Academy Finance Policy

Academy finance policy governs how academies, publicly funded independent schools in England, manage their financial resources. Unlike local authority-maintained schools, academies have greater autonomy over their budgets, which are primarily allocated based on a per-pupil funding formula.

The core of academy finance policy revolves around the Academies Financial Handbook, published by the Education and Skills Funding Agency (ESFA). This document sets out the mandatory requirements and best practice guidelines that academies must adhere to. Compliance with the Handbook is crucial for maintaining financial probity and ensuring public funds are used effectively to support educational outcomes.

Key aspects of the policy include:

• Budgeting and Financial Planning: Academies are required to develop comprehensive, multi-year budgets that align with their strategic plans. This involves forecasting income (primarily government funding) and expenditure across various categories like staffing, resources, and premises. Effective budgeting helps academies anticipate financial challenges and make informed decisions about resource allocation.
• Financial Controls and Reporting: Robust internal controls are essential to prevent fraud, error, and mismanagement. Academies must implement clear financial procedures, segregation of duties, and regular reconciliations. They are also obligated to submit detailed financial reports to the ESFA on a timely basis, providing transparency and accountability for their financial performance.
• Governance and Oversight: The academy trust board, comprising governors and trustees, bears ultimate responsibility for financial oversight. They must ensure the academy operates within its budget, complies with regulatory requirements, and makes decisions that are in the best interests of the students. The board should have individuals with relevant financial expertise to provide informed guidance.
• Procurement and Value for Money: Academies are expected to secure value for money in all their procurement activities. This involves obtaining competitive quotes, conducting due diligence on suppliers, and ensuring that purchases are aligned with the academy's needs and budget. The policy encourages collaborative procurement with other academies to leverage economies of scale.
• Related Party Transactions: Transactions involving individuals or entities connected to the academy trust (e.g., trustees, employees, or their family members) are subject to strict scrutiny. Academies must have clear procedures for identifying, disclosing, and managing related party transactions to avoid conflicts of interest and ensure fair dealings.
• Reserves and Deficits: Academies are permitted to hold reserves, but these should be justified by a clear plan for their intended use. The policy discourages excessive accumulation of reserves while emphasizing the need to maintain sufficient funds to cover unforeseen circumstances. Academies facing financial deficits must develop recovery plans and work closely with the ESFA to address the underlying issues.
• Audit and Assurance: Academies are subject to annual external audits, which provide independent assurance on the accuracy and reliability of their financial statements. The auditors assess compliance with the Academies Financial Handbook and report any significant weaknesses in internal controls or financial management.

Ultimately, academy finance policy aims to empower academies to manage their resources effectively and efficiently, enabling them to provide high-quality education for their students. By adhering to the principles of transparency, accountability, and sound financial management, academies can build public trust and ensure their long-term sustainability.