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Does the handbook go too far?

27 May 2014

The EFA has reportedly demanded that an academy sponsor terminates its contract with a leisure facilities management company (owned by the principal of the academy) due to the ‘risk of a conflict of interest’. Company and charity law requires directors to avoid conflicts of interests and declare interests in proposed transactions or arrangements. Whilst many think the law provides sufficient protection, the Academies’ Financial Handbook goes further.

The handbook states that an academy trust must pay no more than ‘cost’ for goods or services provided by any organisation connected to a director. The term ‘connected to’ captures entities owned, or even part-owned, by a director. Trustees of an academy need to be careful before entering into any contracts that might be caught by this provision in the handbook, as such contracts could be set aside regardless of whether the supplier provides best value for money or is deemed to be the highest quality provider and regardless of whether procedures to deal with conflicts have been followed.

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