Academy Schools and Conflicts of Interest in Contracting – SORT IT OUT!

After the riots of 2011, mainly in London, courts were told to ignore usual sentencing guidelines and lock people up for the smallest riot-related offences - stealing a bottle of water, or “receiving” a pair of stolen shorts, for instance. Or if you fiddle a few thousand pounds from the DWP by falsely claiming your disability is worse than it really is, you may well go to prison. We can see that the State clamps down hard on offences that it feels threaten the entire fabric of society, as in these two examples.

But set up an Academy School, get yourself a 56% pay increase to £230,000, award contracts to other directors of the Academy, friends and associates, and get another large payment for running a leisure club in the school premises, and then at worst, the National Audit Office and the Department of Education might advise you that you’ve been just a little unwise.

And yet this sort of greed (at best) is surely just as corrupting and corrosive to national life as cheating on benefits. It is part of that entitlement shown by too many in the “ruling class” whether we’re talking MPs expenses, Tony Blair’s exploits advising dodgy dictators, or CEOs making millions despite destroying shareholder value. And it makes everybody think, why shouldn’t I rip off the system – everyone else is doing it?

What’s triggered this rant, you may wonder?  Sir Greg Martin is headmaster of the Durand Academy in South London, and at the heart of the recent National Audit Office investigation.

Here is the Daily Mail:

“An academy headmaster paid nearly £230,000 a year also raked in cash running a business based at the school. Sir Greg Martin enjoyed a 56 per cent pay rise last year. He is also sole director of a company which managed a health club and accommodation business on his school’s site and his ex-wife is the school’s deputy head. A probe by the National Audit Office found Sir Greg’s firm was paid £508,000 in management fees over the past three years alone.” 

The NAO uncovered evidence of a ‘large number of conflicts of interest in the way that it managed its academy and its assets’.

There were also individuals that sat on the board of the Academy Trust that were directors or staff at companies that the Academy Trust had contracted or purchased services from, and other transactions between individual connected parties. Some contracts had been awarded without competition. Complex structures and governance arrangements are not always transparent, which can increase the perception of any wrongdoing”.

It's almost enough to turn you into a socialist, or call for revolution. There is something really distasteful about those who already are wealthy by the standards of most people extracting more from the public purse. And we seem more generally to have lost sight of conflict of interest issues in the public sector somehow. Perhaps that suits politicians who can make a fortune through similar mechanisms either when still in power or certainly afterwards (see Blair, T). We have the same concerns about the health service commissioning model, where GPs are sitting on clinical commissioning groups and awarding contracts to businesses of which they are direct beneficiaries.

In the case of Academies, the Education Funding Agency has obviously been useless in overseeing all this, although they did at least tell Durand to terminate the contract for running the leisure service. But the NAO casts doubt on their current policy, which says that all related party transactions should be "at cost”. But as NAO points out with admirable directness.

The measurement of ‘cost’ or ‘no profit’ is subjective and will be difficult to evidence and audit. For example, different suppliers will absorb their overheads at different rates, making it difficult for an academy to demonstrate whether goods and services it has obtained from a related party were provided ‘at cost’. This will become especially difficult when accounting for the purchase of professional services, where the academy is effectively buying-in an expert’s time and knowledge rather than goods with an historic cost”.

Let’s be even more clear. “At cost” is meaningless for many purchases. Why don’t we just have a clear rule. No-one involved in the governance of Academies – or any other public bodies – should benefit from any contracts placed by the organisation. Simple.

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First Voice

  1. Peter Kobryn:

    Well said ! – could not agree more with your final paragraph

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