Guidance

Financial handbook for independent training providers: effective from 1 August 2025

Published 23 July 2025

Applies to England

Introduction

Independent training providers (ITPs) are valued partners of the Department for Education (DfE), delivering vital education and training, improving skills and increasing national productivity.

Effective governance, operational and financial management are essential for ITPs to:

• deliver training effectively and sustainably
• manage their finances
• report accurately and transparently to stakeholders
• make informed business decisions for their future
• protect delivery for their learners

The handbook aims to:

• support ITPs by providing a framework for governance, financial management, oversight, and assurance
• serve as a source of guidance and best practice, helping ITPs in making sound decisions, strengthening internal controls, and developing effective financial governance arrangements
• act as a tool for continuous improvement

Chief executive officers, chief financial officers and those with responsibility for the financial governance and management of ITPs (see section 1.2) should familiarise themselves with this handbook and adhere to its contents. Compliance with the handbook is a condition of DfE funding.

The sector is diverse, including:

• private companies
• public limited companies
• charities
• community groups
• sole traders and employer providers

The handbook reflects areas that are common to this diverse market. It reflects diversity by setting arrangements that are proportionate to the amount of public funds each ITP receives from DfE.

DfE may update this handbook on occasion to reflect changes in policy and best practice. ITPs should ensure they review the most recent version when published and take prompt action to implement new requirements by the date they become effective. This version of the handbook remains effective until it is replaced.

Use the customer help portal to give feedback about the handbook or to contact DfE for further guidance.

What has changed in the 2025 edition

The first edition of this handbook was published on 28 February 2024 and became effective from 1 August 2024. Changes to the first edition, incorporated in this edition are:

• updates to reflect the closure of the Education and Skills Funding Agency (ESFA) on 31 March 2025 and the transfer of its functions to DfE from 1 April 2025
• the ‘road’ to publication section in the inaugural handbook has been removed now that the handbook is in its second year
• the timescales for employer-providers or main providers to submit their annual accounts have been reviewed to reflect that education and training provision is not their core business – section 4.9 has full details

Part 1:  About the handbook                         

Who the handbook is for

1.1 The handbook is applicable to all ITPs in receipt of funds provided directly by DfE. Annex A provides more information on providers within the scope of the handbook.

1.2 Readers of the handbook are expected to include:

• chief executives
• chief operating officers
• chief financial officers
• finance directors
• managing directors
• heads of management information
• chairs of the board and other board members
• owners with a controlling interest and major shareholders
• audit and risk committees
• accountancy firms who audit the annual accounts of ITPs
• professional advisors

1.3 The handbook is applicable for the duration that an ITP has a contract of service with DfE.

Overview of handbook arrangements

1.4 Parts 3 to 5 of this document are split into three key areas:

• governance
• financial management and oversight
• assurance

1.5 In each section, the expectation levels are given. For example, whether an arrangement is required, recommended, discretionary or dependent on the ITP’s funding group. This is done using a ‘handbook matrix’.

1.6 Where appropriate, the handbook provides guidance on ITPs’ compliance with the obligations applicable to them under the handbook.

The handbook matrix

1.7 The ITP sector is diverse in many ways, including:

• organisation size
• legal status
• types of training provided
• funding streams delivered
• the amount of funding received from DfE and level of reliance on it

Given this diversity, the governance and financial management arrangements in the handbook apply to ITPs depending upon the level of risk, which is driven by the amount of funded training that ITPs deliver for DfE.

We designed a handbook matrix (summarised at annex B) which identifies requirements and recommendations applicable to ITPs dependent upon the level of funding they receive from DfE. There are 3 aspects to the matrix.

Aspect 1: funding groups

1.8 Funding groups categorise all ITPs into cohorts, depending upon their level of annual DfE funding.

1.9 ITPs should calculate their funding group by adding together all funds received directly from DfE (including ESFA pre-closure) in the previous full funding year – August to July.

All funding envelopes within the period should be included. Devolved funding received through agreements with mayoral combined authorities (MCAs), the Greater London Authority (GLA) and any other devolved commissioners of education and skills is not in scope (section 2.4 has further information).

For the majority of ITPs, it should be clear which funding group they fall within.

