Suppliers in administration - are you at risk?

29th August 2019

As academy trusts you will have a large number of suppliers and outside agencies that you work with. Many of these will be key to running your school, for example the building contractor delivering your capital projects or your ICT leasing provider. What happens however if there is an issue with your key suppliers?

This is a key issue facing some schools right now, with it being recently revealed that Gaia Technologies have entered administration. Gaia Technologies were suppliers of ICT equipment under leases to over 500 educations customers (per their website) and so their administration could cause problems for a number of customers. More information can be found on the Schools Week website.

Depending on how you have procured ICT equipment, you may not actually own it. In the case of an operating lease (and remember Academy Trusts are not allowed finance leases), the ownership of the assets remain with the lease company. In the case where the lease company enters administration, the assets may therefore need to be taken back from schools and sold by the administrators to settle liabilities. This could leave schools with a lack of suitable IT for the new year. 

What can you do to protect yourselves?
Firstly it is really important to complete your own checks and due diligence on suppliers. Just because they are on a government approved framework does not automatically mean that due diligence checks have been completed on your behalf. The same applies for ensuring that they offer value for money and the service that you need. You need to be able to satisfy yourself. Depending on how reliant you are on a supplier will dictate the extent of due diligence that you may complete. For instance a supplier for a one time, low value purchase, very little will be considered necessary. If however you are procuring significant recurring services, for example catering services, IT equipment, or a large capital project you will want to complete more checks. For instance, checking Companies House for filing history, asking some of the following questions:

  • Do they file documents on time?
  • What is their credit rating?
  • Have there been any winding up orders?
  • What financial position do the latest accounts show? Are they audited? If so has the auditor highlighted any points in the audit report?
  • Do the accounts make reference to going concern, or highlight any issues?

Alongside all of the above points, it can be linked to your risk management policies. For example for a capital project, do you also take out additional insurance, or agree a payment plan such that your risk is largely mitigated?

These are all areas for considering, and simply assuming that your suppliers will not run into financial difficulties could cause your Trust problems.

If you would like to discuss due diligence or risk management, please contact us and we will be happy to help.

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