National Audit Office criticises ‘excess payments’ by academy schools to former staff

By David Hencke and Frederika Whitehead | 27 July 2012

“I have been unable to confirm that, in all material respects, grants to academies conform with the authorities that govern them”
– Amyas Morse, auditor general

Auditors have condemned the funding body for England’s academy schools for failing to ensure that spending meets Treasury guidelines.

Exaro can reveal that auditors “qualified” the entire £6.1 billion of funding distributed by the Young People’s Learning Agency (YPLA) to 1,660 academies in the 2011-12 financial year.

They also criticised the YPLA, an agency of the Department for Education (DfE), over “excess severance payments” by academies to ex-staff – without prior Treasury approval.

The astonishingly tough condemnation from the National Audit Office (NAO) has provoked a row in Whitehall, with the DfE insisting that academies do not need Treasury approval for such payments.

Amyas Morse, auditor general and head of the NAO, has written a stinging five-page audit report that accompanies the annual accounts for the DfE for the latest financial year. He rebukes the YPLA for failing to meet the Treasury’s ‘Managing Public Money’ guidance.

“The control framework is not adequately designed to provide sufficient appropriate assurance that academies have complied with all aspects of HM Treasury’s Managing Public Money,” he writes, referring to “weaknesses in that framework”.

Stephen Twigg, shadow education secretary, told Exaro: “Now, more than ever, there is a duty on government to ensure value for money. This report raises concerns about the funding for academies.”

“The government must ensure that all schools – including academies – are governed by the Treasury rules.”

In his audit report, Morse records that the number of academies grew from 440 in March 2011 to 1,660 within a year. By the beginning of this month, the figure had risen to 1,957.

He says that more than one in five academies was late in submitting accounts to the agency. And more than half filed their ‘financial management and governance evaluation’ returns late.

Some transactions that “are potentially repercussive, or of a novel or contentious type” must be approved by the Treasury, he writes. These include “severance payments in excess of the employer’s contractual commitment.”

The YPLA was aware of 14 cases of excess severance payments, totalling just under £230,000 at nine academies. But it does not know how many other excess payments were made, says Morse.

The audit report says that the YPLA only knew about 11 cases because it had carried out inspections at 135 academies – just eight per cent of them. “The remainder were identified through discussions on funding with the academies,” says Morse.

“It is unclear how many other special payments were made in the academy sector in this financial year.” But, he adds, the frequency in this sample suggests that there were many more.

If the pattern had been repeated throughout all academies, the total in excess severance payments would have reached just under £3 million.

Morse writes: “YPLA has not required academies to notify them of severance cases or any other payments that require Treasury approval, and so I have concluded that the assurance framework that YPLA had in place for the financial year was not capable of identifying and managing all cases.”

“I have been unable to confirm that, in all material respects, grants to academies conform with the authorities that govern them, and have been applied for the purposes intended by Parliament.”

The NAO also qualified the DfE accounts because it overspent its authorised budget by just under £63 million.

The DfE told Exaro that the NAO was wrong to say that the severance payments above contractual commitments required Treasury approval.

A spokeswoman for the department said: “We do not believe that we need approval for these payments because maintained schools are not required to submit them. We are working with the NAO and HM Treasury on this.”

The YPLA was scrapped in April, and replaced by the newly created Education Funding Agency (EFA). Peter Lauener transferred as chief executive of the old agency to the same position at the new body.

In its business plan, the new agency promised to ensure “the proper use of public funds through financial assurance undertaken by the EFA itself, or by others.”

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