The Hallmarks of Good Governance in Academy Trusts – Part 4

A series of posts examining what good governance in an academy trust looks like and how boards can create a framework to deliver their core purpose and properly discharge their duties. In part 3 we looked at Stewardship of Finance and Resources. In this final part 4 we examine..

How to get governance right from the outset

The Department of Education’s view is that effective governance requires the following key ingredients:

  • The right people with the necessary skills, time and commitment, and sufficient diversity of perspectives to ensure internal challenge, all actively contributing in line with clearly defined roles and responsibilities under an effective chair and an explicit code of conduct, and with active succession planning
  • Clear governance structures and documentation with tightly defined remits, particularly in relation to functions delegated to committees or other bodies
  • Clear separation between the strategic and operational in terms of the role of the board and the school management
  • A positive relationship between the board and its school management enabling robust constructive challenge on the basis of a good understanding of objective data, particularly on pupil progress, staff performance and finances
  • The support and advice of an independent and professional company secretary
  • Robust processes for financial and business planning and oversight and effective controls for compliance, propriety and value for money
  • Processes for regular self-evaluation, review and improvement including; skills audits, training and development plans, and independent external reviews as necessary.

“Governors and trustees are engaged and energetic non-executive leaders who are driven by their core strategic functions of setting the vision, holding the Headteacher to account or results and making sure money is well spent; they sit on boards no bigger than they have to be; are curious about what’s going on in the classroom and aren’t afraid to innovate; they focus ruthlessly on what really matters: raising standards”  – Schools Minister, Lord Nash, 2013

Ensuring continuous improvement

Achieving high standards of governance and accountability requires sustained effort and resources – it isn’t easy. With all aspects of good governance, the effectiveness ultimately depends on the skills, knowledge and behaviour of those responsible for operating the system. The board must set the desired values, ensure they are communicated, incentivise the desired behaviours, and sanction inappropriate behaviour. Academy Trust boards can benefit greatly from an external review of their governance structures and/or an independent review of their board’s effectiveness. In response to the growing need for improvements, Elderflower Legal has developed fixed price review packages which can be delivered quickly, confidentially and with the minimum of fuss to help trustees and school leaders get a picture of how they are performing and what areas of practice need to improve. You can find out more about our review packages here.

Final thoughts

One of the difficulties in embedding sound practice is a current lack of clarity about who is responsible in academy trusts for setting up the framework for sound governance and embedding good practice.  CEOs and Executive Principals may not be the best people to lead on this – they are tasked with driving the organisation forward and taking measured risks. Similarly Finance Directors and School Business Managers may be too immersed in the day to day operations and short of time to take an overview of governance. The best person to implement your system is trained governance professional, such as an ICSA-qualified chartered secretary. They have the necessary experience and rigorous qualifications beyond financial and legal aspects to make things happen and help you succeed. Chartered secretaries can work for your trust on an outsourced or employed basis, depending on your budget.

A sound system of governance isn’t a ‘nice to have’, an exercise in box-ticking compliance or even a brake on progress: it is an essential foundation stone on which the whole institution is built. Get it right and it can be enabling and empowering: get it wrong and the academy trust’s whole purpose and even its survival may be compromised.

If you have enjoyed these posts, we have compiled the series “The Hallmarks of Good Governance in Academy Trusts” into a FREE downloadable Special Report.  The report can be downloaded here.

Mark Johnson is a highly experienced independent solicitor & chartered secretary supporting academy trusts, free schools & other education providers with their governance arrangements, legal and compliance matters. He is an independent member of a MAT audit committee. He offers a cost-effective governance review GovernanceCHECK360™ for academy trusts

If you enjoyed reading this series of posts on Good Governance in Academy Trusts and would like to be kept up to date on similar topics like this, then why not sign up to receive our regular newsletter.

The Hallmarks of Good Governance in Academy Trusts – Part 3

This series of posts examines what good governance in academy trusts looks like and how boards can create a framework to deliver their core purpose and properly discharge their duties. In Part 2, we examined the framework of governance in academy trusts. In this Part 3, we examine….

