Lord Agnew and the new Academies Financial Handbook
Most of us will recall that back in February Lord Agnew, Parliamentary Under-Secretary of State for the School System, wrote to all academy chairs and his letter included a headline grabbing section on senior leadership pay, especially the Accounting Officer (or the CEO to you and me). However, due to the media storm around that, other points in his letter did not receive the attention necessary at the time. Importantly, the letter went on to stress that a key priority for chairs is the financial health and sustainability of their trusts. So, to emphasise this point, Lord Agnew included an annex to his letter providing helpful links on how to save money.
In the middle of June, Lord Agnew wrote another letter, this time directed at Academy audit firms, asking them to “reflect” on how they can increase awareness of best practice in financial management and governance.
Last week, the new Academies Financial Handbook (AFH), with its foreword written by Lord Agnew, was quietly released into the public domain. Reviewing the changes, we can see that the commitment to academy’s financial health and sustainability continues. Academies are now required to set an approved three-year budget on an annual basis. This three-year budget is to be submitted to the Education Skills and Funding Agency via the Budget Forecast Return Outturn and Budget Forecast Return. In addition, there is now a requirement for academies, regardless of size, to produce monthly management accounts to be shared with the chair of trustees with all the other trustees having sight of them at least six times per year. Other key changes include:
- Cash management. Under the old AFH, there was a requirement that academies “should not go overdrawn”. This has been changed to “must not go overdrawn”.
- Executive pay. The existing section has been extended to provide information on keeping pay transparent, proportionate and justifiable. There is also a reminder that academies now come under the requirements to publish gender pay gap information.
- Related Parties. From 1st April 2019, academies must report all related party transactions to the ESFA prior to the transaction taking place. This will be done via an online form. Any contract or combination of contracts with a related party which would total over £20,000 will require prior approval from the ESFA.
Compliance with the AFH is a must for academies. This is where Schools’ Choice can help. We are experienced in providing a range of financial services to academies – from internal audit to monthly management accounts and annual financial statements – that are always mindful of the need for compliance. At the end of the day, the last thing you want is a personally addressed letter from Lord Agnew!