Changes to the Academy Trust Handbook 2023

An updated Academy Trust Handbook was published in July 2023 by the Education and Skills Funding Agency (ESFA), and came into effect on 1 September 2023 (ATH 2023). This is a broad summary of the principal changes included in the ATH 2023, compared to the Academy Trust Handbook published in 2022 (ATH 2022).

1. Background

The Academy Trust Handbook is updated each year and sets out obligations and responsibilities in relation to governing, managing and auditing academy trusts. Academy trusts are required to comply with the obligations of the Academy Trust Handbook as a requirement of their funding agreements, with the Academy Trust Handbook setting out what academy trusts “must” comply with (i.e. requirements) and what they “should” comply with (i.e. minimum good practice that should be applied unless a Trust can show that an alternative approach better suits their circumstances (page 5, ATH 2023).

In December 2022, Baroness Barran, Minister for the School System and Student Finance, invited representatives from the education sector to provide feedback on ways in which the oversight framework could be improved, simplified, or streamlined including ways in which the Department for Education (DfE) could provide clearer communication. As a result, the ATH 2023 has been reduced in length from the previous iteration and is described in the Minister’s Foreword as simpler, shorter and more sharply focused. 

Whilst the length of the ATH 2023 has been reduced from the previous version, this does not necessarily mean that the obligations on academy trusts have substantially reduced. In practice, most of the “musts” and “shoulds” remain very similar to the ATH 2022, with some small updates and clarifications. Much of the reduction in length is due to the removal of some of the general explanation and guidance which is set out in supplementary guidance documents (and so no longer also replicated in the ATH 2023). 

Whilst many of the obligations remain the same, there are some significant new provisions in the ATH 2023 which include:

• additional obligations and guidance regarding estates management and health and safety (particularly in light of recent RAAC issues);

• a new section on Electric Vehicle salary sacrifice schemes;

• an extension to when an academy trust’s budget forecast return needs to be submitted to ESFA (from July to the end of August);

• removing the requirement to report in the governance statement, accompanying the annual accounts, if the Trust is having less than six board meetings a year;

• strengthening certain recommendations of the DfE from “strong preferences” to obligations which Trusts “should” comply with e.g. that Trusts should have at least five members; 

• relaxing the requirements on related party transactions to raise the reporting threshold and to clarify that certain transactions are not caught by the rules; and

• clarifying the circumstances in which a “Notice to Improve” (Ntl) may be issued to an academy trust for governance issues.

A detailed explanation of the various changes to the different sections of the ATH 2023 is set out below. 

2. Roles and responsibilities

The first section of the ATH 2023 focuses on the overall role and purpose of an academy trust and describes certain key positions and responsibilities within an academy trust i.e. trustees, members, the accounting officer, chief financial officer and the governance professional. 

The DfE has indicated that the content in this section has largely been updated to reflect the publication of Trust Quality Descriptions (which is now specifically listed in the ATH 2023 as a document which, key persons involved with academy trusts, should read).

The main changes include condensing information on the role of members and trustees, strengthening the language regarding the ESFA’s expectations, and adding details regarding of the academy trust board of trustees (Board) in respect of Estate Management. 

3. MAIN CHANGES

• Role of the Academy Trust - the explanation of the role of academy trusts has been updated to now emphasise the importance of promoting pupil welfare and keeping trust’s estates safe and well maintained. Linking to this, the section on estates management has been substantively updated – see below.

• Role of Members - the explanation in the ATH 2023 which sets out the role of members and how they work with trustees has been condensed. References to how the members exercise their powers have been removed      - although this is further explained in the DfE’s Governance Handbook and the Academy Trust Governance: structures and role descriptors guidance. The role of Members therefore has not substantively changed.

• Number of Members - the minimum number of members of an academy trust remains as three, but the ATH 2023 now states that trusts should have at least five or more, rather than as set out in the ATH 2022, the DfE having a strong preference that they have at least five. The obligation has therefore been clarified and strengthened from a preference to something academy trusts should comply with.

• Separation of Trustees and Members - the ATH 2023 explicitly states a majority of members should not be trustees, rather than stating, as before, that this is the DfE’s strong preference. Again, this clarifies and strengthens the obligation.

• Member’s Powers - there is now a specific reference to the members using their powers to step in if governance is failing, clarifying the DfE’s expectations. There is no longer a detailed explanation of member’s powers. This does not mean member’

• s powers have altered, rather the explanation of these powers is no longer replicated in the ATH 2023.

