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Tuesday, 06 June 2017 17:49

Lilac Sky Schools Academy Trust: Will anyone be held to account?

BBC South East is running an item on this story, tonight, January 12th at 6.30 p.m.

The 2016 Accounts for the Lilac Sky Schools Academy Trust (LSSAT), a charitable company (!), finally lay bare the rottenness behind the Trust.

The Lilac Sky Schools Trust is carrying a net deficit of £1,329,631 on these funds because: 

The Trust incurred extortionate and expensive Founder/ substantive CEO consultancy  costs for 232 days at a net cost of £217,500 along with other high cost  support  services,  central  Trust  staffing  costs that were far higher  than average,  the cost of  settlement  agreements  (contractual  and non-contractual) paid to staff who were immediately appointed as consultants by the company and recharged  to  the Trust, minimal  value for money procedures and a lack of competitive  tendering.

2016 Accounts Page 38

 These accounts are prepared by new Trustees, appointed 8 June 2016 to sort out the mess, described as emergency interim appointments, who do not mince their words with regard to the previous management of the Trust. LSSAT handed over its academies to other Trusts on 31st December 2016, and is currently being wound up, possibly with government financial aid. See below in blue.  

I am not an accountant but the shocking detail in the Report is plain to see and builds further on my exposure in the 2015 Accounts, of the Trust being run as a Money Tree by those in control. Of course, this is at the expense of the pupils in the seven local primary schools run by the Trust, and other casualties along the way.  

LSSAT Logo

For those with a long memory, I first identified the methods used by Lilac Sky in 2013 to siphon off school funds by ripping off Furness School and I faced excoriation from KCC who continued to insist Lilac Sky was wonderful for some years afterwards, the school closing in 2015, with £1.6 million having gone missing, apparently with no one noticing. Since then I have covered the appalling story of Lilac Sky through  a number of articles, accessible through my search engine, most recently here.   

There are of course many other examples of entrepreneurs taking large sums out of academies, but these normally remain hidden, and it often requires independent Trustees to winkle out the truth, as has happened here.

Update June 9th: I have no criticism of the new Board of Trustees of Lilac Sky Academy Trust, in their decision, posted 8th June, to strike off, or dissolve the Charitable Company. They are clearly doing as they were probably instructed by the Regional Schools Commissioner on being installed in June 2016, to terminate the issue as soon as possible. As a comment posted below suggests however, this cannot have happened unless the Trust was previously funded by government to remove its indebtedness. Even more questions in this murky business. 

Key details of the accounts, with examples of malpractice, show funds passing between companies associated with Lilac Sky, or else straight out of the system. An article I published earlier this week shows a successor company to Lilac Sky taking over a small but apparently successful private school in London, then taking the company running the school into voluntary liquidation. The school closed within nine months, owing debts of nearly a million pounds, mainly in staff salaries and rental costs, but as so often, where did the money go?  

One of the most shocking examples of malpractice came after government ordered LSSAT to stop using associated companies to provide services at what are claimed to be exorbitant rates. The Trust defied this instruction and continued using Corporate Bespoke Services, Lilac Sky Outstanding Education Services, and Lilac Sky Schools, until June 2016, when the new Trustees took over. Corporate Bespoke Services is highlighted, majority shareholder Mr Averre-Beeson, founder of the Lilac Sky chain. The company provided services totalling £217,500 to LSSAT, although there was no competitive tendering. In addition, the company invoiced the Trust in advance  for  services  to be performed from May to August 2016, (i.e. after the new Trustees took responsibility) at an increased rate and the Trust made payments to Corporate  Bespoke Services Limited in advance as well.

Lilac Sky Schools appointed Trustees and Directors, against Governance guidance, as they were not formally connected with the Trust.

Four of the LSSAT academies were new build, and funding for these was inappropriately used, so that the DfE had to provide emergency funds to enable classrooms to open with necessary basic equipment and furniture. 

The accounts identify multiple inappropriate business relationships between former Trustees, some senior staff and the Founder, whose names recur regularly through previous articles I have penned, including five relatives of the founder. The Trust Finance Manager was also Finance Manager of several of the above companies. Several of these names received severance payments during the year and were immediately rehired next day as consultants, fees not available. These included A Donaldson who retained her position as Director of Learning after becoming a consultant and so should have remained on the payroll. There is no evidence that Trustees approved these payments.  Another Trustee was Christopher Bowler, who had seen a rotating range of responsibilities, like so many members of the inner circle. He resigned in August 2016 as Director of Schools and Academies, on a salary of  £135,000. 

Thistle Hill Academy  carried a net deficit of £16,688 because the Academy was overstaffed in 2015/16 and the Principal in post at that time was paid a salary of £72,686 p.a., above expectations  for  the pupil roll of 231 for that academic year. She is the step-daughter of the Founder's wife, and school documentation shows she did not appear to attend the school full-time, having other responsibilities in the Lilac Sky portfolio.  

Knockhall Academy carried forward a net deficit of £106,887 because the Academy was overstaffed in 2015/16, there was unexpected costs due to building works, a deficit  loan repayment to the Local Authority  and central Trust recharges.

The accounts provide a number of perhaps minor examples of malpractice: a credit card used by a non-employee; purchasing of IT equipment and a mobile phone contract for non-employed Consultants.

The accounts make clear there is no proper monitoring of expenditure, and indeed the founder also undertook internal audits for a period, although there appear to be no records of these and such an appointment appears contrary to the Academies Financial Handbook.  The new Interim Accounting Officer of The Lilac Sky Schools Trust was 'very concerned at the apparent lack of compliance in several areas of the Trust's financial management which did give rise to multiple breaches of the Academies Financial Handbook 2015'.

Included within incoming resources are emergency grants received from the Education Funding Agency (EFA) totalling £345,440 (presumably to support the rebrokerage of the academies to new Trusts). The EFA reserve the right to request repayment of the  emergency  cash advances at a later date.

The Trust has run up a Pension Fund Deficit of £3,073,000 which will be passed on to successor institutions to be recovered through increased employer contributions, effectively a tax on the schools, along with the fixed assets (premises etc.). 

'The Trustees'  indemnity  'provides cover for the Academy  Trust's costs incurred as a result of allegations of negligence following a wrongful action  resulting in a subsequent  financial  loss.  This is against  both the entity and individuals'. So that's all right then, except there is a difference between negligence and wrong doing!

 

 

 

  

Last modified on Monday, 12 June 2017 14:17

1 comment

  • Comment Link Friday, 09 June 2017 18:48 posted by Ben

    Peter.
    I have just seen that as of 8th June 2017 The Lilac Sky Schools Trust applied to Companies House to be stuck off the register.

    https://beta.companieshouse.gov.uk/company/08289583/filing-history

    So this really is the end of LSSAT, but as you have reported here and in other articles, not an end to the knock-on effects for the children in successor academy trusts.
    I believe this implies an “orderly” close of business by the new trustees with no outstanding creditors, rather than a liquidation. I can only imagine that if there was such a large deficit at the end of August 2016 there must have been an injection of government cash at some point to allow the trust to be struck off rather than liquidated? This may well be difficult to establish as the Companies House website indicates that a company that is struck off does not need to file their final accounts with Companies House.
    Maybe our only hope for the real facts of this case is the EFA investigation and/or prosecutions. PETER: Ben, thank you for this and your other contributions to this story, that have kept it alive. I have the same fears as you how the ending is being engineered.

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