Academies Financial Handbook 2017

The Education and Skills Funding Agency (ESFA) has recently released the 2017 Financial Handbook which replaces the 2016 version with effect from 1 September 2017. Overall, there are not many changes and the main emphasis is on ensuring effective governance. We have a look at the main changes and what these mean for Trusts.

Roles and Responsibilities

There has often been confusion over the relative roles of members and trustees which have become blurred in the past. The handbook provides greater clarity over the respective roles and the Handbook emphasises that a robust governance structure will have a significant degree of separation between individuals who are members and trustees. It states that employees of the Trust must not be appointed as members, unless permitted by their Articles of Association. Where the Articles of a trust permit employees to be members, they may wish to consider adopting the latest model articles to ensure more effective governance.

The Handbook also states that it is the Department for Education’s preference for no other employees, other than the senior executive leader, to serve as a trustee. This is to ensure there are clear lines of accountability through the senior leader.

ESFA Letters

Every year trusts are sent a letter from the ESFA addressed to the Accounting Officer which covers issues pertinent to their role, such as developments in the accountability framework and findings from ESFA’s work with trusts. The new Handbook states that Accounting Officers must share this letter with members, trustees, the chief financial officer and other members of the senior leadership team, arrange for it to be discussed by the board of trustees and take action where appropriate to strengthen the trust’s financial systems and controls.

Improving Financial Health and Efficiency

The handbook has identified circumstances in which it may prescribe working with an expert in school financial health and efficiency to support the Trust and identify where improvements can be made. This may be required as a result of a FntI or where there are concerns about a Trust’s financial management.

Other Governance Issues

The ESFA is becoming increasingly focused on the effectiveness of trust boards and there are several changes in the handbook which seek to address this. Boards have previously been expected to identify and address any skills gaps, but the handbook now emphasises that this is particularly important at key transition points, for example when the Trust is converting to a MAT or is in a growth stage. It is highlighted that the board can use the Competency Framework for Governance and Key Features of Effective Governance included in the Governance Handbook when considering effectiveness. Any reviews should be documented and a process should be in place to ensure that a review is completed each year.

The ESFA has identified that trusts are not keeping records up to date on members and trustees. This includes both Edubase and Companies House. The Trust should identify an individual who can be responsible for updating the records and ensure that they are reviewed regularly and updated for appointments and resignations.

The Handbook has also clarified that the appointment of members must be made by the members.

Financial Control

The changes in this area are more about emphasis rather than major changes. The Handbook has a new section which states that the board of trustees must ensure that their decisions about levels of executive pay follow a robust evidence-based process and are reflective of the individual’s role and responsibilities. Any decisions should be well documented and follow a robust process.

The Handbook has previously identified novel and contentious transactions as requiring approval from the ESFA. It has now added repercussive transactions to this list. These are transactions which are likely to cause pressure on other trusts to take a similar approach and hence have wider financial implications. It is worth considering if the Trust is undertaking a transaction outside its normal activity, whether they are going to need ESFA approval. If in doubt you should contact the ESFA for guidance.

Trusts are required to obtain approval before making a non-statutory/non-contractual severance payment of £50,000 or more. The handbook has clarified that this is based on the gross amount before any deductions for tax.

If you would like to speak to us about the Academies Financial Handbook or if you have any questions, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Academies team.

This article originally appeared on the blog of our member firm, MHA Moore & Smalley.

Accounting Changes for Academies

Following the end of election purdah restrictions, the Education and Skills Funding Agency (ESFA) has issued its annual revision to the Academies Accounts Direction (AAD) 2016 to 2017, which will determine the format of accounts prepared by Academy Trusts for the year to 31 August 2017.

The changes noticed by most trusts will be limited, but there are additional disclosures and clarifications for trusts with specific circumstances. We have set out some of the highlights below.

First Period Accounts

The ability to defer accounts in the first period for up to 18 months is removed. For example, if a new academy was incorporated on 1 May 2017, it now needs to have audited accounts to 31 August 2017.