Stewardship of finance and resources

The academy trust board is responsible for the proper stewardship of trust funds, including regularity and propriety, and for ensuring economy, efficiency and effectiveness in their use. The Financial Handbook states “The board of trustees has wide discretion over its use of the trust’s funds, which it must discharge reasonably and in a way that commands broad public support”. This is hinting at the reputational risk of expenditure which could be perceived as inappropriate.

Further, the governing body has a responsibility, under the Academies Financial Handbook, to appoint an Accounting Officer, normally the headteacher or CEO, who has specific responsibilities for financial matters. This role includes a personal responsibility to Parliament, and to the Secretary of State, for the financial resources under the trust’s control.

The Accounting Officer must take personal responsibility (which must not be delegated) for assuring the board that there is compliance with the Financial Handbook and the Funding Agreement. The Accounting Officer must advise the board in writing if, at any time, in his or her opinion, any action or policy under consideration by them is incompatible with the terms of the Articles, Funding Agreement or the Financial Handbook.

Trustees have a number of legal duties that must be met in relation to accounting and financial reporting. These include:

  • keeping ‘sufficient’ accounting records to explain all transactions and show the trust’s financial position
  • preparing an annual report and statutory accounts meeting legal requirements, including the EFA’s Accounts Direction (updated annually) and the Statement of Recommended Practice (SoRP) for charity accounts.
  • considering the need for a reserves policy, managing the level of reserves held and the disclosure of any reserves policy in the Trustees’ Annual Report
  • formally approving the Trustees’ Annual Report and accounts at a minuted board meeting
  • ensuring that accounts are subjected to an external audit
  • ensuring that the Trustees’ Annual Report, accounts and annual return are filed on time with the EFA and Companies House.

Financial information should be provided at each trustee meeting which include details of the academy trust’s financial position and performance. The financial information should be sent to each trustee before each meeting and will typically include:

  • the latest management accounts
  • a comparison of budget to actual figures
  • an explanation for variances between forecasts and what actually happened
  • details of cash flow and closing bank balances

The meeting should set aside a specific time within the agenda for discuss of financial matters and allow the trustees to raise any issues of concern.

Systems of internal control

The Funding Agreement contains a range of obligations in relation to accounting and financial records. There is a general obligation to comply with the requirements of the Financial Handbook published from time to time.

The trust’s internal control framework must include arrangements for:

  • co-ordinating the planning and budgeting processes
  • applying discipline in financial management, including managing banking, debt and cash flow, with appropriate segregation of duties
  • preparation of monthly budget monitoring reports
  • ensuring that delegated financial authorities are respected
  • effective planning and oversight of any capital projects
  • the management and oversight of assets
  • the propriety and regularity of financial transactions
  • reducing the risk of fraud and theft
  • ensuring efficiency and value for money in the organisation’s activities
  • a process for independent checking of financial controls, systems, transactions and risks

Executive management and the trust’s staff are responsible for ensuring that the controls put in place by the trustees are implemented. There should be a culture of control embedded in the operations of the organisation; this culture is created by the trustees and senior management, who should lead by example in adhering to the trust’s internal financial controls and good practice.

All academy trusts are now required to include a statement about their governance arrangements in their annual report and accounts and to publish details on their website. New trusts are also required to complete an EFA online financial management and governance self-assessment within 4 months of opening. This includes questions such as:

