Financial responsibilities for schools and academies
Maintained schools and academies are both bound by obligations in relation to the discharge of their financial responsibilities. For maintained schools, their obligations are largely provided for in statute and associated guidance. Academies have specific statutory obligations under the Companies Act 2006 and also separate obligations under their own individual funding agreements with the Secretary of State. If schools do not properly follow the law and / or guidance, this can leave both schools and academies open to a legal challenge and/or intervention by the Local Authority or Secretary of State.
There are also obligations under charity law – Directors of MATs have particular obligations in relation to managing financial risks. They have duties in company law and under the Academies Financial Handbook. Recently, publicity has focused on issues arising out of connected parties and conflicts of interest. The importance of this cannot be overstated – last year a Head Teacher was banned from teaching following the award of an IT contract to a friend.
A recurring theme is managing conflicts of interest and connected parties. While it is legal for boards to pay for goods and/or services to those serving on a board, it is vital that individuals should not put themselves in a position where their personal interests conflict with their duty. Boards must manage and be seen to manage any conflicts of interest which may arise and must be open and accountable. It is also essential that proper procurement processes are followed.
In all decision making, there should be a full record of decisions that have been made which would stand up to scrutiny. It is important to keep in mind that this is not limited to just the board members themselves, but it would also include their relatives or companies. This issue is arising more regularly in financial notices to improve and is gaining increasing media attention. Directors and Governors should be prepared for detailed scrutiny in this area and must be ready to demonstrate that decisions are made lawfully.