To clarify this, the AAD states that it applies to all trusts with a funding agreement and to any academy open during the accounting period. It would appear that the grants offered to new trusts preparing short period accounts are not being repeated.

Additional Accounting Disclosures

Trusts should make the following additional accounts disclosures:

  • Financial instruments (including cash and debtors) – add disclosure of the accounting policies adopted.
  • Apprenticeship levy – account for levy payments as expenditure, and disclose on a separate line in staff costs note.
  • Teaching schools – if a trust has teaching school status and receives a core funding grant, record as a restricted fund. There are new separate lines on the Statement of Financial Activities (SOFA) for income and expenditure. Trusts should not use the General Annual Grant (GAG) to support the work of the teaching school. Trusts are likely to need separate certification to the National College for Teaching and Leadership (NCTL) (plan for this with your auditor).
  • Academy combinations and dissolutions. There is additional accounting and disclosure guidance for these increasingly common transactions. It applies where acquiring a school or Single Academy Trust (SAT), or a SAT joining a Multi Academy Trust (MAT), or a school leaving a MAT, or if an Academy Trust (AT) is dissolving. For transfers between trusts, balances need to be formally agreed between transferring and receiving trusts (e.g. keep trial balance). Trusts must agree dates and account for opposite sides in the same accounting period, so Government accounts are complete.
  • Local Government Pension Scheme – there is an added disclosure of sensitivity analysis. Actuaries should be able to supply disclosures in this format – you might need to ask the actuary when requesting 31 August 2017 information; however note that 2016 reports to Local Government included this information as standard, so no extra request may be needed.

Accounting Policy Updates

There is new guidance on when to recognise income for where the Education and Skills Funding Agency (ESFA) is constructing an asset for the trust under either the Free Schools or Priority School Building Programme.

In addition, there is extensive new guidance on accounting for land and buildings in church academies. This should be read carefully and discussed with your professional advisers.

Premises under Private Finance Initiative (PFI) contract – many academies are in contracts with the Local Authority (LA) to support the PFI by making contributions to costs. These contractual payments will typically be accounted for as lease commitments (lease costs or premises costs).

Gender Pay Gap Reporting

Trusts with more than 250 employees will be required to publish information on their own website and on the government website (by 31 March 2018 for data for the year to 31 March 2017) statistics on gender pay gap:

  • Average (mean and median) hourly rate of pay
  • Average (mean and median) bonus paid
  • Proportions of employees receiving bonuses
  • Proportions of employees in each quartile pay band

Governance Statement

The Board must also disclose:

  • Coverage of their work.
  • The Board’s performance/ assessment of effectiveness and challenges faced.
  • Information about the quality of data used by the Board and why the Board finds it acceptable.

Further Information

The full guidance can be found  here on the Education Funding Agency (EFA) website.

If you have any questions or would like to discuss any of the issues raised with us, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Academies team.

This article originally appeared on the blog of our member firm, Larking Gowen.

5 Ways to Generate More Income for Your Academy

As we are all aware, making the school budget balance is becoming more challenging as funding fails to keep pace with the costs all schools are facing. There is a lot of focus on cutting costs and making financial efficiencies, but what are you doing to increase your income? Below are five examples of ways to generate more income for your Academy:

1. Grant Funding

Those awarding grants have targets to meet too and they need to find a recipient for the available funding. If you have an exciting and innovative project on your wish list, why should the recipient not be you? You can find some further information on grants through the Education and Skills Funding Agency.

2. Internal Fundraising

Are you doing all you can to tap into the goodwill of your most interested stakeholders, the school’s families and friends? There are many traditional staples in this area, such as sponsored events, tea towel sales, photograph sales, but your imagination and creativity will know no boundaries in coming up with new ideas for money-making enterprises – how about a school lottery or a pyjama day?

3. Events

4. Local Partnerships

All schools are encouraged to forge better links with their local business communities, allowing them to benefit from a range of careers experiences. You could also benefit financially if you can identify sponsorship opportunities, whether it’s the playing kits, a neighbourhood road safety scheme or a themed activity week in school. There’s also the option of encouraging internet traffic via your school website to benefit from donations per click to retailers’ sites.

