Guidance

Academy trust handbook 2025: effective from 1 September 2025

Published 25 June 2025

Applies to England

© Crown copyright 2025

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This publication is available at https://www.gov.uk/government/publications/academy-trust-handbook/academy-trust-handbook-2025-effective-from-1-september-2025

Introduction

Welcome to the academy trust handbook.

In this document the Department for Education (DfE) provides an overarching framework for financial governance, management and other controls, for academy trusts in England. Compliance with the requirements set out in this document is a condition of the funding agreement between each trust and the Secretary of State for Education. Trustees, accounting officers, principals, senior leaders and others with responsibility for governing, managing or auditing an academy trust must understand this handbook and adhere to its contents.

In addition to setting out mandatory requirements, the handbook also provides links to guidance and best practice to support trusts in making sound decisions, strengthening internal controls, and developing effective governance arrangements. Trusts are encouraged to use the handbook as a tool to identify continuous improvement and not only for compliance.

We review the handbook at least annually. Trusts should ensure they review the most recent version when published and take prompt action to implement any new requirements by the date they become effective.

Use the customer help portal to provide feedback about the handbook or to contact us for further guidance.

What the handbook covers

The handbook:

  • must be complied with as a requirement of trusts’ funding agreements with the Secretary of State for Education
  • describes financial responsibilities of academy trusts, and reflects the principles in HM Treasury’s (HMTs) Managing Public Money (MPM)
  • describes other responsibilities of academy trusts including references to safeguarding and keeping buildings safe and well-maintained
  • explains when trusts must obtain DfE approval in advance for financial transactions
  • balances the need for effective financial governance with the freedoms that trusts need over their day-to-day business
  • reflects The Seven Principles of Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership) to which public office holders must adhere
  • covers all types of academy including single academy trusts, trusts with multiple academies, free schools, studio schools, university technical colleges, alternative provision and special academies
  • sets out that DfE may intervene where it has concerns about the trust’s compliance

It is effective from 1 September 2025 and will remain in force until updated or replaced.

Using the handbook

In the handbook:

  • ‘must’ identifies requirements – a list can be found in the Schedule of Musts
  • ‘should’ identifies minimum good practice which trusts should apply unless they can demonstrate that an alternative approach better suits their circumstances

What else should you read

The handbook signposts trusts to supplementary guidance, which trusts should read and apply where applicable. There is further reading in:

What has changed

The main changes in each section are as follows.

What else should you read?

Roles and responsibilities

  • Confirming that trusts should have an understanding of and be working towards meeting the 6 core digital and technology standards by 2030 (1.16).
  • Providing trusts with further guidance on estates management (1.20).
  • Updating the accounting officer duties and the definitions of regularity, propriety, value for money and feasibility, to better reflect Managing Public Money (1.32 and ‘find out more’ box).
  • Providing further information including links to relevant sections of Managing Public Money regarding the accounting officer’s duty to raise concerns (1.37 and ‘find out more’ box).

Main financial requirements

  • Providing trusts with further guidance and support on procurement (2.24 to 2.26).
  • Clarifying the role of the board in setting of executive pay (2.27 and 2.30).

Internal Scrutiny

  • Clarifying that the income thresholds referred to in 3.6 and 3.16 are based on the trust’s last audited accounts.

Delegated authorities

  • Explaining how cost could cause a transaction to be repercussive (5.5).
  • Providing a link to the relevant section on Novel, Contentious or Repercussive transactions in Managing Public Money (‘find out more’ box below 5.5).

The Regulator and intervention

  • Confirming that trusts must not pay any cyber ransomware demands (6.15).
  • Providing trusts with a link to further information on DfE oversight and support, including intervention (6.16).
  • Removing educational performance as an area where an Notice to Improve (NtI) may be issued (6.17).
  • Confirming that the department may recover funds where there is evidence of irregularity or fraud (6.21).

Part 1: Roles and responsibilities  

The duties of key people responsible for running academy trusts.

1.1. Trusts perform an important role in advancing education, promoting pupil welfare and keeping trusts’ estates safe and well-maintained. Trustees and management must have the skills, knowledge and experience to run the academy trust.

Members

Role of members

1.2. Every trust has members who have a similar role to shareholders of a company limited by shares. Member powers are set out in the trust’s articles of association.

How many members should there be

1.3. The academy trust must have at least 3 members but should have 5 or more.

Suitability of members

1.4. Trusts must ensure that their members are not currently subject to a direction made under section 128 of the Education and Skills Act 2008, which prohibits individuals from taking part in academy trust management, and that they do not appoint as a member, a person who is currently subject to a section 128 direction.

Can employees be members

1.5. No. Members must not be employees of the trust, nor occupy staff establishment roles on an unpaid voluntary basis.

Can trustees be members

1.6. The majority of members should not also be trustees.

Working with the trustees

1.7. It is important for members to be kept informed by trustees about trust business so they can be assured that the board is exercising effective governance and use their powers to step in if governance is failing. This must include providing the members with the trust’s audited annual report and accounts as stated in paragraph 4.4.

Find out more about the role of members in section 4 of the Academy trust governance guide.

Trustees

Who are the trustees

1.8. The trustees of the academy trust are both charity trustees and company directors. This handbook refers to them as trustees. However, in some academy trusts, such as church academies, those on the board are known instead as ‘directors’. In church academies, the term ‘trustees’ is reserved for those on the board of the separate trust owning the land.

1.9. All trusts should have reserved places for parents, carers or other individuals with parental responsibilities in their governance structure. Trusts should hold elections to fill these places, as appropriate.

  • Single academy trusts should have at least 2 such places on the board.
  • Trusts with multiple academies should have at least 2 such places on the board or at least 2 such places on each local committee (known as local governing bodies in the department’s model articles) where the trust has established them.

Find out more about:

Board purpose

1.10. The academy trust is the legal entity with the board having collective accountability and responsibility for the academy trust and assuring itself that there is compliance with regulatory, contractual, and statutory requirements.

The academy trust board provides:

  • strategic leadership of the academy trust: the board defines the trust vision for high quality and inclusive education in line with its charitable objects – it establishes and fosters the trust’s culture and sets and champions the trust strategy including determining what, if any, governance functions are delegated to the local tier
  • accountability and assurance: the board has robust effective oversight of the operations and performance of the academy trust, including the provision of education, pupil welfare, overseeing and ensuring appropriate use of funding and effective financial performance and keeping their estate safe and well-maintained
  • engagement: the board has strategic oversight of relationships with stakeholders – the board involves parents, schools and communities so that decision-making is supported by meaningful engagement

1.11. The trustees must apply the highest standards of conduct and ensure robust governance, as these are critical for effective financial management. Trusts should consider the features of high quality governance as described in the trust quality descriptions.

Trustees’ statutory duties

1.12. Trustees must comply with the trust’s charitable objects, with company and charity law, and with their contractual obligations under the funding agreement. Company directors’ duties are described in sections 170 to 181 of the Companies Act 2006. Charity trustees’ duties are described in the Charity Commission’s The essential trustee guidance.

1.13. As an organisation, the trust has a range of responsibilities under current legislation and statutory guidance. Trusts’ responsibilities include such matters as safeguarding, health and safety and estates management. Ensuring strong governance in these areas will be a key priority for the board.

Safeguarding

1.14. Academy trust boards have a duty to:

  • safeguard and promote the welfare of children
  • have regard to any statutory guidance on safeguarding, issued by the Secretary of State for Education
  • ensure the suitability of staff, supply staff, volunteers, contractors and proprietors

Find out more about this duty in:

Read further guidance in:

1.15. When carrying out the Prevent duty, as required under section 26 of the Counter Terrorism and Security Act, trusts are required to follow the Home Office’s revised Prevent duty guidance for England and Wales and DfE’s guidance on safeguarding learners vulnerable to radicalisation.

Digital and Technology Standards

1.16. Trusts should have an understanding of the extent to which they are meeting DfE’s digital and technology standards and be working towards meeting the following 6 core standards by 2030:

Find out more about DfE’s plan technology for your school service, which allows trusts to self-assess against the standards and receive personalised recommendations for their next steps.

Health and safety

1.17. The main legislation covering this area is the Health and Safety at Work etc. Act 1974 and its regulations. Under the Act the academy trust, as an employer, is responsible for the health and safety of its staff, pupils, and any visitors.

1.18. Trust boards should follow DfE’s Health and Safety: responsibilities and duties for schools as well as Health and Safety Executive (HSE) guidance for Education.

1.19. Academy trusts have a duty to manage asbestos in their schools effectively, compliant with the Control of Asbestos Regulations 2012.

