Profits before pupils: the lessons learnt
The BBC’s screening of Panorama’s investigation into Bright Tribe Trust has again caused many to question the academies regime and the lack of scrutiny. For those that missed it, the programme accused the Trust of making false claims for government grants intended for various capital projects and either not completing the projects or starting them.
However once we look past the emotional side of the concerns raised by the investigation there are some key lessons that many Academy Trusts and Boards of Trustees can learn from.
Condition Improvement Fund (CIF) monitoring
One of the biggest issues raised during the programme was the use of CIF funds that had been received by the Trust. Claims were made that many of the grants received by the Trust for certain projects had not been spent in full or indeed at all. Therefore it is important Trust’s remind themselves of some of the requirements when receiving a CIF grant.
Project monitoring is key and the ESFA guidelines for such grants states that project monitoring returns are required to be submitted to the ESFA on a regular basis. Failure to do so can result in payments being delayed. In addition, both the Accounting Officer and Trust Board should be kept up to date with progress.
Once the project is complete another form must also be provided to the ESFA stating the final total cost of the project. This completion form must be signed off by the Accounting Officer and in the case where projects are more than £500,000 in value, must be accompanied by an architect or contractor’s certificate of completion.
If the actual cost of the project is below the grant received then the ESFA must be informed and a decision will be made with regards to the unspent monies. More often that not, the ESFA will allow the Trust to retain the money (provided it is not a significant sum of course!).
Where the scope of a project changes the ESFA must also be notified as mentioned in my recent article Avoiding Condition Improvement Fund clawbacks.
Capital funding cannot be used as revenue funding
Throughout the programme there were many references to the fact that the unspent CIF monies should have been spent on the education of pupils in the Trust.
Whilst improving the buildings and facilities will help improve the quality of education and safety of the pupils, the unspent CIF money cannot be used to fund additional teaching assistants for example.
Trusts should be clear that monies received for capital projects are only to be spent in line with the purposes intended. As mentioned above, if unspent, then CIF monies could be clawed back by the ESFA, and therefore not used as revenue funding. Alternatively, they could remain with the Trust but as capital funds only.
Of course all of the above issues appear to have arisen due to presence of a related party. Therefore it is easy for many to assume that related party transactions are “bad” and do not represent value for money. But there are many transactions taking place in the sector that are indeed for the benefit of pupils and it appears a shame to tarnish the majority with the same brush.
The programme does however highlight the need for Trust’s to be clear on what business interests exist across the Trust and these are open and transparent. This is one of the many reasons why Trusts should be open and transparent about these types of relationships – to protect themselves from any wrong-doing and show there is nothing to hide.
Trusts should also be aware that from 1 September 2018 more robust rules were introduced in the Academies Financial Handbook (AFH) in respect of related parties. These stated that ESFA approval is required for any contracts worth more than £20,000 per annum. Further details can be found in our article which covered the key changes in the AFH here.
Access to finances by the local governing body
One of the local governing body chairs highlighted the fact that they had not been given access to any financial information of the school in the past 3 years.
The key to this is the Trust’s Scheme of Delegation document as this will detail what remit each local governing body within a Multi-Academy Trust (MAT) has to undertake. The remit will vary from MAT to MAT.
More often that not, this will not include a review of the financial position of the school and will solely be about reviewing and monitoring the curriculum and school improvement. The review of finances is more likely to rest with a separate Finance Committee, which will be a sub-committee of the Trust Board. As such, no financial information is required to be seen by the local governing body.
Therefore it is important that local governing bodies are aware of the Scheme of Delegation and their respective role.
Authorisation of invoices
Finally, the programme revealed numerous invoices for works allegedly completed that had been authorised for payment by the Trust. If the works were indeed not completed (as alleged), then this would appear to represent a breakdown in internal controls within the Trust.
Trusts should be clearly following their financial procedures manual and ensure there is a segregation of duties when it comes to the authorisation of invoices for payment, particularly when the sums are significant.
In respect of capital works then Trusts may wish to consider implementing additional procedures to ensure that works have been performed and completed to a satisfactory standard before invoices are settled. For example, should the Board of Trustees authorise payment?
Whilst it is easy to be caught up in the emotion of the programme (and we are not commenting upon the allegations here), all of us want a better future for children in education. Therefore it is important to step back and look at what the underlying issues are and how they arose. It is also worth remembering that the majority of Academy Trusts around the UK operate well.
No-one likes to hear of such allegations but these unfortunately do always present an ideal time for Trusts to reflect on their policies and procedures and undertake a “spring clean” to avoid such issues arising again in the future and impacting upon their own reputation.
Make sure you download your complimentary copy of Kreston’s Academies Benchmark Report 2019 here: http://eepurl.com/ge8wvr
This year the report includes over 350 Trusts representing nearly 1000 schools and is based on those Academies that prepared financial statements for the period ended 31 August 2018 and which were audited by member firms of Kreston UK.
Related news and insights
Subscribe to our newsletters
Our complimentary newsletters and event invitations are designed to provide you with regular updates, insight and guidance.
You can unsubscribe from our email communications at any time by emailing email@example.com or by clicking the 'unsubscribe' link found on all our email newsletters and event invitations.