Where an ITP is unsure which group they are in, DfE will work with them to agree their group. Where ITPs move groups between years, they are required to comply with arrangements set out in their new group. Flexibility may be provided to allow ITPs to adapt to the change. This is subject to the agreement of DfE.

Where an ITP is in its first year of receiving direct funding from DfE and did not receive any direct funding in the previous funding year, it should calculate its funding group by using the expected funding from the first year.

1.10 The 4 funding groups are listed in the following table. Each funding group shows the total annual funding that an ITP receives directly from DfE.

Funding Group 1	Funding Group 2	Funding Group 3	Funding Group 4
More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000

1.11 Some ITPs will also receive funding under sub-contracting arrangements. DfE subcontracting standard explains how lead ITPs are expected to have a performance management framework and service level agreements in place with sub-contractors. It applies to ITPs who sub-contract more than £100,000 worth of DfE funding each year.

These mechanisms could be used by ‘lead’ ITPs to encourage sub-contractors to align themselves with elements of the financial handbook, based on total combined funding the sub-contractor receives from the lead and from DfE directly.

Aspect 2: applicability

1.12 The categories below set out the extent to which each governance and financial management arrangement applies to ITPs.

Required

Must be in place.

Recommended

Best practice for ITP to have.

Discretionary

ITPs have discretion to do.

Aspect 3: arrangements

1.13 The governance and financial management arrangements are broken down into 3 main areas:

• governance
• financial management and oversight
• assurance

1.14 The matrix at annex B summarises each arrangement and how it applies to ITPs within each funding group.

Expectations for different funding groups are based on a range of factors, including:

• contractual requirements
• the risk level associated with the arrangement
• proportionality

Expectations are higher and therefore more robust for ITPs which receive greater funding from DfE. Some arrangements reflect existing contractual requirements or agreements that ITPs may already be required to comply with.

Compliance with the handbook

1.15 The aims of the handbook are to:

• support the sector’s governance and financial management arrangements
• provide a framework for ITPs’ governance, financial management and oversight, and assurance
• assist as a tool for continuous improvement

1.16 It is critical that ITPs comply with those arrangements which are classified as ‘required’, as well as giving full consideration to introducing ‘recommended’ arrangements. The long-term benefits of doing this are outlined in this handbook.

Complying with the handbook should help place ITPs in a better position to manage their finances and resources and reduce the level of risk to their organisation.

Future editions

1.17 The handbook will be periodically reviewed but remains effective from 1 August 2025 until it is updated. DfE welcomes feedback from the sector to inform future editions.

Part 2: Responsibilities

General responsibilities

2.1 ITPs must meet their statutory responsibilities under company and charity law and any other legislation applicable in relation to annual accounts, audit, and other legal, financial and governance requirements.

2.2 ITPs receive funding under contracts for services with DfE. These set out the requirements placed on, and responsibilities of, ITPs in detail. Requirements included in those contracts and agreements form a condition of funding.

2.3 The conditions of funding include DfE assurance requirements. For a complete picture of assurance requirements, the handbook should be read alongside:

• contracts for services
• DfE’s approach to assessing the financial health of organisations
• DfE’s assurance reviews of the subcontracting standard for post-16 providers

2.4 Some ITPs also receive funding under agreements with MCAs or the GLA and potentially other commissioners of education and skills in respect of devolved adult education funding. These funding agreements are not within the scope of this handbook. More information on devolved funding can be found in the DfE policy document on Adult education devolution.

2.5 All ITPs may be subject to a funding audit by DfE in respect of funds they receive.

Part 3: Governance

Governance arrangements

3.1 Part 3 of the handbook outlines expected governance arrangements and how they apply to ITPs dependent upon the funding group they fall within.

Board and non-executive directors

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Discretionary	Discretionary	Discretionary

3.2 To have at least one non-executive director (NED) or equivalent (registered companies only). The NED (or equivalent) might report at group level, but their remit should extend to DfE-funded delivery.

NEDs bring expertise, experience, and additional credibility to the board. As they are removed from day-to-day management responsibilities, they offer a fresh perspective and independent challenge to processes, policies, performance and the business’s strategic direction. Other types of organisations such as charities should, where possible, make similar use of independent expertise, for example through trustees.

