The Academies Financial Handbook sets out the financial management, control and reporting requirements that apply to academy trusts. It describes a financial framework for trusts that focuses on principles rather than detailed guidance and reflects their accountability to Parliament and to the public.
The handbook also describes the freedoms that trusts can exercise in their day-to-day business, the delegated financial authority levels that the Secretary of State for Education has given to them and the circumstances where trusts must seek the Secretary of State’s consent.
Compliance with the handbook is a condition of each trust’s funding agreement. The 2016 edition of the handbook comes into effect on 1 September 2016.
Trading with connected parties
Section 3.2 of the handbook sets out the principles academy trusts must adopt when trading with connected parties. Additional guidance on charging for overheads is below:
Overhead charges should be proportionate to the amount of work the supplier is doing for the trust. For example, if 10% of the connected supplier’s activity is for the trust, then that trust should pick up no more than 10% of the supplier’s total overheads. However, if at the end of the academy financial year, the charges for overheads recouped by the supplier exceed the total the supplier paid for overheads, the supplier should reduce the charges to the trust in the next academy financial year. This will ensure:
- that the trust is complying fully with the ’not for profit’ principles set out in the handbook by paying no more than the proportionate sum for the services received
- that the supplier is not drawing inadvertent profits
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