Academy school trusts operate in a unique, highly regulated financial environment. Under the Academy Trust Handbook, published by the Department for Education (DfE), maintaining a robust system of internal scrutiny is a compliance requirement and a critical safeguard for public funds.
Understanding internal scrutiny in academy trusts
Internal scrutiny (often referred to as internal audit or internal examination) gives the board of trustees independent assurance that its financial controls, risk management procedures, and governance frameworks are operating effectively.
The Academy Trust Handbook requires all academy trusts to establish an internal scrutiny programme that:
- Evaluates financial and non-financial controls.
- Assesses the management of key operational risks.
- Delivers independent, objective reporting directly to the trust’s audit and risk committee.
Beyond the committee cycle, Part 3 of the handbook also sets a hard external deadline: trusts must submit an internal scrutiny summary report to the DfE by 31 December each year, alongside their audited annual accounts. The DfE’s own internal scrutiny good practice guide sets out a suggested structure for that report and the range of financial and non-financial areas scrutiny should cover, and the Chartered Institute of Internal Auditors publishes sector-specific guidance and an Internal Audit Code of Practice that many trusts use to benchmark their own programme against professional standards.
What’s changing under the Academy Trust Handbook 2026
The DfE published the Academy Trust Handbook 2026, taking effect from 1 October 2026 – a month later than in previous years, giving trusts a slightly longer run-in.
While the overall framework is largely unchanged, two updates are directly relevant to internal scrutiny and audit and risk committee governance:
- Committee expertise is now more explicit. The 2026 edition specifies that at least one member of the audit and risk committee should have recent or relevant accountancy or audit assurance experience, with other members expected to hold appropriate financial training. Trusts relying on a committee without that skill mix will want to address this before the October deadline.
- Wider governance scrutiny feeds into internal scrutiny’s remit. The 2026 handbook tightens expectations around procurement, executive pay and severance decisions (including a new requirement for DfE approval before advertising roles above £174,000), and value-for-money documentation. These are exactly the areas a well-designed internal scrutiny programme should already be testing, so trusts should expect their scrutiny plan to need a proportionate refresh alongside the wider policy updates.
Trusts should treat September as a working window to assess the impact of these changes on their existing scrutiny programme and committee composition, rather than viewing the October start date as room to delay.
The boundary between internal and external audit
A crucial rule within academy finance is the strict separation between internal and external audit functions. This isn’t a grey area open to interpretation trust by trust – it’s an explicit requirement, and one the DfE has tightened over time. An earlier update to the (then) Academies Financial Handbook specifically removed the option for internal scrutiny to be performed by the trust’s external auditor, on the basis that combining the two roles compromises the independence both are meant to provide.
That principle sits alongside the Financial Reporting Council’s Ethical Standard, which governs the professional conduct of auditors more broadly and restricts the non-audit and additional services an external auditor can provide to an audit client — internal audit services being a clear example of a service that creates a direct threat to independence where the same firm is relied on to give an objective external opinion on the same set of accounts.
Put simply: if an accountancy firm provides external audit services to an academy trust, that firm cannot also deliver the trust’s internal scrutiny work. Doing so creates a direct conflict of interest and compromises independence on both sides of the relationship.
For external auditors: a trusted referral solution
If your firm currently provides external audit services to an academy trust, you may well be asked by the trust’s audit and risk committee or School Business Manager whether you can also deliver their internal scrutiny work.
Because independence rules prohibit this, having a reliable peer firm to refer this work to matters – both for the trust’s compliance position and for protecting your own audit relationship. UHY routinely accept internal scrutiny referrals from external auditors across the UK, delivering the work independently and reporting directly to the trust, while leaving your existing audit relationship untouched.
How we help School Business Managers and Chief Financial Officers
For Chief Financial Officers, School Business Managers, and trustees, managing internal scrutiny should be more than a tick-box compliance exercise. The right internal scrutiny strategy adds operational value by highlighting inefficiencies and strengthening internal controls before external audit season arrives, and, increasingly, before the areas of heightened DfE focus under the 2026 handbook come under closer examination.
Our academy team delivers:
- Tailored scrutiny plans, focused on high-risk operational areas including payroll processing, procurement, cyber security, and capital asset management.
- Objective, pragmatic reporting, written in plain language for trustee boards and audit and risk committees.
- Compliance assurance aligned with the current Academy Trust Handbook and the DfE’s supporting good practice guidance.
Partner with our academy finance specialists
Whether you’re a School Business Manager looking to refresh your internal scrutiny programme ahead of the October 2026 handbook changes, or an external auditor seeking an independent partner for a client referral, our dedicated academy team is here to support you.
Contact us today to discuss how we can support your trust’s governance, or assist your clients with independent internal examination.
Download our full summary of the Academies Trust Handbook below: