Academy Trust Handbook 2023: what has changed?

The updated version of the Academy Trust Handbook (ATH) has been published and will come into force on 1 September 2023. Alongside Stephen Lester, Chair of Institute of School Business Leadership (ISBL), who sits on the Department for Education’s (DfE) working group, we have considered the changes to the ATH, and how they will impact your school, in the next academic year.

It is important to note that the DfE have an intent to simplify the size of various documents under the term of ‘simplification’. The length of the ATH has been reduced, however detail which was provided in the previous handbook is still applicable but rather than being in the ATH it has instead been provided via hyperlinks to other guidance. Therefore schools will need to ensure that they continue to access all such information. There is concern that removing information from the ATH may add some complexity and lack of clarity.

Roles and responsibilities

Following the publication of the DfE’s guidance ‘Commissioning high-quality trusts’, which provides information about the decisions made by the Regions Group about the creation, consolidation and growth of academy trusts, part 1 of the ATH, which covers roles and responsibilities in academy trusts, has been updated.

More broadly, this section has been greatly reduced and simplified. For example, information in respect of the role of the members of an academy trust has been stripped back in the ATH. This section now simply states that every trust has members, who have a similar role to shareholders, and whose powers are set out in the Articles of Association. However, the DfE’s preference for trusts to have 5 members is still expressed, although the absolute requirement remains as 3 members.

A section on ‘Board purpose’ is a new addition to the ATH and sets out that the academy trust board has collective accountability and responsibility for the academy trust. This includes providing strategic leadership, accountability, assurance and engagement with parents, schools and communities to support decision making. This new section replaces a section which previously set out the ‘trustee focus’. The ATH also clarifies that the board should have sufficient financial knowledge to hold the executive to account and emphasises the importance and value of good estates safety and management.

The ATH 2023 has also removed guidance in respect of external reviews of governance. However, the expectation for academies to conduct external reviews of governance remains in the Governance Handbook, and external governance reviews should continue to be used to obtain an in-depth view of effectiveness of the board.

The ATH clarifies that the roles of accounting officer and chief financial officer should not be occupied by the same individual. Further the ATH clarifies that the accounting officer should be employed by the academy trust, except in exceptional circumstances when Education and Skills Funding Agency (ESFA) approval is obtained. Similarly, the chief financial officer is expected to be an employee of the academy trust, except again in exceptional circumstances and with the approval of the ESFA.

Furthermore, the ATH has moved information in respect of transparency about governance from the main financial requirements into part 1, dealing with roles and responsibilities. This includes, for example, a requirement to provide details of the academy trust’s governance arrangements within the annual accounts, and also on its website.

Main financial requirements

The section of the ATH which sets out the main financial requirements, remains largely unchanged. However, the requirements in respect of board meetings have been condensed to confirm that board meetings must take place at least 3 times in each year, although trusts should consider meeting more frequently to discharge their responsibilities. Previously, the ATH stated that, if the board meets less than 3 times in each year, it must describe in its governance statement how it maintained effective oversight of funds.

Where there has been a change of trust management or operational structure, there was a requirement to review the scheme of delegation immediately. However, this requirement has been relaxed. Now, where there has been a change in trust management, or a change in the organisational structure which would impact the effectiveness of any existing scheme of delegation, the scheme of delegation should be reviewed at the next available board meeting. It should be noted that the ATH terminology of ‘scheme of delegation’ now includes both financial and non-financial schemes of delegation.

In terms of the control framework, planning and oversight of capital projects must include those which relate to estates safety. The guidance ‘Good estate management for schools’ should be used to help manage capital assets and budgets, including the safety of pupils and others on the school estate.

When setting the 3-year budget, the deadline to submit the budget to the ESFA has been extended from July to the end of August each year. This is positioned by the DfE as giving more time to submit the budget, although some have suggested that the extension is because there have been issues from late publication of the teacher pay settlement which was certainly the case in 2022. Since budgets must be reviewed and approved by the Trust Board, trusts may need to consider whether additional meetings need to be scheduled in late July or August to allow for any late changes to be made.

