Schools and academies – concerned about continuing to pay suppliers during COVID-19?

Published by Phil Reynolds on 5 May 2020

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It has now been a few weeks since the Government updated their guidance regarding the payment of suppliers during the lockdown.

Since the guidance was released, we have heard from schools about their concerns regarding some suppliers potentially taking advantage of schools during the lockdown. This has included rumours of suppliers placing staff onto the Coronavirus Job Retention Scheme but still requesting payment from schools which is effectively a double-relief being claimed. Quite rightly, schools have been left concerned by these rumours and as the ‘gatekeepers’ to public money have been unsure on where they stand in this regard or how to act.

Firstly, schools and academies should be clear that the Procurement Public Notice (PPN) is guidance only and this is not an explicit instruction to continue to pay suppliers – especially if there are any doubts concerning their integrity. Schools and academies should make payments at their discretion and not feel pressurised into continuing to make payments.

For academy trusts, the Accounting Officer must be satisfied that value for money is being achieved. If they doubt this then payments should not be made – if they are then this could represent a novel and contentious transaction which would represent a breach of the Academies Financial Handbook.

Secondly, schools and academies should look to obtain written confirmation from suppliers that they are not benefiting from any other government schemes. This may prove useful should it be required in the future.

Thirdly, if suppliers are already benefiting from other Government schemes then this would constitute a fraud and therefore the school/academy should consider their own whistle blowing policy and consider reporting their suspicions to HMRC and the ESFA. The ESFA will no doubt be concerned by these rumours and alerting them to any potential fraud is a good way of helping protect not just your school/academy but the whole sector.

Academy Trusts should be aware of the rules regarding fraud in the Academies Financial Handbook. This specifically states that any fraud above £5,000 (individually or cumulatively) must be reported to the ESFA. If there is any unusual or systematic fraud, regardless of value, this must also be reported.

Remember that suppliers should be talking with you on an ‘open book basis’ and if they are not then that should immediately raise suspicions. They are not to profit during this period and therefore only their costs should be covered where payments are continuing. Payments in advance of need are capped at 25% of the value of the contract and can only apply until the end of June 2020. You should carefully consider your catering contracts (and others) on this basis due to lower values during school holidays distorting the annual contract value.

Finally, utilise the PPN model interim payment terms document. This will help protect you and will hopefully ensure suppliers do not look for double-relief during these times of hardship. We would also recommend maintaining a folder with all decisions made documented regarding suppliers during this period. This should be retained for any audit or ESFA investigation should it be necessary and will save unnecessary time in digging out various correspondence at a later date.

Please do be vigilant and sceptical of fraud. Ask those challenging questions of your suppliers. You are the gatekeepers to tax payers money and therefore you should make informed decisions from the information provided by your suppliers.

If you would like to discuss any of the topics explored in this article, contact Phil Reynolds.

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