New handbook promotes the art of good governance

7 Jul 2019, 5:00

More than ever, trusts need to ensure that their governance arrangements are as robust as possible, says Phil Reynolds, as he talks us through the 2019 academies handbook

Many people have been demanding the government take action on those who may have flouted the rules – and the latest academies financial handbook is a clear sign that steps are being taken to address this.

The 2019 handbook, which will come into force on September 1, has some significant changes as the Education and Skills Funding Agency and academies minister, Lord Agnew in particular, clamp down on poor governance arrangements.

Focus switches to internal scrutiny

The biggest change comes in the form of internal scrutiny, which most academy trusts commonly refer to as the “internal audit process”. This process is key and can assist trustees in ensuring their trust complies with financial and other controls.

The main driver behind it is the trust’s risk register, and trustees will want to check that the controls they have in place are effective and efficient. Ensuring that you maintain and review your risk register is key, and trusts should look to have this as a standing agenda item to – at the very least – discuss.

The handbook is clear that the internal audit process must have clear appropriate reporting lines. All too often the process is steered by the finance team of the trust – not the finance and audit committee. The committee should select the scope of work with the provider, and then allow the finance team to arrange the visits. The findings of the visits should then be reported directly to the committee.

Membership of that committee is also key. No employees should sit as members, and the chair of trustees should not act as chair of the committee. Where trusts have a committee performing a dual function, such as finance and audit, then the employees should not be present when audit matters are discussed.

The handbook has some significant changes

The present moment is a good time for trusts to review their current committee memberships and remits and to check they are compliant for 2019-20. The accuracy of pupil number returns and funding claims should be checked too, the latter of which has been the subject of recent media reports. Trusts need to have a process in place to mitigate these risks, as well as other risk areas such as health and safety, and consider what reporting is needed for these.

A short annual summary for each academic year (the first being 2019-20) must also now be submitted to a trust’s committee and the ESFA, by December 31. The summary must outline the areas reviewed, key findings, recommendations and conclusions to help the committee assess year-on-year progress.

This, of course, means more work for the trusts, trustees and internal auditors. But if you plan the process properly, it shouldn’t be too much of a chore. The key is to hold a scoping meeting to plan ahead of each academic year.

More transparency for trusts

Trusts subject to a financial notice to improve must publish the notice on their website within 14 days, and retain this until the notice is lifted. This may seem bureaucratic (since notices are also put up on the ESFA website) but it promotes the transparency the sector is driving towards.

The 2019 handbook also clarifies the powers the secretary of state has, which will act as a reminder of the implications of this, should intervention be needed.

More emphasis on the role of the clerk

Finally, a key point is that trusts should have a clerk in place who is neither a trustee nor the accounting officer. The role of the clerk is vital in ensuring the board acts appropriately and they can, at times, challenge the board, or encourage them to refer to legislation before making a decision.

The recently released clerking competency framework highlights what trusts should expect from their clerk.

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