Academy Related Party Transactions
From 1 April 2019, academies will be required to comply with additional requirements to declare, and in some instances receive approval from ESFA before a related party transaction takes place.
The requirements were included in the 2018 Academies’ Financial Handbook, and ESFA has now issued guidance regarding implementation. The requirements relate to new agreements made with related parties on or after 1 April 2019. The requirements do not apply to income received from a related party, ESFA intends to review its approach to these transactions prior to 1 September 2019.
The new guidelines have two requirements:
Firstly, before to entering into a new agreement with a related party, Academies must inform ESFA of their intention;
Secondly, where the agreement is for
- A single contract or agreement in excess of £20,000; or
- A contract or agreement of any value where the total value of contracts and agreements with that related party is in excess of £20,000 in the financial year;
The Trust must obtain permission from ESFA before entering into the contract or agreement.
Trusts should complete an online form which is found within their IDAMS account, in order to notify or obtain approval from ESFA. The online form must be completed in one step, as it cannot be saved and updated at a later point. Trusts will be required to enter details of their supplier, including name, address and Company Number. They will also be required to confirm that an ‘at cost’ assurance statement has been received from the supplier, who must be included within the Trust’s register of interests. Trusts will need to provide evidence of the following:
- How the related party transaction was agreed;
- That the Trust’s procurement policy was followed;
- That the Trust tested the wider market before choosing a related party supplier; and
- How conflicts of interests have been managed.
A copy of the agreement or proposed contract must also be submitted.
If sufficient evidence and information have been provided, ESFA will make an approval decision within 10 working days. We recommend that approval is sought as early as possible to avoid any delays in receiving goods or services.
ESFA note that where faith schools receive services which can only be delivered by the Diocese and the services provided relate to functions which are ‘fundamental to the religious character and ethos of the school’, these services are deemed to be ‘at cost’ and whilst they should be declared to ESFA, prior approval is not required.
The new requirements seek to provide transparency over an area which has continued to cause controversy and make headlines. It’s more important than ever for Trusts to ensure that the Register of Business and Pecuniary Interests is always up to date, and that policies and procedures are followed, with documentation retained to evidence this.
If you would like to find out how we can support your Trust in meeting ESFA requirements, please contact the following specialists:
Brian Laidlaw Business Services Partner 0191 285 0321 firstname.lastname@example.org
Beth Ramsden Business Services Manager 0191 285 0321 email@example.com