24. The authority is responsible for managing the PFI contract until expiry, at which point it inherits the assets.54 In some instances, ownership of the PFI assets can transfer between different public bodies before the contract expires, creating a potential conflict between those who will own the assets in the future, and those who are responsible for their management now. We asked the IPA how this was expected to work, particularly in areas such as the education sector. For example, an authority-usually the local authority-signed a PFI contract for a school and remained responsible for the contract until its expiry. The original contract would have stated that, on expiry, ownership of the school passed to the local authority. But in some cases, during the contract, the school was converted to an academy run by an independent trust funded by the Department for Education rather than the local authority. The NAO found that a local authority could find itself in a position that it still had to manage the PFI contract, but on expiry, the school would be transferred over to the academy trust.55
25. Over 300 PFI schools have been converted to academies. We asked whether local authorities might be incentivised to protect their budgets by limiting expenditure on managing the contract rather than maintaining the assets as they would not own them at contract expiry. The IPA accepted that this was a very complex issue and a very real risk which needed clarification. It explained that the Department for Education, which had one of the "more resourced and capable PFI teams" was "highly focused" on resolving this issue. In the example of schools, the IPA asserted that there was "every incentive to ensure that the school is in a good condition and well maintained" and that it thought the interests of academies, local authorities and the Department for Education were aligned.56 We asked the IPA whether academies were nonetheless at risk of inheriting liabilities in the form of large rectification bills to bring the assets back to a useable condition should the authority not manage the contract properly. The IPA told us that it did not expect these to be large liabilities.57
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54 The ownership of assets at expiry will be dictated by the contract. Assets will either fully or partially transfer to the public sector or remain with the private sector. In most case the authority will inherit the assets on expiry.
55 Qq 55, 63; C&AG's Report, paras 9, 3.9
56 Q 51-52, 56-57, 64; C&AG's Report, para 3.9
57 Q 54