The majority of the concerns raised by the National Audit Office (NAO) about the consolidated accounts relate to the methodology and assumptions used by the Education Funding Agency (EFA).
At the lower level of the academies and their service providers, the area of immediate interest could be regularity (spending money for the purposes intended by Parliament).
At the lower level of the academies and their service providers, the area of immediate interest could be regularity (spending money for the purposes intended by Parliament).
The point of interest for NAO is that 15 of these 21 sets of accounts were highlighted by just one audit firm.
It appears that the NAO is unsure what to make of this concentration of incidents: whether the individual accounting firm had a different interpretation of the rules; whether it was more diligent than its peers; or just happened to have a population of clients that made more of these payments.
One possibility is that new auditors are not yet looking beyond the traditional private sector requirements of truth and fairness to include the public sector's added need for regularity - that money has been spent in the right way.
The NAO also looked at how problematic these payments might be. As far as I can tell the EFA found that, within these 21 sets of accounts there were 37 non-contractual severance payments.
If all 37 of these had been approved by the EFA (and also by the Treasury) it would make this issue academic. But of the 37 instances - with a value of £640,354 - the EFA identified two irregular extra-contractual severence payments worth £99,550.
This shows that just over 5 per cent (37/2) of payments are irregular but 15 per cent (£99,000/£640,354) in terms of value.
The read across is that there is a possibility that there could be more unauthorised payments and they could be quite large - but, as the NAO says: 'There is no evidence of widespread or material levels of irregular spend.'
Otherwise the headline comments of Amyas Morse, head of the National Audit Office, 16 January 2014 focus on the problems faced by the EFA itself and the guidelines: 'The consolidation of academy accounts was always going to be a complex and challenging task. It has demonstrated, however, key and continuing risks to the Department’s ability to exercise strategic financial management of the academy sector and to the sustainability of the Department’s current approach.'
The NAO summary said: '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.'
On land and buildings it said: 'The EFA has made an assumption that all land and buildings used by academies should be capitalized within the Department’s group balance sheet which recognizes their value as £25.1 billion. The EFA does not, however, have robust data to demonstrate that this assumption is appropriate. It may not comply with the Treasury’s reporting manual: for example, where academy buildings are occupied on a short-term basis.'
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