As the Summer Term came to an end, academy trusts and their advisers up and down the UK were patiently awaiting the ESFA’s latest edition of the Academy Trust Handbook (ATH; formerly the Academies Financial Handbook). The ATH has been significantly shortened with a few other changes throughout.
The changes made this year fall into four categories:
- Roles and responsibilities
- Main financial requirements
- Delegated authorities
- The regulator and intervention
Roles and responsibilities
Updating content on governance matters
Generally this involves some wording updates following the latest publication by the ESFA on quality descriptors within trusts.
Less obviously, it also includes the change that employees must not serve as trustees (other than the senior executive leader); in ATH 2022 this was merely a ‘strong preference’. ‘Strong preference’ has now been removed from the entire handbook, and in all other cases replaced with “should”.
Emphasising the importance and value of good estates safety and management
This section (1.19) has been greatly expanded, mainly with links to other publications such as the Estate management competency framework, Condition Data Collection process and Reinforced Autoclaved Aerated Concrete guidance.
Confirming that the board should have sufficient financial knowledge to hold the executive to account
A minor change to reinforce the need for strong financial knowledge at the trustee level.
Explaining that the roles of the Accounting Officer and the Chief Financial Officer should not be occupied by the same individual
Whilst it is widely accepted throughout the academy community that this should not be the case, this year’s ATH explicitly states it.
Main financial requirements
Confirming that trusts no longer need to provide an explanation in their governance statement where the board has not met at least six times in the year
Previously any trust boards that did not meet six times in a year would need to explain this within the governance statement as part of the financial statements. The minimum number of meetings per year remains at four.
Providing trusts with an additional month to submit their Budget Forecast Return (BFR)
This is a very welcome change to all in the academy community. It means that the deadline is now the end of August rather than the end of July.
Simplifying the position on the preparation and circulation of management accounts, including more discretion for trusts
This removes the need for management accounts to be shared with trustees six times a year, now allowing them to be considered just at each board meeting. The chair must continue to receive these monthly. It also removes the need for trusts to select key performance indicators and report on them regularly.
Explaining the permissive position on Electric Vehicle (EV) salary sacrifice schemes
With EV salary sacrifice schemes becoming more popular, the ESFA have clarified their position on these. There is no need for approval from the ESFA if no liability falls on the trust. Should any liability fall on the trust, or the trust is under a Notice to Improve (NtI) then prior ESFA approval must be sought.
Delegated authorities
Simplifying the position on General Annual Grant (GAG) pooling
The updates to this are minor. They reflect some wording changes to encourage trusts to consider the value and importance of GAG pooling.
Refining the approval threshold for related party transactions, and simplifying arrangements for transactions within other educational providers
A raft of changes have been made to this section, from some clarification to other more major changes.
- Trusts must now report the commencement and renewal of contracts with related parties to the ESFA; previously this was just on commencement
- The threshold has also been increased and simplified, becoming £40,000 (previously £20,000) in any financial year The requirements to consider related party transactions on an aggregate section has also been removed, and as such reporting to the ESFA only now need be considered based on the value of each transaction.
- Some exemptions to approval have also been added for providing goods and services to any college, university or school who are sponsors of the trust, and any state funded schools and colleges (this includes other academies). This however does not apply to any subsidiaries of the above
- Also exempt is provision of services to an academy trust with a religious character by their religious authority, where they are essential and can only be provided by their religious authority.
The regulator and intervention
Clarifying circumstances in which an NtI might be issued
The ESFA states: ‘The department will engage with the sector in developing its approach to intervention, including the process to be followed by the department’s Regions Group and the evidence that they will rely on to determine the strength of trustees’ oversight of educational performance.’
This section now provides examples of reasons for the issuing of an NtI, such as an actual or projected deficit, the trust board not being properly constituted and poor internal scrutiny.
When do the ATH 2023 changes apply?
These changes come into effect on 1 September 2023 i.e. the start of the next financial year for academy trusts.
Our academies specialists plan to host a webinar on ATH 2023 later in the year, exploring the changes in more detail and answering any queries you may have. In the meantime, for more information about how these changes affect your academy trust, please get in touch with your usual BKL/Landau Baker contact or use our enquiry form.