2 Jul 2012

How ‘tax-free’ exam boards profit as schools pay more

Channel 4 News lifts the lid on a multimillion pound exam industry, revealing the extent exam boards profit from increased school fees, despite claiming tax-free charitable status.

After weeks of damning evidence, a House of Commons select committee will on Tuesday deliver its verdict on the effectiveness of the country’s secondary level exams system.

The investigation follows revelations by Channel 4 News that potentially thousands of children received the wrong results in their A-level and GCSE exams last year because of examiners adding up marks incorrectly.

But despite mounting criticism, schools are being forced to pay steadily increasing fees for exam boards’ services. According to the latest Ofqual figures, schools in England paid £328m in exam fees last year – a 113 per cent increase on ten years ago. Fees went up by 8.5 per cent last year alone and spending on exams is now the second largest expenditure in secondary schools.

Ofqual says the increase can be attributed to more pupils taking more exams and an increase in re-sits. The exam regulator also says that “reforms are underway” to try and reduce school spending on GCSE resits, and changes have also been proposed for A-levels.

Cost to schools

But the impact of the current system for schools can be hugely significant. For example at Phoenix High School in west London, the spending on exam fees has increased from £60,000 to £160,000 in the course of six years, says Headteacher Sir William Atkinson.

Taking inflation into account, he says that is around £70,000 out of his budget – money which could otherwise have been spent on recruiting two new teachers or paying to fix the leaking roof or replace the inefficient boiler.

Mr Atkinson believes that schools like his are at the mercy of exam boards who are operating as a cartel.

In response, the exam boards said they do not fix prices and operate competitively.

Read more: Exam remarking explained Q&A

How 'tax-free' exam boards profit as schools pay more (G)

Increased profits

On the receiving end of the increased cost are the exam boards. Latest figures show Edexcel had an annual turnover of £270m, while AQA had £159m and OCR, £115m. All are making millions in profits.

Yet while Edexcel is the only overtly commercial company, the other two big operators, AQA and OCR, operate as charities. AQA says it is a charity because its “mission is to do good in education” – offering a broad range of A-levels and GCSE exams. OCR has charity status because it is part of Cambridge University and because “the provision of examination services for the purpose of recognising student achievement is a charitable activity”.

The chief executives of AQA and OCR earn £182,000 and £170,000 respectively. The Association of Chief Executives of Voluntary Organisations (ACEVO) which represents chief executives in the voluntary sector, says the average pay for a CEO in the industry is £60,000. Even in the biggest charities where the CEO is managing thousands of staff and large budgets, the benchmark is around £125,000.

Read more: Whistleblower suspended for revealing exam mark mistakes

Should exam boards have charitable status?

Now John Bangs, the NUT‘s former head of education is calling on the government to investigate whether exam boards should still be entitled to charitable status – something an organisation can claim if it is involved in the “advancement of education”, under a law dating back to the 1601 Charities Act.

But charity commission guidance also says that charities must “provide public benefit” and “have a duty to make provision for the poor”.

The issue, says Mr Bangs, is that exam boards have been transformed into big businesses, operating a multi-million pound industry. The schools are effectively their customers, and because some schools are richer than others, they end up having a better service. For example they can afford to have huge swathes of papers remarked if they feel pupils have been poorly marked.

Charity lawyer Jonathan Silverman told Channel 4 News there is evidence that less well resourced schools are being discriminated against. He suggests that exam boards consider a fee structure to create a more level playing field, allowing poorer schools to pay reduced fees for exams and remarks, and perhaps using some of their profits and reserve funds to do so.

However AQA Executive Andrew Hall told Channel 4 News: “It’s not for schools to think about how schools are funded – that’s a matter for central government.”

Ofqual added: “We are keeping fees under review and will take action, including working with the competition authorities, to secure value for money where there is evidence of excessive charges or anti-competitive behaviour.”

The cost of remarking

Despite the increased cost to schools, there has been a number of high profile incidents where exam boards have made errors in marking, giving pupils the wrong grade. But state schools feel powerless when mistakes are made, says English teacher Francis Gilbert.

He says wrong results, even if eventually corrected, are hugely demoralising for staff and students. And at £30 to £40 for each script remark, it is a huge gamble with hard pressed funds. “If you’re a wealthy school like Eton or Harrow, you can send a whole batch back for remarking and it’s a drop in the ocean,” he told Channel 4 News.

But the AQA’s Mr Hall says he isn’t aware of any difference between the number of state and private schools asking for remarks, and added that it is “absolutely not the case” that schools are prevented from asking for remarks because of the additional costs.

And while Education Secretary Michael Gove recently announced plans to scrap GCSEs in an attempt to try and improve what he sees as a dumbed down system, AQA Mr Hall sees no problem with the current system: “Our GCSE’s are as good as anybody else’s the world.”