3.3 For registered companies, directors’ duties are outlined in the Companies Act 2006. Directors will have skills and experience consistent with the responsibilities of a training organisation, including knowledge of sector funding. Other types of organisations should follow good practice for their sector. For example, for charities, the Charity meetings guidance.

Audit and risk committee

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Recommended	Discretionary	Discretionary

3.4 To have an independent audit and risk committee. This could be at group level or specific to DfE-funded delivery. Audit and risk committees play an important role in ensuring organisations have the best possible framework to protect public funds and other income or funding. They provide independent advice to boards on the adequacy and effectiveness of their governance, risk management (including business continuity), controls and assurance frameworks. They also assist boards to ensure they fulfil their statutory and regularity responsibilities for their annual accounts.

Responsibilities of the audit and risk committee

3.5 For ITPs required to have an audit and risk committee or where they choose to have one, the responsibilities of the committee may include:

• following terms of reference for the committee set by the board which might include the committee’s:
  • role in assuring and challenging the design and operation of the organisation’s systems of control
  • right to investigate any activity
  • right to access all the information and explanations it considers necessary, from whatever source, to fulfil its remit
• advising the board on the adequacy and effectiveness of the ITP’s governance, risk management, control and assurance arrangements, and processes for:
  • the effective and efficient use of resources
  • safeguarding of assets
  • maintaining the ITP’s solvency
• advising and supporting the board in explaining in its annual accounts the measures taken to ensure it has fulfilled its statutory and regulatory responsibilities
• if the ITP’s accounts are audited, the committee should:
  • advise on the appointment, reappointment, dismissal, and remuneration of the external auditor
  • review the reports of the external auditor
  • monitor the implementation of recommendations arising from those reports, within agreed timescales
• if the ITP has an internal audit service, the committee should:
  • review the annual plan and report, as well as other reports of the internal auditor
  • monitor the implementation of recommendations arising from reports, within agreed timescales
  • advise on the appointment, reappointment, dismissal and remuneration of the internal auditor – if the internal audit service is outsourced
• overseeing the ITP’s policies on fraud, irregularity, impropriety, and whistleblowing to ensure:
  • the proper, proportionate and independent investigation of all allegations and instances of fraud and irregularity, and outcomes are reported to the committee
  • internal and external auditors (if applicable) are informed of investigation outcomes, and appropriate follow-up has been planned and actioned
  • fraud or suspected fraud, theft and irregularity are reported to DfE as soon as possible
• producing an annual report for the board, summarising the committee’s activities relating to the financial year under review, including:
  • a summary of the work undertaken by the committee
  • any significant issues arising up to the date of preparation of the report
  • the committee’s opinion on the adequacy and effectiveness of the organisation’s assurance arrangements, framework of governance, risk management and control processes
  • any significant financial governance or internal control matters identified by the committee or external assurance functions.
  • an assessment of the effectiveness of the committee

Membership of the audit and risk committee

3.6 Where an ITP has an audit and risk committee, it is recommended that the committee includes:

• a minimum of 3 people
• non-executive directors, where appointed
• people with the relevant skills to carry out the responsibilities listed
• people with experience relevant to the organisation (if possible)

3.7 The Financial Reporting Council produces guidance relating to the operation of audit committees, including membership suggestions.

Funding compliance scrutiny function

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Recommended	Discretionary

3.8 To have a funding compliance scrutiny function which provides guidance and checks in relation to any funding data or claim submissions to DfE. This acts as an additional layer of assurance to protect ITPs against incorrect funding data or claim submissions that could result in a significant funding clawback by DfE.

The accuracy and reliability of individualised learner record (ILR) data and funding claims submitted by ITPs is critical, as it forms the basis for the issue, allocation, and payment of public funds to each ITP. As a minimum, the function must be sufficient to satisfy the management of the ITP that data submissions which trigger funding are complete and accurate before they are sent. Data cleansing should take place on an ongoing basis throughout the funding year and not just prior to data submissions or audit.

3.9 Those responsible for scrutiny should have a strong understanding of any funding streams and rules the ITP is claiming funding for and the scale of the function should be proportionate to the activity under each funding stream. ITPs also have access to the free PDSAT tool to help them validate and cleanse ILR data prior to submission and to the Post-16 monitoring reports dashboard.

