The role of the accounting officer – when the rubber hits the road

We look at the role of the accounting officer in ensuring their trust board complies with its regulatory and legal responsibilities.

With the ever-increasing policy and regulatory demands of the DfE and the ESFA, trust boards are under more pressure than ever to satisfy the raft of regulatory requirements while also acting in the best of interests of their trust and discharging their obligations under their articles of association and funding agreements. We look here at the key features of the role of the accounting officer, conventionally the chief executive officer in a multi academy trust, in keeping trust boards on the straight and narrow.

Assurance

Under section 1.38 of the Academy Trust Handbook (“ATH”), the accounting officer mustbe able to assure Parliament, and the public, of high standards of probity in the management of public funds. The accounting officer is personally responsible to Parliament, and ESFA’s accounting officer, for the trust’s financial resources (ATH 1.37).

Under section 4.13, the accounting officer is responsible to Parliament for ensuring

• the efficient and effective use of resources (value for money),
• public money is spent for the purposes intended by Parliament (regularity) and
• appropriate standards of conduct, behaviour and corporate governance are maintained (propriety).

The burden of responsibility on accounting officers is therefore not insignificant.

Trustees’ responsibility

However, the appointment of an accounting officer does not remove the responsibility of the trustees for the proper conduct and financial operation of the trust (ATH 1.35). The board retains ultimate responsibility for the way the trust is managed and operated. This includes value for money, regularity and propriety at the trust. In this regard, trustees owe duties under charity law:

• to promote the charitable purposes of the trust, being the provision of education as more particularly described in article 4 of the trust’s articles of association (“articles”);
• to operate the trust for public benefit;
• of undivided loyalty to the trust and its beneficiaries (i.e. its present and future pupils) including the duty to avoid conflicts of interest and not to profit from their position as a trustee;
• to act in the best interests of the trust and its beneficiaries;
• to act in good faith (i.e. with genuine honest intention or motives);
• to act within their powers, as set out in the trust’s articles;
• of prudence, according to the standards of an ordinary business person (which standards may be increased for trustees with a particular profession); and
• to act collectively.

They also owe duties under company law to

• promote the success of the trust,
• exercise independent judgement,
• exercise reasonable care, skills and diligence,
• avoid conflicts of interest and
• declare any interest in a proposed transaction or arrangement

(ATH 1.14)

The accounting officer must ensure compliance with these charity and company law duties under section 4.13 of the handbook above.

Delegation

Subject as follows, an accounting officer can (and needs to) be assisted by others in the discharge of their duties as described above. This is where the strength of a well-formed and functioning central team comes into its own. The accounting officer may delegate functions to others to assist them in their role. However, the accounting officer must take personal responsibility (which must not be delegated) for assuring the board that there is compliance with their funding agreement and the handbook (ATH 1.42). They will need to ensure the necessary policies and procedures are in place to keep them informed.

Our governance review service assesses a trust’s compliance with the key requirements of their funding agreement and the handbook and reports on any deficiencies, with recommendations for next steps. If this would be of interest, do get in touch using the contact details below.

7 principles of public life

Under section 1.39 of the handbook, the accounting officer must also adhere to The 7 principles of public life in the discharge of their functions, namely:

• selflessness;
• integrity;
• objectivity;
• accountability;
• openness;
• honesty; and
• leadership.

Section 5.38 specifically requires the accounting officer and the chair of trustees of the trust to promote integrity and openness when managing personal relationships with related parties, to avoid real and perceived conflicts of interest. The principles also apply to trustees, as public office-holders, and qualify as appropriate standards of conduct, behaviour and corporate governance (propriety), as referred to above. The accounting officer and trustees must therefore comply with The 7 principles of public life.

Annual statement

With the above in mind, the accounting officer must complete and sign a statement on regularity, propriety and compliance each year and demonstrate how the trust has secured value for money (ATH 1.41). The statement is included with the annual accounts.

Advice

Under section 4.14 of the handbook, the accounting officer must advise the board and the ESFA of instances of irregularity or impropriety, or non-compliance with the trust’s funding agreement or the handbook.

The accounting officer mustalsoadvise the board in writing if the board fails to act where required by the trust’s funding agreement or the handbook (ATH 1.44) and must advise the board in writing if action the board is considering is incompatible with the trust’s articles or funding agreement or the handbook (ATH 1.43).

The issue is not whether the accounting officer agrees with what is proposed or has taken place, such as in relation to the growth of the trust, but whether the act or omission is incompatible with or in breach of the trust’s articles or funding agreement or the handbook. The accounting officer must hold this distinction in mind and may wish to obtain their own, independent, legal advice to assist them, which the board may fund in accordance with the trust’s expenses policy. The board may also receive or request advice from the trust’s lawyers to inform its decision-making.

Notification

Where the board is minded to proceed despite the accounting officer’s advice, the accounting officer mustconsider the board’s reasons and, if they still consider the action proposed is in breach of the trust’s articles or funding agreement or the handbook, they must notify ESFA’s accounting officer immediately in writing (ATH 1.44).

Inevitably, this will put the ESFA on notice (if it wasn’t already) that there may be concerns regarding the operation of the trust which, depending on the circumstances, may lead to ESFA scrutiny, potentially leading to enquiries or a more formal ESFA investigation with the consequential application of ESFA powers including re-brokering one or more of the trust’s academies.

Summary

The accounting officer of an academy trust has significant personal responsibility to Parliament, the public and the ESFA to ensure value for money, regularity and propriety in the conduct and operation of their trust. This burden will only increase with the DfE push for all schools to be in strong trusts by 2030. It is therefore essential that trust boards and accounting officers fully understand their responsibilities and work in concert to ensure the continued success of their trust.