Academy Trust Handbook 2021 – What’s New?

The latest Academies Financial Handbook, now called the Academy Trust Handbook, has been published. We look here at the key changes.

The latest revision to the Academies Financial Handbook, now called the Academy Trust Handbook, was published on 16^th June 2021 and takes effect from 1^st September 2021.

The new edition is available here and:

• affirms the aspiration for all schools to be part of ‘a confident and successful multi-academy trust’;

• cites existing duties (not previously recorded in the Handbook) to provide ‘close to a ‘one stop shop’ for trustees, local governors and leaders’; and

• includes new provisions ranging from off-payroll arrangements, senior executive leaders and special severance payments, to the suitability of members, cybercrime, and the provision of information during an ESFA investigation.

The key changes are as follows.

Suitability of members

Section 1.4 confirms that academy trusts:

• must ensure their members are not subject to a direction under section 128 of the Education and Skills Act 2008 which prohibits individuals from taking part in academy trust management; and

• must not appoint a member who is subject to a section 128 direction.

Under section 128, the Department for Education (“DfE”) may direct that a person may not take part in the management of an independent education institution (such as an academy trust) or may only do so where specified by the direction. Such a direction may only be issued where the person:

• has been convicted, cautioned, found not guilty by insanity, or found to have a disability and to have committed the act charged against them, in each case in respect of an offence that is relevant to their suitability to take part in the management of an independent school (which, in the case of an academy trust, would include as a member, trustee or senior leader); or

• has engaged in conduct aimed at undermining the fundamental British values of democracy, the rule of law, individual liberty, and mutual respect and tolerance of those with different faiths and beliefs;
• has been found to be in breach of professional standards by a professional body; or
• has engaged in conduct that, in DfE’s opinion, makes them unsuitable to take part in the management of an independent school.

The current and some preceding editions of the DfE model single or master funding agreement already entitle the DfE to direct an academy trust to ensure a member (or trustee) resigns or is removed within 42 days in these circumstances, failing which the DfE may serve notice to terminate the funding agreement. The Handbook therefore builds on an existing contractual requirement for most academy trusts.

While section 128 directions are published on the DfE website, we recommend that declaration of eligibility forms for new members include confirmation they are not subject to a direction (or other grounds rendering them ineligible to be a member). Members should also be asked to renew that declaration at the start of each academic year. We can advise on your paperwork and procedures, if that would help.

The DfE may revoke or vary a direction on receiving new information or evidence of a material change in the person’s circumstances or on application by that person where:

• the relevant conviction, caution or finding has been quashed or become spent or protected under the Rehabilitation of Offenders Act 1974;

• 5 years have lapsed since the relevant finding; or

• they provide new information or evidence of a material change in their circumstances.

The person may also appeal to the First-tier Tribunal against a direction or a decision not to vary or revoke it, who may consider the appeal where the person is no longer convicted of an offence. Crucially, academy trusts may not appeal to the Tribunal.

Departure of the senior executive leader

Given the number of senior leaders planning to leave their position and the profession early, in some part fuelled by the pandemic, section 1.36 now advises that trustees should approach their Regional Schools Commissioner (“RSC”) in advance to discuss their structure and options where their senior executive leader is planning to leave. As before, the Handbook defines ‘should’ as ‘the minimum good practice which trusts should apply unless they can demonstrate that an alternative approach better suits their circumstances.’ The risk here is that, by informing the RSC, an academy trust may be vulnerable to scrutiny, intervention or re-brokerage by the RSC’s office. Given that local circumstances will seldom merit an alternate approach, which the RSC would likely challenge in any event, academy trusts will therefore need a robust structure and strategy in place for succession and recruitment. Academy trusts will also be served well by ensuring their governance and compliance is in order.

Special severance payments

Section 5.12 extends the existing provisions covering severance payments to employees outside statutory or contractual requirements when they leave employment (“special severance payments”).  Trusts will already be aware that such payments must be in the academy trust’s interests, justified and not exceed £50,000 without the prior written consent of the Education and Skills Funding Agency (“ESFA”).  The new Handbook now also requires academy trusts to obtain prior ESFA consent before making a staff severance payment where: 

Section 5.12 extends the existing provisions covering severance payments to employees outside statutory or contractual requirements when they leave employment (“special severance payments”).  Trusts will already be aware that such payments must be in the academy trust’s interests, justified and not exceed £50,000 without the prior written consent of the Education and Skills Funding Agency (“ESFA”).  The new Handbook now also requires academy trusts to obtain prior ESFA consent before making a staff severance payment where:

·        an exit package (including a special severance payment) is £100,000 or more; and/or

·        the employee earns over £150,000.

This will inevitably trigger the RSC’s interest in the structure and options regarding the departure of the senior executive leader which, as above, the RSC will want to discuss with the academy trust. Even if the trust believes it can demonstrate there are grounds for not informing the RSC of the departure, for which see above, it may find itself having to do so when it requests the ESFA’s prior consent. As above, it will therefore serve academy trusts well to have a robust structure and strategy for succession and recruitment strategy and ensure their governance and compliance is in order.

Publication of off-payroll arrangements

As before, the Handbook requires academy trusts to publish executive pay exceeding £100,000 (in £10,000 bandings) on their website. However, section 2.32 now also requires trusts to publish off-payroll arrangement with anyone who is not an employee where the amount paid by the trust for that person’s work exceeds £100,000. Off-payroll arrangements have been out of favour with the ESFA for some time. The change is therefore a further tightening of the regulatory screw around these practices.

Cybercrime

Given the rise of cyber attacks in the sector, the Handbook now includes new sections 6.16 and 6.17 which require academy trusts to be aware of the risk, implement proportionate controls and take appropriate action where a cyber attack occurs. Crucially, an academy trust must obtain ESFA permission before paying a cyber ransom demand. The ESFA supports the National Crime Agency’s recommendation not to encourage, endorse, or condone payment while the Handbook includes the reminder that payment has no guarantee of restoring access or services and is likely to result in repeat incidents.