Find out more about:

Estates management

1.20. An academy trust’s estate is both an asset and a mechanism to deliver outcomes for pupils. DfE expects academy trusts to manage their school estate strategically and effectively and maintain their estate in a safe working condition. This includes complying with statutory duties to ensure the health and safety of building occupants.

Trusts should ensure they are aware of and are applying the following guidance relevant to estates safety and management:

Further information and guidance is available from The Trust Network, which is run by trusts for trusts to help its members develop effective, efficient, and economically sustainable estates and safety management.

What else do trustees consider

1.21. The trustees must ensure regularity, propriety and value for money in use of the trust’s funds. The trustees must also take ownership of the trust’s financial sustainability and its ability to operate as a going concern.

What does the chair of trustees do

1.22. The chair is responsible for ensuring the effective functioning of the board and has a vital role in setting the highest expectations for professional standards of governance and accountability for the board.

Find out more about the role of the chair in Academy trust governance.

Can employees be trustees

1.23  Any newly appointed senior executive leader can only be a trustee if the members decide to appoint them as such, the senior executive leader agrees and the trust’s articles permit it. No other employees should serve as trustees, nor should trustees occupy staff establishment roles on an unpaid voluntary basis.

Can trustees delegate

1.24. Yes, to committees and the executive in accordance with their governance structure. Each committee (other than those in a trust with multiple academies constituted as a local governing body) must contain a majority of trustees, but it may also include other people the board chooses to appoint.

1.25. Academy trusts must not have de facto trustees (defined in appendix 1 of the Charities SORP) or shadow directors (defined in section 251(1) of the Companies Act 2006).

Skills and experience

1.26. The board should identify the skills and experience it needs, including sufficient financial knowledge to hold the executive to account. The board should also address this for committees, local committees and local governing bodies.

1.27. New trusts in their first year must, and established trusts should, include in their governance statement, an assessment of their governance structure, including a review of the board’s composition in terms of skills, effectiveness, leadership and impact.

Find out more about:

The accounting officer

Who is the accounting officer

1.28. The board of trustees must appoint, in writing, a senior executive leader, who may be appointed as a trustee. In single academy trusts this should be the principal. In trusts with multiple academies, it should be the chief executive or equivalent.

1.29. The board must also appoint, in writing, a named individual as its accounting officer. This should be the senior executive leader. The individual must be a fit and suitable person for the role. The roles of senior executive leader and accounting officer must not rotate. The roles of accounting officer and chief financial officer should not be occupied by the same individual. The accounting officer should be employed by the trust. The trust must obtain prior DfE approval if it is proposing, in exceptional circumstances, to appoint an accounting officer who will not be an employee.

Departure of the senior executive leader (accounting officer)

1.30. When the senior executive leader is planning to leave the trust (for example retirement or resignation), the board of trustees should approach their Regional Director in advance to discuss their structure and options, including plans for recruitment.

What does the accounting officer do

1.31. The accounting officer role includes specific responsibilities for financial matters. It includes a personal responsibility to Parliament and to DfE’s accounting officer for the trust’s financial resources.

1.32. Accounting officers must be able to assure DfE’s accounting officer, Parliament and the public, of high standards of probity in the management of public funds, particularly regularity, propriety, feasibility and value for money, including economy, efficiency and effectiveness – the 3 elements of value for money.

The following definitions are set out in MPM:

  • Regularity: the proposed transaction is compliant with the framework of authorities of the department or body concerned. That the transaction under consideration has sufficient legal basis, parliamentary authority, and Treasury authorisation; is compatible with the agreed spending budgets, the wider legal framework (for example subsidy control and procurement law), and the requirements regarding spending set out in this document.
  • Propriety: the proposal meets high standards of public conduct and relevant Parliamentary control procedures and expectations, including compliance with any conventions or commitments made to Parliament and cross-cutting government policies or standards, as well as the standards of conduct and good governance, as set out in this document.
  • Value for money: in comparison to alternative proposals or doing nothing, the proposal delivers the stated policy objectives in a way that represents good value for the Exchequer as a whole, taking into consideration the chances of different degrees of success or failure.
  • Feasibility: the proposal can be implemented accurately, sustainably, and to the intended timetable with the resources available and without incurring wasteful or nugatory spend.

These definitions are not set out in MPM but may be useful:

  • Economy: reducing the cost of resources used for an activity, while maintaining quality.
  • Effectiveness: achieving the intended outcomes or objectives.
  • Efficiency: achieving maximum output for given inputs, or minimum inputs for a given output.

1.33. Accounting officers must adhere to The Seven Principles of Public Life.

1.34. The accounting officer must have oversight of financial transactions, by:

  • ensuring the academy trust’s property and assets are under the trustees’ control and measures exist to prevent losses or misuse
  • ensuring bank accounts, financial systems and financial records are operated by more than one person
  • keeping full and accurate accounting records to support their annual accounts

The accounting officer’s annual statement

1.35. The accounting officer must complete and sign a statement on regularity, propriety and compliance each year and submit this to DfE with the audited accounts. The accounting officer must also demonstrate how the trust has secured value for money in the governance statement in the audited accounts.

The accounting officer’s duty to raise concerns

1.36. The accounting officer must take personal responsibility (which must not be delegated) for assuring the board that the trust is complying with the funding agreement and handbook.

1.37. The accounting officer must advise the board, in writing, if action it is considering is incompatible with the articles, funding agreement or handbook. This includes where such action conflicts with the duties of the accounting officer, to ensure regularity, propriety, value for money and feasibility.

1.38. Similarly, the accounting officer must advise the board, in writing, if the board fails to act where required by the funding agreement or handbook. Where the board is minded to proceed, despite the accounting officer’s advice, the accounting officer must consider the board’s reasons and, if the accounting officer still considers the action proposed by the board is in breach of the articles, the funding agreement or handbook, the accounting officer must notify DfE’s accounting officer immediately in writing.

Find out more about the:

  • accounting officer role in chapter 3 of Managing Public Money including further information on the accounting officer’s duty to raise concerns and where directions may be given to them
  • consequence of these directions for the governance statement in the accounts as set out in annex 3.1 of Managing Public Money
  • Role of the accounting officer – (CST)

The chief financial officer

Role of the chief financial officer

1.39. The board must appoint a chief financial officer (CFO) to whom responsibility for the trust’s detailed financial procedures is delegated. The CFO should play both a technical and leadership role. The CFO should be employed by the trust, and the trust must obtain prior DfE approval if it is proposing, in exceptional circumstances, to appoint a CFO who will not be an employee.

Skills and experience

1.40. The CFO and their finance staff must be appropriately qualified and/or experienced. Trusts must assess whether the CFO, and others holding key financial posts, should have a business or accountancy qualification and hold membership of a relevant professional body, dependent on the risk, scale and complexity of financial operations. DfE encourages larger trusts (for example over 3,000 pupils) to consider the range of accountancy qualifications available from professional bodies such as the ICAEW, ACCA, CIMA or CIPFA (including CIPFA qualifications developed in partnership with ISBL), and take this into account when filling CFO vacancies.

1.41. CFOs and other key financial staff should maintain continuing professional development and/or personal development and undertake relevant ongoing training.

Find out what the CFO role may cover in the Institute of School Business Leadership’s Professional Standards and its employer guidance, and in CIPFA’s the role of the CFO in public service organisations.

CFOs may find it beneficial to engage in a local or regional network of fellow school business professionals. Find one in the directory of school business professional networks.

The governance professional (clerk to the board)

1.42. The academy trust must appoint a governance professional to support the board of trustees, who is someone other than a trustee, principal or chief executive of the trust.

Find out more about the role of the governance professional in DfE’s Academy trust governance guide.

Being transparent about your governance

1.43. The trust must be transparent with its governance arrangements.

1.44. The trust must provide details of its governance arrangements in the governance statement published with its annual accounts, including what the board has delegated to committees and, in trusts with multiple academies, to local committees or governing bodies.

Register of interests

1.45. The trust must keep a register of any relevant business and financial interests, for (as a minimum) members, trustees, local governors and senior employees, serving at any point over the past 12 months.

1.46. The register must include their full names, date of appointment, who appointed them and their term of office (for trustees and local governors), date they stepped down (where applicable), and relevant business and financial interests including:

  • directorships, partnerships and employments with businesses
  • trusteeships and governorships at other educational institutions and charities
  • for each interest: the name and nature of the business, the nature of the interest and the date the interest began

1.47. The register must identify relevant interests from close family relationships between the academy trust’s members, trustees or local governors. It must also identify relevant interests arising from close family relationships between those individuals and employees.

