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Financial Accounts

Legally, academy trusts are companies limited by guarantee and, under the terms of the Academies 2010, exempt charities.  Academy governors, therefore, are subject to the duties and responsibilities of the charitable trustees and company directors.  Academy governors have wide discretion over their use of the academy’s funds but are responsible for the proper stewardship of those funds and for ensuring economy, efficiency and effectiveness in their use – the three key elements of value for money.

Governors must ensure they use their discretion reasonably taking into account any and all relevant guidance on accountability or propriety as detailed in the Governors Handbook. Governors should therefore also be aware of the Charity Commission’s guidance for academies in ‘Academy Schools: Guidance on their regulations as charities’ and two guidance notes, which are relevant for academy governors.  These guidance notes are‘CC3 – The Essential Trustee: What you need to know’ and ‘CC8 – Internal Financial Controls for Charities’ .

Governors should also be aware of the statutory duties of company directors, which are set out in the Companies Act 2006 and include the duties to:

  • exercise their powers only for a proper purpose;
  • promote the company’s success;
  • exercise independent judgement;
  • exercise reasonable care, skill and diligence; and
  • avoid conflicts of interest.

Academy trusts must appoint a senior executive (usually the Principal) as Accounting Officer who will carry an overriding and personal responsibility for the proper stewardship of public funds, including the securing of propriety, regularity and value for money.  Academy trusts are required to establish an audit committee, or otherwise have a committee which will discharge the responsibilities of an audit committee.  Because academies have been designated as part of central government, they need also participate in annual exercises to consolidate their accounts with those of the Department for Education.

Financial requirements on academy trusts are set out in the Education Funding Agency’s (EFA) ‘Academies Financial Handbook’ and in their funding agreement.  Academies and their auditors should also read the‘Academies Accounts Direction’ when preparing and auditing annual reports and financial statements.