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9.1.1 This guidance has been developed through the Academies Finance and

Assurance Steering Group (the Steering Group) and with the assistance of audit firms. The purpose of the Steering Group has been to ensure that both the needs of the academy sector and the needs of EFA and DfE are met in relation to accountability and transparency in the use of public funds.

9.1.2 Roles and responsibilities 9.1.3 DfE and EFA

9.1.4 The roles of DfE and EFA are set out in section 1.5 of the Academies Financial Handbook (the Handbook). DfE has ultimate responsibility and accountability for the effectiveness of the financial accountability system for academies.

9.1.5 EFA acts as the agent of the Secretary of State within the scope of the powers and discretions formally delegated to it. The Chief Executive of EFA is its

accounting officer and is responsible and accountable to Parliament for how EFA uses its funds. EFA’s accounting officer is also personally responsible for the regularity and propriety of all expenditure of its funds and for ensuring value for money.

9.1.6 To discharge these duties, EFA’s accounting officer must be satisfied that:  an academy trust has appropriate arrangements for sound governance,

financial management, securing value for money and accounting

 the way the academy trust uses public funds is consistent with the purposes for which the funds were voted by Parliament

9.1.7 EFA’s accounting officer will place reliance on the statement on regularity,

propriety and compliance made by the academy trust’s accounting officer and the reporting accountant’s assurance report on regularity.

9.1.8 The academy trust’s accounting officer

9.1.9 The role of the academy trust’s accounting officer is set out in section 1.5 of the Handbook. The Handbook states that the essence of the role is a personal responsibility for regularity, propriety and value for money.

9.1.12 Academy trust’s external auditor / reporting accountant

9.1.13 The academy trust’s reporting accountant is required to review and report on the statement on regularity, propriety and compliance. The reporting accountant must be the external auditor who is conducting the ‘true and fair’ audit of the accounts. 9.1.14 The reporting accountant must provide an assurance report on regularity

addressed jointly to the academy trust and to the Secretary of State through EFA, in accordance with section 4.2.4 of the Handbook. Further consideration is given to this in part 9.3.

9.1.15 The National Audit Office

9.1.16 The role of the National Audit Office (NAO) is set out in section 4.1.6 of the Handbook. The financial accounts of each academy trust are consolidated into EFA’s accounts, which are audited by NAO. NAO conduct a group audit in

accordance with International Standards on Auditing (UK & Ireland). As such, the reporting accountant will be required to audit the information and the academy trust must assist NAO with any enquiries they may have by way of providing information and explanations.

9.1.17 The tripartite relationship

9.1.18 To allow EFA to draw assurance from the reporting accountant’s regularity assurance report, EFA must be bound into the contract between the academy trust and the reporting accountant. Whilst the trust and their reporting accountant should continue to be party to a letter of engagement in the normal way, to avoid bureaucracy there is no expectation that the engagement letter would also be signed by EFA. Instead the terms of reference EFA has adopted as a party to the regularity engagement are set out in part 9.6.

9.1.19 Additionally, a standard paragraph [part 9.5] must be included within the letter of engagement between the academy trust and the reporting accountant that acknowledges their duty to EFA.

9.1.20 The cap for liability in respect of the regularity engagement is set within the

standard terms at £1 million per academy within each trust. Multi-academy trusts, therefore, will have a liability of £1 million multiplied by the number of academies, limited to £5 million in aggregate.

should have regard to these in assessing risk in 2015. The themes were:  lack of prior approval for finance leases (which constitute borrowing)

 no statement of assurance for connected party transactions and some of these transactions including an element of profit

 non-contractual severance payments made without the required approvals 9.1.23 There have been other occasional incidents of irregularity and impropriety which

the accounting officer and reporting accountant should be alert to, and EFA

investigation reports highlighting these have been published. The areas include:  use of public funds for personal benefit

 lack of authorisation for expenditure

 inappropriate procurement processes including breaches of the relevant thresholds within the European Union

9.1.24 Transactions with connected parties and not for profit principles

9.1.25 The Handbook (sections 3.2.1 to 3.2.11) sets out requirements relating to goods or services provided by individuals or organisations connected to the academy trust.

9.1.26 For transactions with connected parties, section 3.2.7 requires trustees to ensure that agreements to supply goods or services to the trust are subject to proper procurement, supported by a statement of assurance and are on the basis of an open book agreement.

9.1.27 These requirements apply to contracts that are agreed or renewed on or after 7 November 2013. Existing arrangements continue to apply to contracts in place prior to this date.

9.1.28 ‘At cost’ must not include an element of profit, however can include:  directly attributable materials and labour

 a proportionate share of fixed and variable overheads

9.1.29 From 1 September 2014 the Handbook granted an annual deminimis limit of £2,500 in respect of ‘at cost’ transactions.

9.1.30 For reporting accountants the focus is confirming trustees have met their obligations in respect of this requirement rather than reviewing whether the

requirements have been met they are to consider whether this is a limitation in scope.

9.1.32 In November 2014 EFA published a report on its review of related party

transactions. In the vast majority of cases, transactions were reasonable with less than 1% being irregular. The primary issue was procurement procedures not being followed. The next most common issue was conflicts of interest not being properly managed.

9.1.33 EFA has produced a proforma statement of assurance that a trust can use to ensure they are complying with the at cost principles.

9.1.34 Subsidiaries

9.1.35 Where a subsidiary is consolidated [part 8.2] into academy trust accounts the regularity assurance report will extend to this. As such the engagement terms in

part 9.6 will be for group reporting.

9.1.36 Where a subsidiary is not consolidated the only transactions in scope are distributions received and inter-company transactions.

9.1.37 Where an academy trust has passed money to the trading subsidiary the funds must be from unrestricted income as GAG is not allowed to be used for this purpose.

9.1.38 In instances where the subsidiary has not been consolidated but the reporting accountant deems the entity to be in the scope of the Handbook, due to control and influence from the academy trust trustees’, this is to be reported in the management letter.

9.1.39 Teaching schools

9.1.40 Teaching schools (a list is provided on gov.uk) receive a separate annual grant known as core funding. Funding is ring-fenced and an academy trust is required to reconcile expenses against income for the period April to March. This is sent to the National College of Teaching and Learning (NCTL) each year where activities are graded against milestones. Where assurance reporting is required by NCTL the requirement is separate to this regularity engagement and the reporting accountant should assess whether they can rely on any work previously undertaken.

in the academy trust’s accounts, including through consolidation.

9.1.43 There are a number of conditions that must be met in order to invest funding into supporting other schools, developing leadership potential and research and development. In cases where staff are being recharged to other academy trusts it is important to note that that it is not the individual who is benefiting but the

academy trust.