• Board Purpose - a new section has been included on the Board purpose, replacing the previous section on What trustees should focus on. This new section goes into more detail on the core functions of the Board, highlighting that the board has collective accountability and responsibility for the academy trust and assuring itself that there is compliance with regulatory, contractual, and statutory requirements. Further this section now sets out in greater detail what the Board’s core role is referring to “Strategic leadership of the academy trust”, “Accountability and assurance” and “Engagement with a further explanation on what is expected in each area.

• Duties of Directors/Trustees - the explanation of company law duties for directors has been removed from the ATH 2023. This does not mean that the company law duties of directors have changed, they are just not summarised in the ATH 2023. An additional reference to charity trustees duties, as set out in the Charity Commission’s The Essential Trustee guidance, has now been included in the ATH 2023, emphasising (but not altering) that trustees also have duties as the academy trust is a charity;

• Trustees and employees – the ATH 2022 provided that senior executive leaders of the academy trust could be trustees (if the members of the academy trust decide to make such an appointment, and the leader agrees to such an appointment). The ATH 2022 though discouraged other employees from being trustees stating it was the DfE’s strong preference that other employees, nor persons occupying staff establishment roles on a voluntary basis, serve as trustees. Overall, the new ATH 2023 maintains a similar position but has now removed the reference to strong preference, and now explicitly states other employees (and persons occupying staff establishment roles on a voluntary basis) should not serve as trustees. The restriction on employees (other than the senior executive leader) being trustees is now stronger.

• Estate Management – this section has been expanded, clarifying and strengthening the DfE’s expectations regarding estates management, putting more emphasis on trusts to ensure estates are maintained appropriately. DfE expect trusts to not only manage their school estate strategically, but also effectively. Specific wording has been included that the DfE expects trusts to comply with statutory duties to ensure the health and safety of building occupants. The following additional guidance regarding estates management which trusts should ensure they are aware of and are applying is now also specifically referenced and explained in the ATH 2023:

• the Condition Data Collection (CPC) process

• Reinforced Autoclaved Aerated Concrete (RAAC) guidance

• School Capital Funding guidance

• Condition Improvement Fund

In addition, the section in the ATH 2023 on the “Good Estate Management for Schools” guidance now stresses the importance of Estatemanagement competency framework for standards on the skills and knowledge needed for individuals at all levels, which was not previously made explicit.

• Chair of the Trust - the explanation of the role of the Chair has been reduced in the ATH 2023 from the previous iteration (although the role has not substantively changed). Rather further explanation on this role is set out in the DfE’s Academy Trust Governance: structures and roles guidance.

• Delegation by Trustees - this section has been condensed in the ATH 2023 and no longer references the audit and risk committee (although the requirements for the audit and risk committee still remain later in the ATH);

• Skills - it is now clearer that the Board should identify the skills and experience for all Board committees, whereas previously this just referred to local governing bodies. The requirement that the Board should have financial knowledge, has now been slightly clarified to make clear the Board should have sufficient financial knowledge, so that they are able to hold the executive to account.

• Governance Handbook - some references to compliance with the Governance Handbook have been removed, although the Governance Handbook is still explicitly referenced in the ATH 2023 as a source of guidance.

• External reviews of governance - the ATH 2022 set out that the DfE’s strong preference is that external reviews of governance are also conducted routinely as part of a wider programme of self-assessment and improvement this section has been removed from the ATH 2023. Guidance also previously set out that such reviews should consider the interaction between members and trustees. By removing this section from the ATH 2023, the expectation to undertake external governance reviews has been diluted. That said, guidance regarding external reviews still remains in the Governance Handbook and on the DfE’s website and so it is not to say that such external reviews are no longer appropriate.

• Accounting Officer – the ATH 2023 includes a new statement that the roles of the accounting officer and chief financial officer should not be occupied by the same individual (1.28) – clarifying who can undertake the roles. 

• Chief Financial Officer – the ATH 2023 now makes clear that other key financial staff, as well as the Chief Financial Officer, should undertake professional and personal development and ongoing training. Explicit references to apprentices and using the apprenticeship levy for the professional development of financial staff in the ATH 2022, have been removed from the ATH 2023.

• Governance Professional – the ATH 2023 has removed much of the detail setting out the role of the governance professional (clerk to the Board) which was included in the ATH 2022. Again, this does not mean the role has substantively changed, rather the DfE’s Governance structures and Role Descriptions guidance should be referred to for details of this role.

• Being Transparent About Your Governance – this section was previously included in Financial Requirements, but in the ATH 2023 has been moved to Roles and Responsibilities, the substance of the obligations though remain the same.