1.48. Trusts should consider whether other interests should be registered, and if in doubt should do so. Boards of trustees must keep their register of interests up-to-date at all times.

The Charity Commission offers guidance in Managing conflicts of interest in a charity and Conflicts of interest: a guide for charity trustees (CC29).

Trust websites

1.49. The trust must also publish on its website up-to-date details of its governance arrangements in a readily accessible format, including:

  • the structure and remit of the trust’s members, board of trustees, committees and local committees/governing bodies (the trust’s scheme of delegation for governance functions), and the full names of the chair of each
  • the register of business and financial interests for members, trustees, local governors and the accounting officer, including a nil return where appropriate – trusts have discretion over the publication of interests of other individuals
  • for each trustee, their attendance records at board and committee meetings over the last academic year
  • for each local governor, their attendance records at local governing body meetings over the last academic year

1.50. The trust must make available on request for public inspection:

  • the agenda for every meeting of the trustees, local committees/governing bodies and committees
  • the approved minutes of each meeting
  • any report, document or other paper considered at each meeting

1.51. The trust may exclude from any item any material relating to:

  • a named teacher or other employee or proposed employee
  • a named pupil or student at the academy, or candidate for admission or referral to it
  • any matter which, by reason of its nature, the trustees are satisfied should remain confidential

Disclosure and Barring Service (DBS) checks

1.52. Academy trusts must obtain enhanced DBS certificates for staff and supply staff as set out in the Independent School Standards and their funding agreements. Academy trust members, trustees, and committee members (including local committees or governing bodies) must also have an enhanced DBS certificate, which does not include a barred list check (unless they also engage in regulated activity).

Find out about DBS checks and regulated activity in schools within the statutory guidance Keeping children safe in education (KCSIE).

Part 2: Main financial requirements

The financial management requirements for academy trusts.

Financial oversight

2.1. Trustees and management must maintain robust oversight of the academy trust.

2.2. The trust must take full responsibility for its financial affairs, stewardship of assets and use resources efficiently to maximise outcomes for pupils.

Board meetings

2.3. Board meetings must take place at least 3 times a year, although trusts should consider meeting more frequently to discharge their responsibilities.

Scheme of delegation

2.4. The board cannot delegate overall responsibility for the academy trust’s funds. However, it must approve a written scheme of delegation of financial powers that maintains robust internal controls. The scheme of delegation should be reviewed annually, and at the next available board meeting when there has been a change in trust management or organisational structure that would impact the effectiveness of any existing scheme of delegation.

2.5. The academy trust should have a finance committee to which the board delegates financial scrutiny and oversight, and which can support the board in maintaining the trust as a going concern.

Basic control principles

2.6. The academy trust must have sound internal control, risk management and assurance processes. This should follow a tiered approach comprising:

  • clearly communicated procedures, structures and training of staff
  • appropriate day to day supervision and checks by management
  • internal scrutiny overseen by an audit and risk committee
  • external audit and assurance

2.7. The control framework must:

  • ensure delegated financial authorities are complied with
  • maintain appropriate segregation of duties
  • co-ordinate the planning and budgeting process
  • apply discipline in financial management, including managing debtors, creditors, cash flow and monthly bank reconciliations
  • plan and oversee capital projects, including those relating to estates safety
  • manage and oversee assets and maintain a fixed asset register
  • ensure regularity, propriety and value for money in the organisation’s activities
  • ensure a risk register is maintained and reviewed by the board, drawing on advice provided to it by the audit and risk committee
  • reduce the risk of fraud and theft
  • deliver independent checking of controls, systems, transactions and risks

Find out more in Internal financial controls for charities (CC8).

Financial planning

2.8. The board of trustees must:

  • ensure that financial plans are prepared and monitored, satisfying itself that the trust remains a going concern and financially sustainable
  • take a longer term view of the trust’s financial plans consistent with the requirement to submit three-year budget forecasts to DfE
  • set a policy for holding reserves, and explain it in its annual report, including a clear plan for managing reserves

Find out more about:

Setting a budget

2.9. The board of trustees, and any separate committee responsible for finance, must ensure rigour and scrutiny in budget management.

2.10. The board of trustees must approve and minute their approval of a balanced budget, and any significant changes to it, for the financial year to 31 August, which can draw on unspent funds brought forward from previous years.

2.11. The board must ensure budgets for the current year and beyond, and any revised outturns for the full year, are compiled accurately, based on realistic assumptions, including any provision being made to sustain capital assets, and reflect lessons learned from previous years.

2.12. It should challenge pupil number estimates as these underpin revenue projections, and review these termly.

2.13. Boards are encouraged to take an integrated approach to curriculum and financial planning.

2.14. Boards should refer to DfE’s material on improving school resource management including the top 10 planning checks for boards. To help manage capital assets and budgets, including the safety of pupils and others on the school estate, they should refer to the Good estates management for schools guidance including the organisation self-assessment tool, top 10 estate checks for boards and material on strategic estate management.

Find out more to help with financial planning, financial performance and resource management, including:

Sending your budget to DfE

2.15. The academy trust must submit to DfE, in a form specified by DfE, an Academies budget forecast return (BFR) by the end of August.

2.16. This must be approved by the board of trustees before submission.

2.17. The board of trustees must notify DfE using the customer help portal within 14 calendar days of its meeting, if proposing to set a revenue deficit budget for the current financial year, which it cannot address after taking into account unspent funds from previous years, as this would be non-compliant with the funding agreement and this handbook.

Find out more about submitting your budget returns to DfE.

Monitoring the budget

2.18. The trust must prepare management accounts including an income and expenditure account identifying variations to the budget, cash flow forecasts and balance sheet every month, setting out its financial performance and position.

2.19. Management accounts must be shared with the chair of trustees every month and the board must consider these when it meets, and be assured that it has appropriate oversight of the trust’s financial position.

2.20. The board must ensure appropriate and timely action is being taken to maintain financial viability, including addressing variances between the budget and actual income and expenditure.

Find out more from DfE about management accounting and operating as a going concern.

Cash management

2.21. The trust must manage its cash position robustly. It must avoid becoming overdrawn on any of its bank accounts so that it does not breach restrictions on borrowing.

Investments

2.22. The board of trustees may invest to further the trust’s charitable aims, but must ensure investment risk is properly managed. When considering an investment the board must:

  • have an investment policy to manage and track its financial exposure, and ensure value for money
  • exercise care and skill in investment decisions, taking advice as appropriate from a professional adviser
  • ensure exposure to investment products is tightly controlled so security of funds takes precedence over revenue maximisation
  • ensure investment decisions are in the trust’s best interests
  • review the trust’s investments and investment policy regularly

Find out more about the Charity Commission’s CC14 Investing charity money: guidance for trustees.

Procurement and spending decisions

2.23. The academy trust must be able to show that public funds have been used as intended by Parliament.

Procurement basics

2.24. The academy trust must ensure:

  • spending has been for the purpose intended and there is propriety in the use of public funds, including in relation to any actual or perceived conflicts of interest
  • spending decisions represent value for money
  • internal delegation levels are applied
  • a competitive procurement procedure is in place and incorporated into the trust’s financial framework, and the procurement rules and thresholds in the Procurement Act 2023 and its associated regulations and Find a Tender service are observed
  • appropriate due diligence is in place
  • professional advice is obtained where appropriate

2.25. Trusts should refer to the Buying for schools: how to buy what you need tool to help obtain value for money and apply relevant procurement regulations.

2.26. Trusts should consider DfE opportunities when making purchasing decisions for goods and services.

Find out more about:

Setting executive pay

2.27. The board of trustees must ensure its decisions about levels of executive pay (including salary and any other benefits) follow a robust evidence-based process and are a reasonable and defensible reflection of the individual’s role and responsibilities. No individual can be involved in deciding their remuneration. Decisions about executive pay may be challenged by DfE.

2.28. The board must discharge its responsibilities effectively, ensuring its approach to, and levels of, pay and benefits is transparent, proportionate and defensible. This must be documented in an agreed pay policy, which sets out the process for determining executive pay and includes:

  • independent scrutiny by the board
  • robust decision-making that demonstrates justifiable pay
  • proportionality – that pay and benefits represent good value for money and are defensible relative to the public sector market
  • documented decision-making with rationale and approval by the board
  • a basic presumption that executive pay and benefits should not increase at a faster rate than that of teachers, in individual years and over the longer term

Publication of pay

2.29. The trust must publish on its website in a separate readily accessible form the number of employees whose benefits exceeded £100,000, in £10,000 bandings, for the previous year ended 31 August. Benefits for this purpose include salary, employers’ pension contributions, other taxable benefits and termination payments. Where the academy trust has entered into an off-payroll arrangement with someone who is not an employee, the amount paid by the trust for that person’s work for the trust must also be included in the website disclosure where payment exceeds £100,000 as if they were an employee.

