The Department for Education (DfE) has published the Academy Trust Handbook 2021 which will come into effect from 1 September 2021 and replaces the current Academies Financial Handbook. The handbook can be accessed here.
Whilst the content of the handbook is most important, its change of name is significant as it reflects more accurately the full range of content, beyond financial requirements, which it contains. In a similar move, the “Financial Notice to Improve” will be renamed the “Notice to Improve”, to signify that the role of trusts goes far beyond financial oversight.
The key updates
The handbook provides an overarching framework for effective financial management and governance, consistent with academy trusts’ obligations as publicly funded bodies. As always, academy trusts must comply with it as a condition of their funding agreement. You should therefore ensure that you understand the requirements placed on your academy trust by the handbook and take the necessary steps to prepare for its implementation in September 2021.
The following sections have been updated to either incorporate new requirements, or highlight key requirements that go beyond simply being ‘best practice’:
- Roles and responsibilities
- Main financial requirements
- Internal scrutiny
- Annual accounts and external audit
- Delegated authorities
- The regulator and intervention
Roles and responsibilities
The handbook incorporates several updates in respect of roles and responsibilities in academy trusts. The new requirements introduced include:
- Academy trusts are encouraged to carry out external reviews of governance, as external reviews can be a more powerful diagnostic tool than self-evaluation.
- From 1 March 2022 any newly appointed senior executive leader may only take on a role as trustee if the members decided to appoint them as such, the senior executive leader agrees and, importantly, the academy trust’s articles of association permit it.
- To maintain clear lines of accountability, the DfE has clarified that its preference is for no other employees to serve as trustees, and for no trustees to occupy staff establishment roles on an unpaid voluntary basis.
- To ensure that academy trust boards are accessible and connected to the community, all academy trusts should ensure that places are reserved for parents and carers. Single academy trusts should have at least two parent trustees, whilst multi academy trusts should have at least two such places on the board, or on each local governing body where established.
- Academy trusts should liaise with their Regional Schools Commissioner if their senior executive leader is planning to leave the academy trust. The aim is that this will encourage discussions of trust structure and options.
- Demonstrating the increasing professionalisation of the clerking role, the term “clerk” has been replaced with “governance professional”, a change which is also reflected in the DfE’s updated model articles of association. In addition, it is now a mandatory requirement for a governance professional to be appointed.
In addition to the new requirements, the importance of several existing requirements is emphasised:
- The importance of suitability checks for existing and future members, including the requirement to ensure that members are not subject to a direction made under section 128 of the Education and Skills Act 2008, which prohibits certain individuals from taking part in academy trust management.
- Academy trusts’ obligations in relation to safeguarding, including having regard to statutory guidance on safeguarding and ensuring the suitability of staff, supply staff, volunteers, contractors, and proprietors.
- Academy trusts’ responsibilities for the health and safety of staff, pupils and any visitors, and the expectation for academy trusts to manage their school estate strategically and maintain their estate in a safe working condition.
- The requirement to ensure that enhanced Disclosure and Barring Service certificates are obtained for all staff and supply staff, and enhanced criminal records certificates from the Disclosure and Barring Service are obtained in respect of all academy trust members, trustees and any individuals on any committees.
Main financial requirements
One new obligation which has been introduced relates to the publication of employee benefits on the academy trust’s websites. Academy trusts are already required, in relation to employees whose benefits exceed £100,000, to publish in a separate readily accessible form the number of employees whose benefits exceeded £100,000 for the previous year ended 31 August. However, this requirement now extends to any off-payroll arrangements with non-employees where the payment exceeds £100,000.
In addition to this new requirement, academy trusts are also reminded that the scheme of delegation should be reviewed annually, and immediately when there has been a change in trust management or organisational structure.
Whilst this is not a new requirement, the handbook clarifies that, in line with good practice, the chair of the audit and risk committee and the chair of the finance committee should not be the same person. In addition, internal scrutiny must not be carried out by a member of the academy trust’s senior leadership team.
Annual accounts and external audit
The handbook now sets out that academy trusts should re-tender for their external audit service at least every five years, and must consider the following when planning:
- the auditor’s sector expertise
- their understanding of the trust and its activities
- whether the audit process allows issues to be raised on a timely basis at the appropriate level
- the quality of auditor comments and recommendations in relation to key areas
- the personal authority, knowledge and integrity of the audit partners and their staff to interact effectively with, and robustly challenge, the trust’s managers
- the auditor’s use of technology
In terms of delegated authorities, the handbook extends existing provisions in relation to severance payments. Academy trusts must now obtain prior approval from the Education and Skills Funding Agency (ESFA) for staff severance payments of £100,000 or more which include a non-statutory/non-contractual element, and/or where the employee earns over £150,000.
The regulator and intervention
Reflecting the increased risk that academies face in respect of cybersecurity, the handbook introduces a new section in relation to cybercrime. It highlights the ESFA support of the National Crime Agency’s advice to not pay cyber ransoms. Therefore, academy trusts must obtain permission from ESFA to pay any cyber ransom demands. Preventing cybercrime is more effective than dealing with it once it has happened, so, owing to the increase in cyber-attacks affecting education, academy trusts must now have in place proportionate controls and plans to help them to take appropriate action where a cyber security incident occurs.
The handbook also requires academy trusts to provide the ESFA with written authority to obtain third party information where it has concerns about financial management and/or governance at the academy trust.
As it is now clear that the handbook covers issues far wider than simply financial oversight, it has been dubbed a “one stop shop” for academy leaders. Whilst the rules are generally those to which academy leaders are already bound, it is recommended that they review the handbook ahead of its implementation in September 2021 and consider whether any steps will need to be taken to comply with the new requirements. For example, you should:
- consider the cybersecurity risks which your academy faces and introduce plans to deal with cybercrime appropriately, including training staff in relation to security risks
- review the Keeping Children Safe in Education 2021 guidance and Sexual Violence and Sexual Harassment between Children 2021 guidance, which both come into force in September 2021, to ensure that your academy policies and procedures align with the current safeguarding requirements
- consider updating the academy trust’s articles of association to the DfE’s new model articles to incorporate the relevant changes, such as the change from “clerk” to “governance professional” and the requirement to reserve places for parent and carer trustees
- implement an external review of your academy trust’s governance to ensure that the academy trust is appropriately scrutinised when necessary
- appoint a governance professional (formerly clerk) to comply with this new mandatory requirement
- consider including a provision in third party contracts requiring the third party to provide the ESFA with information or documentation they hold, as requested by the ESFA
Whilst many of the requirements set out in the handbook have been encouraged for some time, you should ensure that your academy is in a position to comply with those which are new, or those which have now moved beyond just ‘best practice’.