Source · Select Committees · Public Accounts Committee
Recommendation 2
2
The Department does not fully understand the causes of variability within the financial performance of...
Conclusion
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). 6 Academies Sector Annual Report and Accounts 2019/20 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 2018/19 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.
Government Response
Not Addressed
HM Government
Not Addressed
2: PAC conclusion: 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. 2: PAC recommendation: The Department should systematically investigate, and better disclose within the next Academy Sector Annual Reports and Accounts, the underlying reason 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. 2.1 The government disagrees with the Committee’s recommendation. 26 2.2 The national funding formula, introduced in 2018-19, distributes funding to schools fairly, regardless of geographical location. The formula does not discriminate between maintained schools and academies. The formula is updated annually based on schools’ and pupils’ characteristics. 2.3 The primary responsibility for the financial management of academy schools rests with their academy trust, with a clear framework set out in academy trusts’ Funding Agreements, the Academy Trust Handbook and Academies Accounts Direction. Academy trusts’ accountability is rigorous, with trusts’ audited accounts providing information on the financial health of the trust and individual academy costs. 2.4 The department is not able to introduce significant new analysis into the 2021-22 Academies Sector Annual Report and Accounts (SARA), as its contents are already being finalised. The department has committed to undertake research into the impact of financial pressures on schools, in its response to recommendation 3 of the Committee’s Forty-Second report on the Financial Sustainability of Schools in England. The 2022-23 SARA will include the outcomes of this research. 2.5 The department already has an effective assurance programme for academy trusts: trusts must submit their audited accounts and auditor reports, three-year budget forecasts, information about related party transactions and new trusts financial management and governance self-assessments. 2.6 The department uses this information, along with other local intelligence to monitor academy trusts’ overall financial health. Given the complexity of these factors, this is undertaken on an individual basis. In each case, the department takes a risk-based approach, working with the individual academy trusts to support and intervene proportionately on the rare occasions when needed.