City Academies

Mr. Betts
To ask the Secretary of State for Education and Skills (1) which contracts have been placed by city academies with companies in which their sponsors have a financial interest;

(2) what restrictions apply to commercial involvement by city academies in companies with which their sponsors have a financial interest;

(3) what rules apply to the letting of contracts by city academies to companies in which their sponsors had an interest;

(4) what rules relate to declarations of interest in the tendering for contracts by city academies;

(5) how many requests he has received to waive rules on tendering contracts by city academies; and how many have been accepted;

(6) what rules govern the letting of contracts by city academies.

Jim Knight
Academies are charitable companies limited by guarantee, and are subject to the same regulatory framework as applies to all such organisations and to company law generally. The governors of an academy are also its charitable trustees.

The Charity Commission approves the governing documents of all companies proposed to be registered as charities prior to granting registration, to ensure that any provisions conferring authority on the charity to make a payment to one of the governors—or a company associated with a governor—deal with potential conflicts of interest in a transparent manner.

All academy trusts use the Department’s model memorandum and articles of association as a basis for their own, and these include standard conflict of interest provisions recommended by the Charity Commission. These typically require any governor/trustee of the company, who has an interest in a particular contract, to withdraw from discussions and voting in relation to such a contract. In order to comply with these provisions, a sponsor of an academy trust or a sponsor-appointee with an interest in a sponsor company would, for example, be required to withdraw from any meetings at which a discussion took place on the proposed remuneration of either themselves, or a company with which they are associated.

Furthermore, charity and company law place an obligation on charitable trustees and governors of academy companies to act at all times in the best interests of the company, and allowing the academy company to contract with another company in the knowledge that this might not be on the best terms available, would obviously be contrary to this obligation.

In addition, the general requirements relating to the procurement of goods and services are set out in the Academies Financial Handbook, which the Department issues to all academies. This includes the requirement for probity in procurement, to demonstrate that all parties are dealt with on a fair and equitable basis and to ensure that there is no private gain In particular, the Financial Handbook requires governors, including sponsor governors, to make formal declarations of their interests in external businesses and to withdraw from any discussions regarding potential contracting with that business.

In addition to any advice—or indeed directions—which the Department may give to academy trusts in relation to the procurement of goods and services, the law also precludes the payment of any charitable trustee unless and to the extent that legal authority for that payment is given in the charity's governing documents, or otherwise granted by a court or the Charity Commission.

Advice and guidance is also provided through the designated Project Lead within the Department and academies must also comply with the Public Contract Regulations 2006.

The Department cannot waive rules relating to the letting of contracts by academies, and does not keep a record of contracts that each academy enters into. However, academies are obliged by law to lodge their accounts with the Charity Commission and Companies House each year and these records are open to public scrutiny.