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Perry Beeches academy trust gave £1.3m to private company which paid ‘second salary’ to ‘superhead’ Liam Nolan



An academy trust funnelled more than £1m to a private company which then paid a “second salary” to the trust’s “superhead”, a government investigation has revealed today.

Perry Beeches The Academy Trust – which runs five schools in Birmingham – has been issued with a financial notice to improve after an investigation revealed a string of “significant” financial oversight failures.

The trust, praised previously by both education secretary Nicky Morgan and Prime Minister David Cameron, who opened one of their schools in 2013, has now been ordered to make urgent improvements.

The findings of an investigation into financial mismanagement today reveals how the trust paid a private firm called Nexus for providing chief executive services.

Nexus then sub-contracted the role to another company called Liam Nolan Ltd, whose sole director is Liam Nolan, the “superhead” and accounting officer at the trust. He is also listed as a trust director and non-voting member, the investigation added.

The arrangement was found to breach Treasury guidance on tax avoidance.

The investigation also found:

– The trust had spent nearly £1.3m with Nexus over two years, “without a written contract or formal procurement”.

– Payments were not detailed in the trust’s 2013/14 financial statements.

– The trust’s chair of governors had “joint business interests” with a director of Nexus – which were not disclosed in a register of interests.

– The trust’s 2013/14 financial statements did not disclose the Nexus payments.

The findings breach a string of regulations, including the Academies Financial Handbook, Charity Commission and academies accounting rules, and trustee guidelines.

The investigation concludes there was a failure by trustees and Mr Nolan, as the trust’s accounting officer, to maintain “proper stewardship over public funds”.

It added: “Urgent action is required to strengthen governance, financial procedures and management arrangements and ensure trustees fully understand their obligations as company directors and trustees.”

The trust has also been ordered to pay back £118,291 of government funding after a separate investigation into allegations it had wrongly recorded pupils on the annual census as entitled to free school meals.

The investigation found the trust had failed to retain any form of free school meal eligibility evidence for a period of six years – breaching the Academies Financial Handbook.

The government has now handed the trust a financial notice to improve, with a long list of conditions it must meet.

They include an independent review of its membership and board of governors to prove Mr Nolan has the skills to carry out his role “effectively” and review payroll arrangements of all senior employees to ensure they fully meet their tax obligations.

The school did not respond immediately to requests for comment. However Mr Nolan (pictured above) told the BBC last night: “I’m not a business manager, I’m a headteacher.”

He added the trust was criticised for a lack of understanding to do with contract, services and tax law, which he said used to be handled by the local authority.

Mr Nolan was previously reported to have said he deserved a pay rise because his £120,000 salary was “low” compared with those in other industries.

He faced calls to resign last year after one of the Perry Beeches schools was put in special measures. The trust is due to open another free school next year.

A Department for Education spokesperson said: “The Trust has already put in place an action plan and is working with us to urgently fix the weaknesses we found. We will monitor progress closely, and if we don’t see significant improvement we will not hesitate to take further action.

“Academy trusts operate under a strict system of oversight and accountability – more robust than in council-run schools — which has enabled us to identify these issues and take swift action to address them.”

 

This story was updated to clarify that money was paid via an intermediary company from the trust to Mr Nolan.

 

 



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12 Comments

  1. So are the DfE moving all schools to a system where a Head Teacher needs a rule book to tell them it is wrong to take barrow loads of cash from their school in a secret deal?
    I am sure the DfE will claim that the robust funding arrangement for Academies means Academies are kept to a higher standard than in maintained schools; or some sort of similar verbiage.

    I know that the majority of our schools are run by leaders with a strong moral compass, and they don’t need an Academy funding agreement to tell them the difference between right and wrong. Sadly the MAT system seems to be encouraging greed and it is definitely not a good lesson for our young people.

  2. The mook

    “He added the trust was criticised for a lack of understanding to do with contract, services and tax law, which he said used to be handled by the local authority.”

    Tough luck. You chose academisation.

  3. The DfE spokesperson said, ‘Academy trusts operate under a strict system of oversight and accountability – more robust than in council-run schools — which has enabled us to identify these issues and take swift action to address them.’

    But the EFA didn’t notice any wrongdoing at Perry Beeches until contacted by a whistleblower. The EFA admitted that the dodgy deal between the trust, Nexus and Liam Nolan Ltd hadn’t appeared in the 2013/14 accounts. The accounts were also signed off by an independent auditor.

    It’s unlikely a school under the stewardship of a local authority would have got away with such a complex arrangement.

    • Good points Janet. How can an independent auditor not notice £1.3 million is not accounted for properly? When I worked for an LEA Secondary the auditors used to pick up errors of a couple of £ let alone £1.3 million. Can we not trust independent auditors either? Something not quite right here either.

      • To be fair to the auditor, if the whole dodgy deal was kept off the books then the auditor wouldn’t notice. Auditors are only charged with checking accounts were made up properly. I presume that means just checking if the given figures add up and match with any records. If the records presented DO match the accounts then the auditor would presumably sign them off. What appears to have happened here is that contracts and records for the dubious connection between Nexus and Liam Nolan Ltd were limited or non-existent. Conflict of interest between Nexus and Liam Nolan Ltd weren’t recorded in the accounts either.

        • Thanks Janet but if you are correct this reveals a gaping hole in the system. If it is possible not to show transactions in the accounts then how many others are doing this. Surely the total income and expenditure for the Academy has to match. I cannot see how it is possible for £1.3 million to disappear. It must be shown as something within the accounts. This is possibly 10% of the budget. If you can hide 10% of the budget from an auditor it seems pointless to audit accounts at all.
          When we were regularly audited as an LEA school under LMS we were asked to show receipts for the items in the accounts and sometimes had to show the actual items that had been purchased. All major contract paperwork would have to be shown to the auditors. If there is nothing fishy about what happened in the audit then there is an urgent need to review the audit system for Academy/Free Schools.

          • Auditors of academy trusts also don’t have to judge whether money paid out is value for money. So if the MAT decides to spend £4.5k on a desk for the executive principal, raises the salary of the executive principal to £200k pa or spend £12k on ‘hospitality’ and includes these in the accounts correctly then the auditor will still sign off the accounts.
            Each MAT has to include a value for money statement in its annual accounts (this used to be a separate document but is now included in the accounts) but this statement is the opinion of the academy trust’s Accounting Officer and chair of trustees NOT an independent person.
            An auditor can ‘qualify’ the accounts if s/he thinks something is amiss and will explain the reasons for the qualification. It is now the auditor’s responsibility to inform both the National Audit Office and the EFA if accounts are qualified.

  4. Tarquin De Launcey

    There is no earthly way a local authority school could have got away with this. The LEA is all over our finances like a rash. I have freedom over my budget but the LEA has very clear and thorough oversight.

  5. “A Department for Education spokesperson said…
    “Academy trusts operate under a strict system of oversight and accountability – more robust than in council-run schools — which has enabled us to identify these issues and take swift action to address them.”

    Really? I don’t recall hearing of Vera Wang tea sets and 1.3 million pound scams when LEAs were in charge. Or of inflated wages and pay rises for principals who were running failing schools.

    Funny that…

  6. There have been many cases of failed academies and free schools now, along with Ofsted’s criticism of various MATs and a series of financial scandals. Could Schools Week – which has been in the forefront of highlighting these abuses and disasters – put together a definitive list of these to help arguments against the White Paper proposals – or has someone else already done this and I’ve missed it?