Related party transactions at defunct academies trust backed by Interserve didn’t comply with academy financial rules

Janet Downs's picture
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The last accounts* of defunct Interserve Academies Trust (IAT), backed by troubled firm Interserve Plc, had related party transactions with Interserve Investments Limited and Wootton Education Limited which didn’t comply with Academies Financial Handbook. 

IAT also had ‘unapproved borrowing’ in agreeing to finance its insurance premiums over twelve months.  This required prior approval from EFA.

After IAT took on its first school, Crawshaw Academy, it had plans to sponsor additional academies.  But Crawshaw, which had been transferred to IAT as a sponsored academy following an inadequate Ofsted rating, remained its only school.   IAT had received £93.5k in transfer costs.

Despite Crawshaw Academy being judged good in November 2015, IAT gave up the school.   Crawshaw was transferred to Red Kite Learning Trust (RKLT) on 1 March 2017 with no transfer fees paid.

IAT dissolved in August 2018.  Its last accounts* say additional funding was secured from the Education Funding Agency (now Education and Skills Funding Agency, ESFA).  This allowed IAT ‘to settle its debts as they fall due’.

I wanted to know the amount of this additional funding and whether it had been recouped.  Freedom of Information revealed the extra £154,438 was for additional pupil numbers.  There was no need for this to be repaid.  The additional funding was transferred to RKLT.

Crawshaw Academy’s deficit also transferred.    The ‘deficit position’ was under ‘budgetary review’ by RKLT at the end of August 2017**.  This was ‘to ensure a deficit recovery plan’ was agreed.

By the end of August 2018**, Crawshaw Academy’s deficit had risen from £236k at the end of August 2017 to £436k.   A deficit recovery plan hadn’t been finalised by the end of August 2018.  RKLT said a ‘deficit recovery plan will be agreed’ and its implementation would be reviewed by RKLT trustees.  ESFA was ‘being kept updated with progress’.

ESFA said it doesn’t hold any recovery plan for Crawshaw Academy because ‘RKLT was in a surplus financial position to manage the deficit in Crawshaw Academy’.  Academy trusts were responsible for managing the financial position of their academies.  ESFA would only request a recovery plan ‘as part of early intervention and close monitoring’ if a trust ‘as a whole’ was forecasting a deficit.

 

 

 

*IAT accounts for year ending 31 August 2016 available from Companies House

**RKLT accounts for years ending 31 August 2017 and 31 August 2018, ditto

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