Academies Financial Handbook 2015

The annual reissue of the Academies Financial Handbook, effective from 1 September, continues the steady flow of additional requirements for academies

The updated handbook (available here), foreword and other messages coming from DfE confirm an ever more sharpening focus on improving governance and maintaining financial stability. 

Changes in the revised handbook make reference to the following:

1. A watch on de-facto trustees or shadow directors, those individuals or organisations who effectively pull the string either directly through governors unquestioningly following their lead or indirectly through close relationships with head teachers and principals which side steps the operation of the trust board. 

2. Financial notices to improve can be issued due to governance concerns.  Financial concerns may be the product of weak governance.  However "Trojan Horse" scenarios do not readily fit within the existing financial control mechanisms in the academy funding agreement.  This change represents a strengthening of the position of the Secretary of State in dealing with a wide range of concerns that can effect academy trusts (in particular but not exclusively) where existing control mechanisms may be seen to be lacking. 

3. A reminder, seeking to make clear, that:

(a) accounting officers must adhere to the Seven Principles of Public Life;
(b) academy trusts must make certain information, including governance arrangements, available on their websites (see our article here for further guidance on this);
(c) the EFA is to be notified of the appointment, or removal, of members and trustees.  The Secretary of State retains a discretion to object to any appointment, which in any event must satisfy the eligibility and procedural requirements set out in academy trusts' governing documents (the articles of association). 

The Academies Financial Handbook does include some financial updates including:

(i) removal of the requirement to complete a separate value for money statement, which is now incorporated into the governance statement;

(ii) Limits on the authority for academy trusts to write off debts or enter into liabilities without Secretary of State consent.  Academy trusts should take note that most contracts include some element of an indemnity for example against losses arising for breach, and in the case of grant funding can provide for claw back (e.g. where receipts and records are not properly maintained), such that the potential financial liabilities will exceed the delegated limits; and

(iii) Confirmation that academy trusts with an annual income in excess of £50million must have a dedicated audit committee.

September 2015