NAO warns of ‘errors and uncertainties’ in academy accounts


The National Audit Office (NAO) has warned of an “inherent set of risks” in the Department for Education’s financial management of academies because it has no direct control over the schools’ spending.

The DfE has been working flat-out to consolidate the spending of 2,823 academies for 2012/13 into its own accounts.

Last week, the government’s spending watchdog signed off the accounts, but issued a qualifying statement citing “a number of errors and uncertainties”.

It warns of the dangers of the DfE being accountable for financial activity over which it has no direct control.

A statement from the NAO said that comptroller and auditor general Amyas Morse had “qualified his opinion on the accounts of the Department for Education and the Education Funding Agency (EFA) on a number of grounds”.

One issue was that academies produce accounts to August 31, while the DfE’s year-end is March 31. As such, the DfE and EFA hypothesised that financial data for the year to the end of August 2012 was a fair approximation for the equivalent to March 31, 2013.

The NAO statement said: “In Mr Morse’s audit of the EFA’s application of the consolidation methodology, he identified a number of errors and uncertainties. He has been unable to aggregate the individual errors because of overlapping causes of misstatement and uncertainty. Mr Morse has concluded that there was a material level of error and uncertainty in the financial statements.

“Academies have a different financial management regime to the Department and the freedom to determine their own spending profiles. Mr Morse considers that this results in an inherent set of risks as the Department is accountable for financial activity over which it has no direct control.”

The NAO also says that it has been unable to get an assurance from the DfE that funds given to academies have been spent in line with Treasury requirements.

The statement adds: “The Department, through the EFA, provides funding to academies for their activities. Mr Morse has been unable to obtain assurance that the funds provided for the period to August 2012 were spent by academies in line with the Treasury’s requirements for managing public money and, as a result, has qualified his opinion on regularity. There is no evidence, however, of widespread or material levels of irregular spending.”

The EFA has implemented a new assurance framework for 2013/14 to address these issues, and the NAO adds that the success of this should “become evident during 2014”.

Elsewhere, the DfE’s accounts assume that all land and buildings being used by academies belong to the schools and therefore are counted as assets – worth £25.1 billion. 

However, the NAO said that this assumption was not backed up by ”robust data”. In reality, buildings and land might be leased or belong to other organisations.

A DfE spokesperson said: “We are pleased that the NAO has signed off these accounts but at the same time we note their comments and are committed to improving the process further.

“Consolidating the accounts of more than 2,800 academies has been an enormous task — the only consolidation comparable in terms of size and complexity is the Whole of Government Accounts.

“This is the first time it has ever been done and it represents a significant step forward in transparency and open government. The public now has real clarity on the size and scale of the academy sector which is so critically important to the delivery of our educational goals.”


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