National Audit Office to challenge ministers over expansion programme for academies

By David Hencke and Hui Shan Khoo | 5 November 2012

“The [government] should continue to work towards putting into place a sustainable methodology for collecting data from academies” – Amyas Morse, auditor general

Government auditors are preparing a damning report on education secretary Michael Gove’s huge expansion of academy schools in England.

Amyas Morse, auditor general and head of the National Audit Office (NAO), is challenging the government over what he sees as a lack of accountability for academies.

The NAO’s report, due later this month, will examine the expansion programme, and is expected to criticise the oversight of academies by the Department for Education (DfE).

It is expected to reignite a clash between Gove and Margaret Hodge, chairwoman of the House of Commons public accounts committee (PAC).

Gove described the NAO and PAC as “forces of conservatism” that opposed innovation.

Hodge replied that she and her colleagues would not allow themselves to be “intimidated by false accusations.”

The NAO has already condemned the funding body for academies for failing to ensure that spending meets Treasury guidelines. It was also critical about “excess severance payments” by academies to ex-staff – without prior Treasury approval.

Morse has also told the Treasury that it should develop what he called “a more robust methodology” for collecting figures on the value of assets owned by academies, such as buildings. He wrote the comments in his audit report, dated Monday last week, to the ‘whole of government accounts’ (WGA) for the financial year to March 2011.

He noted that the number of academies had risen from 203 in March 2010, to 470 a year later, and to 1,660 by March 2012.

He wrote: “Of the 470 academies open as at March 31, 2011, only 275 have been consolidated into the accounts.”

He said that ministers at the DfE and the Treasury decided not to ask 182 academies to submit data because the funding for them was low or they had opened very recently.

The NAO estimates that this resulted in an understatement of gross assets of £2.4 billion.

“In addition, 13 academies asked to submit data for WGA either made no submission or submitted a return of insufficient quality for it to be included in the WGA.” The NAO estimates that this resulted in a further understatement of £200 million.

The Treasury’s WGA names the academy schools that failed to provide any financial data requested:

Dover Christ Church Academy, in Kent;
Enterprise South Liverpool Academy, Liverpool;
Redhill Academy, Nottingham;
Sarum Academy, Salisbury in Wiltshire;
Sir Robert Woodard Academy, Lancing in West Sussex;
Slough Grammar School, Slough in Berkshire;
Taunton Academy, in Somerset;
The Littlehampton Academy, in West Sussex;
The Westlands School (in federation with Woodgrove Primary School), Sittingbourne in Kent;
William Farr CoE Comprehensive School, Lincoln.

Morse also detailed an array of other problems with academies’ accounts. He concluded: “As a result, I have been unable to obtain sufficient and appropriate audit evidence on which to base my opinion on this element of the WGA.

“The value of unaudited data included within WGA from the individual academy returns for the year ended March 31, 2011 is £2.2 billion of income, £1.9 billion of expenditure, assets of £3.5 billion and liabilities of £0.3 billion.”

The Treasury and DfE say that they are making changes to the way that academies submit financial data.

Morse said that he would review the changes in next year’s accounts, but pressed the ministries to do more “to ensure that the assets in the WGA are complete, accurate and auditable.”

He added: “The Treasury and the department should continue to work towards putting into place a sustainable methodology for collecting data from academies that will provide a true and fair view of the financial state of the academy sector that is auditable.”

Meanwhile, the NAO has qualified the entire WGA for the second year running because the auditors again did not believe that the figures represented a true and accurate picture of the nation’s balance sheet.

The NAO welcomed the Treasury’s decision to accept some changes to its assessment of the UK’s net liabilities recommended by the government auditors.

But the auditors, like last year, criticised the accounts for failing to include huge sums of public assets and debt held by Network Rail, the partly-nationalised banks and other bodies.

Update 22 November 2012: The National Audit Office (NAO) today published its report saying that the Department for Education was “unprepared” for the expansion of academy schools in England.

The report says that the department spent £8.3 billion on the academies programme in the two years since April 2010, and £1 billion of this was “additional cost”.

Included in the “additional cost” was £350 million that the department was unable to recover from local authorities to offset against academy funding, said the NAO.

The department was forced to draw on other budgets to stay within its overall spending limit.

The NAO said that 2,309 academies had opened by September. It raised questions over the department’s “light-touch oversight” of financial management and governance in academies.

Amyas Morse, head of the NAO, said: “The Department for Education was not sufficiently prepared for the financial implications of such a rapid expansion, or for the challenge of overseeing and monitoring such a large number of new academies.

“It is too early to conclude on academies’ overall performance, and this is something to which I intend to return in the future. As the programme continues to expand, the department must build on its efforts to reduce costs and tackle accountability concerns if it is to reduce the risks to value-for-money.”

Margaret Hodge, chairwoman of the House of Commons public accounts committee, said: “The department was caught off-guard by the number of schools applying to become academies. But what is more extraordinary is that the department failed to anticipate or plan properly for the impact on its own finances.”

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