3.10 The role of a funding compliance scrutiny function is to:

• provide oversight of funding claims and ILR data submissions
• ensure that funding claims and ILR data submissions follow funding rules and submission requirements and guidance
• ensure that funding claims and ILR data submissions are complete, accurate and consistent with actual learning activity, including through use of the PDSAT tool, exception reports, and validation checks
• recommend any improvements or amendments to the processes used for submitting funding claims and ILR data, to the senior management of the ITP

3.11 The funding compliance scrutiny function should be separate from, although report to, either an audit and risk committee or another layer of oversight within the organisation, which is primarily responsible for protecting DfE funding. The function should be focussed solely on the underlying data that generates funding. Any audit committee should focus primarily on the organisation’s controls. The ITP should ensure that the size of the scrutiny function is proportionate to funding received.

Sub-contracting

3.12 DfE requirements relating to sub-contracted DfE-funded delivery ensure that there is appropriate accountability and transparency over the use of public funds and the protection of the quality of education provision.

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Required	Required

3.13 To comply with sub-contracting requirements, as set out in any contract for services, and to adhere to DfE requirements for sub-contracting, including the sub-contracting standard (where applicable) and related assurance framework.

Codes of governance

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million		Up to £100,000
Required	Recommended	Discretionary		Discretionary

3.14 To comply with a code of governance appropriate to the organisation. The codes listed below are examples that could be used:

• Code of Good Governance for Independent Training Providers
• UK Corporate Governance Code
• Charity Governance Code

3.15 These codes help organisations to achieve strong governance, regularity, propriety and effective business operations. Compliance with relevant governance codes gives confidence that ITPs are committed to good governance and appropriate use of public funds.

Part 4: Financial management and oversight

Financial oversight

4.1 The ITP’s management team is responsible for:

• maintaining robust oversight of their publicly funded delivery
• financial affairs
• stewardship of assets
• proper and effective use of resources to maximise outcomes for learners

Basic control principles

4.2 Sound governance, robust financial and risk management, clear internal frameworks, and strong assurance processes are basic control principles which can be achieved through a tiered approach, including:

• clearly communicated policies, procedures, structures, and training of staff
• internal controls which include appropriate supervision, checks by managers, and separation of duties
• a clear plan for all aspects of budgetary management
• risk management procedures
• whistleblowing arrangements
• internal review, including internal audit
• external audit

Financial leadership

4.3 Clear lines of leadership, including a clearly identified person or role responsible for financial matters, creates clarity and accountability. For ITPs, the person could be a:

• chief financial officer
• finance director
• finance manager
• the business owner, in smaller organisations

The person should have skills and knowledge, consistent with the delivery of publicly funded training, appropriate qualifications, and membership of professional bodies depending upon the type and size of organisation.

Financial planning

4.4 ITPs should plan carefully to ensure they can effectively deliver the public funding they have received. Planning should include:

• ensuring that financial plans are prepared and monitored, satisfying itself that the organisation has sufficient cashflows to operate, remains a going concern and is financially sustainable
• taking a longer-term view of financial planning consistent with the length of contracts to deliver training
• setting accurate and realistic budgets and ensuring rigour and scrutiny in budget management, including considering lessons learned from budgeting in previous years
• monitoring the budget – this should include:
  • preparing regular management accounts
  • preparing forecasts (including cashflow forecasts)
  • reviewing and addressing variances between actual and budgeted income and expenditure
  • measuring performance against key financial indicators
  • understanding potential liabilities such as VAT
  • acting quickly when any financial performance issues are identified

Financial management and oversight arrangements

4.5 The remainder of part 4 outlines financial management and oversight arrangements and how they apply to ITPs depending upon their funding group.

