Fraud, concerns about related-party transactions, and the challenge of delivering new schools places have been highlighted in the annual accounts of the body that funds schools in England.

The Education Funding Agency’s (EFA) accounts, released this afternoon, are the first since the government decided to strip out the finances of thousands of academies, and publish them separately in the Sector Annual Report and Account, due out in October 2017.

In April 2017, the EFA was replaced by the Education and Skills Funding Agency (ESFA).

These are some of the main points from its 2016-17 annual report and accounts:

Fraud and financial irregularity

The EFA looked at 36 allegations of fraud and/or financial irregularities at academies, and seven at post-16 institutions.

Of 21 fact-finding visits that resulted, nine cases are ongoing, and 12 cases have been closed.

Out of the closed cases, there was evidence of irregularity at one academy and one post-16 institution. The EFA identified inadequate governance and financial control arrangements in both cases. There was no evidence of irregularity in the other 10 cases.

Of the nine ongoing cases, an irregularity has been confirmed at one academy.

Related-party transactions under the spotlight

The Department for Education is seeking further information from 47 academy trusts about financial transactions they made involving people or organisations connected to them.

The accounts of the EFA say “further work is necessary by the academy trusts to demonstrate compliance with our requirements”.

Increasing numbers of financial notices to improve

The EFA issued 18 financial notices to improve to academies or academy trusts in 2016-17 - representing almost a third of the 55 it has published since 2012.

Hundreds of academies submit their financial returns late

The EFA accounts say that 719 academies submitted their financial returns late - representing 8 per cent of the total.

A total of 108 grant returns from local authorities were returned late - 24 per cent of the total.

The EFA accounts add that 98 per cent of academy financial statements that were audited “had no significant concerns raised by their auditors”.

The accounts also reveal that, as of 16 June 2017, eight sets of financial statements from academy trusts were still outstanding, as well as one from a sixth-form college.

The EFA accounts say that seven of the eight academy trusts had closed, while the other “is delaying submission because of going concern issues”. The EFA expects half the outstanding statements to be submitted.

Big rise in complaints against the EFA

The number of complaints made about the EFA almost tripled last year, rising from 21 in 2015-16, to 61 in 2016-17.

Four complaints about the EFA were made to the Parliamentary and Health Service Ombudsman in 2016-17. Only one was accepted for investigation, and was not upheld.

£500,000 given to troubled trust is written off

The EFA has written off £537,440 given to a troubled academy trust that is losing all its schools.

The Lilac Sky Schools Trust has nine primary schools in Kent and East Sussex, and the EFA identified “a number of serious and wide-ranging concerns around governance and compliance” in 2016.

The EFA accounts reveal that after its schools are transferred to new sponsors, Lilac Sky does not expect to have any surplus to pay back advances of £537,440. The EFA said it would write this amount off, rather than saddle the schools with a deficit when they moved.

Cost of asbestos removal

The accounts reveal that the EFA will face claims for asbestos removal or “dark ground rectification” at 56 schools being rebuilt or refurbished as part of the government’s Priority School Building Programme.

The accounts say the cost of this had not yet been quantified, but “in many cases we are still awaiting assessment of potential impact”.

Challenge of delivering new school places

The accounts outline a number of challenges facing the ESFA in 2017-18.

These include “uncertainty in the UK construction sector, paired with rising construction and land costs, and reduced market interest impacts the ability of the capital programme to deliver an increasing number of school places.”

Yesterday, Tes reported that the government’s Priority School Building Programme has been given an amber risk rating, because of similar concerns.

The accounts also warn about “the potential deterioration of the financial health of the sector”.

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