Statement from PAC Chair on NAO report on Oversight of Financial Management in Local Authority maintained schools

19 October 2011


A statement from The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts:

This NAO report shows that almost 1 in 5 secondary schools were in deficit at the end of 2009-10. That is extremely worrying, not least because schools that can’t balance their books tend to perform worse overall. We will need to explore the reasons for this worrying picture.

Schools are under huge pressure to make £1 billion of savings between now and 2014-15. Strong financial management is essential if schools are to achieve savings through genuine efficiencies and not through cuts that affect frontline services.

8% of schools did not meet the Department’s Financial Management Standard in Schools by the March 2010 deadline. We are concerned that the Department has not properly examined why schools fall into the red, and will want to know how it plans to deal with failure if local authorities are unable to resolve a school’s financial difficulties.

Although the Department is accountable for financial management in schools, it relies on the assessments of local authorities. This report shows that almost half of local authorities believe they lack sufficient resources to monitor schools’ financial management effectively, and over a quarter are reducing their internal audit coverage. From January 2012, Ofsted will no longer assess value for money in schools.

We are concerned that scrutiny of school finances is being watered down and we will want to explore how the Department can strengthen its oversight. The Department needs to make sure it can identify and act on serious weaknesses in financial management. 

The report is available to read on the National Audit Office website.

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