Tax arrangements for senior employees

2.30. The academy trust must ensure its senior employees’ payroll arrangements fully meet their tax obligations and comply with HM Treasury’s guidance about the employment arrangements of individuals on the avoidance of tax. This is described in HM Treasury’s Review of the tax arrangements of public sector appointees, which explains that senior managers with significant financial responsibilities should be exclusively on payroll, and therefore subject to Pay As You Earn with income tax and NI contributions deducted at source. Failure to comply with these requirements can result in a HM Treasury fine.

Find out more about:

Electric vehicle (EV) salary sacrifice schemes

2.31. Academy trusts must approach DfE to seek approval for the following transactions:

  • entering into a new electric vehicle salary sacrifice scheme
  • accepting any further employees onto an existing electric vehicle salary sacrifice scheme

You must contact DfE early in the planning stage, both in relation to new schemes and accepting further employees onto existing schemes. 

Find out more about:

Purchase of alcohol

2.32. The trust’s funds must not be used to purchase alcohol for consumption, except where it is to be used in religious services.

Income generation

2.33. The academy trust should set fees for its chargeable services at full cost, but can apply an additional rate of return when in a commercial environment.

2.34. For the provision of mainstream boarding places, trusts should charge on a full cost recovery basis, applying a rate of return of 8% on boarding charges. Fees and charges should be determined in accordance with DfE’s guidance on managing boarding provision and annex 6.1 of Managing Public Money.

Risk management

Oversight of risk and the risk register

2.35. The trust must manage risks to ensure its effective operation. This includes the following aspects:

  • The trust must maintain a risk register.
  • Overall responsibility for risk management, including ultimate oversight of the risk register, must be retained by the board of trustees, drawing on advice provided to it by the audit and risk committee.
  • Other committees may also input into the management of risk at the discretion of the board.
  • Aside from any review by individual committees, the board should review the risk register frequently and must conduct a full review of it at least annually.
  • Risk management covers the full operations and activities of the trust, not only financial risks.

2.36. The trust’s management of risks must include contingency and business continuity planning.

Find out more about:

The risk protection arrangement

2.37. The academy trust must have adequate insurance cover in compliance with its legal obligations or be a member of the academies risk protection arrangement (RPA). Not all risks are covered in the RPA and therefore trusts with RPA cover may require additional commercial insurance.

2.38. The trust should consider the RPA unless commercial insurance provides better value for money. If the trust is not an RPA member, it should determine its own level of commercial insurance to include buildings and contents, business continuity, employers’ and public liability insurance and other cover required.

2.39. The trust must cooperate with risk management auditors and risk managers, and implement reasonable risk management audit recommendations made to them.

Find out more about the risk protection arrangement.

Whistleblowing

Having a procedure

2.40. The board of trustees must agree a procedure for whistleblowing, and publish it on the trust’s website, to protect staff who report individuals they believe are doing something wrong or illegal.

2.41. The trust should appoint at least one trustee and one member of staff, who other staff can contact to report concerns.

Informing staff

2.42. The trust must ensure all staff are aware of the whistleblowing process and how concerns will be managed.

2.43. Staff should know what protection is available to them if they report someone, what areas of malpractice or wrongdoing are covered in the trust’s whistleblowing procedure, and who they can approach to report a concern.

2.44. The trust must ensure all concerns raised with them by whistleblowers are responded to properly and fairly.

Find out more at:

Provision of information

General information requests

2.45. The academy trust must provide DfE, or its agents, with information DfE requires to meet funding requirements.

Information about key individuals in the trust

2.46. The trust must notify DfE of changes to the governance information described in this section within 14 calendar days of the change and update their website and Companies House accordingly.

2.47. Notification must be through the governance section of DfE’s Get Information about Schools (GIAS) register, accessed using DfE Sign-in.

2.48. All mandatory fields specified in GIAS for the individuals must be completed and the trust must ensure its record in GIAS for the individuals is kept up to date.

2.49. The records required in GIAS (including direct contact details) for the trust are:

  • members
  • chair of trustees
  • all other trustees
  • accounting officer
  • chief financial officer

2.50. The records required in GIAS (including direct contact details) for constituent academies in a trust with multiple academies are:

  • headteacher
  • chairs of local committees or governing bodies (where adopted)
  • local governors (where adopted)

Part 3: Internal scrutiny

The need for academy trusts to conduct checks to ensure systems are effective and compliant.

Purpose of internal scrutiny

3.1. All academy trusts must have a programme of internal scrutiny to provide independent assurance to the board that its financial and non-financial controls and risk management procedures are operating effectively.

Approach

3.2. Internal scrutiny must focus on:

  • evaluating the suitability of, and level of compliance with, financial and non-financial controls
  • offering advice and insight to the board on how to address weaknesses in financial and non-financial controls
  • ensuring all categories of risk are being adequately identified, reported and managed

3.3. The trust must identify on a risk-basis (with reference to its risk register) the areas it will review each year.

Working with other assurance providers

3.4. Internal scrutiny should take account of output from other assurance procedures to inform the programme of work – for example external audit and DfE reviews.

Independence and objectivity

3.5. Independence in internal scrutiny must be achieved by establishing appropriate reporting lines, whereby those carrying out checks report directly to a committee of the board, which in turn provides assurance to the trustees.

Directing internal scrutiny – the audit and risk committee

Requirement for a committee

3.6. The academy trust must establish an audit and risk committee, appointed by the board.

  • Trusts with an annual revenue income over £50 million (based on their last audited accounts) must have a dedicated audit and risk committee.
  • Other trusts must either have a dedicated audit and risk committee or can combine it with another committee, such as finance.

3.7. The audit and risk committee should meet at least 3 times a year.

Remit of the committee in relation to internal scrutiny

3.8. The audit and risk committee must:

  • oversee and approve the trust’s programme of internal scrutiny
  • ensure that risks are being addressed appropriately
  • report to the board on the adequacy of the trust’s internal control framework, including financial and non-financial controls and management of risks

Membership of the committee

3.9. Employees of the trust should not be audit and risk committee members, but the accounting officer and chief financial officer should attend to provide information and participate in discussions.

3.10. The chair of trustees should not be chair of the audit and risk committee. Where the finance committee and audit and risk committee are separate, the chair should not be the same.

3.11. Where the audit and risk committee is combined with another committee, employees should not participate as members when audit matters are discussed.

Operating the committee in relation to internal scrutiny

3.12. The committee must:

  • have written terms of reference
  • agree a programme of work annually to deliver internal scrutiny that provides coverage across the year, agree who will perform the work and consider their reports and the trust’s progress in addressing recommendations
  • review the ratings and responses on the risk register to inform the programme of work
  • have access to the external auditor, as well as their internal scrutineers

3.13. Oversight must ensure information submitted to DfE that affects funding is accurate and complies with funding criteria.

Find out more in HM Treasury’s Audit and Risk Assurance Committee Handbook.

Delivering internal scrutiny

Principles

3.14. Internal scrutiny must:

  • be independent and objective – for example it must not be performed by members of the senior leadership or finance team
  • be conducted by someone suitably qualified and experienced and able to draw on technical expertise, as required
  • be timely, with the programme of work spread appropriately over the year so higher risk areas are reviewed in good time
  • include regular updates to the audit and risk committee by the internal scrutineers carrying out the programme of work, incorporating:
    • a report of the work to each audit and risk committee meeting
    • an annual summary report to the audit and risk committee for each year ended 31 August outlining the areas reviewed, key findings, recommendations and conclusions, to help the committee consider actions and assess year on year progress

3.15. Whilst the audit and risk committee is responsible for overseeing the internal scrutiny, the findings must also be made available to all trustees promptly.

Options

3.16. All trusts must deliver internal scrutiny in the way most appropriate to its circumstances. Options include any combination of:

  • an in-house internal auditor
  • a bought-in internal audit service
  • the appointment of a non-employed trustee
  • an independent peer review by the chief financial officer from another academy trust

Trusts with an annual revenue income over £50 million (based on their last audited accounts) must deliver internal scrutiny using any combination of the following:

  • an in-house internal auditor
  • a bought-in internal audit service

All trusts, regardless of income levels, may also use other individuals or organisations where specialist non-financial knowledge is required.