Submission of annual accounts

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Required	Required

4.6 To submit annual accounts to DfE. These should:

• be approved by the board
• be within the timescales set out in the following table
• use submission methods determined by DfE
• follow any published DfE guidance outlining the criteria required for the accounts

Timescales to submit accounts to DfE after ITP’s year-end

Period in which the ITP’s accounting year commences	More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
1 August 2024 to 31 July 2025	Within 7 months (can apply for an extension of up to 2 more months)	Within 9 months (10 months for charities)	Within 9 months (10 months for charities)	Within 9 months (10 months for charities)
1 August 2025 to 31 July 2026	Within 5 months (can apply for an extension of up to 2 more months)	Within 7 months	Within 7 months	Within 9 months (10 months for charities)
On or after 1 August 2026	Within 5 months	Within 5 months	Within 5 months	Within 9 months (10 months for charities)

4.7 To protect learners and to be able to support ITPs, it is important that DfE knows as early as possible about the financial health of ITPs via their annual accounts. The 9-month and 10-month deadlines, which align with statutory filing deadlines required by Companies House and the Charity Commission, increase the risk that it may be too late for DfE to identify financial risks or make effective decisions to help. The revised deadlines will also help DfE to make better informed decisions about future funding allocations.

4.8 As set out in the following table, most ITPs will need to submit annual accounts to DfE within 5 months of their year-end (exceptions are set out in paragraph 4.9). These timescales will achieve earlier clarity over the latest annual financial performance and position of ITPs, a strong feature of sound financial management. It will also align with the 5-month deadline colleges and higher education institutions have to submit their accounts to DfE and the Office for Students respectively. However, DfE is aware that this could impact on existing business and audit cycles, particularly for ITPs with group structures. Therefore, DfE is phasing in earlier submission of accounts over a period of time, as set out in the table above.

4.9 Some cohorts of ITPs are exempt from the timescale requirements.

Employer providers, regardless of their funding level, must submit their accounts to DfE. They can do this within 9 months of their year-end (10 months for charities). Employer providers are organisations that successfully applied to the apprenticeship provider and assessment register using the levy paying employer route and for whom education and training is not their core business purpose. These organisations can be listed on the register as either employer providers (delivering apprenticeship training to their own employees) or main providers (delivering apprenticeship training to their own employees and additionally to the employees of organisations connected to them).

ITPs which only contract with DfE to deliver Skills Bootcamps are exempt from submitting accounts annually to DfE – DfE has alternative arrangements for assessing their financial health.

Cash flow forecasts

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Required	Discretionary

4.10 To maintain a rolling internal cash flow forecast for control purposes, which sets out the expected financial position for the organisation for the next 12 months. This will enable ITPs to plan and budget for changes in income and manage funding cycles. Some ITPs will also be required to submit a cash forecast to DfE from time to time as in line with the financial forecast guidance. These ITPs will be notified individually by DfE.

Financial health information

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Required	Required

4.11 To submit financial health records as required by DfE.

4.12 DfE monitors the financial health of ITPs it funds. This enables DfE to support ITPs that encounter financial problems and to protect public funds. ITPs need to be familiar with any guidance issued by DfE in relation to the submission of financial information.

4.13 ITPs must inform DfE of any:

• financial difficulties that could impact contract delivery
• change of name, ownership, control, or investment structure

Counter fraud and error

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Recommended	Discretionary

4.14 To have a counter fraud and error policy and procedures, including mechanisms to report suspected fraud and error to DfE, and to provide training to all staff working on DfE-funded contracts on fraud awareness and indicators. Ideally, the policy and procedures should be a standalone document but could be part of wider operational documents an ITP may already have.

4.15 ITPs must be aware of the risks of fraud, theft and irregularity and mitigate them by establishing proportionate controls. ITPs must take appropriate action where fraud and error, theft or irregularity is suspected or identified. Action Fraud has further advice.

4.16 ITPs must also be aware of the risks from cybercrime, establish proportionate controls and take appropriate action where a cyber security incident has occurred.

4.17 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.

4.18 Fraud is a serious threat to ITPs and prevention is the first line of defence. It is important that ITPs also have sufficient measures to protect themselves and public funds against the threat of fraud.

