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The Department for Education and Employment took reasonable steps to mitigate the financial risks that were inherent in the new Education Action Zones programme, according to a National Audit Office report today. The report warns, however, that the DfEE and the zones must remain vigilant to avoid financial irregularities or improprieties which could detract from the zones’ educational achievements.

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The report, presented to Parliament today by Sir John Bourn, head of the NAO, contains the results of the NAO’s examination of the financial statements produced by the first 25 Education Action Zones in their initial period of operation in 1998-99. This examination was not concerned with the effectiveness of the zones in raising local education standards.

Sir John’s main conclusions were as follows.

  • A key feature of the successful implementation of the programme was the joined up working between the DfEE, their consultants PricewaterhouseCoopers and the NAO itself which gave advice on issues such as parliamentary accountability, preparation of charity accounts and VAT liability.
  • There were risks from the outset in paying substantial sums to very small, newly formed bodies (eg., impropriety, poor value for money and inadequate accounting). To counter this, the department phased the introduction of the zones, to learn lessons and establish good practice for later stages, and set ground rules for the zones’ financial operations.
  • With only one or two full-time staff in post, many zones experienced difficulty in meeting all the department’s initial requirements and expectations and, therefore, some zones were spending large sums of public money before they had sound financial controls in place. The department responded positively to these teething troubles with the result that no major irregularities or improprieties occurred.
  • There are a number of examples of good practice that can be learned from the establishment of the zones and wider lessons – principally, that trustees must understand their responsibilities, secure purchasing arrangements that are competitive and proper, and account for grants made.

"I am glad that we are able to provide positive assurance about the way that the Department for Education and Employment handled the establishment of these new charitable bodies. Innovation such as the action zones programme carries risks and the department has taken the right steps to mitigate the financial risks in particular.

"The wider lessons learned from the establishment of the zones can be applied to other government programmes involving the setting up of innovative new bodies."

Sir John

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