4. Main Financial Requirements

This section has a similar scope to the ATH 2022 concentrating on financial oversight, basic control principles, financial planning, procurement and spending decisions, income generation, risk management, and whistleblowing. Some structural and content changes concern: the frequency of Board meetings, the condensing of the paragraph on setting executive pay, and a new paragraph relating to Electric Vehicle (EV) salary sacrifice schemes.

5. MAIN CHANGES

• Board meetings – the Board is no longer required to provide a description in its governance statement accompanying the annual accounts, where the Board has met less than six times a year. Board meetings are though still required to take place at least three times a year but now trusts should consider whether to meet more regularly (rather than a previous obligation that they must meet regularly. Boards should therefore consider what is appropriate for their organisation.

• Scheme of delegation - this section now clarifies that where there is a change in trust management or organisational structure that would impact the effectiveness of any existing scheme of delegation, the scheme of delegation should be reviewed at the next available board meeting (2.4) as opposed to the more onerous immediately as stated in the ATH 2022.

• Basic control principles – an obligation has been added that the academy trust’s control framework must include estates safety as part of planning and overseeing capital projects.

• Financial planning – whilst the core duties of the Board relating to financial planning remain the same, a reference to the updated Charity reserves: building resilience (2023) guidance has now been added to the ATH 2023 to provide further background information.

• Setting a budget – it is now explicit that the safety of pupils and others on the school estate (2.14) forms part of managing capital assets and budgets. 

• Sending your budget to ESFA - trusts have been granted an additional month to submit their Academies budget forecast return to the ESFA. This is now due by the end of August, as opposed to the previous requirement of each July.

• Monitoring the budget – the ATH 2022 required management accounts to be shared with the chair of trustees each month and the other trustees six times a year (regardless of whether the Board met in that period). The ATH 2023 still requires the management accounts to be shared with the chair every month, but no longer requires the management accounts to be shared with the other trustees six times a year. The Board must now consider the management accounts when it meets and be assured that it has appropriate oversight of the trust’s financial position (2.19). Further, the Board is now explicitly required to take timely action (2.20) to maintain financial viability according to the ATH 2023 (in addition to the previous requirement of appropriate action).

• Financial KPIs - the obligation that a trust must select key financial performance indicators and measure its performance against them regularly (previously paragraph 2.22 in the ATH 2022) has been deleted in the ATH 2023. Trusts should refer to the Academies Accounts Direction 2022 to 2023 for requirements relating to preparing, auditing and submitting an academy trust's annual financial statements.

• Procurement and spending decisions – trusts must ensure there is propriety in their use of public funds, including in in relation to any actual or perceived conflicts of interest (2.25), rather than (as per the ATH 2022) probity in the use of such funds. There is also now a requirement that a trust’s competitive procurement procedure (previously referred to as a competitive tendering policy) is incorporated into the trust’s financial framework (2.25). 

• Buying for schools - previously, the DfE strongly recommended using the buying for schools’ website to provide trusts with better value for money. The ATH 2023 has strengthened this from a recommendation so that Trusts are now directed that they should refer to the buying for schools’ tool to help obtain value for money andapply relevant procurement regulations (2.26). 

• Setting executive pay –  the Board must still discharge its responsibilities effectively, ensuring its approach to pay and benefits is transparent, proportionate and justifiable, the explanation in the ATH 2023 though as to how the Board discharges this obligation has been condensed. The Board should refer to the DfE Guidance Setting executive salaries: guidance for academy trusts for an explanation on matters to consider when setting executive pay. 

• Publication of executive pay – references to gender pay gap reporting have been removed from the ATH 2023. Note this does not relieve trusts from publishing such information where this is required under the Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017. 

• Electric Vehicle (EV) Salary Sacrifice Scheme – a new section has been included on EV salary sacrifice schemes which clarifies that ESFA approval is not required for schemes where liability does not fall on the trust if an employee does not meet their contractual arrangements with the scheme provider. For any other type of EV salary sacrifice scheme, or if the trust is under a Notice to Improve (NtI), then prior ESFA approval is required. 

• Risk management – trusts must still maintain a risk register, but additionally they now shouldreview this frequently, with a full review at least annually (previously the requirement was for a review at least annually). 

• Risk Protection Arrangement (RPA) – the ATH 2023 now states that, as not all risks are covered under the RPA, trusts may require additional commercial insurance (2.37). This highlights that trusts need to ensure they have appropriate insurance in place for their circumstances.