4.19 A counter fraud and error policy should include:

• how the ITP assesses the risk of fraud and error
• which areas of the ITP are potentially vulnerable to fraud and error
• a list of potential fraud and error indicators
• details of how the ITP:
  • raises awareness of fraud and error internally
  • aims to prevent and detect fraud and error
  • investigates, and sanctions, suspected internal and external fraud and error
• how the ITP tests its internal systems to assess robustness against fraud and error
• a list of policies, procedures, and prevention methods the ITP has to help counter fraud and error
• a list of responsibilities for named job roles relating to counter fraud and error
• definitions of fraud, bribery and corruption as set out in UK Law

4.20 ITPs must notify DfE as soon as possible of any instances of fraud or suspected fraud, theft and/or irregularity linked to DfE-funded delivery. Specific guidance on how to report fraud and financial irregularity to DfE is available.

4.21 From time to time DfE will publish good practice guidelines in relation to fraud awareness to reflect the fast-changing environment and demand from providers. ITPs will want to familiarise themselves with such guidance.

Risk management and business continuity

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Recommended	Discretionary

4.22 To have risk management policies and procedures, which are updated on a regular basis. These would include a:

• risk management policy – outlining the overall strategy for managing risk
• risk register – listing and ranking current and potential future risks, and considering impact versus likelihood and potential mitigations
• business continuity policy – outlining how learning delivery can continue in exceptional circumstances
• conflict of interest policy – covering how the organisation manages conflicts of interest between their contracted delivery of DfE funding and any other interests they or individuals in the organisation and their related parties might have

4.23 Ideally, the policies would be standalone documents but could be part of a wider operational manual used by the ITP.

4.24 ITPs can help protect themselves and public funds from financial and other risks by having mechanisms to identify, prevent, mitigate, record and deal with risks that may arise. These mechanisms might be overseen by a risk management function which is proportional to the level of risk identified.

It is also important to have business continuity plans to ensure, wherever possible, learning can continue to take place in changing circumstances.

Whistleblowing

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Required	Discretionary

4.25 To have a whistleblowing policy that is readily accessible to all employees who carry out any work related to DfE-funded delivery. The policy must include details of how to make a disclosure directly to DfE, including a reference to Blowing the whistle to DfE or a link to the document. The policy could be organisation-wide or specific to DfE-funded delivery. Ideally the policy should be a standalone document but could be part of a wider suite of documents that an ITP might already have.

4.26 A whistleblowing policy should include:

• how to make an internal whistleblowing disclosure
• details of how the ITP deals with a whistleblowing disclosure, including timescales for doing so
• how the person making the disclosure will be protected
• a link to Whistleblowing for employees
• a link to Blowing the whistle to DfE
• a link to Protect – a whistleblowing charity that advises and supports individuals and organisations

For ITPs that only have a discretionary requirement to have all the features described in paragraphs 4.25 and 4.26, they must have whistleblowing procedures as set out in their contracts of service or funding agreement.

Part 5: Assurance

5.1 This section outlines assurance arrangements and how they apply to ITPs, depending on the funding group they fall within.

Internal controls review

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Recommended	Discretionary	Discretionary

5.2 To have and follow a formalised internal review process, which ensures that the ITP’s policies, procedures, and controls relating to financial management and governance are robust, effective and up to date.

5.3 The approach an ITP could use might vary dependent on the size, scale and type of funded contracts and income they have, but could range from an annual review of key policies to a full internal audit of relevant processes, policies and programmes of work.

5.4 Having internal audit would provide DfE with additional confidence that an ITP can effectively deliver allocated funds. Internal audit could be carried out by an independent in-house function or by a bought-in internal audit service.

5.5 Where internal audit is undertaken, it should:

• follow an annual plan of activity and assignments which are reported against at the end of the year
• be independent and objective – for example, it should not be performed by a member of the finance team or by anyone with a controlling influence over the organisation
• be conducted by suitably experienced and, where appropriate, qualified individuals, 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
• evaluate the suitability and effectiveness of, and level of compliance with, financial and other controls, including the ITP’s oversight of any sub-contracted delivery
• offer advice and insight to the management team of the organisation on how to address weaknesses in financial and other controls, acting as a catalyst for improvement, but without diluting management’s responsibility for the day to day running of the organisation
• ensure all categories of risk are adequately identified, reported and managed
• identify on a risk-basis (with reference to its risk register, where appropriate) the areas it will review each year, modifying checks accordingly – for example, this may involve greater scrutiny where procedures or systems have changed
• take account of other assurance arrangements and procedures to inform the programme of work – for example, it should have regard to any recommendations from external auditors and from any reports produced by DfE as part of their programme of assurance activity

5.6 The Chartered Institute of Internal Auditors produces an Internal Audit Code of Practice that seeks to improve the effectiveness of internal audit and details best practice.