In terms of procurement, the academy trust must ensure not only that there has been propriety in the use of public funds, but this must include in relation to any actual or perceived conflicts of interest.

A new section setting out requirements in respect of electric vehicle salary sacrifice schemes has been included. The ATH confirms that such schemes do not need ESFA approval where no liability falls on the academy trust if the employee fails to meet their contractual obligations to the scheme provider. Otherwise, prior ESFA approval is necessary.

Internal scrutiny and annual accounts and external audit

The ATH sections ‘Internal scrutiny’ and ‘Annual accounts and external audit’ have each been condensed from September 2023.

Delegated authorities

The section of the ATH titled ‘Delegated authorities’ confirms the financial freedoms and limits which apply to academy trusts. Significant changes have been made to provisions of the ATH dealing with reporting and approval of related party transactions. From September 2023, related party transactions require prior EFS approval where the arrangement exceeds £40,000 in the financial year. This has been increased from the previous £20,000 threshold.

In addition to this significant increase to the threshold, where contracts and agreements are for the supply of goods or services by a sponsor college, university or school, or a state funded school or college (including academies) these do not require ESFA approval. However, this does not apply to arrangements with a subsidiary of such a related party.

Further, the ‘at cost’ requirement will not apply to these transactions. This means that where a contract causes the academy trust’s cumulative annual total of contracts with a related party to exceed £25,000, the contract no longer needs to be at no more than cost.

Importantly for faith schools, ESFA approval is not necessary in relation to the provision of services to an academy trust with a religious designation, for essential functions fundamental to the academy trust’s religious character and ethos, which can only be provided by their religious authority such as their diocese.

The regulator and intervention

In terms of how the ESFA oversees academy trusts, from September 2023 it will send a ‘Dear Accounting Officer’ letter on occasion to the trusts accounting officers, rather than on at least an annual basis.

In addition, the ATH has provided additional information in respect of the DfE/ESFA’s intervention powers. For example, from September 2023 the ATH confirms that a Notice to Improve may be issued on financial grounds, including an actual or projected deficit, cash flow problems, and poor internal scrutiny. A Notice to Improve may also be issued on governance grounds, such as the trust board failing to be properly constituted, and trustees failing to comply with their safeguarding duties or lacking the necessary skills, knowledge and experience to exercise their duties.

This is a further increase in scope for Notices to Improve and emphasises the continued expansion from the original scope of the Handbook from primarily financial areas to a far wider range of aspects of trust activities. In the absence of the planned Schools Bill the ATH remains the primary lever the DfE have to impose additional responsibilities on trusts.

Where a Notice to Improve is issued, the ATH confirms that the academy trust will be notified of the date on which it is published by the DfE, following which the academy trust must publish the Notice to Improve on its own website within 14 days, and until it is lifted by the DfE.

New Schedule of Musts 2023

A schedule of musts was previously included within the body of the handbook. As part of the word count reduction, this has been removed from the handbook and the DfE has published a separate ‘Schedule of Musts 2023’ as an excel document. This sets out in one document the absolute requirements which academy trusts must achieve and allows for academy trusts to track their compliance with those requirements.

The use and completion of the document is entirely voluntary, and it does not need to be submitted to the ESFA. Whilst using the Schedule of Musts 2023 is not a substitute for reading the ATH in full, it is a useful point of reference to ensure that your academy trust achieves the bare minimum in terms of complying with the ATH.

Practical steps

The ATH is a key document which trustees, members and senior leadership teams, must be familiar with. You should ensure that you take steps to achieve all of the necessary obligations as set out in the ATH and regularly review and monitor compliance. You may wish to consider what aspects from the ATH could be incorporated into your internal audit programme.

The updated ATH also provides a helpful opportunity to reflect on your academy trust’s articles of association and ensure that they meet all of the requirements as set out in the ATH.  If your academy trust has not updated its articles of association for some years, we strongly recommend that these are now pro-actively reviewed, especially given the extended powers within Notices to Improve to address governance issues.

This article was written by Emma Swann, Partner and Head of Academies at HCR, and Stephen Lester MBE, Chair of the Institute of School Business Leadership (ISBL).