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

[noblegiraffe]

www.theguardian.com/education/2017/oct/21/collapsing-wakefield-city-academies-trust-asset-stripped-schools-millions-say-furious-parents

I thought it was bad enough when the Wakefield City Academies Trust just ditched its 21 schools, but now it turns out that as well as paying himself £82,000 for 15 weeks work and a nice bit of nepotism (£440,000 to companies owned by himself and his daughter) the CEO Mike Ramsay was also in charge of a trust which took rainy-day surpluses from schools that were planning from the future, and what looks like money raised by the PTA(?) to put into general trust funds which were lost when the trust collapsed.

The DfE are (as is usual for them) refusing Freedom of Information requests about the finances and have (as is usual for them) released a bland statement about how everything is fine really.

And I hate that you can't see the full title in that little box when you're writing it. Apologies for the extra word.

Academies are the worst thing to happen to education that I can remember. Academy chains are just vehicles for fat cats to line their pockets even more. Until it goes pear shaped of course.

Good Lord. I knew academy chains were going to be a bad thing, but this is appalling.

How can theft of funds like that even happen?

Unfortunately if you look at the EFSA handbook you will find that there is a presumption that any surplus funding from individual schools in the trust will be drawn into the trust for the good of all schools in the trust. So in that context that was entirely correct, the question is whether having drawn the funding to the Trust why it was not spent for the good of all the schools in the Trust, not kept in the Trust finance account.
This could be another example of the individual schools and their governing boards having not carried out enough due diligence before becoming part of the Trust and realising that this was always going to be the case that all funds end up with the Trust. It would be interesting to know if any of the schools now moaning can substantiate in writing what they believe they were told by the Trust. If they can then there are some very serious questions for the Trust to explain and by default the EFSA and DfE.

From the article: "High Crags Academy primary school in Shipley was instructed by the DfE to join the trust in April 2016 after being put into special measures the previous year. When it joined it had a surplus of £178,000, which was immediately moved to centralised accounts."

So it doesn't sound like they were given a choice, and it is surely the fault of the DfE if they are allowing academy chains where there are serious concerns about the finances to take on more schools.

Many people have spoken out about how poor the MATs are, yet the government seems intent on protecting them by not allowing freedom of information act to be used to back up the stories.

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

Largest MATs most likely to be in deficit: www.tes.com/news/school-news/breaking-news/largest-mats-most-likely-be-deficit-despite-economies-scale

If MATs are likely to be in deficit and they are allowed to take surplus money from schools that they take over, then this is a real problem with the model.

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

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.

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'.

In my LA it would be clawed back if there was no detailed plan to spend it

The article says that the surplus that was taken from one school was a fund anticipating a larger than normal cohort of pupils who were born in the 2000s. Another set of money that was taken was being held back for capital investment. The suggestion that there were no plans for this money appears to be unfounded.

Parents need to look at accounts much more closely

What if they refuse to comply with government transparency regulations? www.tes.com/news/school-news/breaking-news/exclusive-academy-trusts-refuse-publish-pay-information

Blaming parents and schools isn't fair. The DfE should have anticipated this sort of thing from the start and put regulations in place to prohibit it. But they are giving more power and more schools to MATs that have not demonstrated that they can be trusted to do a good job. I've just seen on twitter that asset-stripping from schools then handing them back has been well-known as a scam in the US. How has this not been protected against?

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

Wakefield Council calling for a police investigation.

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.

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.

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 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 ?

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 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

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.

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....

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.

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

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.

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