Book Look – Part 3 The Other Stuff

The is the third and final post which has looked at three sets of Multi-Academy Trust accounts to see what, if anything, we can learn from them. The first of the posts looked at governance and the second concerned itself with money. In this post I’m going to pick up on any other issues that appear, to me at least, to be interesting.

A very brief recap.

I am looking at these three trusts:

MAT A – Total of six schools (five primary and one secondary according to the 2015 accounts) based in the West Midlands. Now has eleven (eight plus three).

MAT B – Total of eleven schools (seven primary and four secondary) based in the South East. Now has thirteen (six plus seven)

MAT C – Total of eight schools (four primary and four secondary) based in the South East. Now has nine (five plus four).

So even in a fairly short period of time we can see that these MATs are all changing. MATs A and B also state on their websites that they are in the process of having more schools joining in coming school year.

MAT A MAT B MAT C
Number of Schools 6 11 8
Students 2,850 7,400 4,075
Income (CAG) 12,381 41,015 20,805

(for more detail have a look at either of the first two parts)

Having looked at the accounts I think there are two key things that I think bear discussion.

Firstly there is the issue of related party transactions (RPTs).

The DfE defines RPTs as any transaction:-

“…where one party has control or influence over the other, or where the parties are subject to common control. This includes parent companies and their subsidiaries, key management personnel including company directors, their close family members and other entities in which these parties have a controlling interest.”

It is important to note that RPTs are not illegal (though like any transaction they can be). Again, from the DfE:-

Such transactions are permitted under company law, charity law and under the Academies Financial Handbook, provided that open and transparent procurement procedures have been followed, and any potential conflicts of interest are adequately and appropriately managed.”

So, generally speaking, procure properly, be transparent and disclose any such transaction and you will be ok. So lets have a look at what the accounts show us.

MAT A

  • In one of the trusts the Finance Director is brought in as a service from a company in which one of the trustees has an interest. The value of this transaction exceeded £40,000. The accounts state that the charges were made at cost and that it followed a competitive tendering exercise. More about that later.
  • The trust also discloses that a number of its trustees and employees have been asked to become trustees of another trust (presumably prior to some form of merger). This involved the trust purchasing some services on behalf of the other trust, among which was the purchase of FD services in the same way as above. This time the value was £10,000.

MAT B

  • The second trust I looked at listed a number of RPTs. The first was due to the trusts involvement in a local training partnership, which one of the trustees was the chairman of. I’d imagine that you would find many such schools in this position (including the other 25 members of the training partnership).
  • There were two other transactions mentioned. One related to the purchase of £660 (2014: £23,000) worth of premises and maintenance work from a company owned by one of the governors of one of the trusts schools.
  • The second was £1000 (2014: £12,000) for advertising with the main local media company. One of the governors at one of the schools is a shareholder in this company.

MAT C

  • One of the trustees was paid a consultancy fee for the “performance management of the CEO and leadership development”. Which seems a bit strange but in the context of the accounts it was of trivial value.
  • There are a couple of notes about income from what are effectively the PTAs of a couple for the schools – they had been set up as charities themselves.
  • One of the schools pays a peppercorn rent to a charity for the rent of its land – which leaves the question of who owns the land hanging, but given the rent, and the nature of the schools involved seems ok.
  • The final transaction is the purchase of a limited company that appears to have been connected to a couple of the trusts schools, the sole shareholder of which was the schools headteacher. This looks a bit odd on the face of it but I suspect that this is the clearing up of a state of affairs that existed prior to the development of the trust.

So, are there any out and out “dodgy” transactions in there? On the face of it not. Personally I don’t approve of the kind of relationship where the services of such a key person are purchased from a trustee. I wouldn’t sit on a board where that occurred. It does not seem to be a reaction to short term need as it has continued for some time and I am surprised that the EFA haven’t passed comment (well, given the general disarray in the DfE I’m not really, I’m just being polite).

I think this is relevant given the publicity given today to the number of academy trusts that show RPTs in their accounts. These three MATs were picked at random and they all have transactions that would put them into that list. None of these trusts accounts show they have done anything wrong (falling outside of my rather strict probity test doesn’t count as doing wrong). I suspect that were the accounts of any groups of schools, academy or otherwise, they would find similar transactions in similar quantities.

My preference with RPTs is that they should not be permitted in Academies. Given the above transactions this might be difficult and I would be prepared to moderate that outright ban into a bar on recurring transactions. So a one off transaction undertaken in extremis, or to regularise extant arrangements would be permitted. but nothing more.

The second thing the accounts make me think about is the following question, which I have heard a lot recently.

How much education experience, if any, should the CEO of a MAT be required to have?

I know a school is a complex organisation. I know a small MAT is more complex still. Consider a MAT that contains Secondary schools, primary schools, Pupil Referral Units, Special Schools and a nursery of two. Indeed, rather than looking at these three MATs individually, consider what the organisation looks like if you join them together. That’s the size of MATs being envisaged as the norm. And between them, these three MATs contain all those types of educational establishment. This would be 25 schools, over fourteen thousand pupils and over sixteen hundred staff (around eight-hundred of them non-teachers). A total income exceeding £74 million. This is a significant organisation. Remember, there are les than seven thousand organisations in the UK employing more than 250 employees. This organisation would be way up that scale.

I am not convinced that the primary competence required by the person running that organisation is a prior involvement ineducation. Remember, within that organisation there are at least 25 headteachers (or whatever they are going to call them). There is no lack of educational experience to call on. Ask yourself, is it likely that one person would have sufficient knowledge of each of the sectors identified above to lead on them?

Is not the effective and efficient management of 1,600 employees at least as important? What about the operational management of an organisation that will inevitably always have building going on somewhere on its estate? What about getting maximum effect from some £20m of non-staff spend?

I suspect my view on this will put me in a small minority. I am sure that there are people with education experience who are more than capable of running such a set-up, and running it well. I am also sure that there are many people without education experience capable of doing so. Where I probably depart from the wisdom of the crowd is in thinking that there are probably not enough of the former to run all the MATs that will exist in this brave new world. Which means we are going to have a fair number of the latter.

 

That’s it. That’s enough of looking at accounts. I hope it’s been helpful.

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