Education’s consolidated annual report and accounts.

These trusts spent a total of £353,000 on six special severance payments without asking the ESFA. Only three payments are being investigated, because one payment got “retrospective” approval and two more are awaiting the same. Retrospective approval may only be sought in “exceptional circumstances” and is considered on a case-by-case basis, according to a DfE spokesperson.

The DfE is nevertheless refusing to name the remaining three trusts.

The ESFA will think, ‘if we weren’t asked for approval, they’re hiding something’

Jon Richards, the head of education at Unison, said such “huge” special severance payments were sometimes justified when a headteacher or chief executive on a large salary is “wrongly” fired.

For many of those leaders, the extra payment would only equate to six more months’ wages, he pointed out.

But he also “suspected” that special severance payments such as these can sometimes be used as a “bung” to someone whom the trust felt bad about letting go.

Governors’ boards might have a close relationship to a fired headteacher, and wish to give them a sweetener, he said.

Phil Reynolds, a specialist in academies and education at accountancy firm Kreston Reeves, said the ESFA would investigate where it was worried a trust had done someone a favour.

“The ESFA will think, ‘if we weren’t asked for approval, they’re hiding something’,” he said.

Not all special severance payments have even been properly recorded, Schools Week can reveal.

New management at the disgraced Ridings Federation near Bristol, which is being wound up after financial notices to improve, found some historical severance payments had not appeared in the trust’s accounts.

David Baker, the interim chief executive at Ridings until it joins his Olympus Academy Trust, said he and new chair of governors, Claire Emery, had commissioned an audit of the trust’s finances when they both took over last year.

They discovered evidence of severance payments made to 12 members of staff worth £220,000, of which £77,000 were special severance payments. There were no business cases for the payments, nor evidence that the Academies Financial Handbook had been complied with.

The findings were so shocking the school shared the documents with parents and held meetings to reassure them the accounts were being sorted out, said Baker.