A culture of “extravagant” expenses, “prestige” venues and first- class travel at one of Britain’s biggest academy chains has been laid bare by a report containing many examples of financial mismanagement.

An official investigation into the E-Act group - which runs schools that have opted out of local authority control - has revealed that hundreds of thousands of pounds of public money was also spent on unapproved consultancy fees.

The report, seen exclusively by TES, comes as the movement to grant schools greater autonomy grows around the world. As the number of academies continues to snowball in England and the number of charter schools in the US also rises, Australia and New Zealand are about to follow suit with similar policies.

Opponents have raised concerns about insufficient scrutiny when schools are given more freedom. Just last month, an audit of a charter school in Cleveland, Ohio, led to charges of corruption, theft and money laundering totalling more than US$1.8 million (pound;1.2 million).

The damaging findings for E-Act have been revealed in a report by the UK government’s Education Funding Agency, which criticises Sir Bruce Liddington, who resigned as director general of the organisation last month.

Sir Bruce, a former principal, was knighted for turning around Northampton School for Boys. He then became England’s schools commissioner, playing a key role in the expansion of the academies programme. But his time at E- Act, which he joined in 2009, was beset by controversy over pay and expenses. In 2010-11, he received almost pound;300,000 in wages and pension contributions, making him one of the best-paid people in education. He stepped down from E-Act after it was revealed that the academy chain had become the first to be given a financial “notice to improve” by the Education Funding Agency.

“Expenses claims and use of corporate credit cards indicate a culture involving prestige venues, large drinks bills, business lunches and first- class travel all funded by public money,” the agency’s report said. It added that expense and card payments by senior managers had “occasionally stretched the concept of propriety and value for money. Controls have been lax and some payments have tended to extravagance. However, we found no evidence of fraud.”

The report questioned the composition of E-Act’s board: a significant proportion of trustees were paid either as chairs of governors at E-Act schools or as consultants, which breaches the rules of the Charity Commission for England and Wales.

Officials from the UK government’s Department for Education investigated the chain in 2010 over claims that its directors were living the “high life”, but the probe proved inconclusive, with E-Act providing “satisfactory assurances”.

Mary Bousted, general secretary of the Association of Teachers and Lecturers union, said that the department would be asked serious questions about its capacity to police academy sponsors, and described the actions of E-Act as “immoral”.

”(Sir Bruce) had his cards marked but he carried on. Despite having been given a warning, he felt he could continue to use taxpayers’ money to fund a champagne lifestyle,” Dr Bousted said. “It was money that should have been spent on improving the education of what are very poor kids.”

One source close to E-Act said that Sir Bruce saw the organisation as “his empire with his rules”. But its chair, Ann Limb, stressed that the chain had gone through a change of culture since his departure, with an overhaul of internal processes and major alterations to the governance and make-up of the board.

Dr Limb, who became chair of E-Act last year, said that the organisation had moved into a “very different gear”. “We have put in place a very robust action plan,” she added. “When I joined, I recognised that there needed to be a great deal of improvement and so we have instigated a complete governance review as well as a restructuring.”

The finance director, appointed under the previous leadership, is also being replaced and a number of trustees have stepped down. Since Sir Bruce’s resignation the chain has taken on four more academies, bringing the number of schools that it manages to 35.

On announcing his resignation, Sir Bruce said that he was “thrilled” at how quickly the academies programme and E-Act had grown.

A Department for Education spokesperson said: “Academies cannot hide from their responsibilities - all their accounts must be externally audited and they are held to account by the Education Funding Agency, so any issues of impropriety are immediately investigated. That is exactly why the (agency) has written to E-Act requiring them to take swift action to improve financial management, control and governance. We are monitoring the situation closely and will take any further action necessary.”

Footing the bill

The Education Funding Agency’s findings:

• A total of pound;393,000 was spent on “procedural irregularities” including consultancy fees, breaking E-Act’s own financial rules, pound;237,000 of which was spent by Sir Bruce Liddington.
• Expenses indicate a culture of “prestige” venues, large drinks bills, business lunches and first-class travel, all funded by public money.
• “Extravagant” use was made of public funds for an annual strategy conference, at a cost of almost pound;16,000.
• Monthly lunches took place at the Reform Club, a private members’ club in London.
• Boundaries between E-Act and its trading subsidiary E-Act Enterprises became “blurred”. A number of activities undertaken by the subsidiary were paid for with public funds.

• Photo credit: Alamy

  Original headline: `Extravagant’ expenses, `prestige’ venues and pound;393K on `irregularities’