Recommendation 5

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.