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Report on the EFA and DfE 2012/13 financial statements

Efficiency, transparency and accountability in the education sector

On the 10 June the Public Accounts Committee (PAC) published its report on the Education Funding Agency (EFA) and Department for Education (DfE) 2012 – 2013 financial statements. In summarising the report Margaret Hodge, Chair of the committee suggested that the EFA had not yet “got to grips with effective oversight” of how monies sent to schools in a timely fashion, was being spent and that the EFA needed to do more to address the potential conflicts of interest in academies.

 She commented:

“We were concerned that individuals with connections to both academy trusts and private companies may have benefitted from their position when providing trusts with goods and services. The Agency has reviewed 12 such cases but it is likely that many more exist and have gone unchallenged.”

Although ‘related-party transactions’ are currently permitted by the EFA, the PAC is calling on the EFA to reconsider this policy.  The committee feels that such transactions are always open to accusations of conflicts of interests, even when supposedly on a not-for-profit basis, and this undermines public confidence. 

Wayne Thomas, Education Partner at Bates Weston comments;

“As part of the firm’s audit process Bates Weston has always required the trustees and senior management of our academy clients to complete a Related Parties Questionnaire. The purpose of the questionnaire is to ensure that we understand who the related parties are, the nature of any transactions between them and how such transactions are identified. We are then able to work closely with our clients to ensure that relevant matters are adequately disclosed in the financial statements, and any potential conflicts of interest suitably addressed. We’ve found that the trustees and senior management are very receptive to this approach, as they are naturally keen to be seen to be fully compliant and transparent.”

The PAC goes on to say that the EFA is “too reactive and does not spot risks or intervene in schools quickly enough. It needs more complete, accurate and timely information on academies’ finances and to get much tougher on those who fail to comply with reporting requirements: nearly one in ten academy trusts failed to submit their accounts on time last year.”

The PAC also felt that the Department did not have a process for vetting those appointed as academy trustees or chief executives as being “fit-and-proper persons” to hold such positions of trust.

In fairness the PAC did recognise that the EFA had done well in ensuring timely payment of funds to schools and appreciates the scale of the task it faces in dealing with an expanding workload whilst reducing its costs by 15%.

Wayne concludes:

“It is part of the role of the PAC to be deliberately challenging of matters they perceive as being in the interest of the public purse, and on occasion they have been known to be a little over-zealous in their approach and criticisms. The EFA will undoubtedly respond to this matter and we are therefore likely to see further regulation and guidance in the near future, which should further clarify trustees and senior management’s responsibilities.”