  1. Has a named individual been designated as the accounting officer and does this person fully understand the duties and responsibilities of the role?
  2. Does the accounting officer, under the guidance of the board, ensure appropriate oversight of financial transactions by having all the trust’s property under the control of the trustees, measures in place to prevent losses or misuse; having bank accounts, financial systems and financial records operated by more than one person; keeping and maintaining full and accurate accounting records; and preparing accruals accounts, giving a true and fair view of the trust’s use of resources, in accordance with existing accounting standards?
  3. Do the board and appropriate committees meet at least three times per year and conduct business only when meetings are quorate?
  4. Does the board receive and consider information about the financial performance of the trust at least three times a year?
  5. Has a chief financial officer, with appropriate qualifications and/or experience, been appointed by the board?
  6. Has the board approved a written scheme of delegation of financial powers that maintains robust internal control arrangements?
  7. Has the board approved a balanced budget for the financial year and has the approval been minuted?
  8. Has the board been made aware of the requirement to obtain approval from EFA where it is considering borrowing funds or entering into liabilities such as leases or tenancies beyond delegated limits?
  9. Has an appropriate internal control framework been established?
  10. Has a contingency and business continuity plan been prepared?
  11. Have the risks arising from your operations been assessed?
  12. Has adequate insurance cover been obtained?
  13. Has the board been informed of the requirement to obtain approval from EFA before making any novel or contentious payments?
  14. Have all trustees completed the register of business and outside interests?
  15. Has the academy trust published on its website the relevant business and pecuniary interests of trustees and members?
  16. Are there measures in place to manage any conflicts of interest?
  17. Has the board approved a competitive tendering policy?
  18. Do senior officers’ payroll arrangements meet tax obligations fully?
  19. Has the board been informed that goods or services provided by individuals or organisations connected to the trust must be provided at ‘no more than cost’, on the basis of an open book agreement and supported by statements of assurance, in accordance with the conditions set out in the Handbook?
  20. Has a set of accounting policies been approved?
  21. Has an external auditor been appointed?
  22. Has an audit committee or a committee that fulfils the functions of an audit committee been established?
  23. Has a process for independent checking of financial controls been implemented?
  24. Has an appropriate committee agreed a programme to address the risks to financial control?
  25. Has the board been informed of the requirement to report to EFA any instances of fraud or theft: above £5,000 against the trust whether by employees, trustees or third parties; or where fraud is unusual or systematic in nature? Full details must be provided in the commentary section where any such fraud or theft has occurred.

EFA Chief Executive Peter Lauener set out further key questions which accounting officers and trustees must be able to answer on an ongoing basis in a letter dated June 2013:

  • Are you confident you are procuring all goods and services in an open and transparent way?
  • Are you ensuring that your cashflow reflects the activity at the trust and that it is properly reconciled at least monthly?
  • Do you have robust controls for payroll arrangements – particularly important in a multi-academy trust – including checks that any amounts paid out are the right amounts and paid to bona fide employees?
  • Do you have appropriate segregation of responsibility in your finance section (i.e. cross-checks and approvals)? And are you providing proper management support to your finance staff to operate in a role where they are well-placed to provide you with a “first line of defence” in terms up upholding propriety, regularity and value for money in the use of public funds?
  • Are you making sure conflicts of interest are avoided and that you are keeping registers of interest up to date?
  • Are you confident senior staff and trustees are not gaining any private or personal commercial or financial benefit as a result of their position, other of course than under their contract of employment?
  • Are you sure that your academy trust is not being exploited for personal/private benefit and that any fees for consultancy work are where appropriate being properly accrued to the academy trust rather than to individuals?
  • Do you have robust procedures for the recording, documenting, evidencing and monitoring of information and especially the reasons for entering into major spending commitments?
  • Do you have properly constituted arrangements for internal audit to give you and trustees a further safeguard that everything is in order?

Combating Fraud

To reduce the risk of fraud, academy trusts are recommended to consider the following actions:

  • ensure anti-fraud and whistleblowing policies are in place and regularly update these and communicate them to staff
  • conduct regular anti-fraud awareness training events for finance staff
  • highlight to staff that they can also contact theEFA with any concerns of possible irregularity or fraud (the EFA publishes financial management and governance reviews on its website)
  • management communications to pursue identified incidents of fraud
  • ensure financial controls are regularly assessed and are well designed and implemented
  • ensure that there is appropriate segregation of duties in your controls
  • review your processes for references and background checks on new employees
  • scrutinise significant business transactions and personal relationships to avoid possible conflicts of interest
  • install a physical security system to protect the trust’s assets

The most common abuses identified by auditors were set out in a National Audit Office report of 2015:

  • misuse of funds by headteachers using academy funds for personal gain
  • inappropriate expense claims for both staff and trustees and unjustified salary increases
  • transactions in breach of the Academies Financial Handbook and not in line with Parliamentary intentions
  • poor oversight of activities of individual schools in a group, or weak controls at the trust level
  • weaknesses in procurement (that is, non-compliance with EU procurement rules, and employment or contracting with related parties, or both)
  • Related-party transactions (that is, whether they have been entered into on an arms-length basis and are in line with the new ‘at cost’ requirement.

