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NEW Academies Financial Handbook – effective September 2018



The Academies Financial Handbook (the ‘handbook’) describes the financial responsibilities of academy trusts reflecting their status as companies limited by guarantee, exempt charities and public bodies. It balances the need for effective financial governance with the freedoms that trusts need over their day to day business. It sets out the areas of HM Treasury’s Managing Public Money that apply to trusts, and reflects the ‘seven principles of public life’ (selflessness, integrity, objectivity, accountability, openness, honesty and leadership) to which public office holders must adhere. 


The handbook is for academy trustees, members, local governors of multi-academy trusts (MATs), accounting officers, chief financial officers, clerks to the board and auditors.  It covers all types of academy including single academy trusts (SATs), MATs, free schools, studio schools, university technical colleges, alternative provision and special academies.

Compliance with the handbook is a requirement in trusts’ funding agreements with the Secretary of State.


The handbook clarifies the use of and meaning of must and should:

• Must - identifies requirements (these are also summarised annex C to the document. All Boards should have these at hand for reference
• Should- identifies minimum good practice, where there is no absolute requirement, but which trusts should apply unless an alternative better suits their circumstances.


A core theme running throughout the document is the expectation that trustees must apply the highest standards of governance. Greater emphasis, than in previous years, is given to; how trustees carry out their role, the role of chair and working with the ESFA. The focus on effective governance and how it is characterised in trusts are also aligned with content in the 2017 Governance Handbook.


Subject to the trust’s funding agreement, the new handbook no longer suggests that there is an expectation that any of the trust’s senior leaders, including the Chief Executive Officer (CEO) would automatically be expected to be trustees. This has been achieved by the removal of the term ‘ex-officio’ from the handbook.


The other key changes that we believe are of most interest to those involved in governance of academy trusts are as follows:


• A restated expectation that trust boards must meet a minimum of three times per year is now accompanied by the expectation that ‘Larger trusts should consider meeting more frequently. If the board meets less than six times a year it must describe in its governance statement, accompanying its annual accounts, how it maintained effective oversight of funds with fewer meetings.

• The ESFA has set an expectation of enhanced governance around cash management, budget setting and monitoring. These are now more robust and the requirements for financial reporting have been extended. The respective paragraphs include 13 different ‘must’ directives.

• Executive pay receives more attention that in the past which will come as no surprise, given the high media profile given to subject; the ESFA expectations have been strengthened and made more explicit and instead of the single paragraph in the current handbook are detailed in five paragraphs running over two pages.

• A new section on ‘related’ party transactions has been included, which stipulates that, with effect from April 2019, the ESFA prior approval must be sought for any transactions which are, individually or cumulatively, greater than £20,000. Considerable media coverage, during the past year, has highlighted a significant number of financial concerns within the Academies sector.  Overall, the new AFH leaves no doubt that the Department for Education has attempted to make expectations very clear to trusts and that non-compliance could have serious repercussions for the trust and that  trusts who are suspected of non-compliance or malpractice can expect intervention, from the Secretary of State, the Charities Commission or the ESFA.


Annex C is an essential read for all members, trustees and the executive team as it lists the full Schedule of Requirements (or ‘musts’) for academy trusts.


The AFH for 2018 includes a new section outlining some of the intervention powers of the Secretary of State (SoS) specifically relating to directions concerning Trustees and Members and officers, these are:
• Subject to the Trust’s funding agreement the SoS can require the trust remove a member or trustee;
• The SoS can under Section 128 of the Education and Skills Act prohibit individuals from taking part in academy trust management. The new requirement will mean that all those involved in academy trust leadership now require a s128 check. This is reflected in the new Keeping Children Safe in Education (2018) statutory guidance, which also takes effect from September 2018.


Despite the changes, this year’s Handbook is four pages shorter than the 2107 handbook.It is of course a vital insight into compliance issues for trusts and all involved in governance should ensure they are familiar with it.


A full copy can be downloaded via this link: .

14 Jun 2018

Kathleen Wallace
Governor Services
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