• Being transparent about your governance – as noted above, this section has now moved to the Roles and Responsibilities section of the ATH 2023. 

• Provision of information to ESFA – academy trusts must still provide the ESFA with information required to meet funding arrangements. The detail though explaining the ESFA’s reasoning for such information requests has been removed along with a description of the quality and type of information needed. The ESFA’s discretion to request information has not altered.

• Information about key individuals in the trust – where there are governance changes at the trust, the ATH 2023 makes clear that as well as updating the DfE via GIAS within 14 days, they must also update their website and Companies House within this timeframe.

• Failure to provide information to DfE – the ATH 2022 included a section setting out the consequences if an academy trust failed to provide information to the DfE by a set deadline including the ESFA deducting costs from the trust and the DfE publishing names of the trust. This section has been removed from the ATH 2023.

6. Internal Scrutiny

This section still focusses on the need for academy trusts to ensure their systems are effective and compliant and that appropriate checks are conducted. Notably, some of the detail regarding the requirements of the audit and risk committee and the requirements for internal scrutiny have been condensed and, in some places, removed. 

7. MAIN CHANGES

• Approaching internal scrutiny – the headline points remain unchanged but some of the detail has been condensed removing some examples of approaches to internal scrutiny. 

• Operating the audit and risk committee – again, some of the detail regarding the operation of the committee has been deleted in the ATH 2023. For example, a previous requirement that the audit and risk committee, in trusts with multiple academies, has oversight of the financial and non-financial controls and risks at constituent academies, has been deleted.

• Delivering internal scrutiny – this section has also been shortened, but the key obligations remain largely unchanged. Previously wording stated Trusts should note that the Financial Reporting Councils Ethical Standard states that a firm providing external audit to an entity should not also provide internal audit services to it – this has been deleted from the ATH 2023. 

• External reporting and transparency – trusts are still required to submit an annual internal scrutiny report to the ESFA. The detail though regarding what should be included in the report has been removed from the ATH 2023. Academy trusts are directed to consider the ESFA’s internal scrutiny good practice guide which sets out what should be included in such reports.

8. Annual Accounts and External Audit

This section concerns how academy trusts report on their finances to give assurance to the public and Parliament in relation to the use of their funds, and includes content relating to external auditors, regularity reviews, and external audit oversight. The main obligations in this section remain unchanged. There has again been some condensing of detail where this is already covered elsewhere e.g. certain references to company law have been removed, as this can be found in the Companies Act 2006 and references to auditor’s obligations under the Financial Reporting Council’s Ethical Standard have also been removed. Moreover, details setting out the accounting officers declaration and the format of the accompanying statement have been removed as this information is covered in the ESFA’s Accounts Direction. These changes do not alter the key “musts” for academy trusts.

Accordingly, there are no significant changes to report in relation to this section in the ATH 2023.

9. Delegated Authorities

This section focuses on the financial freedoms and limits which apply to academy trusts, describing the trusts responsibilities regarding disclosure, special payments, gifts, borrowing etc. Key changes include increasing the threshold for consent for related party transactions and a relaxation of the reporting and at cost rules where transactions are with other educational providers/ state funded schools/colleges. 

10. MAIN CHANGES

• Schedule of delegated authorities – academy trusts were previously required to be familiar with this schedule, they are now required to ensure they understand and comply with the schedule of delegated authorities. 

• Novel, contentious and repercussive transactions – these must still be referred to the ESFA for approval, the ATH 2022 previously stated though that the ESFA may refer such transactions to HM Treasury for approval, this has been removed. 

• Special staff severance payments – the main obligations regarding staff severance payments have not changed. A trust must still obtain approval from the ESFA in relation to severance payments of £50,000 or more and the Academies severance payment guidance should still be followed. The ATH 2023 has removed some of the background detail from this section e.g. the table containing examples of approval requirements for statutory/non statutory and contractual/non contractual payments has been removed. 

• Compensation payment – again the main obligations regarding these payments remain the same, althougha previous obligation that trusts should consider whether compensation payments indicate concerns about the effectiveness of internal control systems and that they should take steps to correct failings have been removed. In practice Trusts would still need to consider such issues anyway as part of their estates’ safety management. 

