WIREDGOV

The National Audit Office has reported that the Department for Education has delivered a fundamental change in the nature of the Academies Programme through a rapid, ten-fold increase in the number of academies since May 2010. This increase is a significant achievement. However, the Department was unprepared for the scale of the financial implications arising from such a rapid expansion. In the two years between April 2010 and March 2012, the Department had to meet an estimated £1 billion of additional costs, while remaining within its overall spending limits.

By September 2012, 2,309 academies had opened, compared with 203 in May 2010. This represents significant growth of 1,037 per cent, most of which has been from schools choosing to convert to academy status. Academies have greater financial freedoms than maintained schools and the Department’s approach to approving applications – coupled with the fact that most converters to date have been outstanding and good schools – appears so far to have managed the risk of schools converting with underlying performance issues. However, more schools with lower Ofsted ratings are now applying to the Programme. Future applicants may therefore require more in-depth assessment and support to manage potential risks.

Between April 2010 and March 2012, the Department spent a total of £8.3 billion on the Academies Programme. The NAO estimate that £1 billion of this was additional cost, some £350 million of which was money the Department was not able to recover from local authorities to offset against academy funding. The additional cost of the Programme has increased annually as it has expanded, although the Department reduced its average additional cost per open academy (excluding transition costs) by 53 per cent in the last two years. It forecasts that this additional cost per academy will continue to reduce in future. The rapid increase in the cost of the Programme has led to ongoing pressures on the Department's wider financial position. It has had to transfer funding from other budgets to stay within its overall spending limits while maintaining the pace of the expansion.

The Department largely relies on the quality of academies’ financial management and governance to safeguard effective use of public money. To date, there have only been a small number of investigations into financial mismanagement and governance failure in academies. Financial mismanagement in any school is a real cause for concern, and such failures in academy schools create the risk of wider reputational damage to the Programme. The Department needs to weigh this risk carefully in operating a light-touch oversight regime.

Amyas Morse, head of the National Audit Office, said today:

“The Academies Programme is a key element of the Government’s plans to reform the school system. Delivering a ten-fold increase in the number of academies since May 2010 is therefore a significant achievement. However, the Department for Education was not sufficiently prepared for the financial implications of such a rapid expansion, or for the challenge of overseeing and monitoring such a large number of new academies.

“It is too early to conclude on academies’ overall performance, and this is something I intend to return to in the future. As the Programme continues to expand, the Department must build on its efforts to reduce costs and tackle accountability concerns if it is to reduce the risks to value for money."

Notes for Editors

1. The Department funds maintained schools via grants to local authorities, whereas academies receive their funding directly from central government. To avoid double-funding across the system, the Department aims to recover from local authorities most of the funding paid to academies.

2. The term 'academy' covers several types of school, which have identical legal status and a broadly similar funding and oversight regime. This report focuses chiefly on 'converter' academies (whose academy trust is formed from the predecessor school's governing body) and 'sponsored' academies (where an external sponsor organization takes over the running of the school). As at September 2012, 97 per cent of all open academies were converter or sponsored academies.

3. ‘£1 billion of additional costs’ (paragraph 1) is the estimated total cost to the Department of expanding and operating the Programme in the two years from April 2010 to March 2012, net of money which it:
• recovered from local authorities,
• distributed to schools on the same basis, irrespective of whether they were maintained schools or academies, or
• provided directly to 103 academies for whose pupils it does not allocate any funding to local authorities, thus making recovery unnecessary.

4. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.

5. The National Audit Office scrutinizes public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 860 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of more than £1 billion in 2011.