Single-academy trust rapped over £60k undeclared pay-offs

A single-academy trust has been warned to overhaul its financial and governance set-up after a government review found £60,000 of undeclared severance payments made in one year.

The government has also had to provide Stratton Education Trust with financial notice to improve after handing out a £120,000 bailout to cover the trust’s budget deficit.

The Education and Skills Funding Agency sent a team to investigate the trust, which runs Stratton Upper School in Bedfordshire, at the end of July after receiving allegations relating to “financial management and governance arrangements” said to have taken place in May.

The trust was originally formed with two schools in May 2012, but became a single-academy trust when Gamlingay Village College transferred to another trust in September 2017. Stratton Upper School is rated as ‘requires improvement’ by Ofsted.

The report, published today, warned a “number of significant findings and breaches of the Academies Financial Handbook have been identified” and instructed the trust to “take urgent action to resolve the issues, including greater consideration given to the robustness of financial management and governance arrangements by the board.

The ESFA discovered that £66,306 of severance payments were not declared in the 2016/17 accounts. The report said that although the payments were made in September 2017, provision for the payments should have been made in the accounts.

The total paid out in six severance payments that month was £96,306. The ESFA identified one member of staff that had been underpaid £991, and an overpayment to another member of staff of £10,237. The trust could not explain the underpayment, but said the overpayment was a “result of negotiations”.

The ESFA also found the trust spent £63,000 with an academy, where a former headteacher was a trustee, for alternative provision without declaring it as a related-party transaction in its audited accounts.  Last year it spent another £7,000 for the same provision.

Another allegation related to contracts worth £281,505 to build a new science block. Although the ESFA found that a formal tendering process was undertaken to select both the architects and construction contractors for the project, it said there was “no evidence of any formal or informal procurement process” undertaken to appoint the person or company to manage the tendering processes for the contractors used.

The person appointed was proposed at a full board meeting in May 2013, with “no clear indication as to why the proposal was made”.

The ESFA review found the trust had therefore “failed to comply with their own finance policy” and breached the academies financial handbook.

Other findings included a “lack of transparency” in reporting governance arrangements and business interests on the trust’s website and Get Information About Schools, an audit committee that does not operate in line with government requirements and a failed recruitment exercise for a Director of Transformation which did not demonstrate “value for money” after the trust paid £20,000 to a recruitment agency which had previously been used by one of the trustees in the past but with no formal procurement process.

It has also prompted a financial notice to improve, sent on Monday but also published today, which cites 14 breaches of the Academies Financial Handbook and reveals that the trust was almost five months late in submitting its financial audited statements and auditor’s management letter on time, finally submitting them on May 17, 2018, rather than the deadline of December 31, 2017.

The notice, from Mike Pettifer, director of the academies and maintained schools directorate at the DfE, said the ESFA’s report “does not provide the ESFA with assurance of good financial management and governance.”

He added: “I recognise the cooperation and extensive discussions that have taken place between the trust and officials and am pleased to note the steps the trust are considering to strengthen accounting, financial management and internal financial controls.

“However, my concerns remain in relation to the weak financial position and financial management and governance at the Trust and also due to the number of the material weaknesses and breaches identified in the ESFA financial management and governance review report.”

According to the notice, the trust must now develop an action plan to address the weaknesses identified, and submit it to the ESFA by January 31. It has been told to “refresh” its board to ensure a “significant degree of separation between those who are members and those who are trustees” and commission a full independence governance review.

It must also agree a repayment schedule for £120,000 of deficit funding support provided by the ESFA in October 2018, ensuring the full amount is repaid within five years.

The Stratton Education Trust was contacted for comment.