Academies: Due diligence – how can it help?

Academies: Due diligence – how can it help?

For academies what is it?

Due diligence is an investigation into the background, financial condition, business operations and contractual obligations of a charitable trust or company.

Why undertake a review?

Due diligence is undertaken to provide management/trustees with a view over the transferor or transferee to provide confirmation of facts to allow informed decisions to be taken.

Due diligence contributes significantly to informed decision making by enhancing the amount and quality of information available to decision makers.

Specifically applied to academies, it means ensuring that you fully understand all of the risks, assets, liabilities and relevant information to make an informed decision about whether entering into a Multi Academy Trust with a particular academy is the right decision for your own organisation.

When should it be undertaken?

It is recommended that due diligence is carried out before any decisions are formally made. It should be clearly documented that all Trustees have been made aware of this information, and that the findings are minuted in case of challenge at a later date.

Circumstances when completed:

Due diligence is usually applied to the following circumstances:

• An existing MAT considers taking on a new school/entity;
• An existing academy considering joining an established MAT;
• A Local Authority maintained school considering converting to an academy and joining a existing MAT;

Who should undertake the review?

All educational matters should be considered by the management team to ensure the ethos and quality of provision is in line with that expected.

Academies should also consider whether a third party view is obtained when assessing the financial strengths/weaknesses of the proposed entity.

Management/trustees may have sufficient skills within the existing team and therefore external assistance may be limited to just legal advice.

However, where a third party is engaged a clear scope of work should be agreed to ensure you understand what it is you are going to receive. This ensures you obtain additional information over concerns you may have already identified as well those you haven’t.

It should be noted that a due diligence review is not an audit or a guarantee that all weaknesses/issues are identified. Therefore, it is not an insurance policy that an entity can fall back on should something come out of the woodwork.

Equally where something significant is identified later and management/trustees had not engaged a third party then they could open themselves up to criticism.

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