Academy schools asset-stripped of millions before being ditched by the their sponsor

It predates Pickles but it doesn't really matter. I am not in any way denigrating auditors. Most of them seem to do a good job. However, a competent fraudster is able to hide their tracks well enough to evade detection by auditors.

The statistics show that fraudsters are most commonly caught following tip offs from employees, accounting for over 40% of detections. That has been the case for at least 15 years, probably much longer. Similarly, the percentage of fraudsters caught by external audit has hovered at around 3-4% for a long time in both public and private sectors.

prh
The answer to your last question is
Eric Pickles
I wish I was joking, but sadly his rushed ill thought out abolition of the Audit commission brought VFM and controls testing work at a local level to a shuddering halt in 2010.
I suspect that the current growing level of governance failings will allow the remit of the replacement body to be widened.
Certainly that is the 'vibe' coming out of the auditor chat groups.

Don't forget that a Companies Act audit does not in fact set out to detect fraud

So why aren't public sector auditors doing a better job than private sector ones of detecting fraud?

Before everybody gets too carried away, I think that it is necessary for a proper examination of this Trusts accounts to be carried out to establish exactly what has gone on.
Clearly if the trust Board and senior executives have blown through all their funding and the funding got from constituent schools in the Trust then something has gone very wrong and needs to be made public.
As PRH says there has always been issues over finances in schools and trusted staff, including plenty of head teachers, found guilty of theft. It just seem that there is "extra" publicity if it involves and academy.

LaLa - if you have concerns about an academy you can report them to your Regional Schools Commissioner

I repeat, detection rates in the public sector appear to be much the same as they are in the private sector.
Don't forget that a Companies Act audit does not in fact set out to detect fraud. Its in the engagement letters - the joy of the 'expectation gap'.

That is appalling, how can people be so awful? :(

There are dodgy auditors, although most of the auditors I know would have no hesitation in barking if they find any signs of fraud. But nonetheless, dodgy auditors is not the reason external auditors don't detect fraud. I repeat, detection rates in the public sector appear to be much the same as they are in the private sector. And most fraud happens at a lower level in the organisation than the executive officers.

Lala
are they at Companies House or the Charities Commission?
Remember the publication deadline is ten months after the year end.

By the way, the auditors for a charity are appointed by the members of the charity, not the staff
And back in the real world
the quotes for the audit work will almost always be obtained by the executive officers
and the trustees will accept the recommendation of the officers
and dodgy officers hire the dog that doesn't bark.

In my sector I'm known as an akita - I am only hired by organisations who know they have nothing to hide.
The person I put in prison for fraud found that out the hard way.

External audits, my nearest MAT doesn't even have an up to date financial statement on its website. Legal requirement, but who is checking? Compliant websites are part of OFSTED inspections in schools....oh but wait, newly 'converted' schools have 3 years before their first inspection....

Because Academies pick their own auditors and fire the ones who bark

No, because external auditors are poor at detecting fraud. That applies for external auditors in the public sector as well. External auditors are not good at detecting fraud. Not suggesting that auditors are rubbish or audits are pointless, but the evidence is that fraudsters are generally competent enough to hide their activities from auditors.

By the way, the auditors for a charity are appointed by the members of the charity, not the staff. Unless the majority of the members are participating in any fraud they are not going to fire the auditors for detecting it. And, of course, if the majority of the members are participating in fraud they won't be in a position to fire the auditors once the boys in blue get involved.

Do you have a link for that?

The estimate comes from the University of Portsmouth Centre for Counter Fraud Studies - you can see their report here. It is based on research the government used to carry out up until 2013.

They don't appear to have broken out education separately. I presume the figures for education fall under central government expenditure fraud and/or local government fraud. If we assume that fraud in the education sector is at the same level as for the rest of the public sector, it would be running at about £2.6 billion per annum on these estimates.

There are lots of examples of different types of fraud / financial impropriety included in the NCTL's module on financial management. Academies may not be a great thing to everyone, but let's not pretend that they are uniquely vulnerable to financial impropriety

If it is this report
www.croweclarkwhitehill.co.uk/wp-content/uploads/sites/2/2017/11/Annual-fraud-indicator-2017.pdf
to which you refere, you'll see that fraud in education is so minor it does not even merit a heading
and yet Tax disc fraud does ....

There are external audits for academies too. They are charitable companies so must comply with the relevant audit requirements. In any case, external audits are an irrelevance.
Because Academies pick their own auditors and fire the ones who bark.

Total public sector fraud is believed to be running at around £37.5 billion annually
Do you have a link for that ?
How much is in Education ?

There are external audits for academies too. They are charitable companies so must comply with the relevant audit requirements. In any case, external audits are an irrelevance. They only find around 3.3% of those frauds that are detected.

Of course we only know about the cases that have been found out. That is always true. There are undoubtedly many more cases that have not been detected or where the fraud has been covered up. Total public sector fraud is believed to be running at around £37.5 billion annually. Since the total value of frauds resulting in prosecution is only £1.1 billion and that covers all sectors (public, private and charity), it is clear that reported fraud is only a fraction of the total.

There is surely a difference though. In the academy system the funds removed from individual schools to a MAT is legal, required and appears to be under little scrutiny.
In the case of maintained schools, there are strong systems in place around accountability including external audits. In the cases above staff have been found out, have broken the law and will be dealt with accordingly.

This is potentially a police matter.

Unfortunately there is no form of organisation that is immune to fraud or similar financial misbehaviour. There have been cases of substantial amounts of money going missing from community schools. Only 2 months ago a head teacher admitted defrauding his school of over £100k. Not long ago another head teacher and 5 others (staff members and governors) managed to defraud their school of £1.6M.

I would agree that there are questions to be asked of the DfE if they knew this academy chain was in financial trouble when they instructed a school to join it.

www.bbc.co.uk/news/uk-england-leeds-42084865

Wakefield Council calling for a police investigation.

BubblesBuddy

Most schools will try and stash some money away for various things.

Whether its a new machine for tech, a mini bus for the school, repairs or a known increase in school numbers. They are generally saved up for in some sort of 'saving fund'.

Why did any primary school run a massive surplus like that? In my LA it would be clawed back if there was no detailed plan to spend it. Rainy day money that is not spent on children is not allowed - quite rightly.

Any PTA money belongs to the PTA which should be run as a separate charity with separate trustees. If they have not done this, they are to blame if the money is in the school's accounts. If a charity is wound up, it is normal for the trustees to put the money into an alternative educational setting.

Some MATs are very good. Clearly some are not and are badly run. Most pay huge salaries to senior staff. Parents need to look at accounts much more closely and start taking action and asking difficult questions.

I am more surprised that there have been no stories of MATs selling equipment from the more expensive departments to subsidise the core subjects.

Oh lord. My eldest is at a WCAT and this terrifies me.