• Managing General Annual Grant (GAG) – this section has been slightly condensed. Wording has been removed which stated that the ESFA would report to the DfE any trusts where the ESFA had serious concerns regarding long term surplus with no clear plans for use. Wording has though been added to the section on pooling GAG stressing that the ability to amalgamate and direct funds to meet improvement priorities and need across the trust’s schools can be integral to a trust’s successful operating model. There are also other additional references highlighting how pooling can be effective. Where an academy trust does pool funds, they are still required to consider the funding needs and allocations of each academy and have an appeal mechanism in place. The appeal can be escalated to the ESFA, whereas before it was escalated to the Secretary of State via the ESFA. The explanation which previously set out what the ESFA would consider as part of an appeal has been removed.     

• Related party transactions – academy trusts must still report all contracts and other agreements with related parties to the ESFA in advance of the contract/agreement commencing (or, as has been added to the ATH 2023, before being renewed). The threshold for related party transactions where ESFA prior approval is required, has increased from contracts/agreements exceeding £20,000 under the ATH 2022, to contracts/agreements which exceed £40,000 (in the same financial year ending 31 August). The increase in this threshold applies from 1 September 2023. In addition, the ATH 2023 also now makes clear that ESFA approval is not required for the supply of goods or services to an academy trust by: colleges, universities and schools which are sponsors of the academy trust nor does it apply to the supply of goods and services from state-funded schools and colleges, including academies. Note though, this concession only applies where the transaction is with that entity, not with a subsidiary of a related party of such an entity. In addition, there is also a concession that ESFA approval is not required where services are provided 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.

• Register of interests –  the section no longer refers to pecuniary interests, instead using the clearer term financial interests. 

• At cost requirements – a new paragraph has been included in the ATH 2023 to make clear that the “at cost” requirements are met where an academy trust has a college, university or school which is the sponsor of the academy trust, and that entity is providing goods/services to the academy trust. Likewise, the at cost requirement is met when an academy trust is transacting with any other state funded school (including an academy or college). Again, these exemptions do not apply if an academy trust is transacting with a subsidiary or related party of the entities above.

11. The Regulator and Intervention

This section focusses on the intervention powers of the ESFA, and more explicitly now, the DfE. The core “must” obligations remain the same in this section but with some detail being condensed regarding the role of the ESFA’s accounting officer. In addition, the ATH 2023 makes much more explicit grounds concerning governance which could lead to the issue of an Ntl, with specific examples now set out. 

12. MAIN CHANGES

• Oversight – this section highlights the role of both the ESFA and DfE in the oversight of academy trusts (previously the section focussed on the ESFA but did not separately refer to the DfE). The role of the ESFA’s accounting office is set out, but some of the detail explaining how the ESFA undertakes its role have been removed.

• Access rights – the ESFA can still conduct audits and investigations into academy trusts, with trusts providing the ESFA (and explicitly now also the DfE) with access to information, people and premises as needed. Previous drafting setting out that the ESFA may choose to conduct interviews during such audits/investigations and that the ESFA will give reasonable notice in writing for proposed audits have been removed from the ATH 2023. 

• Retention of records – a new link to guidance on Record keeping and retention information has been added to the ATH 2023.

• Intervention powers – the ATH 2023 now makes clear that intervention in the form of an Ntl may arise from concerns of the DfE, as well as the ESFA. Further, new drafting has been inserted at 6.16 setting out examples of when NtIs mat be issued on governance grounds – the examples being:

• 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 [the ATH also notes in a footnote that: The department will engage with the sector in developing its approach to intervention, including the process to be followed by the department’s Regions Group and the evidence that they will rely on to determine the strength of trustees’ oversight of educational performance.] 

13. Definitions

The defined terms list has been reduced significantly, with a number of defined terms removed from the list as they are explained in the body of the ATH 2023 (or elsewhere). 

14. Schedule of Requirements

The ATH 2022 included a “schedule of requirements” – setting out the list of requirements which academy trusts “must” meet. This section has been removed from the ATH 2023, with a “schedule of musts” now compiled in a separate excel spreadsheet. This spreadsheet abbreviates the “musts” of the ATH 2023 and can be used as a working document for trusts which they can use to keep track of their compliance with the ATH 2023. It is made clear that the spreadsheet does not need to be submitted to the ESFA.

15. Further Reading

This section updates the links to guidance referred to in the ATH 2023, as well as removing references to dated guidance/material.

16. Conclusion

We hope this note is useful in gaining an understanding of the key ways in which the ATH 2023 has been updated. Most of the changes are fairly minor and subtle and there have been no radical changes. Whilst the document is shorter, overall the further changes reflect the continuing trend of greater and more refined regulation of academy trusts. To gain a full understanding of the changes, it will be necessary to review the full detail of the ATH 2023, and this note cannot be relied upon in this regard.