3.17. To ensure those carrying out the programme of internal scrutiny work are suitably qualified or experienced:

  • auditors should be members of a relevant professional body
  • trustees and peer reviewers performing the work should have appropriate qualifications or experience relevant to the area being reviewed

Trusts should work towards this position where it is not already the case.

3.18. The trust must keep its approach to internal scrutiny under review. If it changes in size, complexity or risk profile, it should consider whether its approach remains suitable.

External reporting and transparency

3.19. The trust must confirm in its governance statement, accompanying its annual accounts, which of the internal scrutiny options it has applied and why. The outcome of the work must also inform the accounting officer’s statement of regularity in the annual accounts.   

3.20. The trust must submit its internal scrutiny summary report to DfE by 31 December each year when it submits its audited annual accounts. The trust must also provide DfE with any other internal scrutiny reports, if requested.

Find out more in DfE’s internal scrutiny good practice guide, which:

  • describes both financial and non-financial areas that internal scrutiny could cover
  • provides a suggested structure for an internal scrutiny annual report

Further information on internal audit is available at the Chartered Institute of Internal Auditors including an Internal Audit Code of Practice.

Part 4: Annual accounts and external audit

How academy trusts must report on their finances to give assurance to Parliament and the public about the use of resources.

Preparation and audit of accounts

4.1. The academy trust must maintain adequate accounting records and prepare an annual report and accounts in accordance with the Charity Commission’s Statement of Recommended Practice (SORP) and DfE’s Accounts Direction.

4.2. The accounts must be audited.

4.3. The accounting period of an academy trust will end on 31 August.

4.4. The audited report and accounts must be:

  • submitted to DfE by 31 December
  • published on the trust’s website by 31 January
  • filed with Companies House by 31 May
  • provided to every member and to anyone who requests a copy

Find out more about:

External auditors

Appointment of external auditors

4.5. Academy trusts must appoint an external auditor to give an opinion on whether their annual accounts present a true and fair view of the trust’s financial performance and position (appointment being by the members, other than where the Companies Act permits the trustees to appoint) and, as reporting accountant, provide a regularity assurance conclusion. Trusts should retender their external audit contract at least every 5 years and must consider the relevant points in 4.15 when evaluating.

4.6. The audit contract and regularity engagement must be in writing and must not cover other services. If additional services are purchased, a separate letter of engagement must be obtained specifying the work and the fee.

Find out more about:

Removal of external auditors

4.7. The letter of engagement must allow for removal of auditors, before the expiry of the term of office, in exceptional circumstances. Proposals to remove auditors must require a majority vote of the members, who must provide reasons for their decision to the board. There must be a requirement in the letter of engagement for the auditors to provide the trust with an explanation within 14 calendar days if the auditors resign.

4.8. The board of trustees must notify DfE immediately of the removal or resignation of the auditors. For removal, the trust must notify DfE of the reasons, copying to DfE any statement received from the auditor on this matter. For resignation, the trust must copy to DfE an explanation from the auditors. A change in auditor at the expiry of their agreed term of office does not require notification to DfE.

Group auditors and sector account

4.9. DfE will consolidate each academy trust’s accounts into a sector annual report and accounts (SARA). As each trust is a component of the SARA, the trust must prepare the financial information requested by DfE for this purpose.

4.10. Academy trusts’ auditors will be required by DfE to audit certain information, and this requirement should be incorporated within the terms of engagement.

4.11. The National Audit Office (NAO) must reach an opinion on regularity for DfE’s own accounts, and for this will draw on the regularity conclusions of trusts’ auditors.

Find out more about the academies sector annual report and accounts.

Review of regularity

Accounting officer’s statement

4.12. An accounting officer’s statement on regularity, propriety and compliance must be included in the academy trust’s annual accounts. This is a declaration by the accounting officer that they have met their responsibilities to DfE’s accounting officer and to Parliament for the resources under their control during the year.

Auditor’s review of regularity

4.13. A review of the accounting officer’s statement must be included within the remit of academy trusts’ external auditors. The auditor’s conclusions on regularity must be addressed jointly to the trust and DfE.

Find out more about the accounting officer’s statement and review of regularity in the accounts direction.

External audit oversight and findings – the audit and risk committee

4.14. The board of trustees, taking advice from the audit and risk committee, must ensure there is an appropriate, reasonable and timely response by the trust’s management team to findings by external auditors, taking opportunities to strengthen systems of financial management and control.

4.15. Specifically the audit and risk committee must:

  • review the external auditor’s plan each year
  • review the annual report and accounts
  • review the auditor’s findings and actions taken by the trust’s managers in response to those findings
  • assess the effectiveness and resources of the external auditor to provide a basis for decisions by the trust’s members about the auditor’s reappointment or dismissal or retendering – considerations may include:
    • the auditor’s sector expertise
    • their understanding of the trust and its activities
    • whether the audit process allows issues to be raised on a timely basis at the appropriate level
    • the quality of auditor comments and recommendations in relation to key areas
    • the personal authority, knowledge and integrity of the audit partners and their staff to interact effectively with, and robustly challenge, the trust’s managers
    • the auditor’s use of technology
  • report the committee’s conclusions annually to the board of trustees and members, including recommendations on the reappointment or dismissal or retendering of the external auditor, and their remuneration

Part 5: Delegated authorities

The financial freedoms and limits applying to academy trusts.

Requirement to obtain DfE approval

5.1. The academy trust has autonomy over financial transactions arising in the normal course of business. However, some transactions have delegated authority limits beyond which trusts must obtain prior DfE approval, using the customer help portal, regardless of the source of funds. This includes instances when part or all of the cost is covered through insurance.

5.2. Trusts must ensure they understand and comply with the schedule of delegated authorities set out in section 5.60. DfE may intervene where trusts do not seek the required DfE approval in advance.

5.3. Certain transactions, as set out below, require approval in advance by either DfE or HM Treasury. For these transactions approval must be obtained before the transaction is agreed and before the transaction occurs. DfE may refer such transactions to HM Treasury for approval so trusts should allow sufficient time for proposals to be considered.

Trusts should use the customer help portal contact form to request DfE approval for any transactions beyond the academy trusts delegation limits.

Disclosure

5.4. Irrespective of whether DfE approval is required, in accordance with the Academies accounts direction, the academy trust must disclose aggregate figures for certain transactions in its audited accounts. Other than what is required under financial reporting standards, the Charities SORP and the academes accounts direction, disclosure can be anonymised.

Novel, contentious or repercussive transactions

5.5. Novel, contentious or repercussive transactions must always be referred to DfE for approval, and the request must be made to, and approved by, DfE before the transaction is agreed and before the transaction occurs.

  • Novel transactions are those of which the academy trust has no experience, or are outside its range of normal business.
  • Contentious transactions are those that may cause criticism of the trust by Parliament, the public or the media.
  • Repercussive transactions are those likely to set a precedent and cause pressure on other trusts or the broader public sector to take a similar approach and hence have wider financial implications, including where a trust’s proposal could cause additional costs to arise for other parts of government.

Find out more about:

Special payments

5.6. Certain transactions by public bodies may fall outside their usual planned range of activity and may exceed statutory and contractual obligations. HM Treasury calls these special payments (see annex 4.13 of Managing Public Money). They are subject to greater control than other payments and include:

  • staff severance payments
  • compensation payments
  • other types of special payments, including ex gratia payments

Special staff severance payments

5.7. Special staff severance payments are paid to employees outside statutory or contractual requirements when leaving public employment. They are different to ex gratia payments.

5.8. If an academy trust is considering a staff severance payment above statutory or contractual entitlements, it must consider the following issues before making a binding commitment:

  • that the proposed payment is in the trust’s interests
  • whether the payment is justified, based on legal assessment of the trust’s chances of successfully defending the case at employment tribunal – if there is a significant prospect of losing the case, a settlement may be justified, especially if the costs of a defence are likely to be high – where a legal assessment suggests the trust is likely to be successful, a settlement should not be offered
  • if the settlement is justified, the trust would need to consider the level of settlement – this must be less than the legal assessment of what the relevant body (for example an employment tribunal) is likely to award

5.9. Staff severance payments should not be made where they could be seen as a reward for failure, such as gross misconduct or poor performance. The only acceptable rationale in the case of gross misconduct would be where legal advice is that the claimant is likely to succeed in an employment tribunal because of employment law procedural errors. In the case of poor performance, an acceptable comparison would be the time and cost of taking someone through performance management and capability procedures.

5.10. Where the academy trust is considering a staff severance payment including a non-statutory or non-contractual element of £50,000 or more, (gross, before income tax or other deductions), DfE’s prior approval must be obtained before making any offer to staff.

