Academy Trust Handbook
The Education and Skills Funding Agency (ESFA) has published the new Academy Trust Handbook 2023 (ATH) which is effective from 1 September 2023. We look at some of the key changes and provide insight into areas academy trusts should focus on from September.
The ATH continues to build on the ESFA’s ongoing initiative to simplify and streamline the regulatory requirements placed on academy trusts, leading to a notable reduction in the size of the ATH for this year. An increase in the use of external hyperlinks and schedules means that the detail can still be located as necessary.
The ATH also continues to emphasise trusts existing responsibilities in estates management and to ensure the ongoing safety of the estate. This is a theme that was also evident in the June 2023 publication of the Academies Accounts Direction 2023 (AAD).
Governance
Quality descriptors
Newly established Regions Groups will consider the quality of a trust by reference to five pillars:
- high-quality and inclusive education
- school improvement
- workforce
- finance and operations
- governance and leadership.
Section 1 of the ATH has been updated to include reference and closer alignment to the Trust Quality Descriptions that Regions Groups will use in making decisions around trust mergers, conversions and expansions. Trust Boards and executive teams will find Annex A - trust quality descriptions very helpful when preparing for expansion.
Good estates management
In anticipation of the National Audit Office’s Condition of School Buildings report, both the AAD and the ATH have a renewed focus on good estates management. Section 1.19 of the ATH has been expanded to include references to an array of useful resources that trust Boards and executive teams will find useful in setting their estates management strategies.
An estates management strategy should be forward-looking, fully costed and easy to understand. This will help to prioritise available resources/funding into the areas most at need of attention. Applying pre-emptive measures early can also lead to better value than reacting to a problem after the event.
Note also that the AAD clarifies the Accounting Officer’s statement on Regularity and Compliance also extends to estates management, compliance and safety. The Accounting Officer will need to be able to demonstrate that they have undertaken the necessary actions to be able to sign to this effect. This is an area external auditors are likely to focus on through this year’s audit cycle.
Financial requirements
Board meetings
Section 2.3 of the ATH has been updated to remove the need to comply or explain where Board meetings have not taken place at least six times per year. There is now more flexibility for the Board to decide how often they need to meet to discharge their duties.
This same relaxation also extends to the distribution of the monthly management accounts which, until now, needed to be considered by the Board at least six times per year, regardless of whether the Board meets that many times annually.
Despite this concession, the Chair must still have sight of the academy trust’s management accounts each month and there is an expectation that the Board must consider the management accounts when they meet.
In practice, many Trusts elect to distribute management accounts to the full Board monthly, a practice that we consider sensible given the current economic climate.
Electric Vehicle Salary Sacrifice Schemes
Many organisations are turning to electric vehicle (EV) salary sacrifice schemes to help attract and retain talent. There are many different scheme providers operating in this area, but all provide the same principal terms which are:
- employees sacrifice some of their salary in return for an electric car of their choice hired by their employer, typically saving 30–60% of costs through income tax and national insurance savings
- there is usually no incremental cost to the employer
- the associated benefit in kind on electric vehicles is typically very low, which means overall cost savings to the employee can be substantial
- these savings help make the switch to electric cars not only possible, but also attractive for many.
Section 2.31 of the ATH has clarified that EV salary sacrifice schemes do not need ESFA approval if no liability falls (or can fall) on the academy trust. This concession is not applicable where a trust is under a Notice to Improve (NtI) where several delegated authorities are effectively removed from the academy trust.
Delegated authorities
General Annual Grant (GAG) Pooling
Sections 5.29 - 5.31 of the ATH refer to the ability of academy trusts to pool GAG. While the fundamental principles of GAG pooling have not changed it is noticeable that the messaging is now more positive as it explains the benefits that GAG pooling can bring. Perhaps a recognition that pooling generally has been slow to gain traction across the sector. In previous iterations of the ATH the focus was less about the benefits and more about what constituent academies can do if they are unhappy with a trust’s decision to pool GAG.
Also interesting is the removal of the reference to ESFA reporting trusts to DfE where it has serious concerns about a long-term substantial surplus with no clear plans.
Related Party approvals
From 1 September 2023 the limits at which prior ESFA approval is required for related party transactions will double to £40,000 (previously £20,000) per year. This applies to new contracts or agreements agreed with a related party on or after 1 September 2023.
There are also some welcome concessions where approvals are not required:
- colleges, universities and schools which are sponsors of the academy trust
- state funded schools and colleges, including academies
- the provision of services to an academy trust with a religious designation, for essential functions fundamental to the academy trust’s religious character and ethos which can only be provided by their religious authority.
Note however that concessions 1 and 2 do not extend to transactions with a subsidiary of these organisations. Nor do they apply where the sponsor is a registered charity.
Salaries and payments made by the trust to a related party under a contract of employment through the trust’s payroll are not included within the need to seek approval, or indeed report, transactions to ESFA.
Summary
The 2023 iteration of the ATH follows on with some of the themes set out earlier in the year on the release of the Academies Accounts Direction (AAD). The changes this year may not be considered fundamental but the timely concessions around electric vehicle schemes are welcome. We have noticed an increasing number of academy trusts that are exploring this relatively new initiative and the associated employee benefits may help to instil a sense of loyalty in employees where the scheme is offered.
It is important that appropriate due diligence is undertaken before selecting a provider in this area and ultimately the trust should not be at risk if the employee leaves. It is also important that the employer seeks appropriate tax advice, and that the employee fully understands the tax and operational implications of entering into the scheme, something that is often overlooked.
The recent enhanced focus on estates management is also pertinent. Many academy trusts have now embraced the Good estates management for schools framework and are well on their way to setting a robust estates management strategy. With the increased focus in this area Boards, Accounting Officers and their executive teams will need to be able to demonstrate that their strategy is robust, fully costed, easy to follow and that the strategy is providing value for money. The conclusions reached in this area will also require disclosure in the academy trust’s annual financial statements, so it is important that the conclusions reached are clear and succinct.
If you have any questions regarding the new ATH, please speak to your usual Partner or Matt Doyle Healey.
