Academies Financial Handbook 2017

The ESFA has recently released the 2017 Financial Handbook which replaces the 2016 version with effect from 1 September 2017. Overall there are not many changes and the main emphasis is on ensuring effective governance. We will have a look at the main changes and what these mean for Trusts.


Roles and responsibilities

There has often been confusion over the relative roles of members and trustees which have become blurred in the past. The handbook provides greater clarity over the respective roles and the Handbook emphasises that a robust governance structure will have a significant degree of separation between individuals who are members and trustees. It states that employees of the Trust must not be appointed as members unless permitted by their Articles of Association.  Where the Articles of a trust permit employees to be members they may wish to consider adopting the latest model articles to ensure more effective governance.


The Handbook also states that it is the Department for Education’s preference for no other employees, other than the senior executive leader, to serve as a trustee. This is to ensure there are clear lines of accountability through the senior leader.


ESFA letters

Every year trusts are sent a letter from the ESFA addressed to the Accounting Officer which covers issues pertinent to their role such as developments in the accountability framework and findings from ESFA’s work with trusts. The new Handbook states that Accounting Officers must share this letter with members, trustees, the chief financial officer and other members of the senior leadership team, arrange for it to be discussed by the board of trustees and take action where appropriate to strengthen the trust’s financial systems and controls.


Improving financial health and efficiency

The handbook has identified circumstances in which it may prescribe working with an expert in school financial health and efficiency to support the Trust and identify where improvements can be made. This may be required as a result of a FntI or where there are concerns about a Trust’s financial management.


Other governance issues

The ESFA is becoming increasingly focused on the effectiveness of trust boards and there are several changes in the handbook which seek to address this. Boards have previously been expected to identify and address any skills gaps but the handbook now emphasises that this is particularly important at key transition points, for example when the Trust is converting to a MAT or is in a growth stage. It is highlighted that the board can use the Competency Framework for Governance and Key Features of Effective Governance included in the Governance Handbook when considering effectiveness. Any reviews should be documented and a process should be in place to ensure that a review is completed each year.


The ESFA has identified that trusts are not keeping records up to date on members and trustees.  This includes both Edubase and Companies House. The Trust should identify an individual who can be responsible for updating the records and ensure that they are reviewed regularly and updated for appointments and resignations.


The Handbook has also clarified that the appointment of members must be made by the members.


Financial control

The changes in this area are more about emphasis rather than major changes. The Handbook has a new section which states that the board of trustees must ensure that their decisions about levels of executive pay follow a robust evidence-based process and are reflective of the individual’s role and responsibilities. Any decisions should be well documented and follow a robust process.


The Handbook has previously identified novel and contentious transactions as requiring approval from the ESFA. It has now added repercussive transactions to this list.These are transactions which are likely to cause pressure on other trusts to take a similar approach and hence have wider financial implications. It is worth considering if the Trust is undertaking a transaction outside its normal activity whether they are going to need ESFA approval. If in doubt you should contact the ESFA for guidance.


Trusts are required to obtain approval before making a non-statutory/non-contractual severance payment of £50,000 or more.The handbook has clarified that this is based on the gross amount before any deductions for tax.


If you would like to discuss the Academies Financial Handbook in more detail, or you would like to speak with a member of our team, please contact Nicola Mason or call 01772 821021 to be put in contact with a member of our Academy team.