Academy trust praised by Cameron and Gove in ‘serious breach’ of financial guidelines, investigation finds

An academy trust praised by David Cameron and two Conservative education secretaries has been warned to improve its practices, after an investigation discovered it was in “serious breach” of guidelines.

Perry Beeches academy trust, which runs five secondary schools in Birmingham, and other companies linked to some of its senior administrators were flagged up as a cause for concern due to potential conflicts of interest, according to a government report. The revelations comes after ministers announced this month that all schools are to become academies by 2022.

The Department for Education told the trust earlier this month it would be required to open up its financial transactions to the Government until it made sufficient improvements.

The report said Liam Nolan, the trust’s chief executive, received a “second salary”. He received payments of at least £160,000 over two years – not disclosed in financial statements – on top of his annual payroll salary of £120,000. The report also found there to be issues with the number of pupils declared as eligible for free school meals.

Mr Nolan was previously reported to have claimed he meited a pay rise because his £120,000 salary was “low” compared with those in other industries.

He faced calls to resign last year after one of the Perry Beeches schools was put in special measures. The trust is due to open another free school next year.

Nic Dakin, Labour’s shadow minister for schools, told The Guardian: “Parents will be deeply worried that this government has completely failed to put in place the appropriate checks over academy chain funding decisions, prioritising converting schools into academies over school standards and the protection of public money.

“It is extremely concerning that so much taxpayer money is ending up in the pockets of academy chain directors and trustees. Labour will fiercely oppose this top-down, costly reorganisation of our schools, which nobody wants and schools don’t need, ensure there is proper oversight of all our schools, and put local parents and communities at the heart of decisions when it comes to their children’s schools.”

The Government’s report reveals the trust paid a firm called Nexus for services, which were then subcontracted to a firm run by the trust’s own accounting officer.

Due diligence found the trust’s chair of governors (CoG) had “joint business interests with the primary director of Nexus” and that “a review of declarations of interest confirmed the CoG did not disclose these on the [2014] annual declaration.” The trust had spent nearly £1.3m with Nexus over two years “without a written contract or formal procurement”.

It warned: “Trusts should consider carefully whether to include the interests of other individuals in the register of interests.”

In a letter earlier this month, the government’s Education Funding Agency said there had been “serious breaches of the academies financial handbook including serious concerns about financial management, control and governance”.

In 2013, the prime minister said Perry Beeches’ first academy was “one of the most successful comprehensive schools ever in Britain”. Current education secretary Nicky Morgan last year described Perry Beeches as an example of schools achieving "truly extraordinary outcomes for young people".

Former education secretary Michael Gove told the 2012 Conservative party conference: “There are some amazing schools in Birmingham, there are some great independent schools, there are some great grammar schools, but I have to say the best schools in Birmingham are Perry Beeches I and Perry Beeches II.”

A Department for Education spokeswoman said in a statement: "The Trust has already put in place an action plan and is working with us to urgently fix the weaknesses we found.

"We will monitor progress closely, and if we don't see significant improvement we will not hesitate to take further action."