The EFA publishes regular reports of investigations it has carried out into financial mismanagement and governance issues on its website.

Next time – How to get your governance right from the outset.

Mark Johnson is a highly experienced independent solicitor & chartered secretary supporting academy trusts, free schools & other education providers with their governance arrangements, legal and compliance matters. He is an independent member of a MAT audit committee. He offers a cost-effective governance review GovernanceCHECK360™ for academy trusts

If you would like to be kept up to date on more topics like this, then why not sign up to receive our regular newsletter.

The Hallmarks of Good Governance in Academy Trusts – Part 2

This series of posts examines what good governance in academy trusts looks like and how boards can create a framework to deliver their core purpose and properly discharge their duties. In Part 1, we examined the importance of governance and the role of the Board of an academy trust. In this Part 2 we examine..

The framework for good governance in academy trusts

There are now a wide variety of structures used for academy trusts. All Academies are established as independent companies limited by guarantee with exempt charitable status. The following are the usual key players in the structure (see Figure 1):


Members are akin to the shareholders of the company. They have ultimate control over the academy trust, with the ability to appoint or dismiss some or all of the trustees and the right to amend the trust’s articles of association (subject to approval by the Secretary of State). Unfortunately, in many cases the members are often the same people who sit on the board as trustees. This weakens accountability since there is a danger of creating a self-serving oligarchy. Alive to this risk, the Department now recommends that there are at least 5 members, the majority of whom are not trustees. Employees of the trust cannot be members. In most current structures the role of the members is very muted. The members will meet perhaps once a year to approve the accounts and re-appoint auditors. A truly mature model would allow parents, and even pupils, to exercise the full rights of members. For example, the Cooperative Academy model articles provide for pupils, parents, staff, community and alumni to all become members. In theory, they could exercise their powers to dismiss individual directors, or the whole board. For more on the rights of members see here. The Trust must notify the EFA of the appointment of any new members within 14 days.


Persons appointed to sit on the board of the academy trust are both company directors and charity trustees. They are responsible for the operation of the trust. They set the strategic direction and are accountable for finance and academic standards. The trustees have duties under charity law to ensure that the academy complies with its governing document and the law, to take reasonable care that the trust is managed efficiently and effectively, and to ensure that resources are used appropriately and protected for the benefit of the charity. They have duties under Company Law to act in the best interests of the company, to avoid conflicts of interest and to perform their duties diligently, as well as wider duties under the general law for the management and safety of premises, safeguarding, data protection, non-discrimination and under employment law. They also have specific contractual duties to the Secretary of State under the Funding Agreement, such as providing information to the Department, providing places to pupils with SEN, providing free school meals and compliance with the Admissions Code, as well as adhering to the Academies Financial Handbook. Trusts must notify the EFA of the appointment of any new trustee within 14 days. The board may establish sub-committees to manage particular strands of its work, such as finance and risk, audit and internal controls, premises and nominations (recruitment & succession planning), curriculum and pastoral care.


Sometimes there may be one or more external sponsor, which could be another high-performing school, a charity, university, commercial organisation or faith organisation. The sponsor may have a right to appoint members and sometimes trustees, which gives them a degree of influence or control. Usually some form of agreement will be in place with the sponsor setting out the scope of their involvement and the terms on which they may receive start-up grant funding. The Department may insist on a ‘tripartite agreement’ which regulates the sponsor’s ability to charge for services only ‘at cost’.

Secretary of State

Despite the rhetoric about academies enjoying a high degree of autonomy, the Secretary of State (through the Education Funding Agency) enjoys very significant controls over academy trust’s freedom of action: firstly, through the Funding Agreement, which provides a wide range of contractual rights for the Department; and secondly, in its capacity as ‘principal regulator’ of an academy’s trust’s compliance with charity law (functions having been asssigned to her under a Memorandum of Understanding with the Charity Commission).

