One of the attractions of the academy trust model has been the delegation of financial decision-making to operational leadership level within academy trusts and individual academies. This has enabled them to be more agile and flexible, as well as being more creative in finding ways to raise income to enhance learning.
However, all academy trusts are required to follow the overall financial control framework ‘Managing Public Money’, and as part of this, that delegation of financial decision-making does not apply when a transaction falls into the ‘Novel, Contentious and Repercussive’ (NCR) category.
This doesn’t mean that such transactions are prohibited, but it does mean that prior DfE approval needs to be received before they happen.
So what exactly is meant by ‘Novel, Contentious and Repercussive’ transactions?
Novel Transactions
These are defined as those which are outside the normal course of an academy trust’s operations, or in an area where it has no experience.
Examples could include an academy which decides to purchase a fleet of electric bikes to rent out to students at a nominal cost.
Contentious Transactions
These are transactions which might cause debate or criticism of the academy or trust. This is not to say that such decisions, which might, for example, cause negative comment in local media, should not be taken, but they will need DfE approval.
One example might be an institute which has an international reputation for its courses in game design, and which decides to send a large delegation to the World Gaming Symposium to try and expand its expertise overseas. The college books business class tickets and a five-star hotel for the delegation, and the trip has vague business objectives – both factors which could make the trip be seen as unnecessarily extravagant and a poor use of public funds.
Repercussive Transactions
These are defined as transactions which may have wider financial implications for other academy trusts, colleges or the wider public sector, and/or which appear to set a precedent.
One example given in the DfE guidance is an academy which wants to waive making a deduction from pay following a one-day strike by teaching staff, as a gesture of goodwill and to end disruption to learning. Because doing this might lead to other academy trusts feeling pressurised to do the same, it is unlikely this would receive DfE consent.
These three concepts will sometimes overlap, and a transaction may fall into more than one category. But the over-riding principle applies: DfE approval is required if the transactions falls into one or more of these classifications.
Failure to seek such consent could lead to reporting of a regularity exception in the year-end audit process, and could lead to the risk of further inspection, as well as potential reputational issues.
The advice is very clear: if you think that a transaction may fall into one of the three NCR categories, you must seek DfE permission before entering into that transaction. If you are not sure whether a transaction is NCR, then seeking advice is vital, as early as possible.
Full DfE guidance on novel, contentious and repercussive transactions can be found in the official guidance.