Comment from the Chair
The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:
"As the Government devolves the delivery of education and children’s services in England , it becomes ever more important for the Department to tell us exactly how accountability to Parliament is going to work so that we can properly follow the taxpayers’ pound.
The Department has described arrangements for providing assurance on regularity and propriety. But although this is the third draft of the accountability arrangements we have seen, we remain very concerned at the weakness of the proposed arrangements to ensure accountability for value for money.
Responsibility for this is shared by the Department with a whole raft of bodies: the DCLG, individual schools, academy trusts, local authorities and the Education Funding Agency. The specific responsibilities of each for achieving value for money and how they are to interact to secure value for money across the entire education system remain unclear.
This is particularly important as money becomes tighter. One in four Local authorities have cut their resources devoted to monitoring school spending. Many governing bodies remain too weak with one in four local authorities stating that only a few of their primary schools enjoyed governing bodies with sufficient, appropriate financial expertise.
And there is a question mark over whether the Education Funding Agency will have the capacity and skilled staff to oversee the growing number of academies.
We are already seeing instances where the Agency’s systems have proved insufficiently robust to ensure proper value for money of schools’ expenditure.
Among our concerns is whether the Department’s has the ability to pick up early warning signs of improper spending or poor value for money, such as academies paying very high salaries to senior staff or incurring questionable expenditure. We expect local mechanisms to be in place to detect promptly any concerns around spending within schools."
Margaret Hodge was speaking as the Committee published its 82nd Report of this Session.
On the basis of the Department’s draft Accountability System Statement and a report by the Comptroller and Auditor General, the Committee took evidence on 28 November 2011 from the Department and the Young People's Learning Agency (YPLA) on how the Department accounts to Parliament for the use of funds allocated to it and how it gains assurance from other bodies for devolved funding. The most recent draft Accountability System Statement the Committee has seen is that provided on 1 February 2012. This report takes into account this latest draft and also the evidence given by the Treasury and the Department for Communities and Local Government at the Committee's Accountability hearing on 6 February 2012.
The Department for Education (the Department) is distributing £56.4 billion in 2011-12 to schools, local authorities and other public bodies for the delivery of education and children’s services in England. Where responsibility for service delivery rests with local bodies, the Department is responsible for establishing an accountability framework for devolved spending. The Department has set out how it intends to provide Parliament with assurance about the regularity, propriety and value for money of this spending in a draft Accountability System Statement (the Statement).
We have now seen three drafts and the latest iteration of the Statement has gone some way to address our initial concerns, with the Department having made better efforts to outline its accountability responsibilities within an increasingly localised delivery system. However, the Department for Education’s draft Statement remains the weakest of the four Statements we have seen. It reveals that the Department will rely on a mix of local accountability mechanisms, information systems, inspection, and oversight bodies to gain the necessary assurances over regularity, propriety, and value for money. The Department needs to do more work to clearly define how funding streams will be monitored, audit arrangements, and processes to support whistleblowers.
While the Statement explains how the Department gains assurance on the regularity and propriety of devolved funding for education and children’s services, it places insufficient emphasis on how value for money will be achieved. Securing value for money is particularly important at a time when financial constraints are biting harder. Responsibility for value for money is shared by the Department with schools, academy trusts, local authorities, the YPLA and the Department for Communities and Local Government. However, the Statement does not yet clearly describe the specific responsibilities of each body for achieving value for money, how these will interact to drive value for money, or how the Department will assess value for money across the entire education system. We are particularly concerned that the respective responsibilities for value for money between the Department, YPLA and academy trusts seem blurred. Responsibilities and accountabilities must be clearly defined and articulated.
The Department relies on local authorities and the YPLA to exercise financial oversight over local authority maintained schools and academies respectively. However, oversight by some local authorities is currently weak and could worsen as many authorities reduce the resources they devote to overseeing their schools. More than a quarter of local authorities responding to a National Audit Office survey were planning to reduce internal audit coverage of schools; and nearly half may not have sufficient resources to monitor their schools effectively. We also have concerns about whether the YPLA will have the right skills, systems and capacity to oversee the rapidly increasing numbers of academies expected in coming years. We are already picking up instances where public money appears not to be used to provide good value and the YPLA must have robust systems in place to intervene promptly where necessary.
Accountability for local authority maintained schools and academies relies on good management and effective governance. The financial management capability of local authority maintained schools has improved, but the quality of management and governance in all schools varies between institutions. Over a quarter of local authorities surveyed by the National Audit Office thought that only a few of their primary schools had governing bodies with sufficient financial expertise. Our 2011 report on the Academies Programme found that there were already signs of potential financial and governance instability even at the early stage of that Programme.
The Department, local authorities and the YPLA need better information to assess and challenge schools’ financial management and governance. More consistent requirements for data and data returns must be applied to all schools so that academic and financial performance can be benchmarked, and all schools can be held accountable. The Department needs to enforce these requirements more stringently, particularly given previous problems with lack of compliance by some academies.
We are concerned that the accountability framework is not sufficiently robust to address operational or financial failure of service providers. We are alarmed by reports of worrying expenditure by some schools – for example, very high salaries being paid to senior staff in academies or excessive expense payments for governors – which could be symptomatic of more system-wide concerns such as the adequacy of governance and controls on value for money. Persistent school deficits or excessive surpluses may also indicate wider problems with financial management and governance that require early intervention to prevent them getting worse. The Department needs to improve its understanding of such financial indicators, so it can determine when and how it would be best to intervene to ensure public money is being put to best use.