EDUCATION: Under the spotlight

by
19 September 2014

New regulations for academies came into effect at the beginning of this month. Howard Dellar gives an overview

EARLY last month, the Education Funding Agency (EFA) published the latest version of the Academies Financial Handbook. The third in three years, it contains significant revisions that directors and governors of trusts managing the Church of England's 400 academies must mark, learn, and inwardly digest. And without delay; for the new regulations came into force on 1 September.

The key changes focus on three main areas: governance, financial control, and audit.
 

Perhaps because the Government wants to be able to show, during the next General Election campaign, that no one can make a profit out of an academy, the new regulations highlight the EFA's concern about possible connections between trust directors, governors, and members and organisations providing academy services - trading or school-improvement companies, for example. These attract close public scrutiny, and demand high standards of accountability and transparency. Such relationships must be managed to avoid perceived conflicts of interest. Indeed, a register of members' business and pecuniary interests must be maintained and published on the trust's website.

There is, however, a slight relaxation of the rules, which now allow transactions at "more than cost" with connected parties up to a total of £2500. Any transaction above this limit must be at cost, and the service provider must be able to demonstrate that no profit has been made.

The Handbook also underlines the EFA's concern over the use of confidentiality clauses in the case of severance or redundancy agreements. The costs for employers have already to be disclosed in an academy's accounts. Trusts must now ensure that confidentiality clauses do not prevent an individual's right to make disclosures in the public interest.

The rules also specify that any instance of fraud in excess of £5000 must be reported to the EFA. Moreover, all non-statutory and non-contractual severance payments must be included in a trust's audited accounts, giving rise to possible embarrassment, or even press interest. The accounts must be published on an academy trust's website by the end of January following the financial year to which they relate.

The revisions make it possible for the director or chief executive of an academy chain to act as an ex-officio trustee. However useful that might be, it may not always be appropriate, especially during a probationary period.

 

The key change here is the requirement for trusts' financial performance to be considered by boards of directors and governors and finance committees at least three times a year. Also, when a trust proposes to set a deficit budget, the EFA must be notified within 14 days.

 

An important change means that staff employed by a trust may not be members of an audit committee, nor participate when matters relating to audit are discussed by a combined finance and audit committee. Although they must not be formal members, they may attend, to provide information and participate in discussion.

The term "responsible officer" is no longer used to describe the director or governor assigned to check a trust's internal controls. The position remains an option, however, if is it is regarded as helpful to good governance.

Given the complex demands of the handbook, it is no surprise that it includes a reminder of the importance of strong, effective trust membership. Trust members are the owners of the academy, and, in the case of church academies, will include representatives of diocesan boards of education.

Trust members have to hold directors or governors to account, as we have long argued, and, if there are members who underperform, they must be removed.

It will come as a relief to trusts that the changes set out in the handbook are not retrospective. But they do confirm the ever more important need for regular training for governors of church academies.

 

Howard Dellar is head of the ecclesiastical, education, and charities department at Lee Bolton Monier-Williams, and Secretary of the Ecclesiastical Law Society.

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