Charities and Education update: The latest guidance for academies

Published: Friday 1 October 2021

The ESFA has released their latest guidance for academy trusts. In the Accounts Direction, the Education and Skills Funding Agency (ESFA) takes the requirements set out by the Charity Commission in its Statement of Recommended Practice (SORP) and translates them into a form applicable to academy trusts. The academy trust handbook provides an overarching framework for implementation of effective financial management and other controls and must be complied with as a condition of the academy’s funding agreement. 

Academies Accounts Direction

As in prior years, a ‘What has changed’ section has been included to provide an easy reference guide to the changes to the direction. The key change being that this year the academies accounts direction has been split into three parts:

  1. Academies direction: Has also been split into three parts to make it easier to follow and use as a reference document.
    1. Part 1: financial reporting requirement
    2. Part 2: detailed guidance on the account
    3. Part 3: How to account for specific topics
  2. Model accounts (Coketown): In the introduction to the academies model accounts, the ESFA emphasises the need to improve the financial reporting within the Trustees report and the importance of not using the example text provided but “academy trusts should modify such wording in the Coketown model to fairly reflect their circumstances and performance and are encouraged to do so.”
  3. Framework and guide for external auditors: This provides further information on the external auditors’ roles and responsibilities with regards to the external audit and the regularity of audit work.

The summary also makes greater reference to the ESFA’s good practice guides to assist trustees, accounting officers, principals and chief financial officers. Click here for more
As with last year, an Academies Accounts Direction supplementary bulletin: July 2021 has been issued in order to provide guidance on matters arising from the COVID-19 pandemic, which you can read here

Academy Trust Handbook (effective from 1 September 2021 to 31 August 2022)

This is the new name of the Academies Financial Handbook and the main changes in the 2021 edition that we would like to bring to your attention for the coming year are:

The forward by Baroness Berridge identifies the following three additions to the handbook:

  • Emphasises increasing the involvement of parents, carers or other individuals with parental responsibilities in the governance of academies by ensuring that trusts have reserved places for parents in their governance structure.
  • Highlights the benefits of commissioning an external review of governance, as a stronger means of identifying potential improvements, rather than self-assessment alone - especially recommended where trusts are undergoing significant change.
  • Emphasises the importance of cyber security due to an increasing number of attacks affecting the education sector and provides advice and guidance on cybercrime.

The summary on page seven of the Handbook provides guidance on the key changes within the handbook in the following areas:

  • Roles and responsibilities
  • Main financial requirements
  • Internal scrutiny
  • Annual accounts and external audit
  • Delegated authorities
  • The regulator and intervention

The ESFA has continued emphasis on going concern; in October 2020, the ESFA published a good practice guide on ’Operating an academy trust as a going concern’. The aim of the guidance is to provide trustees, accounting officers, and chief financial officers with further information about the accounting and audit requirements and responsibilities of preparing financial statements on a going concern basis. Guidance is also provided on the importance of reserves and how to understand the financial position of your academy to support the going concern assessment. Read more here