Understanding the Academies Accountability Framework Academies Financial Handbook 2014

1. Understanding the Academies Accountability Framework Academies Financial Handbook 2014

2. Purpose of session • To acknowledge the underlying accountability framework applying to academy trusts • To provide an overview of academies’ key financial responsibilities under the Academies’ Financial Handbook • To provide an update on key changes in the 2014 edition of the Handbook

3. Accountability framework A reminder that academy trusts are: • companies limited by guarantee • so subject to company law – hence avoid conflicts of interest, prepare accounts, undergo audit – and responsible for themselves • charities • so subject to charity law – hence acting in the wider public interest and accountable to beneficiaries • central government public sector bodies • so subject to public standards of accountability – hence accountable to Parliament, and PAC / HMT / NAO interest shapes the rules.

4. Accountability framework cont’d As they receive public funds academy trusts are also subject to: • afunding agreement with the Secretary of State • which sets out broad conditions for the receipt of grant • an Academies Financial Handbook issued by EFA • which pulls together key financial requirements and freedoms • compliance with Handbook is a condition of funding agreement • it contains principles and requirements, not guidance

5. A collaborative process • Working with stakeholders • the Handbook is produced in consultation with academy working groups • consultation also with HM Treasury • Giving notice • 2014 Handbook published in advance (effective from 1 Sept 2014) • 2013 Handbook still applies for year ended 31 August 2014 • Will be published on the gov.uk website • May also be accessible via forthcoming EFA Information Exchange

6. 1: Roles and responsibilities Handbook coverage • Academy trustees • take full responsibility for financial affairs • act within powers • promote the company, not themselves • avoid conflicts of interest (etc) • Academy accounting officer (principal/CEO) • ensure regularity (purposes intended), propriety (standards) and VFM • report concerns to EFA • DFE and EFA • ultimate responsibility for adequate framework to ensure proper financial management • intervention powers (issuing financial notice to improve and withdrawal of freedoms)

7. 1: Roles and responsibilities What’s new? • Governance reviews – a “must” for new trusts in their first year • EFA interventions – breaches of rules around connected parties may prompt a financial notice to improve • Accounts – publish on website by 31 January

8. 2: Main financial requirements Handbook coverage • Financial oversight and management challenge – trustees to meet regularly, should have a finance committee, have a chief financial officer • Financial planning, monitoring and reporting - balance the budget, manage cash flow and publish accounts • Operational controls - have controls over decision making, reporting, procurement, asset management, risk management • Internal scrutiny - have an audit committee, or equivalent, and a means of self-checking your internal controls

9. 2: Main financial requirements Handbook coverage - Internal scrutiny cont’d • Scrutiny must be driven by a committee: • must have a dedicated audit committee if income over £10m or capital assets over £30m • should have a dedicated audit committee if a multi-academy trust and below these limits • others can include within remit of another committee • Options for performing checks of systems and transactions include: • appointment of an internal auditor • extra work by external auditor • appointment of an unpaid trustee (previously referred to as responsible officer, but title no longer used in Handbook) • agreeing peer review with another trust

10. 2: Main financial requirements What’s new? • Scheme of delegation – trusts must have one, underpins controls • Financial management information – must give to trustees 3x per year • Budget deficits – must report deficits to EFA within 14 days • Investments – information given on key considerations • Audit committee – staff shouldn’t be members of the committee, but can attend to give information and advice • Risk protection arrangements – alternative to insurance from 1 Sept 2014

11. 3: Delegated authorities & responsibilities Handbook coverage • Freedoms - academies have delegated authority over most transactions • Responsibilities - but must demonstrate proper and regular use of funds • Connected parties • trusts must be even-handed with transactions – eg tendering policy / fair and open procurement • purchases from some connected parties must be ‘not for profit’; • see separate session

12. 3: Delegated authorities & responsibilities • Delegated limits – are unchanged for 2014 • Limits are now summarised - in new annex B • Staff severance payments • EFA approval needed for non-statutory or non-contractual payments of £50k or more • more guidance on severance payments on gov.uk website at: www.gov.uk/academies-severance-payments • Anything novel (outside normal range) or contentious (potentially giving rise to criticism) – prior EFA must be sought via Academy Questions • Delegations may not apply if • funded on estimated pupil numbers • under a Financial Notice to Improve

13. 3: Delegated authorities & responsibilities What’s new? • Transactions with connected parties • Avoidance of personal gain – emphasis on trustees and staff • Awareness of public scrutiny and perceptions – manage real and perceived conflicts of interest (e.g. with chairs & AOs) so disclose fully • Novel and contentious transactions with connected parties – require prior EFA approval • Register of interests • members, local governors and senior staff to complete it, as well as trustees, but there may be others • the Handbook explains what the register must contain (eg other directorships and employments, and more) • Not for profit – applies only above £2,500 (section 3.2.3)

14. 4: Audit requirements Handbook coverage • Public scrutiny - Parliament and public expect assurance that funds are being spent as intended, hence independent audit • Audit framework • statutory audit of annual accounts – appoint external auditors, plan early • regularity audit – same auditor to consider correct use of funds – see separate session • your own financial management and governance self assessment – may be validated by EFA • Fraud and irregularity • EFA may investigate • main message - control, report, investigate

15. 4: Audit requirements What’s new? • Fraud reporting • cases over £5k (both individually or cumulatively) to be reported to EFA • information to be reported in each case is now set out

16. Summary - what you should do • Act within your powers • understand and apply the requirements in the new Handbook • have clearly laid out responsibilities so that everyone knows the parameters • Maintain oversight • have some means of monitoring whether the requirements are being met, and taking action if they are not • Consider standards of conduct • go with the spirit, not just the letter of the Handbook • aim beyond the requirements and apply best practice • be even-handed and transparent

17. Thank you for watching