Academy Trust Handbook 2024

Academies
Academies Trust Handbook
Education and academies

With the new academic year now just one month away the ESFA have acted quickly in releasing the Academy Trust Handbook 2024, following the general election on 4 July. As Trusts were made aware in the Letter to Accounting Officers on 29 May the announcement of an upcoming general election resulted in the publication of the Handbook being delayed as anything “new or novel” was not permitted during a pre-election period and the new Handbook required ministerial approval.

Catherine McKinnell, MP for Newcastle Upon Tyne for the past 14 years was appointed Minister of State for School Standards at the Department for Education on 8 July 2024 having previously been the Shadow Schools Minister and just over 3 weeks into her role published the new Handbook on 31 July.

The Handbook, which comes into effect on 1 September 2024, contains minimal, but we would hope, welcome, changes. We have summarised all the changes that have been made to the Handbook below:

Finance leases

The Financial Reporting Council (FRC) have long promised changes to the FRS 102 accounting standards that academy trust accounts must comply with. One of these proposed changes will change the way leases are accounted for to move them in line with International Accounting Standards (IFRS) and will result in operating leases, which academy trusts have always been permitted to enter into, being accounted for as if they were finance leases, which have previously been prohibited in the Handbook without prior approval. Quite when these changes will take place is still yet to be confirmed but when they do this would cause issues in the academy sector where in accounting terms there is essentially no difference between finance and operating leases which would make assessing what is and isn’t allowed more difficult. In March 2024 the DfE therefore promised changes to the Handbook to make this issue simpler and they have now followed through on that promise in the 2024 Handbook.

From 1 September 2024 academy trusts do NOT need ESFA permission to enter into any of the following leases regardless of whether they constitute a finance or operating lease:

leases related to IT equipment (for example laptops, tablets, desktop computers, printers, photocopiers, servers, door entry security systems, CCTV Systems, whiteboards and touch screen boards)
leases related to telephony (for example mobile phones, landline phones and telephone systems)
leases related to catering and cleaning equipment (for example tills, water coolers, vending machines, dishwashers, washing machines, ovens, fridges, freezers, water boilers, small kitchen appliances, crockery and cutlery)
leases related to furniture (for example desks, tables and chairs)
leases related to bathroom and sanitary items (for example hand dryers, towel dispensers, sanitary bins)
leases related to gym equipment (for example treadmills, free weights and weight machines, rowing machines and exercise bikes)
leases related to groundskeeping equipment (for example lawn mowers, string trimmers, leaf blowers and salt spreaders)
leases related to LED lighting systems or to support renewable activity (for example lightbulbs, control mechanisms and control panels)
leases related to minibuses and other vehicles for the use of the school
leases related to temporary classrooms and equivalent structures (but not land leases they sit on, which may require separate consent)

In the vast majority of cases, for the purpose of whether to seek approval, Trusts will not have to assess whether a lease they are considering entering into constitutes a finance lease or an operating lease. This will ease administrative burden and offer greater flexibility to achieve the best value for money from prospective lessors. However, should a lease fall outside of these categories, it will still need to be considered whether it constitutes a finance lease or an operating lease as a finance lease outside of these categories still requires ESFA approval. If you find yourself looking at leasing any such assets please contact the Price Bailey Academy Helpdesk or your audit manager and we can assist you with the operating vs finance lease assessment. Approval is still required for operating leases on land or buildings with a term of over 7 years or granting a leasehold interest on land and buildings to any other party.

For financial statement reporting purposes, an assessment will still need to be made until the changes to FRS 102 come into force which are currently expected to be effective for accounting periods beginning on or after 1 January 2026. So for academy trusts, not until the year ended 31 August 2027.

Internal scrutiny

All trusts are required to run a programme of internal scrutiny each year be it through an in-house internal auditor, a Trustee, an independent peer review from a CFO at another academy trust or a bought in Internal Audit service from a company like Price Bailey. The new Handbook states that for Trusts who have annual revenue exceeding £50 million (which will only therefore affect very large trusts) they should deliver their internal scrutiny using a bought in internal audit service or an in-house internal auditor. From 1 September 2025 this will become a must meaning that those Trusts with revenue exceeding £50m will not be permitted to deliver their internal scrutiny through a Trustee or a peer-review.

The Handbook also clarifies that Trustees or peer-reviewers undertaking this work should have suitable qualifications relevant to the area being reviewed and that auditors should be members of a relevant professional body.

If you are not a Price Bailey external audit client and are interested in internal audit services please contact our head of education Tom Meeks ([email protected]) who can advise further on our offering.

Other changes

In the 2023 Handbook Elective Vehicle Salary Sacrifice (EVSS) schemes did not require ESFA approval where no liability falls on the trust should an employee not fulfil their contractual obligations with the scheme provider. We are aware of a small number of trusts using such schemes. Following cross-government discussions the Handbook now states that Trusts must approach the ESFA for such schemes early in the planning stage both in relation to new schemes and accepting further employees onto existing schemes.

With fraud against academy trusts becoming more common and the majority occurring as a result of cybercrime, the 2024 Handbook expands upon the must included in the 2023 Handbook which stated “Academy trusts must also be aware of the risk of cybercrime, put in place proportionate controls and take appropriate action where a cyber security incident has occurred.” to add reference to the DfE’s published guidance on cyber security stating: “Trusts should take appropriate action to meet DfE’s cyber security standards, which were developed to help them improve their resilience against cyber-attacks”. As a minimum we would expect all trusts to insist on anybody with access to its IT infrastructure to undertake the National Cyber Security Centre’s Cyber Essentials certification.

An expansion has been made to the list of examples where a Notice to Improve (NtI) may be issued on the grounds of governance to include “trustees and the executive failing to manage their school estate and maintain it in a safe working condition strategically and effectively”. If your trust does not already have an estate vision, strategy and asset management plan, this should be a priority for the coming academic year.

Clarification has been added of the need to explain in the annual Trustees’ Report a clear plan for managing reserves with the ATH wording changing from: “The board of Trustees must set a policy for holding reserves and explain it in its annual report” to “The board of Trustees must set a policy for holding reserves, and explain it in its annual report, including a clear plan for managing reserves.

A paragraph has been added to state: “Trusts should refer to the DfE’s digital and technology standards, which were developed to support trusts in making more informed decisions about technology.”

Clarification has been added to confirm that when publishing business interests on the Trust website nil returns must also be disclosed.

Price Bailey will be running a webinar in the new academic year covering these updates with a date soon to be published. If you have any questions on what the changes might mean for you and your trust please don’t hesitate to contact the Price Bailey Academy Helpdesk ([email protected]) or your Price Bailey audit manager.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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