Local Governing Bodies

The role and powers of a local governing body depend on the precise local arrangements. A multi academy trust which runs several schools may devolve powers and functions to a local governing body based on ‘earned autonomy’ (i.e. better performing schools are able to take more decisions locally, whereas others may be purely ‘advisory bodies’). The details about precisely which functions have been delegated by the trust board should be contained in a clear Scheme of Delegation. Local governing bodies may operate as sub-committees of the Board. Key decisions on big ticket issues such as setting vision, policies, governance procedures, contracts and procurement, health and safety, HR matters, the budget and staffing structures usually sit with trustees at the trust board level. There is discretion over whether the local governing body should have any role in:

  • determining the individual school’s vision ethos and direction
  • recruitment of the Headteacher
  • performance management of Headteacher
  • delegated responsibility for the budget

The Local Governing Body may have delegated authority in relation to:

  • recruitment and performance management of staff, other than the local headteacher
  • monitoring of teaching standards
  • admissions and exclusions
  • Appeals Panels
  • term and holiday dates
  • reporting to parents

The trust board will usually reserve the right to suspend delegation and intervene in the event of falling standards or a serious risk to welfare of children.

Academies Governance Framework

The Department is now considering allowing trusts to either scrap local governing bodies or give them powers to oversee more than one school, with a less prescriptive requirement that the governance of each school should be ‘informed by local intelligence’. This should help remove possible confusion between accountability of local heads and managers to the overall CEO and executive management vs. accountability to local governing bodies. It is important to remember that, even where trustees have given delegated authority for certain functions to local governors or sub-committees, the trustee board as whole remain accountable and responsible for these functions. The ‘buck always stops’ with the board of trustees. It is important that the trust board receives written reports and minutes from sub-committees and local governing body meetings so they have ‘eyes and ears’ on what is happening across the organisation. As the academy trust grows to take in more schools, so the complexity and risk grows: systems and roles may need to evolve. Leaders need to be aware of the organisation’s capabilities and capacity to grow. DfE research (2015) has shown that the key pinch points usually occur when the grouping reaches 5 schools, 11 schools and then 20 schools.

You can read more detail about the governance arrangements and legal duties of trustees of an academy trust in our concise guide.

Getting the documentation right

The main documentation needed to set up the governance framework for an academy trust will include:

  • Articles of Association (largely in the form prescribed by the Department with little flexibility to change)
  • Funding Agreement(s) with Secretary of State
  • Tripartite Agreement with Sponsor and SoS, Letter of Grant, where applicable
  • Standing Orders & Financial Regulations, including Tendering and Procurement Policy
  • Schedule of Reserved Matters for the Board
  • Scheme of Delegation
  • Company Registers (Members, Directors, Secretary, Persons with Significant Control)
  • Minute Books
  • Board Code of Conduct
  • Statutory Policies (e.g. Charging, Behaviour, Sex Education, SEN, Data Protection, Complaints, Health & Safety)
  • Terms of Reference for Board Committees, such as Audit, Finance, Premises and Nominations.
  • Register of Business, Outside Interests & Family connections – which covers members, trustees, local governors and senior leadership team and must be published on the trust’s website
  • Conflicts of Interest Policy
  • Board Induction, Training and Evaluation Procedures
  • Vision, Mission and Values statement
  • Strategy Document (see more)
  • School Development Plan, including defined KPIs to monitor and measure progress, for example on pupil attainment, quality of teaching, pupil wellbeing, staff morale, effectiveness of communication, future aspirations of pupils.
  • (Balanced) Budget
  • Risk Register (see more)
  • Business Continuity Plan
  • Appropriate Insurance Covers
  • External auditor appointment letter (setting out their responsibilities)

As the trust grows, there will inevitably be a need for more sophisticated and standardised processes for governance and oversight, including systems for reporting and analysing performance data, financial planning and control, management, HR, teaching and learning methods.

Next time: we look at stewardship of finances and resources.

Mark Johnson is a highly experienced independent solicitor & chartered secretary supporting academy trusts, free schools & other education providers with their governance arrangements, legal and compliance matters. He is an independent member of a MAT audit committee. He offers a cost-effective governance review GovernanceCHECK360™ for academy trusts

If you would like to be kept up to date on more topics like this, then why not sign up to receive our regular newsletter.