Report identifies conflicts of interest at academies
Academy trustees are reminded of their duty to manage conflicts of interest, following a report by the National Audit Office (NAO). The report, which was published last week, has revealed that nearly half of academy trusts examined in its recent investigation disclosed “related party transactions” in 2013. The report followed an investigation by the NAO into the Education Funding Agency's (EFA) oversight of the Durand Academy in South London. Concerns had been raised over irregularities and potential conflicts of interest at Durand and the NAO was brought in to investigate the EFA's oversight of the Academy.
As part of the investigation, the NAO looked at the academy financial statements that had been reviewed by the EFA. It found that of the 2,256 academy trusts reviewed by the Agency in 2013, 976 academies had disclosed related party transactions in their financial statements. These transactions had a combined value of approximately £71m. The Agency subsequently identified 54 cases, worth £8.6 million, as "posing a risk" to value for money and therefore requiring further follow-up work.
The report serves as a timely reminder that directors of academy trusts, unlike their counterparts in maintained schools, have a duty to comply with company law and charity law. Conflicts of interests are not unusual, but they do need to be managed appropriately in order to avoid risk to the academy, including the risk of adverse publicity affecting the academy's reputation. Academy directors should be familiar with the Charity Commission's guidance on managing conflicts of interest and seek advice if unsure about how to manage any potential conflicts. Guidance is also provided to academies on the use of public funds and on dealing with related party transactions in the Academies Financial Handbook.
We know that there are many challenges for all schools after conversion to academy status, and ensuring that all of the directors understand their role and responsibilities is centrally important in meeting those challenges. However, it can be difficult to find the time for this, particularly as the role is voluntary and there is a lot of guidance to read. Many of our charity clients address this need by providing a programme of induction and refresher training for board members.
We offer cost-effective training for directors of academy trusts, covering the legal duties under both company and charity law, to ensure that all directors understand their role and responsibilities. We can arrange to come to you at a time convenient to your board, and we can put together a rolling programme of training to meet your needs. Please get in touch if you would like to find out more.