Each year the Government provides those involved with the running of academy trusts with some summertime reading in the form of the latest edition of the Academies Financial Handbook.
As a reminder, the Handbook contains a number of mandatory rules together with recommended practices that all academy trusts are obliged to follow under the terms of their funding agreements.
The current Parliamentary Under Secretary of State for the School System, Lord Agnew, is a regular correspondent with not just academy trustees but also their auditors and he has been providing a consistent message about the need for trusts to have good governance and internal controls. It is therefore not surprising that the latest edition of the Financial Handbook has somewhat ‘beefed up’ some of the requirements in these areas.
Amongst the changes introduced by the latest Financial Handbook are:
- Further guidance on the requirement for internal scrutiny of risk and management procedures including the requirement to submit to the ESFA an annual summary report prepared by the individual or organisation carrying out the programme of work.
- A recommendation to formally appoint a clerk to support the Board of Trustees.
- Further clarification on the rules and regulations relating to transactions with related parties.
- Updated regulations on how frequently management accounts must be produced and what these should contain.
Whilst the regulations are designed to promote good governance, it is likely that they will be a constant challenge for academy trusts unless appropriate and due care is taken by senior leaders and trustees to ensure that the rules are understood and a practical set of procedures are developed to fit the style of working adopted by the trust to ensure compliance. Trusts also need to ensure that adequate financial resource is available in order to:
- Ensure an appropriate level of trustee and senior management training is maintained in terms of governance requirements.
- Ensure that an appropriately resourced internal audit programme is commissioned and undertaken on an ongoing basis.
Ultimately the message that all trusts should take from not just the most recent edition of the Financial Handbook but also the regular letters from Lord Agnew is that academy trusts are expected and obliged to operate to a high level of probity and to be able to independently demonstrate that this is ingrained at the very heart of their organisation.
Please click here for the full version of the 2019 Academies Financial Handbook.