£Tens of millions “propping up poorly managed academy schools” with potentially excessive levels of pay

PAC reports concerns on emerging two-tier school system with some “orphaned” while others “too big to fail”

Around 43% of state-funded schools now operate as academies, educating over half of pupils in England across over 2,700 academy trusts, and the Department for Education (DfE) aims for all state-funded schools to become part of a family of academy trusts. 

But in a report today the Public Accounts Committee says a lack of transparency in local academy financial information is harming parents’ ability to hold their local academy leaders and the DfE to account, for the services they provide to pupils or for their use of public funds.

The PAC says DfE doesn’t have “a handle on excessive pay within the sector” – with the number of trusts paying at least one individual in excess of £100,000 rising from 1,875 in 2019/20 to 2,245 in 2019/20 – and that the “Education & Skills Funding Agency’s decision to use public money to prop up academy trusts in difficulty … fails to address poor financial management within academy trusts.”

DfE gave an additional £31 million of financial support to 81 academy trusts in 2019/20, of which £21 million was provided as non-repayable funding. £10 million of debts held by academy trusts was written off in 2020-21, including £5 million for a single trust. The Committee is concerned about the “risk that a trust becomes too big to fail and could therefore see large sums of public funds pumped into it to keep it afloat”, while other less ‘attractive’ schools – financially struggling schools, small secular primary schools, schools in a rural area – become “orphaned”.

There are also concerns over the condition of the school estate, particularly whether pupils have access to facilities that support learning, and the continuing threat to the health of pupils from asbestos in school buildings – a significant and potentially dangerous problem in many schools. £11.4 billion is required for essential remedial work across all schools but DfE made £5.6 billion of capital funding available for the education sector in 2021/22, with only £1.8 billion specifically for maintaining and improving the condition of school buildings. Ofsted has downgraded schools based on inadequate facilities, and “there is a risk that schools are not receiving sufficient capital funding to invest in facilities that enhance educational outcomes”.

Dame Meg Hillier MP, Chair of the Public Accounts Committee, said:

“Parents deserve a lot more visibility and clarity over exactly what is being provided to their children, in what facilities, for the vast amounts of public money pumped into the school system. Parents and pupils have legitimate questions over the levels of pay at their schools, the conditions and facilities they’re learning in, and while mysterious millions disappear into the coffers of favoured trusts, the Department has committed only a fraction of what is required to address potential dangers to our young people from schools in poor condition including those where there is risk from asbestos. 

“This unacceptable lack of transparency and accountability to parents and taxpayers must be resolved before the DfE presses ahead with plans to consolidate all of our schools into academy trust groups. The school system at least must give our children a strong start, on a level playing field that may be lacking in so many other parts of their lives.”

PAC report conclusions and recommendations

7. The Department for Education has not yet set out how it will deliver its ambition to establish a fully academised school sector that best supports pupils.

Despite reconfirming its commitment to full academisation, the Department cannot yet tell us how this will be achieved for all schools across all regions. We remain particularly concerned over the risk that schools that may be less attractive to existing or new academy trusts could become orphaned schools, for example financially struggling schools, small secular primary schools, schools in a rural area, or a school with any combination of these characteristics. The Department needs to take geographical considerations into account when trusts take on new schools. There is currently regional variation in the take up of academisation and there can be a wide geographical spread across multi-academy trusts. Further work is required by the Department to ensure its plans for full academisation provide choice to parents, for example over different types of trusts, and access to learning opportunities to all pupils across all regions and social groups. The Department asserts that the Schools White Paper will set out further details about the government’s plans for academisation. However, there is a risk that this will not provide enough detail of how academisation will look on a practical level for pupils and schools. Academies are not new, nor is the Department’s push towards full academisation, so it is surprising that a detailed plan for achieving the government’s ambition has not yet been published.  

Recommendation: When the Department publishes its Schools White Paper it should be clear about its plan for full academisation. This plan should clearly set out the Department’s overall timetable, milestones and measures of success for academisation, and how the Department will: 

• Ensure academisation achieves the intended outcomes for all pupils across all regions; 
• Have a plan to support schools that may be less attractive to sponsors; and 
• Ensure clear and effective due diligence prior to a maintained school converting to an academy, that takes into account geographical variations and access to learning provision.   

8. The Department does not fully understand the causes of variability within the financial performance of academy schools, and consequently may not know how to best protect the education for pupils taught in financially struggling academies.

There can be a disconnect between data on the overall financial health of schools and the experience of pupils, parents and staff on the frontline. The SARA reports an improving financial position across the sector as a whole, with the percentage of academy trusts reporting a deficit falling from 7% of academy trusts in 2018/19 to 4% in 2019/20. However, the Department does not yet appear to have a comprehensive picture of how the COVID-19 pandemic has affected academy finances, nor the variability of impact. We are also concerned about the regional disparity in financial performance, with academy trusts in the North of England reporting a far higher proportion of deficits (8% of academy trusts) compared with other regions such as South East England & South London (2% of academy trusts). Finally, the Department does not yet have a sufficient handle on excessive pay within the sector, and therefore cannot assess whether public funds are being well spent in this area. The number of trusts paying at least one individual in excess of £100,000 is rising, from 1,875 in 2019/20 to 2,245 in 2019/20, with the Department’s review on pay yet to be published.  

