Guidance

Summary guidance: report or seek approval for related party transactions

Updated 2 September 2024

Applies to England

The Academy trust handbook sets out reporting and approval requirements for academy trusts in advance of transacting with a related party.

1. Reporting related party transactions

Academy trusts must report their intention to enter into a new transaction with a related party to the Education and Skills Funding Agency (ESFA) before confirming the transaction with the related party. This includes transactions being renewed with a related party.

Academy trusts do not need to report income transactions with related parties. For expenditure related party transactions with a new supplier, academy trusts must confirm whether they have previously received a donation from the related party.

Salaries and other payments made by an academy trust to a related party under a contract of employment, through the academy trust’s payroll, are not in scope of this reporting requirement.

Academy trusts must declare all related party transactions, regardless of value, in their annual financial statements as set out in the Academies Accounts Direction.

2. Seeking approval for related party transactions

Academy trusts must obtain ESFA’s prior approval, using the online form, for related party transactions that start on or after 1 September 2023, and exceed £40,000 for the supply of goods or services to the trust by a related party in the same financial year ending 31 August.

The £40,000 approval threshold applies to single transactions with the same supplier, the transaction value is not aggregated by supplier.

This approval requirement does not apply in the following circumstances:

• transactions 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 academies

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

• transactions for the provision of goods or 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.

These related party transactions must be declared to the ESFA via the online form.

Novel, contentious or repercussive related party transactions are subject to separate arrangements. Trusts must obtain ESFA’s prior approval for any transactions with related parties that are novel, contentious or repercussive, regardless of value. Approval must be sought using ESFA’s online form. Trusts should carefully consider the impact of this requirement and its relevance to transactions involving the board chair or the accounting officer as set out in Academy trust handbook.

A single request for approval can be submitted for a series of intended transactions with the same supplier if sufficient detail about each transaction is included in the evidence provided.

3. Submitting a retrospective expenditure transaction with a related party

All expenditure transactions with a related party must be reported to ESFA using the online form. Submitting a retrospective transaction is a breach of the Academy trust handbook, and ESFA may consider further action.

The accounting office should report the breach in their ‘Statement on regularity, propriety and compliance’.

In the event of an emergency where the academy trust has taken immediate action to procure goods or services to address an emergency situation, it is essential the academy trust:

• demonstrates how it has followed its own procurement and delegation procedures
• demonstrates how conflicts of interest were managed
• reports or seeks ESFA approval retrospectively using ESFAs online form and as soon as possible after the emergency
• provides ESFA with appropriate evidence of the emergency circumstances and can justify why the transaction was needed

4. Reported transactions that do not require approval by ESFA

Transactions which are reported but do not require approval, will still be monitored by ESFA:

• as part of routine oversight for compliance and transparency purposes
• to improve or shape future policy changes

Even though approval may not be required for certain transactions it is still important to maintain accurate records and documentation of all transactions with related parties. If required, academy trusts may need to make this information available to ESFA as part of an audit or other review.

5. Preparing to complete the online form

Academy trusts must report all expenditure transactions and seek approval where necessary before confirming such transactions with a related party using the online form.

The checklist sets out the type of evidence to provide when seeking approval for a related party transaction.

You will need a DfE Sign-in account to use the form. Register for a DfE Sign-in account if you do not have one already.

6. Do you have any questions?

For all enquiries for ESFA, contact us using the customer help portal.