5.11. Settlements must not be accepted unless satisfying the conditions in this handbook and in DfE’s guidance and submission template.

5.12. Additionally, in accordance with HM Treasury’s guidance on Public Sector Exit Payments, academy trusts must obtain prior DfE approval before making a special staff severance payment where either:

  • an exit package which includes a special severance payment is at, or above, £100,000
  • the employee earns over £150,000

Find out more about severance payments.

Use of confidentiality clauses

5.13. Academy trusts must ensure confidentiality clauses associated with staff severance payments do not prevent an individual’s right to make disclosures in the public interest (whistleblowing) under the Public Interest Disclosure Act 1998.

Compensation payments

5.14. Compensation payments provide redress for loss or injury, for example personal injuries, traffic accidents or damage to property. If an academy trust is considering a compensation payment, it must base its decision on a careful appraisal, including legal advice where relevant, and ensure value for money.

5.15. Academy trusts have delegated authority to approve individual compensation payments provided any non-statutory or non-contractual element is under £50,000. Where the trust is considering a non-statutory or non-contractual payment of £50,000 or more, DfE’s prior approval must be obtained.

Other types of special payments including ex gratia  

5.16. Other types of special payment, which go beyond statutory or contractual cover or administrative rules, include:

  • ex gratia payments
  • extra-statutory payments
  • extra-contractual payments
  • extra-regulatory payments

Annex 4.13 of Managing Public Money provides examples including, in the case of ex gratia, payments to meet hardship caused by official failure or delay, and to avoid legal action due to official inadequacy.

5.17. These other types of special payment transactions must always be referred to DfE for prior approval. If trusts are in doubt about a proposed transaction, they should seek DfE advice.

Write-offs and entering into liabilities

5.18. The academy trust must obtain DfE’s prior approval for the following transactions beyond the delegated limits described below:

  • writing-off debts and losses
  • entering into guarantees or letters of comfort
  • entering into indemnities which are not in the normal course of business

Find out more about:

5.19. The delegated limits, are:

  • 1% of total annual income or £45,000 (whichever is smaller) per single transaction
  • cumulatively, 2.5% of total annual income (subject to a maximum of £250,000) in any financial year per category of transaction for trusts that have not submitted timely, unqualified accounts for the previous 2 financial years – this category includes new trusts that have not had the opportunity to produce 2 years of audited accounts
  • cumulatively, 5% of total annual income (subject to a maximum of £250,000) in any financial year per category of transaction for trusts that have submitted timely, unqualified accounts for the previous 2 financial years

5.20. In relation to these limits:

  • the trust should always pursue recovery of amounts owed to it, including overpayments or erroneous payments – in practice, however, there will be practical and legal limits to how cases should be handled
  • the trust should only consider writing-off losses after careful appraisal, including whether all reasonable recovery action has been taken with the debtor, the trust’s insurers, or the risk protection arrangement, and should be satisfied there is no feasible alternative
  • the amounts for write-offs are before successful claims from an insurer or the risk protection arrangement
  • total annual income is defined as grant income as disclosed in the trust’s last audited accounts – DfE should be contacted if the trust has not yet published their first audited accounts

5.21. Before accepting liabilities by issuing guarantees, a letter of comfort or indemnity, the trust should secure value for money by appraising the proposal through assessment of the costs and benefits of relevant options.

Acquisition and disposal of fixed assets

5.22. Academy trusts must obtain prior approval from DfE for the following transactions:

  • acquiring a freehold of land or buildings
  • disposing of a freehold of land or buildings
  • disposing of heritage assets, as defined in financial reporting standards, beyond any limits in the funding agreement for the disposal of assets generally

5.23. Other than land, buildings and heritage assets, trusts can dispose of other fixed assets without DfE’s approval, subject to achieving the best price that can reasonably be obtained, and maintaining the principles of regularity, propriety and value for money.

Find out more about submitting a school land transaction proposal.

Leasing

5.24. Under UK financial reporting standards applicable to academy trusts, there are 2 types of lease: 

  • finance leases: these are a form of borrowing 
  • operating leases: these are not borrowing

5.25. Trusts must obtain DfE’s prior approval for the following leasing transactions: 

  • taking up a finance lease on any asset not on the DfE approved list in Changes to leasing agreements for academy trusts for any duration from another party, which are subject to the borrowing restrictions described in paragraphs 5.32 and 5.33 
  • taking up a leasehold or tenancy agreement on land or buildings from another party for a term of 7 or more years 
  • granting a leasehold interest, including a tenancy agreement, of any duration, on land and buildings to another party

5.26. Other than the these, trusts do not require DfE’s approval for operating leases. 

5.27. Trusts must ensure any lease maintains the principles of value for money, regularity and propriety. Trusts should seek advice from their professional adviser or external auditor if they are in doubt over whether a lease involves borrowing. 

Find out more in DfE’s Leasing guidance for academy trusts, which includes information on distinguishing between the two types of lease.

Managing general annual grant (GAG)

Managing surplus GAG

5.28. DfE previously set limits on general annual grant (GAG) carried forward by trusts from year-to-year. These limits have now been removed for eligible trusts (see section 5.55).

Pooling of GAG by trusts with multiple academies

5.29. The ability to amalgamate and direct funds to meet improvement priorities and need across the trust’s schools can be integral to a trust’s successful financial operating model. A trust with multiple academies can amalgamate GAG for its academies to form one central fund. This practice can enhance a trust’s ability to allocate resources in line with improvement priorities and running costs across the trust’s constituent academies.

5.30. If a trust decides to pool GAG, it must consider the funding needs and allocations of each constituent academy. The trust must have an appeals mechanism and an appeal can be escalated to DfE, if not resolved. DfE’s decision will be final and can result in the pooling provisions being disapplied. A trust must not pool private finance initiative (PFI) funding.

Gifts

5.31. Academy trusts should have a policy and register on the acceptance of gifts, hospitality, awards, prizes or other benefits that may compromise their judgement or integrity and should ensure all staff are aware of it. When making gifts, the trust must ensure the value is reasonable, is within its scheme of delegation, the decision is documented, and achieves propriety and regularity in the use of public funds.

Borrowing

5.32. Academy trusts must obtain DfE’s prior approval for borrowing (including overdraft facilities, but excluding finance leases on the DfE approved list) from any source, where such borrowing is to be repaid from grant monies or secured on assets funded by grant monies, regardless of the interest rate chargeable. Credit cards must only be used for business expenditure, and balances cleared before interest accrues.

5.33. Permission for borrowing is only allowed in exceptional circumstances, such as schemes introduced by the Secretary of State for Education – for example the department’s Condition Improvement Fund.

5.34. This part of the handbook deals with goods or services provided by or to individuals or organisations related to the academy trust.

Related parties include persons and entities with control or significant influence over the academy trust, and members of the same group (for example, parent and subsidiary companies, key management personnel and close family members).

The above description is not comprehensive. Find the full definition in:

The related parties section of DfE’s Academies accounts direction provides further information.

5.35. Academy trusts must be even-handed in their relationships with related parties by ensuring that:

  • trustees comply with their statutory duties as company directors to avoid conflicts of interest, not accept benefits from third parties, and declare interest in proposed transactions or arrangements
  • all members, trustees, local governors of academies and senior employees complete the register of interests, in accordance with sections 1.45 to 1.48 of this handbook
  • no member, trustee, local governor, employee or related individual or organisation uses their connection to the trust for personal gain, including payment under terms that are preferential to those that would be offered to an individual or organisation with no connection to the trust
  • there are no payments to trustees by the trust unless permitted by the articles, or by authority from the Charity Commission, and comply with any relevant agreement with the Secretary of State for Education – trusts will need to consider these obligations where payments are made to other business entities who employ the trustee, are owned by the trustee, or in which the trustee holds a controlling interest
  • the Charity Commission’s approval is obtained where the trust believes a significant advantage exists in paying a trustee for acting as a trustee
  • payments provided to the persons referred to in section 5.44 satisfy the ‘at cost’ requirements in this handbook

5.36. The trust should be aware of the Charity Commission’s guidance for trustees CC11: Trustee expenses and payments.

5.37. The board of trustees must ensure requirements for managing related party transactions are applied across the trust. The board chair and the accounting officer must ensure their capacity to control and influence does not conflict with these requirements. They must manage personal relationships with related parties to avoid both real and perceived conflicts of interest, promoting integrity and openness in accordance with The Seven Principles of Public Life.