Recommendation: The Department should systematically investigate, and better disclose within the next Academy Sector Annual Report & Accounts, the underlying reasons for the variation in the financial health of academies. 

It should, within six months, write to us to explain how it will improve its understanding of the variation in the financial health of academy schools and determine whether further interventions are required to support the financial sustainability of academy schools.   

9. The Department still does not understand well enough the condition of the school estate, meaning it does not know whether pupils have access to the learning facilities they need.

Some academy trusts are building large reserves, and these may be invested in capital projects. However, as we have previously reported, the Department does not have information on whether trusts have earmarked reserves for particular projects and therefore cannot effectively challenge academy trusts on the build-up or planned use of excessive reserves. The Department does not systematically collect comprehensive data on the capital investments held by academy trusts which are specifically aimed at improving children’s learning outcomes. It therefore does not routinely monitor how much schools have been able, or plan, to spend on capital projects of this nature, for example IT provision, science and technology labs, and arts facilities. The latest condition data collected by the Department estimates that £11.4 billion is required for essential remedial work across all schools. The Department has made available £5.6 billion of capital funding for the education sector in 2021/22, of which £1.8 billion is specifically for maintaining and improving the condition of school buildings. There is a risk that schools are not receiving sufficient capital funding to invest in facilities that enhance educational outcomes. Ofsted have reported instances where it has downgraded schools based on inadequate facilities. However, the Department may not know where to target funding to improve school facilities because it does have a sufficient understanding of where the gaps are.  

Recommendation: The Department should, within the next year, collect and publish data on pupils’ access to learning facilities, and the condition of such amenities, for example IT provision, science and technology labs, and arts facilities. and associated equipment. The Department should report how much capital investment is required to provide all pupils with access to such core facilities. 

10.We continue to be concerned about the Department’s understanding of asbestos within the school estate.

Asbestos is a significant, and potentially dangerous, problem in many schools. We have previously found that the Department did not have a complete picture of asbestos in school buildings, or enough information to ensure that the risks were being properly managed. The Department has developed its understanding of how well asbestos is managed in schools through its asbestos management assurance process launched in March 2018 but appears unconcerned that the 7% of schools yet to return their asbestos survey could be the worst affected schools without the budget to resolve this. The Department asserts that those schools yet to respond to the asbestos management survey would be picked up in the school condition survey. However, it has still not earmarked specific funding for asbestos management, or determined whether this is a barrier to schools engaging with the Department on asbestos risks.  

Recommendation: The Department should urgently chase the remaining 7% of schools who are yet to respond to the asbestos management survey. The Department should write to the Committee within six months setting out its full understanding of asbestos across the estate, detailing the asbestos risk arising from the non-responders, along with its plans to manage the asbestos risk in schools.  

11. We are concerned that the Education & Skills Funding Agency’s decision to use public money to prop up academy trusts in difficulty fails to address poor financial management within academy trusts.

Academy trusts have been set up as charitable companies, with more freedoms and responsibilities than maintained schools, including being responsible for managing their own finances. There is a tension between this autonomy and the oversight role by the centre via the Education & Skills Funding Agency which is required to provide assurance to the Department who hold ultimate responsibility for the delivery of education in England. The Department provided additional financial support of £31 million to 81 academy trusts in 2019/20 to support financial recovery, build capacity, facilitate a transfer of academy schools triggered by financial or educational factors, or as a short-term advance. Of this, £21 million has been provided as non-repayable funding. The Education & Skills Funding Agency has reported that £10 million of debts held by academy trusts have been written off in 2020-21, including £5 million for one trust. We are concerned that there is a risk that a trust becomes too big to fail and could therefore see large sums of public funds being pumped into it to keep it afloat.   

Recommendation: The Education & Skills Funding Agency should, within the Treasury Minute response, set out the criteria it uses to determine whether it is appropriate to provide additional funding to academy trusts to support financial recovery, or to write-off an academy’s debt. 

12. We are concerned that the Department’s approach to monitoring the skills and experience of academy leaders, and the lack of remedial action for leaders of failing academies, risks further failures across the sector.

The Education & Skills Funding Agency’s monitoring and intervention activities are designed to consider the effectiveness of governance arrangements within academy trusts. However, there is no requirement for trustees to hold financial qualifications, even where these individuals sit on a trust’s finance or audit committee. The number of instances where the independent auditor found some element of income or expenditure may have been incurred outside permitted use, or instances where the trust’s internal procedures have not been complied with, has risen to 9% of trusts in 2019/20, in part driven by the impact of the pandemic on the internal controls of academies and their spending. The Secretary of State has used its? her powers under Section 128 of the Education and Skills Act 2008 against 10 individuals, suggesting quite a high threshold for debarring directors of academy trusts. There is a risk that the powers available to the Department do not go far enough to prevent leaders of failing academy trusts from moving elsewhere within the education system. We remain concerned that the Department does not have a sufficiently joined up approach to dealing with misconduct, monitoring the potential re-deployment of leaders of failing academies within the education sector, or capturing insights from poor performance across the sector.  

Recommendation: The Department should write to the Committee within 6 months detailing how it will better identify and address cases of failed leadership within academies. This should include how it will ensure the necessary lessons are learned to avoid similar incidents from occurring in future elsewhere in the sector.