EFA investigation reveals ‘significant failings’ at Trust - Palmers Solicitors

EFA investigation reveals ‘significant failings’ at Trust

EFA investigation reveals ‘significant failings’ at Trust

A multi academy trust (MAT) which has been investigated by the Education Funding Agency (EFA) faces uncertain times after significant failings and weaknesses in governance were identified.

Troubled ‘Academy Transformation Trust’ (ATT), which has a network of 24 primary and secondary school academies across the Midlands, East of England and the South East, has been under the regulator’s spotlight, following complaints of financial mismanagement and breaches of the Academies Financial Handbook (AFH.)

The official investigation follows intense media scrutiny by both C4 Dispatches and The Observer, which alleged that Ian Cleland – the Trust’s Founding Member, CEO and Accounting Officer – had claimed thousands of pounds in perks.

Mr Cleland was allegedly in receipt of a range of publicly-funded benefits, including the lease of a Jaguar motor car for himself and his wife, first-class rail travel and dining expenses at top-class restaurants. His lavish expense claims came during the same period that he asked staff to reapply for their jobs as part of a cost cutting drive.

Matters came to a head when ATT’s Chair of Trustees raised concerns about financial mis-management and deficits of around £2.2million across the MAT.

Amidst warnings that ATT needed to eliminate the deficit or risk losing three of its Norfolk primary schools which faced bankruptcy, the Chair of trustees questioned Mr Cleland’s performance and behaviour as Accounting Officer, placing him on temporary leave.

However, it is understood that Mr Cleland fought back and, using his powers as founding member of ATT, he allegedly removed the Chair as a trustee and director and appointed five new directors who purportedly reinstated him as Accounting Officer.

The EFA review has now identified significant failings at ATT including:

  • Lack of separation between members and trustees
  • Insufficient financial expertise on the board
  • The Accounting Officer (AO) also serving as a director as well as being a founding member
  • Allowing trust reserves and certain individual academy financial positions to deteriorate significantly over three years, with further deterioration forecast for 2017/18
  • A conflict of interest and not acting in a manner that would command broad public support when removing the trust chair as a director

The EFA has now ordered the trust to undertake an independent review of governance arrangements and confirm an action plan to implement the required improvements.

BJ Chong, a Partner with Palmers, explained: “A vital aspect of running a successful MAT is good governance and any allegations of financial mismanagement affect the reputation of both the school and its trustees.

“There have been other recent cases where poorly performing MATs have been broken up, with the academies merging with other more successful MATs.

“In such situations, careful due diligence is vital to ensure that there are no additional skeletons in the cupboard which may cause issues for the new trustees and CEOs.

“Although due diligence can be a lengthy, it is critical to ensure that there are no unpleasant surprises which could jeopardise the success and reputation of the MAT.”

For help and advice on all aspects of due diligence, please contact us.