The impact of the new Academy Trust Handbook 2021

As part of our Education Matters Forum webinar and event series, we collaborated with Kreston Reeves to provide guidance on the legal and financial implications for the education sector of the key changes to the Academy Trust Handbook.

The Handbook, previously known as the ‘Academies Financial Handbook’, features changes which come into effect on 1 September 2021. The reason for the change in title is to ensure that it reflects the full range of content the handbook contains and the broad range of responsibilities undertaken by academy trusts. This may well have been influenced by the increased focus on changes and improvements to governance that we have seen over the past year.

We would recommend a proactive approach to discussing and reviewing changes that might be required by your trust.

In this article we summarise the main changes and provide some top tips and guidance to ensure that you are ready and compliant for the new academic year.

Governance – roles and responsibilities

The Academy Trust Handbook focuses on the interaction between members, trustees and senior leaders – emphasising the importance of strong governance.

Trusts must ensure existing members are not currently subject to a made under section 128 of the Education and Skills Act 2008. They must also ensure that any members due to be appointed are also not subject to a direction (para 1.4).

From 1 March 2022 any newly appointed accounting officer can only be a trustee if the members decide to appoint them as one. The accounting officer will also need to agree and the trust’s articles permit this.

The Department for Education (DfE) has a strong preference that no employees serve as trustees. This is also widely shared by many governance organisations such as the National Governance Association (para 1.23).

The Handbook recommends that single-academy trusts should have at least two places for parents on the board. For multi-academy trusts they should follow the same rule or have two places on each local governing body (where established).

The chair of trustees should not be the chair of the audit and risk committee. This applies whether the committee is separate or not (para 3.10).

The DfE’s recognition of the importance of governance continues with the emphasis on the value of an objective and independent external governance review. There is particular emphasis on this before a trust grows significantly. Interestingly, the importance of the member role emerges again, with reference to such reviews also covering the interaction between members and trustees to include the extent to which members can be assured that trustees undertake their duties effectively. Given the number of trusts which have been identified as having significant failings in governance, the DfE are clearly expecting members to take a more proactive role.

Top tips

• If your trust appoints a new accounting officer after 1 March 2022, ensure the articles are reviewed and the members are involved in any appointment process. This should be clearly minuted.
• When an accounting officer or any senior executive leader is planning to leave a trust, the board should approach their Regional Schools Commissioner (RSC) in advance to discuss options and structures for the recruitment process. It is likely that this forms part of the Education and Skills Funding Agency’s (ESFA) wider remit to reduce the number of trusts which exist. Therefore, if your plans are not accepted you may see some pressure to join another trust (para 1.36).
• Ensure appointments are clearly minuted.

Scheme of Delegation

As you may be aware, MATS must have in place a Scheme of Delegation. The Academy Trust Handbook now specifies this should be reviewed annually or immediately following a change in structure or trust management.

Top tip

We encourage trusts to be proactive rather than reactive with their Scheme of Delegation. Consider the Scheme before changes are made as it can sometimes be difficult to adapt it afterwards or it may be forgotten when you are focusing on implementation of the change.

Auditors

Trusts must appoint an auditor to give an opinion on the annual financial statements. The Academy Trust Handbook now stresses that trusts should re-tender their external auditors at least every five years and must consider certain points when evaluating (para 4.17).

Top tip

When considering appointing an appropriate external auditor, you should look at:

• Sector expertise
• Their knowledge and understanding of your trust and activities
• Whether issues are raised in a timely manner
• The quality of comments and recommendations
• Interaction and the level of robust challenges
• Use of technology

Severance payments

Prior approval by the ESFA must be obtained before making a staff severance payment where:

• An exit package which includes a special severance payment is at, or above, £100,000; and/or
• The employee earns over £150,000

Top tip

In most trusts it is likely to be rare that such a requirement arises unless it involves the exit of a CEO, CFO or Executive Head. If you are looking to make such a payment, we strongly recommend getting legal advice first. The advice would include the  merits and values of potential claims, as this can be relied upon when obtaining board approval and when submitting your case to the ESFA.

Cybercrime

This is a hot topic in the education sector at the moment, with a number of recent examples of schools being subject to cyber-attacks.

The new Handbook introduces guidance in this area. It confirms that trusts must be aware of the risk of cybercrime and put in place controls and appropriate procedures and actions should an incident occur.

Top tips

We recommend that if you are not already doing so, cybercrime is an area that is regularly reviewed by your audit and risk committee. It should also form part of your risk registers and internal scrutiny arrangements.

To assist your trust in reducing risk and exposure to cybercrime:

• Review your current system arrangements and keep up to date with processes. You may need specialist support for this
• Train your staff
• Ensure all virus protection is up to date and do not use free software
• Check your back up system. Using a cloud system might be best but again, if necessary, take specialist advice.
• Ensure all staff have good, reliable and safe equipment

Please remember, if you receive a demand, you must obtain ESFA approval before paying, no matter how desperate the situation may be.

Updated Model Articles

On 30 June 2021 the DfE updated model articles of association for mainstream academies, special academies, 16 to 19 academies, alternative provision academies, free schools and studio schools.

You should be familiar with these changes if you are a trust looking to grow. If your old articles were drafted in 2016 or before, then there is a likely expectation to update your articles.

Further support

If you have any queries on the issues covered in this article, please contact our specialist Education team today.

This content is correct at time of publication