UK: More Scrutiny Of Academies' Financial Management

Last Updated: 25 October 2018
Article by Tim Wrigley

The sector is under fire again. What is being done and what can you do?

Another ESFA review has raised issues about academies procurement and relationships with suppliers. Of course, the issues raised are not solely limited to academy schools, but that is the political and public focus at the moment.

From 1st April 2019 'related party transactions' will require prior authorisation from ESFA if they exceed £20,000 whether for a single or multiple transactions. Given ESFA capacity to deal with other consent matters we assume obtaining a consent could take months.

None of the publicity covers the value that related party transactions can bring to a Trust. The assumption is that any such transaction is wrong. Accordingly, think carefully about entering into any transactions. Trustees must bear in mind their legal duty to act in the best interests of the Trust, and that includes considering the reputational aspect of related party transactions.

If you do think about entering into such a transaction then manage the procurement process meticulously (see below). Ensure you can justify and evidence and perhaps even proactively publicise the benefits. After all if you can get something "at cost", or even  less than cost, that might otherwise have cost you considerably more that can be a good thing.

Auditors have highlighted poor compliance with AFH procurement and tendering requirements. This includes both initial procurement and reviewing supplier performance. Rules governing auditors means that they are under a duty to whistleblow where they suspect financial wrongdoing.  Every time you buy any goods or services the AFH and government guidance requires you to do a procurement exercise. Even for low value transactions (ESFA suggest low is under £10,000) you should:

  • set out a bidding process;
  • decide how you will assess the bids;
  • get quotes from at least 3 suppliers;
  • have at least 2 people assess all the quotes you get fairly;
  • choose the supplier that offers best value for money;
  • keep all the records of the process;
  • (remember GDPR too!).

For all significant contracts (particularly higher value, longer duration) you should be doing supplier reviews, i.e. checking supplier performance and against targets, assessing quality and value for money. These contracts will require at least benchmarking against the market from time to time and retendering on expiry.

This can be an awful lot of work, but there is no de-minimis level. If you don't do it then you can be criticised by the Auditors and ESFA. Not to mention the journalists and politicians. You must do as they say… not as they do (but that is a different story!).

Controlling executive pay is a continuing thorny issue. It appears the ESFA would like to cap executive pay, but haven't done so. Presumably they recognise that they cannot really do so without opening other cans of worms (but don't assume it will never happen).

Instead the ESFA will continue to challenge, demand justifications, and publicise senior executive pay levels. The clear message from Government is that earning a lot of money out of the public purse is "wrong". On this topic, notably less importance is given to value than the actual figure. You must be prepared to justify the numbers. Clearly the role of a headteacher of one school is not the same as the role of a CEO of a 10 or a 50 school MAT and the markets and comparators are not the same, but you need to do the benchmarking and evidence the market, the comparators and produce the justifications when challenged.

Please remember academy trust trustees' duties in relation to all these topics (and indeed every action of the academy trust!) if trustees are not acting in the best interests of the trust and particularly if they are not complying with the AFH and trust's policies and procedures they could in theory face claims for personal liability for breach of duty and causing loss to the trust.

There used to be an expectation that if a charity trustee genuinely acted in the best interest of their charity they could expect leniency from the Charity Commission and the Courts in the event that things did go wrong.  However recent scandals involving international charities, safeguarding and a change of emphasis at the Charity Commission focusing more on its enforcement role does mean that there is a higher level of expectation on the performance of trustees and particularly so where there are public funds involved whether they are volunteers or not.

The academy sector continues to be hit by public scrutiny and condemnation. The government doesn't appear to put much effort into defending the sector. It is up to you to demonstrate not only compliance, but also the value to the sector and ultimately to pupils and society at large. Shout your accomplishments from the rooftops, prove your worth.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions