The Academies Financial Handbook 2016 defines a connected party as:
- any member or trustee of the academy trust;
- any individual or organisation connected to a member or trustee of the academy trust;
- any individual or organisation that is given the right under the trust’s articles of association to appoint a member or trustee of the academy trust; or anybody related to such individual or organisation; and
- any individual or organisation recognised by the Secretary of State as a sponsor of the academy trust, or anybody related to such individual or organisation.
These definitions are quite vague and confusing, especially when considering entering into a transaction with anyone whom could fall within these descriptions. The guidance remains vague with financial reporting standards that merely defines the term 'related party' using the phrases 'control / joint control' or 'significant influence' to describe the nature of the relationship.
So what does an academy trust need to think about?
Going back to the basics, CC29, the Charity Commission guidance on managing conflicts tells us that:
'Trustees have a legal duty to act only in the best interests of their charity. They must not put themselves in any position where their duties as trustees may conflict with any personal interest they may have'.
The steps, as defined here, for this are:
- IDENTIFY conflicts of interest
- PREVENT the conflict of interest from affecting the decision
- RECORD conflicts of interest
This sounds fairly straightforward. Making sure that all trustees, members and senior staff (including those in control of budgets) are declaring any organisation in which they, or a family member, have an interest. Conflicts should be reviewed on a regular basis to ensure those records are up to date this can be either:
- in the form of an annual written declaration of interest; or
- verbal declarations as a part of trustee and committee meetings.
Download the full report and follow our four simple steps to ensure evidence of robust controls and of trustees fulfilling their legal responsibilities and transparency in the transactions within your trust.