Academies Trust Handbook 2023 released - what’s new?

After last year’s late release, the publication of the latest Academy Trust Handbook (ATH) 2023 by the ESFA will have been welcomed by many involved in the sector across the UK. Even more so with the promise that this is a “materially sharper and shorter document” at 62 pages in total—the 2022 version was 78. I’ll let you judge if that’s material or not!

The ATH 2023 is effective from 1 September 2023 and replaces the 2022 version from this date.

A full copy of the ATH can be accessed here.

This year there are some key changes and it is important that academy trusts are aware of these as we head into another academic year.

So what are the changes to note heading into 2023-24?

Roles and responsibilities

The roles of members and trustees have been made much punchier in the latest ATH (section 1). Whilst there are no specific changes to the roles, the ATH is more to the point in terms of conveying governance expectations. 

Trust boards should always re-read this section to ensure their governance arrangements meet the latest expectations, even if no changes have been made.

We are aware of the ESFA’s drive for trusts to take estates management seriously and this has already been emphasised in the recent Accounts Direction changes. The ATH (paragraph 1.19) now goes further to state that academy trusts should ensure they are aware of and are applying the following guidance:

• Good Estate Management for Schools
• Estate management competency framework
• Condition Data Collection
• Reinforced Autoclaved Aerated Concrete (RAAC) guidance
• School Capital Funding guidance
• Condition Improvement Fund.

There is also confirmation that the role of the accounting officer and chief financial officer should not be occupied by the same individual (paragraph 1.28). When there is a sudden departure of persons from at least one of these roles, sometimes, a short-term resolution is for the roles to be undertaken by the same person. The ESFA are clearly not keen on this idea—although it should be noted that this is not a “must” requirement.

Governance changes

The following changes have not been flagged by the ESFA as key changes. However, they will have some impact upon academy trusts in our opinion.

Previously, the ATH indicated that having no other employees (aside from senior executive leaders) as trustees was a strong preference. The latest ATH now categorically states this requirement that no other employees should serve as trustees (paragraph 1.22).

The suggestion that trust boards have an external review of governance has also been removed from this year’s ATH.

 

Financial Requirements

Previously, if a trust board met fewer than six times a year, it was required to describe in its governance statement (in the annual accounts) how it maintained oversight with fewer meetings. This requirement has now been removed in the latest ATH (paragraph 2.3) with the only requirement being for trust boards to meet at least three times a year.

However, trusts should note there is clearly still an expectation that meeting more often is the preferred stance of the ESFA.

As previously announced, the deadline for trusts to submit their Budget Forecast Return (BFR) is by the end of August (paragraph 2.15). 

Updating the ATH with this revised deadline gives an indication that perhaps the later deadline (previously the end of July) is here to stay. If so, then trusts may need to reconsider their governance arrangements moving forward in terms of the timing of meetings to enable the BFR to be approved by trustees.

Management accounts are still to be prepared on a monthly basis and shared with the chair of the trust as regularly. However, the requirement for the rest of the board to see the management accounts at least six times a year has been removed (paragraphs 2.18 to 2.20).

Another interesting change is the removal of the requirement for trusts to select key financial performance indicators and regularly monitor these. This is quite a surprise considering the ESFA’s keenness for trusts to monitor key performance indicators (KPIs) as they have stressed in the past this is a key ingredient to monitoring financial viability.

For those trusts that already include their KPIs in their management accounts, we would recommend continuing to include these or at least discussing their potential removal with the trust board to ensure they are comfortable with this approach.

An allowance is now made for trusts to establish Electric Vehicle (EV) salary sacrifice schemes without ESFA approval (paragraph 2.31) provided no liability falls on the trust if an employee does not meet their contractual obligations. However, if your trust is under a Notice to Improve (NtI), then ESFA approval must be obtained.

Delegated authorities

The ATH re-emphasises GAG pooling (paragraphs 5.30 and 5.31) as a mechanism for trusts to consider. We are a firm believer in this approach—read our article here to find out more.

The related party transaction approval threshold has now been increased to £40,000 (paragraph 5.42). Trusts must obtain prior approval 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 the contract value exceeds £40,000 in the same financial year ending 31 August.

Transactions involving other educational establishments (as listed below) are excluded from this requirement unless they are with a subsidiary of such a related party:

• Colleges, universities and schools which are sponsors of the trust
• State funded schools and colleges, including academies

The provision of services to an academy trust with a religious designation, for essential functions fundamental to the academy trust’s religious character and ethos which can only be provided by their religious authority, are also excluded from the requirement.

The previous limit of £20,000 was always far too low and a perfect example of the ESFA being over-zealous in response to previous mis-demeanours. Therefore the increase to £40,000 is the right one in our opinion.

Regulator and intervention

The ATH now includes examples of when an NtI might be issued on both financial management and governance grounds (paragraph 6.16). The examples given are:

• an actual or projected deficit
• cash flow problems
• insolvency risk
• irregular use of public funds
• poor internal scrutiny
• breaches of related party requirements
• the trust board not being properly constituted
• trustees failing to comply with their safeguarding duties
• trustees lacking the skills, knowledge and experience to exercise effective oversight of the trust’s operations and performance, including educational performance.

These are important to note and be aware of in case your academy trust has any issues arising from these topics.

The “Musts”

Finally, the ATH has now published (in Excel format) a separate schedule of the “Musts” in the form of a handy checklist for trusts. Previously, this was an annex at the back of the ATH.

This is a useful tool and one trust boards should review annually to ensure compliance is met or at the very least, is being worked towards.

Summary

The current climate is for growth and amalgamation and those trusts doing things well should not have to follow such stringent rules. 

The new ATH certainly feels like an attempt by the ESFA to follow through on this, but as we have seen in the past, when rules are relaxed there are often some trusts who push the limits a little too far! 

However, ultimately, trusts do know what they are doing and should be allowed to focus on the case in hand—to improve educational outcomes in a tough economic environment. Let’s hope the new ATH allows this to happen.

PLR Advisory recommend that the ATH 2023 is read by all those involved in making decisions on behalf of the trust, in particular, the new “Musts” checklist; otherwise, are you demonstrating strong governance and financial management?

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