Appointment of external auditors

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Required	Discretionary	Discretionary

5.7 To appoint an external auditor to provide an opinion on whether the ITP’s annual accounts are a true and fair view of its financial performance and position, even if not a statutory requirement for the ITP. This might be an audit of group level accounts if there are no separate subsidiary accounts. This is effective for accounting periods commencing on or after 1 August 2025.

5.8 Many ITPs are already required to appoint external auditors under the Companies Act 2006, Charities Act 2011 or Limited Liability Partnership Audit and Accounts Regulations 2008.

5.9 ITPs must note any areas for improvement identified by the external auditor and have a plan to implement and monitor the recommended improvements. ITPs with an audit and risk committee (or equivalent) should ensure the committee hold the management team to account in relation to improvements identified.

External audit management letters

More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
Required	Recommended	Discretionary	Discretionary

5.10 To submit management letters or audit completion findings reports or equivalent provided by external auditors (where appointed) to DfE, using submission methods determined by DfE. Control risks for wider group structures which are unrelated to DfE-funded delivery may be redacted. Access to management letters will enable DfE to work with ITPs to mitigate risks and protect funds and learning delivery.

5.11 Management letters will outline and rank control risks, if any, identified by the external auditors and make recommendations to the ITP.

DfE assurance activity

5.12 DfE will continue to perform its regular programme of assurance activity relating to ITPs. This includes funding audits, sampled on a random and risk basis, as well as financial health assessments. This handbook helps ITPs establish processes which will enhance the likelihood of positive assurance outcomes from those audits and assessments.

DfE funding audits

5.13 ITPs receive funding under contracts for services with DfE. These require providers to:

• comply with funding rules
• maintain ILRs
• submit ILR data and other returns to DfE to support their funding claims

They also provide for DfE to conduct funding assurance and other ad hoc reviews.

5.14 DfE obtains direct assurance over providers’ funding through ILR data returns. DfE conducts a programme of funding monitoring and data validation, which involves data analysis and identifying providers’ ILR data anomalies. DfE informs providers of the ILR data anomalies and explains how to correct any errors. DfE also obtains direct assurance through a programme of funding assurance reviews (funding audits).

5.15 In addition to the direct assurance performed by DfE, MCAs, the GLA, and other commissioners of education and skills may adopt their own processes for assurance on the funding they give to ITPs.

5.16 Providers may sub-contract the delivery of DfE-funded learning, provided they comply with the sub-contracting requirements set out in DfE’s funding rules and in the Assurance reviews of the subcontracting standard for post-16 providers.

Part 6: Oversight and intervention

DfE oversight

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

6.2 Oversight work specific to ITPs includes monitoring reviews of:

• DfE funding
• funding assurance reviews
• assessment of controls at newly contracted ITPs
• financial health assessments

6.3 DfE takes a risk-based approach to oversight and managing contracts. Resource is focused on providers where their financial accounts and other relevant data suggest that there is a risk of failure or overclaim of funds. The potential impact of failure on learners is also considered. We use specific triggers in our risk assessments to indicate where there may be areas of concern.

DfE access

6.4 DfE or their agents may carry out reviews, audits or investigations of ITPs, which require access to all books, records, information, explanations, assets, premises, and staff. DfE may take copies of relevant documents.

Provision of information to DfE

6.5 DfE or their agents will require, on request, any information from ITPs to meet published funding requirements.

6.6 ITPs are required to notify DfE of changes relating to their ownership.

Intervention and investigation powers

6.7 DfE may use intervention powers where a breach of contract is identified, or specific financial performance or quality measures are not being met.

6.8 The priorities of any DfE intervention are to safeguard the interests of learners and protect public funds.

6.9 Intervention activity may include:

• requirements to provide additional financial information
• requirements to design and implement an improvement plan to address quality issues or financial position, including specific targets to be met within a specified period of time
• requirements to cease using a particular sub-contractor
• suspension of learner enrolments
• termination of contracts

6.10 Further information on our intervention arrangements is set out in the guidance on how oversight of ITPs is maintained.

