Changes to the Academies Financial Handbook 2020
What you need to know
The newly published Academies Financial Handbook (AFH) 2020 will take effect from 1 September 2020. Here are the main changes of which you should be aware.
- The need for trustees to ensure that their trust is maintained as a going concern is emphasised more than once. This is highlighting the need for trustees as a whole and the finance committee in particular to ensure that their scrutiny and oversight of trust finances is strong. Going concern status needs to be closely assessed more than ever in the current climate and is something in which auditors will be very interested.
- There is explicit confirmation that employees of the trust must not be members of the trust. If this remains the case, you have until 28 February 2021 to change this.
- Members are also reminded of their duty to stay informed about trust business.
- The board must appoint a clerk, and the board must ensure that its register of interests is kept up to date at all times.
- The accounting officer and chief financial officer, where applicable, must both be employees of the trust.
- Larger trusts (for example those with over 3000 pupils) are encouraged to consider the need for relevant accountancy qualifications for their CFOs. The CFOs must keep up their Continuing Professional Development (CPD).
General controls and transparency
- There is now an explicit requirement (a “must”) to maintain a fixed asset register
- The trustees’ involvement in setting the budget is discussed – with a key area being a strong focus and challenge on projected pupil numbers, which are a key driver of income projections. These should be reviewed on a term by term basis.
- Boards are encouraged to take an integrated approach to curriculum and financial planning. This is to help deliver the best possible curriculum with the available funds and ensure educational priorities are met.
- Bank balances must be strongly managed to ensure that no account slips into overdraft. This would be a breach of borrowing restrictions.
- There is a new disclosure requirement for high paid employees. The trust must publish on its website (not just in its accounts) the number of employees whose pay and benefits (excluding pension) exceeds £100k, in £10k bands.
- Trusts must have whistleblowing procedures. These must be agreed by the trustees and must be published on the trust’s website.
- Trust funds must not be used to purchase alcohol for consumption except for use in religious services.
- There is increased emphasis on risk management, with focus on the maintenance and regular review of (and input into) the risk register. The trust must also have a fully functioning audit and risk committee, which may be combined with, for example, the finance committee. The committee is also responsible for overseeing the internal scrutiny work.
- The School Resource Management Self-Assessment Tool must be completed and submitted to the Education and Skills Funding Agency (ESFA) each year.
- It has been clarified that the work should cover both financial and non-financial controls and risk management. Where specialist knowledge is needed for the non-financial aspects of the work, trusts are able to call on others to provide such specialisms.
- Following a change to the ethical standards governing accountants, it is no longer possible for your external auditor to also provide internal audit services to the trust.
- 2020 will also be the first year that an annual summary report of the internal scrutiny throughout the year must be provided to the ESFA, alongside the annual accounts.
- The role of the audit and risk committee in the external review process has been given some detailed guidance, and is mandatory. An active role in reviewing the audit plan, the accounts and the audit findings letter is detailed.
- The committee is also advised of their need to consider closely the effectiveness and resources of their auditor to ensure that they are fit for purpose. They must then provide the board of trustees and members with a report of their findings and conclusions regarding the appointment / need to dismiss and retender the auditor.