Novel , Contentious and Repercussive Transactions

The Department for Education has published new guidance for academy trusts and colleges setting out best practice in understanding what novel, contentious and repercussive (NCR) transactions are, and ensuring that they are approved appropriately.

Full guidance for academy trusts and colleges to follow when considering NCR transactions is set out in the Academy Trust handbook and in the College Financial Handbook.

Why is there a need for further guidance if the requirements are already set out in handbooks? Owing to misunderstanding of the guidance, the new best practice guidance seeks to offer academy trusts and colleges with illustrative examples to help with decision making.

What is an NCR transaction?

The general rule of thumb to follow when considering whether a transaction is novel, contentious or repercussive is:

>        novel transactions are those of which the academy trust or college has no experience or are outside its normal course of business

>        contentious transactions might cause debate or criticism by Parliament, the public or the media

>        repercussive transactions have wider financial implications as they are likely to set a precedent or cause pressure for other academy trusts, colleges, or the wider public sector

In some transactions there may be an overlap of these principles. However, only one needs to apply for Department approval to be required. It is important to note that the Department has clarified that, if there is doubt as to whether a transaction falls into any of these categories, it must be referred to the Department for determination, which will be the final decision.

NCR transaction decision-making is not delegated

Academy trusts and colleges will be aware that their relevant handbooks set out a financial framework. This framework delegates the majority of financial-decision making to operational leadership.

However, NCR transactions are transactions where the decision-making is not delegated to the operational leadership. Instead, NCR transactions must always be referred to the Department for approval. Approval must be obtained before the transaction is made.

This control by the Department may give the impression that NCR transactions are likely to be ‘forbidden’. However, the Department has clarified that this is not the case.

Identifying an NCR transaction

The Department has helpfully provided some illustrative examples of NCR transactions.

Novel transactions

>        The purchase of 100 rechargeable electric bikes at a cost of £50,000 to be rented to learners at a nominal cost is likely to be considered novel if the academy or college has no previous experience of running such a scheme and there is limited evidence of such a scheme being run elsewhere in the sector.

Contentious transactions

>        A party of four staff travelling business class and staying in a 5* hotel to attend an event where the business objectives are vague and not susceptible to objective analysis of their success is unlikely to obtain approval, as the trip could very easily be seen as an unnecessary extravagance and poor use of public funds.

Repercussive transactions

>        An academy which has experienced staff take strike action proposes to waive a deduction in pay for a 1-day strike, at a cost of £10,000. The payment of strike pay, when it is well-established that staff are not be paid for strike days, would be repercussive and unlikely to be approved. The public funding for academies is for the teaching of learners, not for staff to have paid time off so that learning is disrupted. Even though the academy is seeking to get staff back in school for the benefit of learners, the impact could be felt throughout the sector if others consequently felt pressurised to take the same line.

Seek advice if it is unclear

With the increased pressure on schools to find new funding revenues and to move to energy efficient systems, many academies and colleges may find that they are considering transactions which they are not experienced in.

It is key that Department approval is sought for any NCR transactions, so academies and colleges should seek advice where they are unclear as to whether a proposal is novel, contentious or repercussive. We are experienced in supporting academies and colleges in considering these issues and seeking approval from the Department,

In some instances approval for an NCR transaction may need to be sought from HM Treasury. Ensure you allow plenty of time to seek advice and, if necessary, seek approval for the transaction.