Rapid Expansion Leads To Unforeseen Financial Implications

According to the Head of the National Audit Office, Amyas Morse, the Department for Education (DfE) was not sufficiently prepared for the financial implications of the rapid expansion of academies since May 2012, nor for the challenge of overseeing and monitoring such a large number of them.

Despite the significant achievement of delivering a ten-fold increase in the number of academies since that date, the department has had to meet an estimated £1bn in additional costs and yet remain within its overall spending limits.

The DfE spent a total of £8.3bn on the Academies Programme between April 2010 and March this year and the Audit Office estimates that some £350m of this was money the department was not able to be recovered from local authorities.

The additional cost of the programme has increased annually as it has expanded, although the department reduced its average additional cost per open academy, excluding transition costs, by 53 percent in the last two years. It forecasts that this additional cost per academy will continue to reduce in future.

However, the rapid increase in the cost of the programme has led to ongoing pressures on the department’s wider financial position. It has had to transfer funding from other budgets to stay within its overall spending limits while maintaining the pace of the expansion.

To date, there have only been a small number of investigations into financial mismanagement and governance failure in academies. However, the Audit Office warns that financial mismanagement in any school is a real cause for concern, and such failures in academy schools create the risk of wider reputational damage to the programme.

Therefore, the Audit Office suggests that the DfE should weigh this risk carefully in operating a light-touch regime in its treatment of financial and governance matters in academies.

As an accountant, Gill Freeman specialises within academy finances and charity tax.

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