5. Crowdfunding

Crowdfunding has become a more prominent source of alternative funding in the commercial world and can apply to schools too. On many of these sites, people can be rewarded for their donations on a sliding scale. For example, £10 could get them a personal letter of thanks from a pupil, £50 could see them as VIP guests for the next school production. For a bigger contribution, they could be included for posterity on a benefactors’ board in the school reception or have the new resource named after them. All of this can be dealt with online and can create a real buzz as you see progress towards your target. There are many crowdfunding platforms available such as Kickstarter, Crowdfunder and GoFundMe.

Many of the above ideas can not only create the opportunity to raise funds but also to give pupils chances to apply their numeracy and literacy skills when getting involved with campaigns!

If you have any questions or would like to discuss your Academy with us, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Academies team.

This article originally appeared on the blog of our member firm, MHA Carpenter Box.

Multi Academy Trusts – Governance and Internal Assurance

This article will look at good governance and internal assurance for Trustees of Multi Academy Trusts (MATs).

Delivering Strong Governance

MATs often have 2 levels of governance; local governors who work with individual schools, as well as an over-arching Trustee Board who take responsibility for the Trust as a whole. The effectiveness of this governance structure is essential and any MAT should be regularly reviewing this to ensure that there is the adequate energy, expertise and challenge. Scandals such as those identified at the Perry Beeches Academy Trust would normally be avoided where the Trustees are adequately equipped to challenge the Trust’s management.

There are a number of ways Boards of Trustees should be self-evaluating their effectiveness and this can include steps such as:

•    Ensuring that there is a clear scheme of delegation and that governors and Trustees are clear what their role is.
•    Conducting regular skills audits of the Board of Trustees to ensure that the requisite expertise is present.
•    Conducting proper recruitment processes for new Trustees , including an interview process.
•    Consider regular Trustee appraisals to ensure that individuals are conducting themselves with the required enthusiasm and professionalism and individually have the skills needed to undertake the role.

The National College for Teaching and Leadership has provided useful guidance for Governors of MATs and additional support can be obtained from professional advisors such as our member firms.

Delivering Internal Assurance

All Trusts must have in place a process for checking its financial systems, controls, transactions and risks. However, the financial handbook is flexible on how Academy Trusts can achieve this.

There are a number of options including:

•   The appointment of an internal audit service (either in-house or bought in).
•   The performance of a supplementary programme of work by the trust’s external auditor.
•   The appointment of a non-employed trustee to check internal controls.
•   Peer review, with the work carried out by a suitably qualified member of staff from another academy.

Although a separate audit committee is only required where the income of the Trusts is over £50m, this process of internal review does still need to be driven at a trustee level. This is particularly important in the case of a MAT, where the complexities of operating over a number of sites and business units, as well as dealing with additional financial risks, requires a more focussed and risk based approach.

For instance, it is not uncommon for MATs to look primarily at key financial processes such as cash processing or procurement, but overlook risks specific to their situation. For instance, The Perry Beeches Academy Trust was criticised by the EFA for its poor governance and lack of probity in relation to the payments made to its Head. One would have hoped that a well-focused and risk based approach to internal assurance would have considered the reputational risks associated with the remuneration paid to its key staff. However, reading between the lines of the report, this was overlooked. In our experience, a focussed programme of internal assurance will be driven from the Trust’s risk register and would look at the more global and strategic risks, as well as the more anodyne errors driven by routine process.

Our member firms are experienced in providing internal assurance. To be put in touch with a member of our Academies team, please contact Hannah Farmborough or call on 0207 429 4147.  

This article originally appeared on the blog of our member firm, Monahans.

Recruiting to your Multi-Academy Trust – Some Things to Consider

The academy conversion program is beginning to pick up significant momentum in this part of the world. Currently, the Government’s favoured structure is the Multi-Academy Trust.

A number of strong schools that are now established as academies are beginning to look outwards to see how they can join forces with other schools, whether they’re existing academies or state schools looking to convert, for the mutual benefit of all involved.

