Both documents contain a number of clarifications and updated requirements, though updated rules around academy trust related party transactions will likely get a fair degree of attention in the coming months.
In short, with effect from 1 April 2019, the Academies Financial Handbook 2018 requires that:
- all related party transactions are reported to ESFA using a new online form, prior to the transaction taking place; and
- supply of goods or services from a related party that exceed £20,000 in a financial year to 31 August require prior approval from ESFA. The £20,000 threshold applies to an individual contract over that amount; a contract of any amount that brings annual spending with the related party to more than £20,000; and all contracts, of any amount, where the £20,000 threshold has already been exceeded in that year. Approval will be through ESFA’s online form.
These additional oversight and approval requirements follow criticism of the scope of related party transactions by the Public Accounts Committee earlier this year and add to existing requirements to keep and publish registers of business and pecuniary interests and for certain transactions to be ‘at cost’ and to obtain ESFA approval for novel, contentious and / or repercussive related party transactions.
The Accounts Direction for 2018 has also clarified some of the annual accounts reporting requirements in this area, with the objective of increasing transparency.
The updated Handbook also tightens the process for setting executive pay, again following negative media coverage and Public Accounts Committee criticism and recommendations earlier this year.
Hear the latest thinking on these and other changes affecting academy trusts at our Mercia Academies Update Conferences on 28 June and 6 September and at our Academies: Audit and Accounts Update sessions running in July.