The National Audit Office has issued an “adverse opinion” on the accounts of the Department for Education (DfE), saying they are “not true and fair”.
The public spending watchdog says the level of error in the department’s financial statements is “pervasive”.
Since 2012-13, the DfE has consolidated the accounts of all academies with its own and that of its executive agencies.
As academies have a different reporting period, this has made it hard to make sense of the figures, the NAO says.
NAO chief executive Amyas Morse said that the inability of the department to provide statements that gave a “true and fair view” of the financial activity of its organisations meant it was not meeting the requirements of Parliament.
“I have provided an adverse opinion on the group financial statements, concluding that they are not true and fair and that the level of error I have identified is both material and pervasive,” he says in the report.
The watchdog says that problems have arisen because the DfE has had to combine the accounts of more than 2,500 organisations – including academy trusts collectively running 3,905 individual academies – its own statements and that of its executive agencies.
To add to the confusion, the DfE has a different reporting period to academy trusts – the department has to produce its statements by the end of March, whereas the trusts’ reporting period runs until 31 August, the end of the school year.
This has left the department facing a significant challenge in preparing and providing accounts that give a fair and true reflection of the financial activity across all bodies over the 12 months and the financial position at the end of the year, the report says.
Mr Morse said: “I recognise the importance of not placing unnecessary additional burdens on the academy sector.
“But the inability of the Department for Education to prepare financial statements providing a true and fair view of financial activity by its group of bodies means that it is not meeting the accountability requirements of Parliament.
“In particular, I believe that, if the challenge posed by consolidating the accounts of so many bodies and the fact that so many have a different reporting period is to be surmounted, the department and Treasury need to work together to find a solution.”
A DfE spokesman said: “We are pleased the NAO has found no material inaccuracies in the financial statements of the department, the EFA and the 3,905 academy trusts included in this report.
“However consolidating the accounts of thousands of academies is an enormous task – a complex procedure and the largest of its kind carried out in the UK – and we recognise the issues identified by the NAO with this process. We take the concerns very seriously.
Shadow education secretary Tristram Hunt said: “This is a straightforward, open-and-shut-case of incompetence by David Cameron’s government.
“The accounts reflect serious management and leadership failings at the Department for Education that go all the way to the top.
“The findings in the accounts raise very serious questions about the ability of ministers to run the department.”