22.12.16
DfE accounts lack ‘truth and fairness’, says auditor general
The comptroller and auditor general has criticised the accuracy and fairness of the Department for Education’s (DfE’s) group financial statements, because of irregularities in how the department monitors academy finances.
Sir Amyas Morse issued the judgement on the 2015-16 finances, marking three consecutive years of adverse opinions. The DfE is required to produce its financial statements by 31 March, but academy trusts produce theirs by 31 August, despite regulations stating that different groups must release their statements within three months of each other.
The National Audit Office (NAO) found that while there were no material inaccuracies in the financial statements issued, there were “material and pervasive levels of error and uncertainty” in how they were collected.
The DfE used financial statements for 2,910 academy trusts from the end of last August, making adjustments where necessary, on the assumption that they do not materially change between March and August.
The NAO warned that this did not deliver “a true and fair view” of the DfE’s financial performance, or hold it accountable to Parliament.
To address the NAO’s concerns, the DfE has now proposed establishing the Academy Sector Annual Report and Accounts (SARA), which will provide separate financial statements for academies. The first one was due to be published in June.
However, Sir Amyas said the department had “many challenges to overcome” to achieve this. In particular, it would need to ensure that it sets a realistic timetable for delivering these changes. The DfE’s last set of accounts were delayed from November 2015 to April 2016.
Sir Amyas also recommended that the DfE assess the impact of other problems with its accounts, such as those around academy land and buildings. The DfE was not able to prove that its information on the value of academy land and buildings is accurate. It includes all land and buildings used by academies in its estimate of their value, regardless of whether they are owned by another entity, which may not comply with accounting standards.
The auditor urged the DfE to make “significant improvements” to its forecasts and management information, delivering better in-year monitoring of its spending, and develop its proposals to incorporate academy accounts into Whole of Government Accounts.
A DfE spokesperson insisted that the accountability system for academies was “tougher and more transparent than maintained schools”, but added that there were problems because the consolidation of accounts for academies was “one of the largest and most complex procedures of its kind”.
The previous education secretary, Nicky Morgan, promoted a significant rise in the number of academies. Councils fiercely opposed the plans, warning that a lack of local government oversight could harm academies’ financial accountability and performance.
In response to the criticisms, Morgan backed down from plans to convert every school in England into an academy, replacing it with an Education for All Bill aimed at forcing under-performing schools to convert. However, her successor, Justine Greening, has indicated that the legislation will not be brought forward.
Separately, Sir Amyas issued a qualified opinion on the regularity of the DfE accounts because they had breached two Parliamentary controls.
It overspent the Capital Departmental Expenditure Limit of £4.9bn by £115.9m, and overspent the Resource Annually Managed Expenditure Limit of £1.2bn by £175.1m.
However, the auditor did note that the DfE had made “significant improvements” in reducing errors in its accounts for urgent schools repairs. He urged the department to improve further by tackling outstanding issues, including not re-evaluating assets when they were brought into use.
A recent NAO report found that the DfE is failing to provide schools with sufficient support in making £3bn of efficiency savings.
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