The following is a list of some of the matters that the recruiting Trust should consider before welcoming a new school into the Trust. It’s a case of doing your homework, or more formally – undertaking a due diligence process.


One of the key benefits of joining forces with others is the ability to exploit economies of scale and make better use of limited finances. However, will your new school provide a boost to your finances or be a drain on resources:

  • How has the school budget been run for the past few years – is there a history of surpluses or deficits?
  • Are the buildings and equipment old and tired and likely to require a large outlay in the near future, or is everything shiny and new?
  • Are there any long tie-ins to leases for equipment or vehicles that will be onerous over the next few years?
  • Has the school already committed to new capital projects that may prove expensive to the Trust as a whole?
  • Are the teaching staff, on average, near the top or bottom of the pay scale?
  • Do you consider the number of TA’s or admin staff to be greater than necessary?


  • What specialist skills do the staff possess that could be shared across the Trust, or even shared outside the Trust to bring in additional income?
  • Are there any ongoing disputes / disciplinary matters that are disrupting a smooth operation?
  • Are there skills gaps within the team, either in subject areas or at management level, that will need to be addressed?
  • Is the existing staff structure top heavy / inexperienced?


  • What is the school’s data telling you?
  • Where does the school sit amongst its peers and how does this fit with your own position?
  • Do you have the ability to support a low-performing school, can you both benefit given your relative positions?
  • What does the School Improvement Plan tell you about priorities and planned direction?

Legal matters

  • Are there any complexities with land titles that are likely to cause headaches?
  • Are there any ongoing legal disputes or claims that may affect finances or operations?
  • Is the TUPE process going to throw up any issues?

Commercial matters

  • As well as the financial considerations above, what opportunities are there to generate additional income for the Trust?
  • Does the school have facilities that can be used by the local community outside school hours?
  • What arrangements are currently in place with the Local Authority that may prove problematic?

To discuss the academy conversion process in more detail or if you have any queries regarding academies finance, please contact Hannah Farmborough or call on 0207 429 4147 to be put in touch with a member of our Academies team.

This article originally appeared on the blog of our member firm, Carpenter Box.

Academies Financial Handbook 2016 – Key Changes

The Education Funding Agency (EFA) has released the Academies Financial Handbook 2016, which is effective from 1 September 2016.

We consider the Handbook essential reading for trustees, members, accounting officers and chief finance officers/school business managers. Must-reads are Annex B: Schedule of freedoms and delegations and Annex C: Schedules of requirements.

The changes from the 2015 version are not significant, with the main changes usefully summarised on pages 5 and 6. Some of the key points have been noted below, most being greater emphasis on items that were already best practice.


  • Emphasis that boards of trustees should identify the skills they need and address any gaps in their skills through recruitment or training.
  • Updated text on registers of interests. Confirmation that trusts must publish the relevant business and pecuniary interests of their accounting officer regardless of whether they are a trustee. Confirmation that local governors are included when identifying relevant interests from close family relationships.
  • Confirmation that trusts must use Edubase to notify the DfE of changes to the positions of member, trustee, local governor in a multi-academy trust, chair of trustees, chairs of local governing bodies, accounting officer and chief financial officer.

Financial control

  • Explanation that variances between budget and actual income and expenditure must be understood and addressed.
  • Now a requirement, rather than a recommendation, for trusts to have a whistleblowing procedure.
  • Emphasis that trusts should consider opting into the risk protection arrangement (RPA) unless commercial insurance provides better value for money.
  • Trusts must implement reasonable risk management audit recommendations that are made to them by risk auditors.
  • Emphasis that the audit committee’s oversight of its trust must extend to the controls and risks at its constituent academies. Oversight must also ensure that information submitted to DfE and EFA that affects funding is accurate and compliant.
  • When considering a staff severance payment, emphasis that trusts must satisfy the conditions in the handbook and obtain the required approval before making a binding commitment to staff.

If you have any queries about the issues raised in this article or to be put in contact with one of the members of our Academies team, please contact Hannah Farmborough or call on 0207 429 4147.

This article originally appeared on the blog of our member firm, Larking Gowen.