5.38. Trusts must recognise that some relationships with related parties may attract greater public scrutiny, such as:

  • transactions with individuals in a position of control and influence, including the board chair and accounting officer
  • payments to organisations with a profit motive, as opposed to those in the public or voluntary sectors
  • relationships with external auditors beyond their duty to deliver a statutory audit and, as reporting accountant, their regularity assurance review

5.39. The trust must keep sufficient records, and make sufficient disclosures in their accounts, to show that transactions with these parties, and all other related parties, have been conducted in accordance with the high standards of accountability and transparency required within the public sector.

5.40. Trusts must report all contracts and other agreements with related parties to DfE in advance of the contract or agreement commencing or being renewed, using DfE’s related party online form.

5.41. Trusts must obtain DfE’s prior approval, using DfE’s related party on-line form, for contracts and other agreements for the supply of goods or services to the trust by a related party agreed on or after 1 September 2023, where a contract or other agreement exceeds £40,000 in the same financial year ending 31 August.

This approval requirement does not apply in the following circumstances:

  • contracts and other agreements for the supply of goods or services to a trust by the following educational establishments:

    • colleges, universities and schools which are sponsors of the academy trust
    • state funded schools and colleges, including academy trusts

This concession does not apply to transactions with a subsidiary of such a related party.

  • 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

5.42. For the purposes of reporting to and approval by DfE, contracts and agreements with related parties do not include salaries and other payments made by the trust to a person under a contract of employment through the trust’s payroll.

Further information on related party transactions, including a good practice guide and a checklist, can be found in Related party transactions: information for academy trusts.

5.43. Novel, contentious or repercussive related party transactions are subject to separate arrangements. Trusts must obtain DfE’s prior approval for any contracts and other agreements with related parties that are novel, contentious or repercussive, regardless of value. Approval must be sought using DfE’s related party on-line form. Trusts should carefully consider the impact of this requirement and its relevance to transactions involving the board chair or the accounting officer.

At cost requirements

5.44. Subject to sections 5.49 to 5.52 a trust must pay no more than ‘cost’ for goods or services (‘services’ do not include contracts of employment) provided to it by the following persons (‘persons’ meaning both individuals and organisations):

  • members or trustees of the academy trust
  • individuals or organisations related to a member or trustee of the academy trust – for these purposes the following persons are related to a member or trustee:
    • a relative of the member or trustee – a relative is defined as a close member of the family or member of the same household, who may be expected to influence, or be influenced by, the person, including, but not limited to, a child, parent, spouse or civil partner
    • an individual or organisation carrying on business in partnership with the member, trustee or a relative of the member or trustee
    • a company in which a member or the relative of a member (taken separately or together), or a trustee or the relative of a trustee (taken separately or together), holds more than 20% of the share capital or is entitled to exercise more than 20% of the voting power at any general meeting of that company
    • an organisation controlled by a member or the relative of a member (acting separately or together), or a trustee or the relative of a trustee (acting separately or together) – for these purposes an organisation is controlled by an individual or organisation if that individual or organisation can secure that the affairs of the body are conducted in accordance with the individual’s or organisation’s wishes
  • any individual or organisation given the right under the trust’s articles of association to appoint a member or trustee of the academy trust, or any body connected to such individual or organisation
  • any individual or organisation recognised by the Secretary of State for Education as a sponsor of the academy trust, or any body connected to such individual or organisation

5.45. A body is connected to another individual or organisation if it is controlled by the individual or organisation, or controls the organisation, or is under common control with the individual or organisation. For these purposes, control means either:

  • holding more than 20% of the share capital (or equivalent interest)
  • having the equivalent right to control management decisions of the body
  • having the right to appoint or remove a majority of the board or governing body

5.46. The ‘at cost’ requirement does not apply to the trust’s employees unless they are also one of the parties described in section 5.44.

5.47. While these provisions do not apply to contracts of employment, the principles of value for money and using public money properly, including managing conflicts of interest, still apply. Salaries should be appropriate to the individual’s skills and experience and to wider market rates.

5.48. If staff of an individual or organisation in section 5.44 are based in, or work from the premises of, the academy trust, that individual or organisation and the trust must agree an appropriate sum to be paid to the trust for use or occupation of the premises, save to the extent that they are carrying out work for the trust.

5.49. The ‘at cost’ requirement applies to contracts with a related party exceeding £2,500, cumulatively, in any one financial year. Where a contract takes the trust’s cumulative annual total with the related party beyond £2,500, the element above £2,500 must be at no more than cost.

5.50. In relation to organisations supplying legal advice or audit services to the academy trust, the ‘at cost’ requirement applies where the organisation’s partner managing the service is a member or trustee of the trust, but not in other cases for those organisations. The published ethical standards for auditors prevent partners or employees of the audit firm from acting as a trustee of their client trust, but not of other trusts.

5.51. For academies with a religious designation, the provision of services to protect and develop their religious character and ethos, which can only be provided by their religious authority, are regarded as meeting the ‘at cost’ requirement. 

5.52. For academy trusts: 

  • with a college, university or school which is a sponsor of the academy trust, or
  • transacting with any other state funded school (including an academy) or college

the provision of goods or services by that sponsor, state funded school or college are regarded as meeting the ‘at cost’ requirement. This does not apply to transactions with a subsidiary of such a related party.

5.53. Academy trusts must ensure any agreement with an individual or organisation referred to in section 5.44 to supply goods or services to the trust is properly procured through an open and fair process and is both:

  • supported by a statement of assurance from that individual or organisation to the trust confirming their charges do not exceed the cost of the goods or services
  • on the basis of an open book agreement including a requirement for the supplier to demonstrate clearly, if requested, that their charges do not exceed the cost of supply

5.54. For these purposes the cost will be the ‘full cost’ of all the resources used in supplying the goods or services and must not include any profit. Full cost includes:

  • all direct costs (costs of materials and labour used directly in producing the goods or services)
  • indirect costs (a proportionate share of fixed and variable overheads)

Find out more about the ‘at cost’ statement of assurance.

Applicability of delegations and freedoms

5.55. Some delegations and freedoms in part 5 of this handbook that go beyond a trust’s funding agreement do not apply to that trust. They do not apply to trusts that are party to one or more funding agreements that:

  • allow one or more of its academies to receive GAG based on estimated pupil numbers regardless of whether they are being funded on that basis
  • allow the Secretary of State for Education to recover GAG from those academies if estimated pupil numbers exceed census-based pupil numbers beyond a specified percentage
  • do not require a move to pupil census-based funding permanently

5.56. A move permanently means:

  • the academy is subject to a funding agreement moving it to pupil census-based funding within a specified number of years, after which the agreement provides for it to be funded only in that way
  • in the case of a free school, it is subject to a funding agreement moving it to pupil census-based funding when all cohorts relevant to the age range have some pupils present, and allows the Secretary of State for Education to recover all additional GAG from the free school, if estimated pupil numbers exceed census-based pupil numbers

5.57. The delegations and freedoms in the handbook that do not apply to trusts on estimates-based GAG funding are those relating to:

  • acquisition and disposal of fixed assets (5.23)
  • leaseholds and tenancy agreements of land and buildings (5.25)
  • carry forward of unspent GAG from one year to the next (5.28)
  • pooling of GAG (5.29).

5.58. The freedoms do not apply until the trust’s funding agreements are updated to move all academies within the trust to pupil census-based funding permanently, as defined above.

5.59. In the case of a trust with multiple academies, if one or more of its constituent academies does not meet the criteria above for access to the delegations and freedoms, all academies within the trust will be unable to access the delegations and freedoms.

Summary of freedoms and delegations

5.60. This summary is not a substitute for the full handbook. Trusts’ delegated authorities are subject to the conditions in section 5.55. Trusts under an NtI will have their delegated authorities revoked under section 6.18.  

Type of transaction Delegation
Novel, contentious and repercussive transactions DfE agreement required 5.6
Staff severance and compensation DfE agreement required if £50,000 or more before tax 5.11 and 5.16
Ex gratia payments DfE agreement required 5.18
Writing-off debts and losses (subject to £250,000 ceiling) DfE consent required if exceeds 1% of annual income or £45,000 individually; or 2.5% or 5% of annual income cumulatively 5.19 and 5.20
Entering into indemnities (beyond the normal course of business), guarantees or letters of comfort (subject to £250,000 ceiling) DfE consent required if exceeds 1% of annual income or £45,000 individually; or 2.5% or 5% of annual income cumulatively 5.19 and 5.20
Acquiring freehold land and buildings DfE agreement required 5.22
Disposing of a freehold on land and buildings DfE agreement required 5.22
Disposing of heritage assets DfE agreement required 5.22
Other asset disposals Trust has full discretion 5.24
Taking up a finance lease not on the DfE approved list DfE agreement required 5.25
Taking up a leasehold on land and buildings DfE agreement if lease term 7 years or more 5.25
Taking up any other lease Trust has full discretion 5.24
Granting a lease on land and buildings DfE agreement required 5.25
GAG carry forward No limits if trust eligible 5.29
Pooling by trusts with multiple academies No limits (except PFI) if trust eligible 5.30
Loan, overdraft DfE agreement required 5.32
Credit cards (for business use) Trust has full discretion provided charges not incurred 5.32
Supplies to the trust from related parties DfE agreement required over £40,000 and over associated limits in 5.41 unless exempt as set out in 5.41

Part 6: The regulator and intervention

How DfE oversees academy trusts and may intervene where concerns arise.

