The ESFA has introduced the requirement for academy trusts to declare or seek approval for related party transactions – the rule applies from 1 April 2019. This article summarises the ESFA’s guidance for academy trusts.

 

 

What needs to be declared?

 

Academy trusts must declare their intention to enter into a new agreement with a related party before confirming the transaction with their supplier – this relates to new agreements made with related parties on or after 1 April 2019.

Academy trusts don’t need to declare income transactions with related parties between April and September 2019 – this includes donations to the trust from related parties. The ESFA will review its approach for reporting income transactions before September 2019.

 

When should approval be sought?

 

Prior approval must be sought from the ESFA when:

  • A single contract or agreement with a related party exceeds £20,000.
  • A contract or agreement of any value means the total value of contracts or agreements with the same related party exceeds £20,000 in a financial year.

 

Do these rules apply to Church schools?

 

Transactions for services that can only be delivered by the diocese, which provide essential functions fundamental to the religious character and ethos of the school, are deemed as meeting the “at-cost” requirement and, therefore, need to be declared but do not require prior approval. If the conditions for seeking approval are met, a single upload of evidence relating to the payment or levy for these services is required.

 

How do trusts declare or seek approval for these transactions?

 

Academy trusts must use the related party transactions online form to declare or seek approval – trusts will need an Identity and Access Management System (IDAMS) account to use the form. All necessary information and documents must be ready before the form is completed, as it is not possible to begin a form and come back to it later. More information on completing the form can be found in section 4 of the ESFA’s guidance.

Once the form has been completed, it cannot be changed or deleted. If a mistake is made, the information has changed, or the form was submitted by mistake, the trust must use the ESFA enquiry form and state the reference number and the reason for why it needs to be removed. The ESFA aims to decide on requests for approving related party transactions within 10 working days, depending on the information and evidence provided.

 

What’s next?

 

  • To read the ESFA’s summary guidance, click here.
  • Our Academies Tendering and Procurement Policy outlines the procedures to follow during minor and major procurements, and ensures that value for money will be achieved during the tendering and procurement of goods or services.
  • You can also use our Single Academy Trust Finance Policy which includes all of the essential criteria you should meet to be compliant and to deliver detailed financial budgeting reports.
  • Our 3-Minute Read can help ensure you are up-to-date with the requirements outlined in the ‘Academies financial handbook’.

Bibliography

 

ESFA (2019) ‘Declare of seek approval for related party transactions: summary guidance’ <https://www.gov.uk/government/publications/related-party-transactions-information-for-academy-trusts/declare-or-seek-approval-for-related-party-transactions-summary-guidance> [Accessed: 25 March 2019]