New Academies Financial Handbook comes into effect

Are you up to speed with the latest changes to the Academies Financial Handbook?

The Education Funding Agency (EFA) has published the Academies Financial Handbook (AFH) 2015 which has replaced the 2014 version with effect from 1 September 2015. The latest edition contains far fewer changes than in previous years, but these still need attention.

Some of the key changes are:


De facto trustees or shadow directors
The AFH2015 now clearly states that academy trusts must not have de facto trustees or a shadow director. A de facto trustee is defined in Appendix 1 of the Charities SORP 2015 as “a person who has not been validly appointed as a trustee but is acting as a trustee of the charity and is exercising the functions that could only be properly discharged by a trustee”. The definition of a shadow director under company law is similar.

This is particularly relevant to academy trusts because there is some confusion over the terms and roles of a governor, trustee and director. We have seen evidence of single academy trusts who have not appointed all of their governors onto the board of trustees/directors even though the individuals are attending ‘governor’ meetings and carry out the same duties as their colleagues who have been officially appointed trustees/directors, they would be seen to be de facto trustees and/or shadow directors.

A Financial Notice to Improve (FNtL)
The EFA can now issue FNtL due to governance concerns as well as financial concerns.

The EFA will raise a FNtI where it believes governance and management is inadequate. This can include, but is not limited to, weakness in oversight of controls or directions by the trustees, poor internal scrutiny and challenges, breaches of duties, principles and requirements governing connected party relationships.

Seven principles of public life
The EFA has emphasised that accounting officers must adhere to the seven principles of public life. These are selflessness, integrity, objectivity, accountability, openness, honesty and leadership.

Governance arrangements
In the interests of transparency, trusts must publish on their website up-to-date details of their governance arrangements in a readily accessible form. This must include the structure and remit of members, trustees, committees and local governing bodies, dates of appointments, relevant business interests and meetings attendance records for trustees and local governing bodies. Full details of the requirements can be found in 2.5.2 of the AFH2015.

For larger academies this could be quite a challenging exercise and they may encourage each academy school to disclose local governors attendance records and business interests on their website rather than the trust’s website.

Register of interest
The EFA has clarified that the register of interests must identify close family relationships between members or trustees and the trust’s employees. For these purposes, a ‘close’ family member is a member of the same household who may be expected to influence or be influenced by the person. This includes but is not limited to a child, parent, spouse or civil partner.

Business and pecuniary interests of local governors
Academy trusts must publish relevant business and pecuniary interests of local governors on their website. This should include governance roles in other educational institutions as well as commercial business interests, however the academy trusts have discretion over the publication of interests of other individuals including child, parent, spouse and civil partner.

Appointment of members of trustees
The trust should notify the EFA through the Information Exchange of all appointments of trustees and members within 14 days of any such appointment.

There is still a requirement for trusts to notify the EFA through the Information Exchange whenever a key position such as the chair of the trustees, the accounting officer or chief financial officer is vacated or filled.

Financial control

Value for money statement
The AFH2015 confirms the removal of a separate value for money (VFM) statement, this has been previously explained in the Accounts Direction 2014-2015. The VFM statement is now incorporated into the Governance Statement within the annual report and financial statements.

Budget monitoring
The requirements relating to budget monitoring have been simplified. In the 2014 Financial Handbook, the requirement was that academy trusts should prepare timely monthly management accounts, including income and expenditure reports on an accruals basis, cash flow forecasts and balance sheets as appropriate. This has now been replaced by the preparation of monthly budget monitoring reports. Trustees should carefully consider what information they require to understand the academy trust’s financial position and performance to enable them to fulfil their duties as a trustee.

Liabilities and write-offs
Delegated authority to write off debts or enter into liabilities is now subject to a ceiling of £250,000. The limit for a single transaction has remained the same – 1% of the total annual income or £45,000, whichever is smaller. For academy trusts that have submitted timely, unqualified financial returns for the previous two financial years, the cumulative limit is 5% of the total annual income.

Leasehold or tenancy agreement on land or buildings
Previously, academy trusts required prior EFA approval for taking leasehold or tenancy agreements on land or buildings from other parties for a term of five or more years. This time period has now been extended, so that approval is now only required for terms of seven years or more.


Dedicated audit committee
Only academy trusts with an annual income in excess of £50m will now be required to have a dedicated audit committee. This is a substantial relaxation in the rules. Previously the requirement to have a dedicated audit committee applied to trusts with income of over £10m or a capitalised asset value of over £30m and to all multi-academy trusts, regardless of their size.

Please get in touch for further help and advice.


Nick Simkins

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