How will changes to the Academies Handbook affect trust governance and finances?

Anyone involved in the running of an academy trust will have been waiting for the publication of the Academies Financial Handbook 2019.

Many will have been expecting some potentially significant changes in the handbook – the ‘bible’ which academies must comply with if they are to continue to receive funding – given the publicised views of Schools Minister Lord Agnew on the need for stronger governance.

The Handbook was published at the end of June by the Education & Skills Funding Agency (EFSA), and for those anticipating change, it doesn’t disappoint. Introducing a raft of changes, Lord Agnew repeats his belief in the need for organisations to have “a strong system of financial management and control”, and the importance of both “regular internal scrutiny” and “oversight and appraisal” particularly regarding executive pay. The Handbook also continues to explain the “key features of effective governance”.

The Handbook has reiterated the need for trustees to “apply the highest standards of conduct and ensure robust governance”, setting out the following criteria:

• strategic leadership that sets and champions vision, ethos and strategy
• accountability that drives up educational standards and financial performance
• people with the right skills, experience, qualities and capacity
• structures that reinforce clearly defined roles and responsibilities
• compliance with statutory and contractual requirements
• evaluation of governance to monitor and improve its quality and impact.

It states that internal scrutiny must focus on:

• evaluating the suitability of, and level of compliance with, financial and other controls. This includes assessing whether procedures are designed effectively and efficiently and checking transactions to confirm whether agreed procedures have been followed.
• offering advice and insight to the board on how to address weaknesses in financial and other controls, acting as a catalyst for improvement, but without diluting management’s responsibility for the day-to-day running of the trust.
• ensuring all categories of risk are being adequately identified, reported and managed.

The changes also include the need for a new annual internal scrutiny report to be filed with the ESFA every year, starting from the year ended 31 August 2020. This means the first report for the 2019-2020 period will need to be filed in December 2020, and trusts will need to start preparing for that reporting process as soon as possible.

Other key messages highlighted in the Handbook include:

• The need for monthly management accounts setting out the trust’s financial performance and position, to be shared with the chair of trustees every month, with the other trustees six times a year. This isn’t a new requirement but it is one which has been cited as impractical by a number of trusts since being introduced.
• The need for annual audited accounts to be submitted to the ESFA by 31 December, available online by 31 January, and provided to all members.
• The range of financial transactions for which trusts must seek prior approval from the EFSA, and those which require separate disclosure in the annual accounts.
• The need for agreed whistleblowing procedures, and the importance of maintaining a risk register.

At Price Bailey, we act for over 80 academy trusts across East Anglia, the eastern home counties and London, and for every type of establishment – from small rural primary schools to large inner-city comprehensives and faith schools, covering single schools through to large established multi-academy trusts.

To find out more about what these changes could mean for your academy, and how our experts can help to ensure you comply with the new ESFA Handbook, contact our Academies team using the form below.