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Changes to controls around ‘related-party transactions’ on the horizon

1 June 2018

The Department for Education (DfE) has agreed a recommendation made by the Parliamentary Public Accounts Committee (PAC) that academy trusts should be forced to apply to the Education and Skills Funding Agency (ESFA) in order to approve ‘related-party transactions’, with changes being introduced by August 2019.

Related-party transactions are deals between academy trusts and member and trustees or individuals or entities which are linked to member and trustees. This includes for example, a trust paying a company for services which is run by one of the academy trusts’ members, trustees or a family member.

A report released in March by the PAC warned that the current rules, which permit such transactions as long as they are at cost, are “too weak” and that establishing what constitutes the cost of providing a service “can be complex and open to manipulation”

The ESFA will need to ensure they have the capacity and expertise to deal with the approvals to ensure that applications are dealt with swiftly. 

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