6.11 DfE may conduct or commission investigations into allegations of fraud and error, theft or irregularity relating to DfE-funded activity, in any ITP, based on information received or uncovered. DfE may involve other authorities, including the police.

DfE work with the Charity Commission

6.12 Where there is a concern relating to an ITP with charitable status, DfE may notify the Charity Commission, reflecting the commission’s interest in addressing non-compliance with legal or regulatory requirements, misconduct, or mismanagement in the administration of any charity, and in ensuring individuals running the charity do so in compliance with their legal duties.

DfE work with the Insolvency Service

6.13 DfE may refer directors of ITPs to the Insolvency Service, which 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.

Annex A: Providers covered by the handbook

This financial handbook applies to the following types of ITP in receipt of post-16 funding from DfE:

• private limited companies
• private companies limited by guarantee
• private companies limited by guarantee, no share capital issued
• private limited companies limited by guarantee, no share capital issued limited exemption
• private unlimited companies
• companies incorporated by royal charter
• industrial or provident companies
• public limited companies
• partnerships and sole traders
• limited liability partnerships
• community interest companies
• charitable incorporated organisations
• charitable unincorporated associations
• charitable trusts
• other charities
• employer associations
• independent associations
• employer-providers (who are also any of the above)

For the avoidance of doubt, this financial handbook is not applicable to any of the types of organisations listed below:

• all types of schools, academies and academy trusts
• further education college groups and sixth form college groups, including college subsidiaries
• special post-16 institutions
• universities and other higher education institutions (other than subsidiaries which have a separate contract with DfE to operate as ITPs)
• central government departments
• public corporations and trading funds
• HM prisons
• health and social service trusts
• NHS England foundation trusts
• NHS England non-foundation trusts
• NHS other organisations
• local authorities
• combined authorities
• fire authorities
• police authorities
• trade unions
• sub-contractors of ITPs who do not receive any funding directly from DfE, although their lead ITP may encourage the sub-contractor to align with elements of the handbook

Annex B: Summary of the handbook’s arrangements

The following table gives a brief summary of each arrangement that applies from 1 August 2025.

The table shows the arrangements needed based on the total annual funding an ITP receives directly from DfE.

Summary of arrangement by paragraph	More than £8 million	More than £1 million up to £8 million	More than £100,000 up to £1 million	Up to £100,000
3.2 To have at least one non-executive director in place to provide independent oversight of financial and governance processes	Required	Discretionary	Discretionary	Discretionary
3.4 To have an audit and risk committee in place to direct and oversee independent assessment of financial and governance processes	Required	Recommended	Discretionary	Discretionary
3.8 To have a funding compliance scrutiny function in place to oversee the submission of data that triggers funding	Required	Required	Recommended	Discretionary
3.13 To comply with all contractual obligations and DfE guidance in relation to sub-contracting arrangements and delivery	Required	Required	Required	Required
3.14 To comply with a relevant published governance code	Required	Recommended	Discretionary	Discretionary
4.6 To submit annual accounts to DfE within timescales as set out in this handbook	Required	Required	Required	Required
4.10 To maintain a rolling cash forecast which sets out expected financial position for the next 12 months	Required	Required	Required	Discretionary
4.11 To submit financial health records as per any request from DfE	Required	Required	Required	Required
4.14 To have a counter fraud and error policy and procedures in place, and fraud awareness training for staff	Required	Required	Recommended	Discretionary
4.22 To have risk management processes in place to include a risk management policy, risk register, business continuity policy, and conflict of interest policy	Required	Required	Recommended	Discretionary
4.25 To have a whistleblowing policy in place which references how to make disclosures directly to DfE	Required	Required	Required	Discretionary
5.2 To have and to follow a formalised internal review process in relation to the ITP’s financial management and governance procedures	Required	Recommended	Discretionary	Discretionary
5.7 To appoint an external auditor to provide an opinion on whether the annual accounts are true and fair, even if not a statutory requirement	Required	Required	Discretionary	Discretionary
5.10 For ITPs whose annual accounts are externally audited, to provide management letters to DfE	Required	Recommended	Discretionary	Discretionary