Question to the Department for Education:

To ask the Secretary of State for Education, what steps her Department takes to ensure adequate financial oversight of academy trusts; and how often financial audits are conducted of underperforming trusts.

The government is clear that strong accountability is non-negotiable. That is why it has committed to bring multi-academy trusts into the inspection system, to ensure every part of our school system is driving forward the best outcomes for children.

The primary responsibility for the financial oversight of academy trusts rests with the trustees themselves, supported by the financial management and governance requirements and framework set by the department in academy trusts’ Funding Agreements, which can be found here: https://www.gov.uk/government/publications/academy-and-free-school-funding-agreements.

Further guidance is provided by the academy trust handbook accessed at: https://www.gov.uk/guidance/academy-trust-handbook/academy-trust-handbook-2024-to-print, and the Academies Accounts Direction, found here: https://www.gov.uk/guidance/academies-accounts-direction.

This framework states that all academy trusts must have an annual external audit of their annual accounts by a registered statutory auditor. This external scrutiny provides the department with a high level of confidence that oversight is professional and consistent, as the external auditors must comply with auditing standards set by an independent regulator.

Auditors must also give an opinion on whether the accounts are true and fair and provide an opinion to the department on regularity and compliance by the trust, reporting any transactions they have identified which have breached our requirements. Additionally, auditors prepare management letters, describing any weaknesses in the trust and recommendations for improvement. The department require trusts to respond to audit findings in an appropriate and timely manner.

The framework also outlines that all academy trusts must:

• Implement robust financial procedures including internal checks of the suitability of, and compliance with, their financial systems.
• Have an audit committee to manage their risks and oversee the checks of systems of control. This committee must ensure an appropriate approach to scrutiny, such as the appointment of internal auditors, report on this work in their annual accounts and take ownership of balancing their budget and send a copy to the department in advance of each year.
• Publish their annual audited accounts and details of their objectives, achievements and future plans and set out what they have done to promote value for money in support of those objectives as part of their annual report and accounts.

Where concerns are identified, the department will intervene in a way that is proportionate to the risk and preserves education provision. This can include issuing a trust with a Notice to Improve (NtI) or, in the most serious cases, termination of the Funding Agreement. Where academy trusts are experiencing significant financial difficulty, the department is clear that its starting approach will always be to have a supportive conversation to explore the challenges trusts are facing and suggest the practical ways it may be able to support.

The department will consider the financial, educational and governance aspects of the trust and work through budget returns with trusts, including discussing revisions to the forecasts as necessary based on recent pressures.

Academy trusts are delivering a high standard of financial management and governance. The latest published data shows that 98.2% of trusts had a cumulative surplus or a zero balance, 99.8% of academy trust accounts received unqualified opinions. In addition, independent auditors concluded that there were no regularity exceptions in trust accounts for over 92% of trusts, and less than 1% of academy trusts are subject to an active NtI.