SOLOMON HUGHES explains how academy school trust managers use public money to fund their own private businesses
THERE is a very bland three-word phrase that points to something very wrong that’s been done to our schools: “Related party transactions.”
The phrase appears in the accounts of the trusts that run academy schools.
The schools academy programme is a privatisation programme, but it is barely recognised as such.
For years the government has been transferring schools into the control of private organisations — academy trusts.
A programme started under New Labour for a minority of schools is now the Tory model for almost all schools. The government is especially keen to transfer schools into “multi-academy trusts.”
These are trusts that run many schools, like a private version of a local education authority.
The academy programme isn’t widely understood as privatisation. There are two reasons for this.
First, the programme transfers state schools into a huge mess of different organisations all over the country. It is almost deliberately confusing.
The national press sometimes has trouble reporting a story outside London with a single dimension. So being expected to both leave the capital and look at the fragmentation of schools into many organisations is a bit much.
There have been some stories by the national press exposing academy privatisations, but not enough.
The specialist education press — Schools Week and the Times Education Supplement — have followed some of the money flowing around the academy schools.
A new website (educationuncovered.co.uk) started by Warwick Mansell, one of the best education journalists covering this subject, is picking up more.
But generally the fragmentation of the academy programme has covered up the extent of privatisation.
Second, the new trusts are supposedly “not for profit.” So many assume this might be just “technically” a privatisation — the academy trusts are private companies — but not a profit-driven one.
Except that little phrase, “related transactions,” covers up one source of profit.
The academy trusts are not for profit. But they can buy educational “services” from profit-driven firms. Often the trusts buy these services from companies that are linked to the trust management.
These are the “related party transactions.” So the trusts get state money for their students’ education, then pass it on to their mates and relatives — the “related parties.”
Last month the Department for Education published the “consolidated accounts” of the “academy schools sector in England” — the accounts of all the schools academy money, for the year ending August 2016.
The accounts show that the government gave about £20 billion to academy schools, which then spent a staggering £120 million in “related party transactions.”
That’s a lot of money flowing to the companies run by companies “related to” the academy bosses. Let’s take one example to show how this can go bad.
The latest accounts of Bright Tribe, a multi-academy trust , show how money can flow out of schools and into companies owned by the businessmen running the trusts.
Venture capitalist Michael Dwan founded Bright Tribe Trust in 2012. The government has given Bright Tribe Trust eight schools to run, from Suffolk to Sunderland.
Its latest accounts, published in May, show that Bright Tribe gets about £20m a year of public money to run these schools. They also show £3.9m flowed out of Bright Tribe into firms “owned or controlled” by Dwan in “related transactions.” Bright Tribe paid Dwan’s firms for “support services” at its schools.
Bright Tribe says that Dwan was actually giving “financial and resource support” to the schools by letting them hire his companies because the work was done at “cost or less.”
In essence, Bright Tribe says the money shows Dwan was helping the schools, rather than the schools helping Dwan’s companies.
However, if you look at the accounts of the private companies run by Dwan that got money out of the academy trust, they mostly seem to make a profit.
In June 2016 the Observer published a big investigation into the Bright Tribe schools (written with Mansell). The article questioned many payments from Bright Tribe schools to Dwan’s firms. Money for schools’ staffing and IT services flowed into Dwan’s companies, and it didn’t look right.
In November 2016 the government’s Education Funding Agency confirmed some of the Observer findings. It said Bright Tribe “needed to manage and address real and perceived conflicts of interest” including “enhanced transparency” and a “new procurement model.”
The latest accounts were published this May, but cover the period ending August 2016.
Bright Tribe told me that it has stopped the payments to Dwan’s firms, that, in its words: “Both trusts now operate using an in-house resource and no longer need or receive substantial support from Dwan or any of his companies. This model was adopted from October 2016.”
However, it seems that Bright Tribe’s habit of paying firms connected to its directors is still ongoing, albeit on a smaller scale.
Bright Tribe’s accounts show £36,000 was paid to Commando Joe’s, a very small company offering military-themed “character education,” “team-building” and “mentoring” to schools.
Another schools trust, The Adventure Learning Academy Trust, which runs five schools for the Department for Education, also shows £33,000 payments to Commando Joe’s in its latest accounts.
The Adventure Learning Academy Trust and the Bright Tribe Trust are “sister” organisations, both founded by Michael Dwan. Another director of Bright Tribe, Terry Flanagan, is also a director of Adventure Learning Academy Trust.
Flanagan is also a shareholder and director of Commando Joe’s. I asked Bright Tribe about its payments to Commando Joe’s, but the trust made no comment on that matter.
The Bright Tribe story shows that “related party transactions” can cover payments from the non-profit schools budget into the accounts of profitable firms run by academy trust directors.
It shows that, when exposed to the public, these payments can cause so much concern that the trusts stop them, or at least reduce them.
However, this only happens when the payments are combed over by the media. There are still a lot more accounts to be inspected.
There is of course a simpler solution. Bring the academy schools back into public sector control.
nSolomon Hughes writes every Friday in the Morning Star. Follow him on Twitter @SolHughesWriter.