Recommendation 25

Over 300 PFI schools have been converted to academies. We asked whether local authorities might be incentivised to protect their budgets by limiting expenditure on managing the contract rather than maintaining the assets as they would not own them at 52 C&AG’s Report, para 13, 3.22 53 Q 82; C&AG’s Report, paras 3.26–3.28 54 The ownership of assets at expiry will be dictated by the contract. Assets will either fully or partially transfer to the public sector or remain with the private sector. In most case the authority will inherit the assets on expiry. 55 Qq 55, 63; C&AG’s Report, paras 9, 3.9 18 Managing the expiry of PFI contracts contract expiry. The IPA accepted that this was a very complex issue and a very real risk which needed clarification. It explained that the Department for Education, which had one of the “more resourced and capable PFI teams” was “highly focused” on resolving this issue. In the example of schools, the IPA asserted that there was “every incentive to ensure that the school is in a good condition and well maintained” and that it thought the interests of academies, local authorities and the Department for Education were aligned.56 We asked the IPA whether academies were nonetheless at risk of inheriting liabilities in the form of large rectification bills to bring the assets back to a useable condition should the authority not manage the contract properly. The IPA told us that it did not expect these to be large liabilities.57 56 Q 51–52, 56–57, 64; C&AG’s Report, para 3.9 57 Q 54 Managing the expiry of PFI contracts 19