New academies handbook focuses on transparency

The latest edition of the Academies Financial Handbook (AFH) has now been released and carries some important changes to be aware of.

Lord Nash’s foreword talks about change, and it emphasises the need for academy boards to keep all aspects of their operations under review to ensure that public funds are spent efficiently.

Some of the key changes are in relation to governance:

Academy trusts must not have de facto trustees or shadow directors.

De facto trustees are defined as “a person who has not been validly appointed as a trustee but is acting as a trustee of the charity and is exercising the functions that could only be properly discharged by a trustee.” The definition of a shadow director under company law is similar.

A Financial Notice to Improve (FNtI) may be issued due to governance concerns as well as financial concerns.

The Education Funding Agency (EFA) will raise an FNtI where they believe governance and management is inadequate, and this can include weak oversight, control or direction by trustees, poor internal scrutiny and challenge, and breaches of the duties, principles and requirements governing connected party relationships. It is therefore vital that you are able to demonstrate strong governance in all areas, and document decision-making by keeping accurate and detailed minutes.

Medium-sized and larger trusts, and any undergoing a period of change, should consider more frequent board meetings than are required, and trusts must publish relevant business and pecuniary interests of local governors on their website.

Finances are also key in the AFH, which comments on the removal of the separate ‘value for money’ statement.

The requirements relating to budget monitoring have also been simplified slightly. The old AFH required the “preparation of timely monthly management accounts, including income and expenditure reports on an accruals basis, cash flow forecasts and balance sheets as appropriate”, whereas the latest AFH only lists the “preparation of monthly budget monitoring reports” as a required element of the internal control framework.

Delegated limits for trusts, to write-off debts or enter into liabilities, is subject to a ceiling of £250,000 in the new handbook, while in a big change, only academy trusts with an annual income in excess of £50 million will now be required to have a dedicated audit committee.

The 2015 handbook seeks to bring in new rules to ensure academies spend public money wisely and fairly.