Third party information

Building on the ESFA’s regulatory armoury, section 6.5 now requires an academy trust, where the ESFA is investigating and has concerns about financial management and/or governance, to provide the ESFA - on request - with written authority giving permission for third parties to provide information and documentation about the trust to the ESFA or its agents. While this will serve as academy trust consent to the release of the information or documentation, it will also be prudent for trusts to include an equivalent provision, in new contracts or contract variations, requiring the contracting party to provide the ESFA with the information or documentation they hold, as requested by the ESFA or trust; and copy this to the trust so they are kept informed.

Notices to improve

‘Financial Notices to Improve’ are now referred to as ‘Notices to Improve’ given the ESFA’s practice of intervening in both financial management and governance issues.

External governance reviews

In this regard, section 1.32 emphasises the value of an external governance review before the board undertakes a significant change, for example before academy trust growth or where governance concerns arise, and routinely as part of a wider programme of self-assessment and improvement.

Information on the governance review service Wrigleys provide can be found here. If you would like to discuss how this service can help support and equip your academy trust, do get in touch.

Governance professional

In keeping with the increasing professionalisation of the clerking role, the Handbook now refers to the governance professional rather than the clerk. (section 1.49).

Senior executive leader as trustee

In terms of governance, section 1.23 prescribes that, from March 2022, any newly appointed senior executive leader (i.e. normally the chief executive in a multi academy trust or the headteacher/principal in a single academy trust) may only be appointed as a trustee if the members decide to appoint them, the senior executive leader agrees and the articles permit the appointment. The current and some preceding editions of the DfE model articles already include these provisions, in which case they already apply.

Parent representation

Meanwhile, section 1.11 confirms the existing requirement in the DfE model articles for a minimum of two parent trustees on the board unless, in the case of a multi academy trust, a minimum of two parents sit on each local governing body.

Scheme of delegation

Section 2.4 also reminds academy trusts that they should review their scheme of delegation annually and immediately following a change in management or organisational structure. This is ‘the minimum good practice which trusts should apply unless they can demonstrate that an alternative approach better suits their circumstances’, which is doubtful given the importance of regular and timely reviews for effective governance. Academy trusts should already be reviewing their scheme of delegation on this basis as this is established good practice.

Committee chairs

Academy trusts are further instructed that the chair of the audit and risk committee must not be the same as the chair of the finance committee (section 3.10). While new to the Handbook, this has been good practice for some time and so should already be in place. If it isn’t, personnel and terms of reference will need to be updated.

DBS certificates

Academy trusts are also reminded of their obligation to obtain enhanced Disclosure and Barring Service (“DBS”) certificates for staff, members, trustees, local governors and committee members (sections 1.52 and 1.52).

Safeguarding, health and safety and estates

The Handbook further reminds academy trusts of their existing obligations in safeguarding (section 1.15), health and safety (section 1.17) and estates management (section 1.20), such as to safeguard and promote the welfare of children, have regard to statutory safeguarding guidance and ensure the suitability of staff, supply staff, volunteers, contractors and proprietors. Academy trusts are also expected to manage their estate strategically and in a safe working condition.

Internal scrutiny

Meanwhile, section 3.15 clarifies the provision that internal scrutiny must not be performed by the trust’s accounting officer, chief financial officer or finance team by adding that this now includes the senior leadership team. This is established good practice and so should already be avoided. Where this isn’t the case, academy trusts will need to update their policies and procedures and their programme of work which they must report to the ESFA by 31^st December.

External audit

On the subject of audit, section 4.5 now advises that academy trusts should retender their external audit contract at least every five years. This is ‘the minimum good practice which trusts should apply unless they can demonstrate that an alternative approach better suits their circumstances’, for example where the trust is dissatisfied with their current auditor.

When evaluating tenders, trusts must consider the relevant points in section 4.17 which already apply to the work of the audit and risk committee and include the auditor’s effectiveness, resources, sector expertise, understanding of the academy trust and use of technology and their authority, knowledge and integrity.

Public inspection

Finally, section 2.51 reminds academy trusts that their funding agreement requires them to make available for public inspection

·        the agenda for every meeting of the trustees, local governing bodies and committees,

·        the approved minutes of each meeting and

·        any report, document or other paper considered at each meeting

but may exclude any material relating to:

·        a named teacher or other employee or proposed employee;

·        a named pupil or student at the academy, or candidate for admission or referral to it;

·        any matter which, by reason of its nature, the trustees are satisfied should remain confidential.

This should be routine practice for academy trusts, given that the obligation has been in the DfE model funding agreement for some time. However, its inclusion indicates that some trusts are not keeping their public records up to date. It is administrative errors of this kind that can attract the attention of the ESFA on a spot-check which, if found, may trigger a wider investigation and, depending on the wider circumstances, intervention. Academy trusts will therefore serve themselves well by ensuring routine obligations of this kind are complied with.

The governance review service provided by Wrigleys checks compliance in these areas to ensure your trust is secure. Further details are available here.

Summary

As usual, the changes included in the new Academy Trust Handbook cover the latest themes or concerns for the ESFA. Some of these build on previous editions. However, some of the changes reflect the current landscape, whether wrought by the pandemic or by the rise of cybercrime. Some things don’t change though, such as the aspiration for all schools to be part of ‘a confident and successful multi-academy trust’ which will continue to see resources targeted at multi academy trusts that fit the bill.

If you would like to discuss any aspect of this article further, please contact Graham Shaw  on 0113 244 6100. You can also keep up to date by following Wrigleys Education on Twitter here The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors