UK: 2015 Academies Financial Handbook

Last Updated: 28 September 2015
Article by Allan Hickie

The Academies Financial Handbook (AFH) 2015, effective from 1 September 2015, was published by the Education Funding Agency (EFA) on 22 July 2015. The latest edition carries far fewer changes than we have seen in recent revisions, but nevertheless there are some important changes that you will need to be aware of.

Lord Nash's foreword talks about change, and evolvement of the handbook from the early, highly prescriptive versions. He also emphasises the need for academy boards to keep all aspects of their operations under review to ensure that public funds are spent efficiently, and for them to continually strive to improve governance.

The AFH lists out the key changes, which are largely in relation to governance. We have summarised below along with our comments on what the changes may mean to you and your school:


  • Academy trusts must not have de facto trustees or shadow directors. De facto trustees are defined in appendix 1 of the Charities SORP 2015 as "a person who has not been validly appointed as a trustee but is acting as a trustee of the charity and is exercising the functions that could only be properly discharged by a trustee." The definition of a shadow director under company law is similar.

UHY commentary:

This is particularly relevant to academy trusts because of the confusion over the terms and roles of trustee, director and governor. We still come across some single academy trusts which have not appointed all of their governors onto the board of directors, effectively operating a split tier of governance. If these governors are attending meetings and carry out the same duties as their colleagues who are officially directors, they would be seen to be de facto trustees and/or shadow directors.

  • A Financial Notice to Improve (FNtI) may be issued due to governance concerns as well as financial concerns.

UHY commentary:

The EFA will raise a FNtI where they believe governance and management is inadequate, and this can include weak oversight, control or direction by trustees, poor internal scrutiny and challenge, and breaches of the duties, principles and requirements governing connected party relationships. It is therefore vital that you are able to demonstrate strong governance in all areas, and document decision making by keeping accurate and detailed minutes.

  • The EFA have emphasised that accounting officers must adhere to 'The seven principles of public life'. These are accountability, selflessness, integrity, objectivity, openness, honesty and leadership.

UHY commentary:

The EFA summary actually contains an error, referring to section 1.5.24 of the AFH when it should say 1.5.23.

  • Medium-sized and larger trusts, and any undergoing a period of change, should consider more frequent board meetings than are required under their articles (2.1.3).
  • Trusts must publish on their websites up-to-date details of their governance arrangements in a readily accessible form. The AFH goes on to say that this must include things like the structure and remit of the members, the trustees and the committees, dates of appointment, relevant business interests and trustees' meeting attendance records. The full list is set out in 2.5.2 of the AFH.

UHY commentary:

Much of this information is available in the year end financial statements, once these have been published and made available on the website. However, the AFH now seems to suggest that changes such as trustee appointment dates need to be disclosed more promptly than this. Our view is that this is unrealistic, it should be sufficient for trusts to maintain a current list of trustees on their website. The most interesting element of this section is that the trust must publish information on each local governor serving on individual school's local governing bodies, so the requirement is not restricted to trustees of the trust. For large multi-academy trusts with over 50 academies this should be an interesting exercise!

  • Following on from the above point, trusts must publish relevant business and pecuniary interests of local governors on their website.
  • The EFA have clarified that the register of interests must also identify close family relationships between members or trustees, and between members or trustees and the trust's employees.

UHY commentary:

The key here is that the requirement is to identify these relationships. There is no strict requirement to include the interests of other individuals in the register of interests, however, this should be considered. Our view and interpretation of the rules is that it is preferable to include these on the internal register of interests, in the interests of transparency, and to make this available to all finance staff.

The requirement to publish 'relevant' business and pecuniary interests of members, trustees and local governors on the website remains unchanged, and there continues to be discretion over the publication of interests of other individuals including child, parent, spouse etc. The definition of 'relevant' also remains unchanged – this includes involvement in other education institutions as well as commercial business interests.

  • A reminder that trusts must notify the EFA of the appointment of members or trustees.

UHY commentary:

This is not new, but it is easy for academies to overlook this requirement in addition to the need to notify Companies House. Trusts should notify the EFA, through the Information Exchange, of all appointments of trustees and members within 14 days of the change.

Additionally, whenever a key position such as the Chair, Accounting Officer or Chief Financial Officer is vacated or filled, the EFA needs to be notified.


  • The AFH comments on the removal of the separate value for money statement.

UHY commentary:

This is not a new announcement, since this was explained earlier in the year in the Academies Accounts Direction 2014-2015, with the Value for Money (VFM) Statement now incorporated into the Governance Statement within the Annual Report and Accounts. This does mean that trusts may need to prepare the VFM statement a little earlier this year, since it will need to be ready for inclusion in the accounts which are typically approved towards the end of November or early December. Although the auditors are still not required to sign off the VFM statement, since it is now within the financial statements, they will be obliged to read it and ensure that there are no material inconsistencies within it.

  • The requirements relating to budget monitoring have been simplified slightly.The old AFH required the "preparation of timely monthly management accounts, including income and expenditure reports on an accruals basis, cash flow forecasts and balance sheets as appropriate", whereas the latest AFH only lists the "preparation of monthly budget monitoring reports" as a required element of the internal control framework.

UHY commentary:

This is interesting because the old version of the AFH, actually requires more than the new version. There has been a relaxation of the strict requirements of completing monthly management accounts, which has been a point of contention in the past for many of our academy clients, who will welcome this move. Perhaps the EFA have finally realised that the vast majority of academy trusts, and in particular single academies and primary schools, just do not have the time, or financial expertise, to commit to producing such detailed documents each month.

We too welcome the flexibility the new wording brings, but with a word of caution. Management accounts are an important management tool, and with increasing pressures on academy budgets it is vital that trustees have as much financial information at your disposal as you can get.

Cash flow forecasts may be particularly important as reserves are extinguished. If you are perhaps not used to worrying about cash flow you may suddenly find that you have to be more prudent with your financial planning, 'juggling' supplier payments and using credit control to ensure income is received promptly.

Despite the relaxation, the preparation of regular management accounts would be seen as good practice and an excellent way for trustees to demonstrate strong governance.

  • Delegated limits for trusts, to write-off debts or enter into liabilities, is subject to a ceiling of £250,000.

UHY commentary:

This ceiling is actually very high, and it would be unusual for a trust to have to consider writing off a debt of anything approaching this level. We think it would be interesting to see the EFA's response to a large write off because whilst bad debts can occur this could be an indicator of bad governance or financial control, and this would be a serious loss of public funds.

  • Academy trusts' delegated authorities to take up a leasehold or tenancy agreement on land and buildings have been extended.


  • In a big change, only academy trusts with an annual income in excess of £50 million will now be required to have a dedicated audit committee.

UHY commentary:

The previous requirement to have a dedicated audit committee applied to trusts with an income of over £10 million or capitalised asset values of over £30 million regardless of size, and to all multi-academy trusts, so this is a substantial relaxation in the rules.

It will be interesting to see whether small trusts which have established a separate audit committee, but which no longer need one, choose to continue with it or opt to merge it with their finance committee.

Please remember that staff employed by the trust should not be members of an audit committee, although they may attend to provide information and participate in discussions. Therefore, if you opt for a combined finance and audit committee, staff should not participate as members when audit matters are discussed. It is important that the minutes of the meeting reflect this, and we recommend that you consider separating the meeting and the minutes into two distinct sections. It is perfectly okay for staff - such as the Headteacher or Finance Officer - to remain in attendance to provide information and participate in discussions, indeed they would be expected to attend to provide information. Do also remember to ensure that the committee's terms of reference adequately cover the audit responsibilities in addition to the usual terms for the finance committee.


As in the past, the EFA has provided useful annexes in the AFH which are well worth reading and circulating to all officers of your trust. The annexes are: Annex B – Schedule of freedoms and delegations; Annex C – Schedule of requirements (the 'musts'); and Annex D – Further sources of information.


The AFH 2015 can be downloaded at:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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