Oversight

6.1. DfE’s accounting officer is accountable to Parliament for how DfE uses its funds and is personally responsible for the regularity, propriety and value for money of its expenditure.

6.2. DfE may send a dear accounting officer letter on occasion to academy trust accounting officers. Accounting officers must share it with their members, trustees, chief financial officer and senior leadership team, arrange for the board to discuss it and take action, if necessary, to strengthen financial controls.

Access rights

6.3. DfE or its agents may carry out audits and investigations at an academy trust. The trust must provide DfE with access to all books, records, information, explanations, assets, premises and staff, and DfE may take copies of relevant documents.

Investigations: Third party documentation

6.4. Where DfE has concerns about financial management or governance at an academy trust, it may wish to obtain from third parties information or documentation about the trust which DfE considers relevant for the purposes of its investigation. Academy trusts must provide DfE with written authority, giving permission for any third party to provide such information and documentation to DfE or its agents on request of DfE.

Retention of records

6.5. The trust must retain records to verify provision delivered by it, or its sub-contractors, in relation to this handbook and its funding agreement, at least 6 years after the period to which funding relates.

Find out more about:

Financial management and governance assurance

6.6. All trusts must complete the school resource management self-assessment checklist and submit their completed checklist to DfE by the specified annual deadline. New operational academy trusts must complete a financial management and governance self-assessment (FMGS) and submit it to DfE within 3 months of opening their first academy.

6.7. To gain assurance over financial arrangements at academy trusts, DfE will conduct financial management reviews, examining whether systems and control comply with the handbook.

Find out more about the financial management and governance self-assessment.

Funding audit

6.8. Funding audits allow DfE to gain assurance on the pupil census and free school meals entitlement data provided by an academy trust to calculate its recurrent funding and establish whether this data is accurate and supported by evidence. The scope and timing of funding audits are determined annually.

Fraud, theft, irregularity and cybercrime

6.9. Academy trusts must be aware of the risk of fraud, theft and irregularity and address it by putting in place proportionate controls. Trusts must take appropriate action where fraud, theft or irregularity is suspected or identified.

6.10. The board of trustees must notify DfE as soon as possible of all instances of fraud, theft or irregularity exceeding £5,000 individually, or £5,000 cumulatively in any financial year. Unusual or systematic fraud, regardless of value, must also be reported. The following information is required:

  • full details of the events with dates
  • the financial value of the loss
  • measures taken to prevent recurrence
  • whether it was referred to the police (and if not why)
  • whether insurance or the RPA have offset any loss.

6.11. DfE may conduct or commission investigations into actual or potential fraud, theft or irregularity in any academy trust, either because of a notification from the trust itself or from other information received. DfE may involve other authorities, including the police.

6.12. DfE publishes reports about its investigations and about financial management and governance reviews at academy trusts.

6.13. DfE also publishes guidance on reducing fraud. Trusts should refer to this and to the findings from DfE’s investigation reports, as part of its risk management approach. 

Cybercrime

6.14. Academy trusts must also be aware of the risk of cybercrime, put in place proportionate controls and take appropriate action where a cyber security incident has occurred. Trusts should take appropriate action to meet DfE’s cyber security standards, which were developed to help them improve their resilience against cyber-attacks.

6.15. Trusts must not pay any cyber ransom demands. DfE supports the National Crime Agency’s recommendation not to encourage, endorse, or condone the payment of ransom demands. Payment of ransoms has no guarantee of restoring access or services and is likely to result in repeat incidents.

Find out more about:

Oversight, support and intervention

6.16. Financial support and oversight for academy trusts guidance sets out how DfE will work with trusts to identify, at an early stage, any financial issues that might affect the trust. It sets out the support available to trusts and, where there are concerns, the types of action DfE will take.

Intervention powers

6.17.  Where DfE has concerns about financial management or governance in an academy trust, the department may issue, and publish, an NtI.

Examples of when an NtI may be issued on financial management grounds include:

  • an actual or projected deficit
  • cash flow problems
  • insolvency risk
  • irregular use of public funds
  • poor internal scrutiny
  • breaches of related party requirements

Examples of when an NtI may be issued on governance grounds include:

  • the trust board not being properly constituted
  • trustees failing to comply with their safeguarding duties
  • trustees and the executive failing to manage their school estate and maintain it in a safe working condition strategically and effectively

6.18. An NtI describes what a trust must do to address concerns about financial management or governance. The trust must comply with the NtI. Failure to comply will be deemed a funding agreement breach. The funding agreement may be terminated due to non-compliance with an NtI.

6.19. If an NtI is issued, the delegated authorities in sections 5.6 to 5.31 of this handbook may be revoked, and all transactions of this nature must be approved in advance by DfE, specifically:

  • special staff severance payments
  • compensation payments
  • writing off debts and losses
  • entering into guarantees, indemnities or letters of comfort
  • disposals of fixed assets beyond any limit in the funding agreement
  • taking up a leasehold or tenancy agreement on land or buildings of a duration beyond any limit in the funding agreement
  • carry forward of unspent GAG from one year to the next beyond any limit in the funding agreement
  • pooling of GAG

The trust may also be prevented from entering into transactions with related parties without approval. These delegated authorities shall be returned once the NtI has been complied with, and improvement is sustainable.

6.20. The department will notify the trust of the date on which the department has published the NtI. The trust must then publish the NtI on its own website within 14 days and retain it on the website until the NtI is lifted by the department.

Find out more about notices to improve.

Recovery of funds

6.21. The department may recover funds where there is evidence of irregularity or fraud.

Secretary of State for Education directions

6.22. Where the Secretary of State for Education has concerns about an individual managing an academy trust, they may take action to address those concerns.

6.23. Subject to the relevant provisions being present in the trust’s funding agreement, the Secretary of State for Education can require the trust to remove a member or trustee. This can include where the individual has been convicted, cautioned or engaged in relevant conduct and, as a result, the Secretary of State for Education considers them unsuitable to take part in management of the academy trust.

6.24. The Secretary of State for Education can also make directions under section 128 of the Education and Skills Act 2008 prohibiting individuals from taking part in academy trust management. This could prevent an individual from acting as a trustee or executive leader of a trust. The circumstances are prescribed in regulations, but can include where the individual is subject to a caution or conviction or has engaged in relevant conduct, and the Secretary of State for Education considers that, because of that caution, conviction or conduct, that individual is unsuitable to take part in management of a school.

DfE work with the Charity Commission

6.25. Where there is a concern, DfE may refer trusts to the Charity Commission, reflecting the Commission’s interest in addressing non-compliance with legal or regulatory requirements or misconduct or mismanagement in the administration of any charity, and in ensuring individuals running the charity (in particular, but not limited to, the trustees) do so in compliance with their legal duties. The Commission may use its regulatory powers as described in its memorandum of understanding with DfE.

Find out about the:

DfE’s work with the Insolvency Service

6.26. DfE may refer academy trustees, as directors, to the Insolvency Service who may consider whether the conduct of a director is such that they are unfit to be involved in management of a company, and whether or not it would be in the public interest for a disqualification order to be sought.

DfE’s approach to academy resource management

6.27. Where DfE has concerns about financial management of a trust, it may prescribe working with an expert in school resource management, such as a School Resource Management Advisor (SRMA). Trusts should make reasonable endeavours to implement improvements identified by an SRMA. Failure to do so may result in an NtI being issued. Working with an SRMA may also be prescribed as a condition of an NtI.

Find out more about:

National Audit Office and Public Accounts Committee

6.28. The NAO has the right to access the accounts and relevant records of an academy trust for inspection, or for value for money studies. The trust must cooperate with the NAO and their contractors and provide help, information and explanation as is reasonable and necessary.

6.29. The NAO’s findings are considered by the Public Accounts Committee (PAC). The PAC has power to call anyone, including past and current accounting officers of a trust, to account for proper use of public funds.

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