Large college CFOs must be qualified accountants, DfE orders

Large colleges will be required to hire qualified accountants who are professionally registered as their chief financial officers from August 2027, according to strengthened government rules.

The 2026 college financial handbook, effective from August 1, states colleges with more than 3,000 students should specify in recruitment adverts that candidates should be a qualified accountant and be a member of a relevant accountancy body.

The request will become statutory for large colleges the following year.

The Department for Education said today that any colleges wishing to recruit a CFO without an accountancy qualification will need advance government approval and must explain why it is not appointing a qualified accountant.

Association of College deputy chief executive Julian Gravatt said the membership body consulted with the DfE on the changes.

“The vast majority of people in this role have relevant qualifications, but there are times when it’s necessary to use people with experience in related disciplines or to combine roles to save management costs,” he said.

“These are exceptional cases and we welcome the fact that DfE is taking a comply or explain approach in that there’s a standard to follow but an opportunity to set out reasons for doing something different. There will be 12 months to prepare for this rule change.”

A Department for Education spokesperson said: “This government hugely values further education and the role colleges play in our mission to grow the economy and get two-thirds of young people into higher-level learning by age 25.

“It is only right that those entrusted to manage their finances are equipped with the skills, expertise and experience relevant to their college, including, where appropriate, a professional accountancy qualification.”

Electric vehicle sacrifice

The handbook, updated today by DfE, also confirmed electric vehicle salary sacrifice schemes no longer need prior DfE approval provided colleges have “comprehensive” mitigations, so they do not incur financial liabilities if employees do not uphold their contractual obligations.

DfE approval will still, however, apply to colleges under intervention.

Gravatt said: “Across the country, college staff drive millions of miles a year for work and it will benefit everyone if a bigger proportion of that travel is electric powered.”

Severance threshold 

This year’s iteration of the handbook also brought rules around staff severance payments in line with HM Treasury guidance, which stipulates special exit payments should be “exceptional”.

Severance payments should be approved by DfE beforehand where exit packages exceed £100,000 or for senior leaders earning over £174,000.

If legal advice determines a college has a more than 50 per cent chance of winning a claim at an employment tribunal or arbitration, they must seek approval from DfE to offer a “contentious” settlement award.

“Colleges would need to demonstrate why they are recommending a payment to the employee rather than defending the case. If the chance of losing the case is 50 per cent or more, a settlement may be justified,” the handbook said.

Previously, colleges were told only that a settlement should not be offered where legal advice suggested they had “a good chance” of successfully defending a claim. DfE told colleges that payouts were justified when there was “significant prospect” of losing, especially if the defence costs are likely to be high.

Colleges were facing severance approval delays lasting several months in 2024, when it needed central government approval for payments of £50,000 or more. DfE admitted at the time its assessment process needed to be streamlined.

Elsewhere, the handbook toughened rules on colleges paying ransom or extortion demands.

It already had imposed a blanket ban on paying any cyber ransom demands, but the refreshed guidance widened the sanction to cover “any ransom or extortion demands”, explicitly including ransomware.

Colleges must also renew their cyber essentials certification annually as per the college accountability agreement.

Gravatt added that the AoC was not aware of any college that has paid a ransom.

Other changes include a new expectation on governors and finance and audit committee members to receive proper financial training, and a requirement to consult the DfE before introducing any pension scheme outside the Teachers’ Pension Scheme or Local Government Pension Scheme.