DfE slammed for refusal to investigate defunct Manchester UTC as paperwork fails to materialise

Auditors were unable to properly scrutinise the finances of a failed University Technical College because important data was missing, but the government chose not to investigate this issue.

Accounts for the Greater Manchester UTC for 2016-17, finally published last month and over a year late, reveal that auditors gave a rare “disclaimer of opinion” on the state of the UTC’s finances.

This was because auditors couldn’t get their hands on data on income and expenditure, the school’s balance sheet or a statement of cashflow.

The UTC, set up by venture capitalist and Bright Tribe founder Michael Dwan, closed in September 2017, just three years after it opened. It had failed to attract enough pupils to be financially sustainable.

In the accounts, the auditors say they were “unable to obtain all of the information and explanations requested” following the departure of trustees and leaders during the 2016-17 year.

The documents also show the UTC closed with a £526,000 deficit, which had to be paid off by the government.

A “disclaimer of opinion” is one of four types of report issued by external auditors when looking at company accounts. It means a firm’s financial status cannot be determined. Such reports are rare in the academies sector; just three were issued in 2015-16 and 2016-17.

However, despite the rarity of such an audit outcome, and despite the fact the ESFA has previously investigated academy trusts and schools on the basis of internal financial information or concerns about potential financial irregularities, the DfE told FE Week no investigation was carried out in this case.

Lucy Powell, MP for Greater Manchester and a member of the parliamentary education committee, told FE Week: “The failure to supply adequate accounting information to the auditors is really concerning and is a further indictment on the management and oversight of this school.

“It beggars belief that the DfE has failed to undertake an investigation into this situation, which yet again calls into question the oversight and accountability of all these new fledgling schools. Large sums of public money were at stake and the DfE and EFSA need much better systems to account for its expenditure.”

She added a “catalogue of errors from the DfE, the ESFA and the school leadership” had contributed to the UTC’s downfall.

FE Week understands the ESFA must take into account the cost of investigations into academies, and may have chosen not to do so in this case because it was already due to close.

The UTC opened in September 2014, but was already showing signs of struggling less than two years later.

A flurry of directors resigned from the UTC in 2016. Michael Dwan and his brother Andrew left in November, but North Consulting Limited, a company owned by Michael Dwan, remained as the UTC’s company secretary until January 20, 2017.

Michael Dwan also remained as a controlling member of the trust until that date, along with the Bright Tribe Trust and University of Bolton.

A spokesperson for Dwan claimed he had resigned in July 2016, but continued to offer “some support to facilitate the transition”, which was given “at the request of the Department for Education”.

“He did not at any stage have any day-to-day operational responsibilities and was never made aware of any issues with the accounts or a lack of information. He was never approached for any documentation.”

A DfE spokesperson insisted the accounts “were signed off by the trust and the auditors”, but acknowledged the disclaimer of opinion judgment.

“New trustees were appointed in February 2017 to oversee the closure of Greater Manchester Sustainable Engineering UTC. The parent trust is still in place, pending all actions being completed.”