There’s something weird and it don’t look good

There have been many reports about related party transactions, expenses and high pay in academy chains in recent days. There are lots of reasons this is happening but the best way to help stop it is to get the regulatory framework right.

The academies financial framework was lashed together from the companies act, the charities regulations and common law (in the form of the Funding Agreements), supplemented by the Academies Financial Handbook (the theoretical bible). The problem with the AFH is that it is too fond of the “should” and not liberal enough with the “must”. It expends too many words on “best practice” and not on enough on “this is how you will do it”.

The overall approach also errs towards the Companies Act too much – the Companies Act is the legal framework primarily for private capital. Academy Trusts are custodians of public funds. The rules they operate under need to be different. And they can easily be. All that needs to happen is to beef up the language in the AFH. This is tied to the funding agreement. On page 1 the AFH states – “Compliance with the handbook is a requirement in trusts’ funding agreements with the Secretary of State.” You don’t follow the AFH, you don’t get the money. End of.

Last night I tweeted a few suggestions about changes around related party transactions and expenses. They are first thoughts.

 

These are a quick starter for ten. I have written more about some of the regulation changes I would like to see previously, here. The point here is not that these are the only (or necessarily the best) changes. The point is that changes are easy to implement.

It is not beyond the collective wit of all involved to arrive at a sensible set of regulations that provides both financial freedom for Trusts to operate and to guarantee financial probity. But this can only happen if those writing the regulations actually want it to happen and frankly I am starting to lose confidence that this is really the case. Or it may simply be that they lack either the capacity or the capability to do this. Again, my confidence level on this is low. The recently inculcated anti-expert bias in the department and the bunker mentality that appears to have developed is not helpful in this context.

They need to move fast on this. They will no doubt be hammered again soon with another round of academy accounts to be made public soon. They need to find a way to get out in front of that with a new set of regulations for the coming year.

If they need any help, who they gonna call?

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5 thoughts on “There’s something weird and it don’t look good

  1. I can’t help feeling that the messages from DfE about autonomy, freedoms and so on have something to do with this. Ministers and civil servants give the impression that academies can do what they like and the messages don’t carry enough of a reminder that it is still public money which is supposed to be spent in ways that secure a better education for the children.

    There’s also an issue about the government’s complacency that they can run thousands of schools from Whitehall. When you delegate too much power without insisting on responsibilities being taken seriously, and don’t put robust accountability processes in place, there will always be people ready to take advantage for their own benefit.

    These so-called leaders need to take a good look at the Nolan principles. But then again they probably don’t think of it as public service, thanks to the government mantra of private sector good, public sector bad. Sorry if this sounds political, but I get angry at the way pupils are being robbed by people with no morals.

    1. Two things.
      Firstly I think that in many cases it is the additional accountability that preparing accounts each years bring which is making some of this more visible.

      Secondly, as I’ve written, this needs to be made stronger in relation to particular areas that have always been an issue in academies and maintained schools – that of related party transactions.

  2. I don’t have any major issue with trustees / trustees’ company involved in openly bidding for any work at the school as long as there is transparency on all areas and it is handled ethically. Otherwise we risk some very good people not getting involved. In the same way that Governors declare pecuniary interests, recluse themselves when needed, etc.

    Yes, I *know* it is open to abuse but to close it out completely could be detrimental.

    It all depends on how much we trust the folk at the top of Academy chains, I suppose …. which isn’t very much right now.

    1. Longer term all things may be possible.

      At the moment, as you acknowledge, the level of trust is low and will only get lower in the short term. Some of this will be because of genuinely bad things happening, others due to misinterpretation (wilful or otherwise) of reasonable transactions. I would argue that at the moment the most important thing, in a time of massive change, is to ensure that trust in the system is maintained. We can’t do that under the current rules.

      In my view, the damage done by a dodgy transaction outweighs the value of a trustee being allowed to bids for work from their own trust. With the system in such a state of flux that cannot be allowed to continue. And I doubt, where such quantities of public money are involved if it ever should.

      In many respects the key to this is transparency. Were such transactions have to be reported openly, immediately in detail on the trust websites I suspect that many of them would cease to occur. Which would tell us much about what people think of their probity.

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