Financial management and Governance Reviews – what can academies learn with regard to Oversight and Independence?

Published on 14 August 2017

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In the second of a series of articles, we are going to look at the Oversight and Independence issues highlighted by the ESFA.

As ever, the Education and Skills Funding Agency (ESFA) published a series of documents on their website just before the summer break – they are obviously keen on providing those in the sector with plenty to read on their summer holidays!

In amongst the various publications were some Financial management and Governance reviews which always make for interesting reading as they can highlight issues that academy trusts may or may not have considered. So can we learn from the most recent reports?

Firstly, there have been a number of instances whereby either the members and/or trustees have not been independent. Examples have included members also being trustees, trustees and members also being individuals on the senior management team, and the Accounting Officer being a member. Although the AFH does not explicitly state that members can’t be trustees, it does state this is not seen as best practice. It is key that Trusts have a clear distinction between the layer of members and the layer of trustees.

Having members of the senior management team “off payroll” has also been highlighted. Trusts must ensure that senior employees’ payroll arrangements fully meet their tax obligations and comply with HM Treasury’s guidance about the employment and contract arrangements of individuals on the avoidance of tax.

The CEO and Accounting Officer (AO) of a Trust must also be named in writing and have their role and responsibilities clearly defined. In addition, the role of the CEO/AO must not rotate so it is clear who is accountable for the financial management and integrity of the Trust.

Some Trusts elect not to have a separate finance committee and therefore financial oversight and management rests solely with the Trust Board. In this instance the Board need to ensure financial information is presented on a regular basis and in a consistent format with sufficient detail. Furthermore, MATs should be presenting consolidated financial information rather than at individual academy level only. Having a lack of adequate financial oversight increases the change of poor finance and governance decisions.

Maintaining up to date records with regards to the appointments and resignations of members and trustees has also been highlighted in recent reports. Investigations have found some Trusts to have inaccurate records at Companies House and Edubase. The Academies Financial Handbook requires that changes to members and trustees should be updated at Edubase within 14 days of the change. This can cause a lack of clarity over who has oversight of the Trust.
Finally, those Trusts who have sponsors as members should ensure that, if a company, it is not insolvent. The inclusion of an insolvent member is a breach of a Trust’s Articles of Association as membership should terminate in instances of insolvency.

This is just a summary of the key points raised regarding Oversight and Independence. We recommend that you review the reports and consider if there are any issues that may affect your Trust.

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