New Academies Financial Handbook 2019 – everything you need to know

The 2019 Academies Financial Handbook has been published by ESFA. This version will come into effect on 1 September 2019, replacing the 2018 version.

Given ESFA’s focus over the last year, the changes and clarifications within the handbook are not unexpected and reflect the departments (and particularly Lord Agnew)’s belief that good governance and strong financial management are critical to an academy trust’s success.

Governance

The 2019 Academies Financial continues to emphasize the need for high standards of governance to be applied by all those involved in the management of academies. As expected, there are several changes to this edition which focus on this.

  • The handbook emphasizes the need for Trustees ensure that robust governance is applied, through:
  1. Strategic leadership
  2. Accountability
  3. People with the right skills
  4. Clearly defined roles and responsibilities
  5. Compliance with statutory and contractual requirements
  6. Evaluation of governance
  • Appointing a clerk to the board is a new ‘should’ recommendation of the handbook, which emphasises the value that an appropriately experienced and knowledgeable clerk can bring to the trust.
  • Direct contract details for all members, trustees, the Accounting Officer and the Chief Financial Register are required to be added into the ‘Get Information About School’ (GIAS) register.
  • The board should act quickly where there are concerns over financial performance and have the financial skills to do so.
  • Trusts with over 250 employees are reminded of their responsibility to publish gender pay gap details on the government website, as well as the Trust’s own website.
  • Audited accounts must be provided to all the Trust’s members.
  • Trusts are reminded that they must be aware of the limits of their delegated powers and seek ESFA approval for any transactions which fall outside these powers.

Internal Scrutiny

  • All trusts must have a programme of internal scrutiny in place, to provide independent assurance to the board.
  • It is the trust’s responsibility to identify on a risk-basis, with reference to the risk register the areas to be reviewed each year.
  • Oversight must ensure that information submitted to ESFA which affects funding is accurate and complies with funding criteria.
  • A short report of work undertaken should be provided to the audit committee (or committee undertaking the functions of the audit committee) on a regular basis. In addition, an annual summary should be provided to the audit committee, and this should also be submitted to ESFA with the annual accounts. This will first apply from December 2020, in relation to the 2019/20 academic year.

Findings of internal scrutiny reports must be made available to all trustees, and not just the audit committee.

Executive (Senior Management) Pay

  • This continues to be a contentious area, decisions regarding executive pay should consider not just salary, but any other remuneration, such as pension contributions. Decisions taken should be taken having followed a robust, evidence-based process considering each individual’s role and responsibilities. The board must ensure that their approach is transparent, proportionate and justifiable. Details of considerations can be found at AFH 2.31.
  • All senior managers with significant financial responsibilities must be included on the Trust’s payroll. Non-compliance with this requirement may result in a fine from HM Treasury.

Budgeting

  • Budgeting requirements have been expanded to include consideration of estate management, particularly important for larger trusts. AFH 2.14 refers to a number of useful guides which can aid trusts with this responsibility

Risk Register

  • It is now a ‘must’ requirement for trusts to maintain a risk register

Whistle Blowing

  • Trusts are reminded that they must have a whistle blowing policy in place which has been agreed by Trustees. Trusts must ensure that staff are aware of the whistleblowing process and how their concerns will be managed.

Clarifications

  • Management accounts should include the following; income and expenditure account, balance sheet, variation to budget report and cash flow. These must be prepared monthly and shared with the chair of trustees every month. All other trustees must receive management accounts at least six times per year.
  • Related party transactions must be notified to ESFA before they occur. In addition, permission must be obtained from ESFA before a related party transaction occurs in any of the following instances:
  • A contract or other agreement exceeds £20,000
  • A contract or other agreement of any value that would mean the cumulative value of contracts and other agreements with the related party exceeds, or continues to exceed, £20,000, in the same financial year ending 31 August.
  • The above do not include salaries and other payments made by a trust to a person under a contract of employment through the trust’s payroll.
  • The handbook clarifies the Secretary of States powers where there are concerns of an individual involved with the management of a trust. These include, but are not limited to:
  • Requiring the trust to remove the individual from their position and preventing them from undertaking such a role in the future. In addition, the Secretary of State may also refer trusts to the Charity Commission or Insolvency Service, where considered appropriate.

Financial Notice to Improve

  • Trusts which receive a financial notice to improve are now required to publish this on their website. Trusts in this position have a number of their delegated authorities revoked, and details of these can be found in AFH 6.17.

ESFA are seeking to ensure that academies are achieving the high standards of governance and financial management expected by public bodies. The changes and clarifications to this version of the handbook are a clear statement of this intent, and therefore Trust’s need to ensure that their processes and procedures meet these standards.

If you’d like to discuss the implications for your trust, contact Brian Laidlaw or Marc Breeze on 0191 285 0321 or email advice@taitwalker.co.uk