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More financial auditing of free schools required – PAC

The financial management of some free schools is ‘not up to scratch’ and overly reliant on whistleblowers when problems should have been identified through their own audit and review processes, a new report from the Public Accounts Committee (PAC) has stated. 

Currently there are 174 free schools in England, which operate independently of local authorities and have freedoms over their curriculum, school day and term time, staffing, and budgets. A further 116 have been approved to open from this September. 

However, PAC stated that the Department for Education (DfE) and the Education Funding Agency (Agency) have set up a “light-touch” governance model, which requires high levels of compliance by schools, yet fewer than half of free schools submitted their required financial returns for 2011-12 to the Agency on time. 

Recent high profile failures in governance and poor financial stewardship at a few free schools, such as Al-Madinah School, Discovery New School and Kings Science Academy, have highlighted that oversight arrangements for free schools are not yet working effectively to ensure that public money is used properly, added the MPs. 

Margaret Hodge, PAC chairwoman, said: “The Department and Agency have set up an approach to oversight which emphasises schools’ autonomy, but standards of financial management and governance in some free schools are clearly not up to scratch.” 

On top of improving the auditing and accountability of free schools, PAC has recommended that the DfE should also be more open about the reasons for making decisions in favour of opening free schools. 

“It was unable to give us a consistent explanation of how its decision-making process leads to certain applications’ approval and others’ rejection, and how this represents value for money,” said Hodge. 

The report was also concerned about the free schools programme's “escalating capital costs”, with the government having budgeted to spend £1.5bn to March 2015. 

The PAC added that the most recent round of approved free schools had a greater proportion of more expensive types, such as secondaries, special and alternative provision, located in more expensive regions such as London, the South East and South West. They warned, though, that if this mix of approved free schools continues, there is a risk of costs exceeding available funding, especially as the DfE’ “cost estimates when approving individual schools have so far proved to be inaccurate”. 

The report also urges tighter cost management, particularly with regard to buying land for school sites. It says applications to set up free schools are not emerging from areas with the greatest forecast need and calls on the government to set out "how and by when it will encourage applications" from these areas. 

But a DfE spokesman said free schools were subject to greater scrutiny than council-run schools. “The financial accountability systems in places for free schools are more rigorous than those for maintained schools. They enable swift resolution if there are any issues of financial impropriety.” 

However, Christine Blower, general secretary of the National Union of Teachers, commented: “It is extraordinary that, as the report makes clear, the DfE has set no limit on how much it is willing to spend on free school premises.” 

In defence of free schools, Natalie Evans, director of the New Schools Network, which promotes the creation of free schools, said: “It is simply untrue to say that free schools are not being set up in areas where new places are needed. This September, 90% of new free schools are opening in areas where there is a predicted shortage of places, and in London this rises to 100%.” 

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