A Public Accounts Committee report out today has criticised the government’s continued commitment to its multi-million pound contract with Learndirect.

The report shows that the Education and Skills Funding Agency and its predecessor the Skills Funding Agency gave Learndirect almost £500m in the academic years from 2013-14 to 2016-17.

However, the PAC also notes that the quality of Learndirect’s apprenticeships have been in steady decline – Ofsted gave it a rating of ‘good’ in March 2013 but downgraded this to the lowest possible rating of ‘inadequate’ in March 2017.

Learndirect instigated a legal challenge challenging the ‘inadequate’ rating, which delayed the publication of Ofsted’s inspection report.

The Department for Education would normally cancel an ‘inadequate’ provider’s contract and withdraw funding immediately, but Learndirect warned that this would impact its 75,000 learners.

The government has since said it is ending Learndirect’s contract to provide apprenticeships and adult education.

Learndirect received £121m from central government in 2016-17 and is expected to get another £105m in the current financial year, the PAC pointed out.

PAC chair Meg Hillier said: “It cannot be right that individual contractors should command such large sums of public money regardless of their performance.

“No commercial provider should be allowed to become so essential to the delivery of services that it cannot be allowed to fail.”

At January 2018 the Department had converted 6,996 maintained schools to academies. The process has cost it an estimated £745m since 2010-11, of which £81m was spent in 2016-17.

The NAO report – Converting maintained schools to academies – highlighted how a much higher proportion of secondary schools than primary schools were academies. Some 72% of secondary schools, including free schools, were academies compared with 27% of primary schools.

“This leaves local authorities with responsibility for most primary schools and specialist providers, but few secondary schools. In areas where a high proportion of secondary schools are academies, it is more difficult for local authorities to take an integrated, whole-system approach to the education of children in their area,” the NAO warned.

The watchdog also found significant geographical variation in the proportion of schools that were now academies. This varied across England, from 93% in Bromley to 6% in Lancashire, Lewisham and North Tyneside. There were 23 local authorities (15%) that had 150 or more maintained schools, while 55 local authorities (37%) had fewer than 50 maintained schools, it said.

The report also found that:

Almost two-thirds of schools rated as inadequate by Ofsted and directed to convert, with the support of a sponsor, took longer than the nine months the DfE says it should take to open as academies. The NAO estimated that, at January 2018, there were 37,000 children in maintained schools that Ofsted had rated as inadequate more than nine months before but that had not yet opened as academies.

In the latest sign of the financial pressures now on the nation’s schools, the auditors of one operator that oversees 21 schools raised concerns over its ability to keep operating after it posted a £2.5m loss last year.

The revelations follow an investigation in last week’s Observer that found that more than half of the biggest multi-academy chains (MATs) had issued warnings about funding, citing pay, staffing levels, building maintenance and mounting deficits. It has now emerged that some smaller trusts have had to ask for cash advances from the state to stay afloat.

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The Birmingham-based Academy Transformation Trust (ATT), which received funding from the government of £59m last year and operates 21 schools educating nearly 12,000 pupils, is one of a number of chains that appear to be relying on future government handouts to keep functioning.

In a note on its 2016-17 annual accounts, the ATT trustees admit: “While the trust’s balance sheet remains solvent, the net position of income funds shows the trust to have a deficit of £2.513m. The trust is also forecasting a further reduction in funds in 2017-18.

“The trust has been taking action to address this position and is in advanced discussion with the Education [and] Skills Funding Agency [ESFA] to provide an advance to ensure appropriate cashflow during 2017-18 and beyond.”

An auditor adds: “A material uncertainty exists that may cast significant doubt on the trust’s ability to continue as a going concern.” It states that ATT’s financial position had been “worsening throughout the year”, and that its board of trustees had not been sufficiently aware of this because of “failings in the trust’s financial reporting and forecasting procedures”.

The Rodillian Multi Academy Trust, in West Yorkshire, disclosed that it also needs a “cash advance … to be able to operate effectively”. The trust, which operates four schools, reported a deficit of £1.5m last year.

“In common with all state-funded schools the [trust] faces considerable pressures on funding,” its accounts state. “The trust took on two schools that had low pupil numbers, were not financially strong and needed a managed staff reduction to address the inherited over-staffing.

“Managing the cash flow month to month is difficult and … the level of creditors has become uncomfortably high. A business case is being prepared to request a repayable cash advance from the ESFA. The ESFA acknowledge that the trust requires a cash advance to be able to operate effectively.”

Andy Goulty, Rodillian’s chief executive, told the Observer that he had come under pressure to take on new schools and had suffered as a result. “It was missionary work really to go in to a community like my own and turn it round. It has been turned around. However, in hindsight we probably wouldn’t take it on. As things have got tighter over the years, we have not had the resource. The government keeps saying that more money is going into schools. Well, yes, it is, but we are paying out more in pensions, national insurance. What is being spent on the kids is less and less.”

London-based Chapel Street Community Schools Trust, which runs five free schools and two academies, saw it post a deficit of £1.6m and state that it is depending on the government providing cash “beyond the normal funding arrangements”.

Its accounts say: “The trust places considerable reliance on continued government funding. This is likely to remain unchanged in terms of the funding per pupil rate, despite pay, pension and general inflation pressures. This increases the risk of deficits.”

Plymouth CAST is predicting that more than 90% of its schools would be in deficit by next year. Its auditors stated: “A material uncertainty exists that may cast significant doubt on the academy trust’s ability to continue as a going concern.” The trust reported a £1.54m deficit for the year. It referred itself to the body that oversees school funding last year.

ATT said that a recovery plan has been developed “which shows the trust returning to in-year surplus in 2018-19 and overall surplus no later than 2021 … The trust [had] over £3m in the bank at 31 August 2017.” Rodillian said it had a plan to deliver a surplus in 2017-18 and a significant surplus in 2018-19.

Chapel Street trust said it had experienced some historical financial difficulties related to setting up new schools, but had good educational outcomes. It said its accounts made clear it was on “a sounder financial footing”.