Blogs/Vlogs

Increased scrutiny for academies over executive pay

20 December 2017

A new requirement has been included in the Academies Financial Handbook 2017 which suggests that executive pay within academies is set to be open to increased scrutiny.

Trustees are urged to ensure that salary setting follows a robust process, with the individual’s salary reflective of the roles and responsibilities they hold.

To this end, evidence of the rationale behind executive pay is now required by the Chief Executive of the Education and Skills Funding Agency (ESFA), who has recently written to academy trusts that have only one academy and pay a salary in excess of £150k.

The letter makes reference to the recent high-profile scrutiny of tax payer-funded executive salaries, emphasising the need for trusts to “ensure value for money and that salary payments are transparent, proportionate, reasonable and justifiable”, and highlighting the ESFA’s responsibility to advocate accountability and best practice.

Trusts are asked in the letter to provide information on the rationale for the level of pay that was set and the due process followed, including details of the level of educational, financial and geographical challenge.

Interestingly, a similar letter has been sent to academy trusts which are deemed to be at risk of experiencing financial difficulties, further encouraging these trusts to review their financial expenditure – including salaries – as a critical aspect of managing their financial risk.  Again, the ESFA emphasise their own responsibilities, indicating their intention to take proactive action to prevent financial difficulties from developing in trusts and schools.

The Chief Executive’s letter also points out that the person in receipt of a high salary is generally also the Accounting Officer, who is accountable for propriety, regularity and value for money.  Thus, there is an increased need for independent scrutiny by the non-executive board members to ensure that the salary given is appropriate for a single school.

Recipients of the letter are reminded that benchmarking is a useful tool when reviewing finances, with trusts encouraged to refer to the Department for Education’s financial benchmarking when compiling their response, to help them compare their spending with similar trusts.

Benchmarking can assist you in identifying areas of spend, enabling comparisons with schools that have similar challenges, and to consider where resources can be best allocated to the benefit of staff and pupils.  At UHY we produce an annual academies benchmarking report, detailing 200 academies in total, which also provides commentary on a range of topical issues.  You can find our 2017 academies benchmarking report here.

Copies of both letters can be found on the Department for Education's website here.

If you have any questions on the points highlighted in this blog, or on benchmarking, please contact your nearest academies specialist.

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