Understanding the Academies Accountability Framework

Academies Financial Handbook 2014

Purpose of session

To acknowledge the underlying accountability framework applying to academy trusts

To provide an overview of academies’ key financial responsibilities under the Academies’ Financial Handbook

To provide an update on key changes in the 2014 edition of the Handbook

Accountability framework

A reminder that academy trusts are:

companies limited by guarantee so subject to company law – hence avoid conflicts of interest, prepare

accounts, undergo audit – and responsible for themselves

charities so subject to charity law – hence acting in the wider public interest and

accountable to beneficiaries

central government public sector bodies so subject to public standards of accountability – hence accountable to

Parliament, and PAC / HMT / NAO interest shapes the rules.

Accountability framework cont’d

As they receive public funds academy trusts are also subject to:

a funding agreement with the Secretary of State which sets out broad conditions for the receipt of grant

an Academies Financial Handbook issued by EFA which pulls together key financial requirements and freedoms compliance with Handbook is a condition of funding agreement it contains principles and requirements, not guidance

A collaborative process

Working with stakeholders the Handbook is produced in consultation with academy working

groups consultation also with HM Treasury

Giving notice 2014 Handbook published in advance (effective from 1 Sept 2014) 2013 Handbook still applies for year ended 31 August 2014

Will be published on the gov.uk website

May also be accessible via forthcoming EFA Information Exchange

1: Roles and responsibilitiesHandbook coverage

Academy trustees take full responsibility for financial affairs act within powers promote the company, not themselves avoid conflicts of interest (etc)

Academy accounting officer (principal/CEO) ensure regularity (purposes intended), propriety (standards) and VFM report concerns to EFA

DFE and EFA ultimate responsibility for adequate framework to ensure proper

financial management intervention powers (issuing financial notice to improve and withdrawal

of freedoms)

1: Roles and responsibilities

What’s new?

Governance reviews – a “must” for new trusts in their first year

EFA interventions – breaches of rules around connected parties may prompt a financial notice to improve

Accounts – publish on website by 31 January

2: Main financial requirementsHandbook coverage

Financial oversight and management challenge – trustees to meet regularly, should have a finance committee, have a chief financial officer

Financial planning, monitoring and reporting - balance the budget, manage cash flow and publish accounts

Operational controls - have controls over decision making, reporting, procurement, asset management, risk management

Internal scrutiny - have an audit committee, or equivalent, and a means of self-checking your internal controls

2: Main financial requirementsHandbook coverage - Internal scrutiny cont’d

Scrutiny must be driven by a committee: must have a dedicated audit committee if income over £10m or capital

assets over £30m should have a dedicated audit committee if a multi-academy trust and

below these limits others can include within remit of another committee

Options for performing checks of systems and transactions include: appointment of an internal auditor extra work by external auditor appointment of an unpaid trustee (previously referred to as responsible

officer, but title no longer used in Handbook) agreeing peer review with another trust

2: Main financial requirements

What’s new?

Scheme of delegation – trusts must have one, underpins controls

Financial management information – must give to trustees 3x per year

Budget deficits – must report deficits to EFA within 14 days

Investments – information given on key considerations

Audit committee – staff shouldn’t be members of the committee, but can attend to give information and advice

Risk protection arrangements – alternative to insurance from 1 Sept 2014

3: Delegated authorities & responsibilitiesHandbook coverage

Freedoms - academies have delegated authority over most transactions

Responsibilities - but must demonstrate proper and regular use of funds

Connected parties trusts must be even-handed with transactions – eg tendering policy /

fair and open procurement

purchases from some connected parties must be ‘not for profit’;

see separate session

3: Delegated authorities & responsibilities Delegated limits – are unchanged for 2014

Limits are now summarised - in new annex B

Staff severance payments EFA approval needed for non-statutory or non-contractual payments of

£50k or more more guidance on severance payments on gov.uk website at:

www.gov.uk/academies-severance-payments

Anything novel (outside normal range) or contentious (potentially giving rise to criticism) – prior EFA must be sought via Academy Questions

Delegations may not apply if funded on estimated pupil numbers under a Financial Notice to Improve

3: Delegated authorities & responsibilitiesWhat’s new?

Transactions with connected parties Avoidance of personal gain – emphasis on trustees and staff

Awareness of public scrutiny and perceptions – manage real and perceived conflicts of interest (e.g. with chairs & AOs) so disclose fully

Novel and contentious transactions with connected parties – require prior EFA approval

Register of interests members, local governors and senior staff to complete it, as well as

trustees, but there may be others the Handbook explains what the register must contain (eg other

directorships and employments, and more)

Not for profit – applies only above £2,500 (section 3.2.3)

4: Audit requirements

Handbook coverage

Public scrutiny - Parliament and public expect assurance that funds are being spent as intended, hence independent audit

Audit framework statutory audit of annual accounts – appoint external auditors, plan

early regularity audit – same auditor to consider correct use of funds – see

separate session your own financial management and governance self assessment –

may be validated by EFA

Fraud and irregularity EFA may investigate main message - control, report, investigate

4: Audit requirements

What’s new?

Fraud reporting cases over £5k (both individually or cumulatively) to be reported to EFA information to be reported in each case is now set out

Summary - what you should do

Act within your powers understand and apply the requirements in the new Handbook have clearly laid out responsibilities so that everyone knows the

parameters

Maintain oversight have some means of monitoring whether the requirements are being

met, and taking action if they are not

Consider standards of conduct go with the spirit, not just the letter of the Handbook aim beyond the requirements and apply best practice be even-handed and transparent

Thank you for watching