Academies: Financial Oversight

Nick Gibb Excerpts

Thursday 6th July 2023 Written Statements

[The Minister for Schools (Nick Gibb)]

Today, my noble Friend, The Parliamentary Under-Secretary of State for the School System and Student Finance (Baroness Barran) has made the following statement:

The 2023 Academy Trust Handbook (ATH), published today and applicable from 1 September 2023, will introduce improvements to the financial oversight framework for academy trusts.

These improvements will maintain the rigour of the current framework, while achieving a better balance for academy trusts, including:

A more streamlined and concise ATH that more clearly describes the framework for Academy Trusts, removing unnecessary detail/prescription, with links to additional guidance for more detailed support where appropriate.

A change in the approval requirements for related party transactions (RPTs) means that from 1 September 2023 RPTs between an academy trust and a college/university, or a school which is a sponsor of the academy trust, or with other state funded schools/colleges will be required to be declared only. In addition, the approval threshold is increased from £20,000 to £40,000 and this will only apply to singular transactions of this value or above.

A range of other improvements such as cutting out duplication across financial returns; prepopulating collection tools; extending the Budget Forecast Return deadline; clarifying requirements through improved guidance are currently being prepared and delivered over the course of this year. There are then areas for action that will be delivered over a longer timescale, and we will continue to engage the sector in this process.

The changes form part of the departmental response to the commitments in the academies regulatory and commissioning review, published in March this year.

The existing framework is robust and thorough with academy trusts—as companies, charities and public sector bodies—subject to high levels of scrutiny. Standards of financial management and governance are high across the sector. In 2020-21, 99.5% of academy trust accounts received unqualified opinions and independent reporting accountants concluded that there were no regularity exceptions in trust financial statements for 92% of trusts.

The framework exists to safeguard taxpayers’ money and ensure it is being used for its intended purpose. This supports the department’s ambition to ensure every pupil is receiving an excellent education and that all young people can realise their potential.

However, we also want to ensure that the framework is appropriately balanced so that it places proportionate requirements on the sector, as well as enabling the Education and Skills Funding Agency (ESFA) and Department for Education (DfE) to fulfil their responsibilities, including the provision of assurance on its stewardship of public funds to Parliament.

In developing these changes, ESFA and DfE have worked closely with a range of representatives of the academy sector. Advisory groups were established, made up of sector experts, representative organisations and academy trusts CEOs and CFOs. The groups provided in-depth feedback on the current ATH requirements. While there was agreement about the core of the financial oversight framework and the key principles that underpin it, we heard that aspects of the current framework are either hard to understand, overly complex or excessively prescriptive.

These changes are possible because of the capability of trusts across the academy sector which has matured significantly in recent years. As the sector continues to develop, we can continue this conversation with sector representatives about the financial oversight framework, identifying further opportunities to improve and streamline.

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