Academies 'lack proper financial controls', MPs warn

The MPs say academies must comply with basic standards of governance and financial management

Many of England's academies do not have adequate controls to ensure public money is spent properly, MPs have said.

The Public Accounts Committee report said the mechanisms to check that the schools' finances are in order are "permissive" and "not fit for purpose".

It says expanding the number of academies increases the risk of public funds being used improperly.

The government said the PAC recognised the success of academies, which operate outside local authority control.

The PAC report says the Department for Education (DfE) and the Young People's Learning Agency have not been "sufficiently rigorous" in requiring academies to comply with financial guidelines.

The report says: "We have serious concerns that the processes for the monitoring of academies' financial position and performance, which the agency inherited from the department, are not fit for purpose."

It says there must be greater clarity about what is required as opposed to what is recommended.

"Too much in the current framework is permissive, and there is insufficient mandated practice to prevent individual academies adopting practices which do not comply with basic standards of good financial management and governance.

The PAC says it should be compulsory for all academies "to comply with basic standards of governance and financial management".

The report follows a National Audit Office analysis published in September which warned that the rapid expansion of academies risked being poor value for money.

Sponsorship

Academies are often backed by external sponsors, such as companies, charities and faith groups.

But the PAC report warns that some academies have been left out of pocket after sponsors failed to make the financial contributions they originally pledged.

The report said the DfE had struggled to enforce payment of debts as the rules on academy sponsorship had changed.

Many of these sponsored academies were established to boost standards at under-performing schools in disadvantaged areas under Tony Blair's Labour government.

Initially, sponsors hoping to set up an academy had to pay 10% of capital costs, up to £2m.

This was later changed and the sponsor was required to create an endowment fund, the interest from which would provide income for the academy.

There is now no requirement for new sponsors to contribute financially.

The coalition government later invited schools classed as outstanding by the education watchdog Ofsted to apply to convert to academies.

Chair of the PAC, Margaret Hodge, said: "Having two distinct strands to the programme - the sponsored academies aiming to raise educational standards in deprived areas, and the new converter academies created from schools already performing well academically - increases the department's challenge of ensuring sound management and accountability.

"It should make clear for each type of academy how success will be measured, how academies will be held to account for their performance and who will intervene, and in what circumstances, if things start to go wrong."

A spokesman for the DfE said the government recognised the issues that the PAC report had raised.

"This is one of the reasons that we announced the creation of the Education Funding Agency (EFA) in the White Paper published in November last year," he said.

"The EFA will be dedicated to managing the flow of funding and overseeing the proper use of public funds in academies in a suitably light-touch way.

"In the meantime, the Young People's Learning Agency is revising and developing academies' financial control frameworks."