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With the new term well underway, there will be competing priorities for the time of CFO’s, Finance Officer and SBM’s. Whilst it is crucial to maintain a focus on business as usual (including the production of accurate monthly management accounts), the deadline for submissions is 31 December. It is important to stay on top of the year-end process.
The Academy Accounts Direction was published by ESFA in March and contained only minimal changes to the requirements expected in the academy accounts for 2023/2024.
Here are the main changes/clarifications to be aware of:
- A new section titled 'What an academy trust must do' has been added to help academy trusts understand their obligations.
- The review of effectiveness for the system of internal control has been expanded to include a conclusion on whether the academy trust has an adequate and effective framework for governance, risk management and control. (Further examples of sources of information to inform the accounting officer’s statement of regularity, propriety and compliance have been provided).
- Clarification that staffing disclosures should now identify ‘other employee benefits’ separately.
- How an academy trust might determine an appropriate value for the initial recognition of premises occupied under a long leasehold.
- The information to be disclosed for agency arrangements has been updated to include cumulative unspent fund balances (for example 16-19 bursary funds).
- Clarification as to how 16-19 core education funding should be disclosed in the financial statements.
- Further clarity has been provided on the links between the financial statements and other financial returns.
Although there are only few technical changes this year, there is increased guidance around expectations in terms of the financial review section of the Trustee’s Report and it is stressed that trusts should avoid using the template ‘Coketown’ narrative to make this report more appropriate and relevant. The ESFA expects that academy trusts should take the opportunity to shed light on the numbers shown in the financial statements, including why and how they have arisen, in terms that a non-accountant would understand.
Therefore, it’s advisable to set aside sufficient time this year to prepare this report, due to the importance of including comment on all key areas:
- detailing financial performance during the year
- the final position at year-end
- key factors looking into the future
- identification and management of key financial risks and the impact of significant events.
Greater emphasis on this comprehensive part of the annual statements may mean that this section requires a more thorough update, as opposed to a simple ‘rolling forward and annual update’ of what has been included in previous years.
Staffing disclosures required for key management personnel and higher-paid staff must now also be applied where the academy trust has entered an ‘off-payroll’ arrangement with someone who is not an employee. There is also further clarification around the classification of funding sources to further align academies’ financial statements to the Academy Accounts Return (AAR).
All other expectations in the Accounts Direction document remain relevant.
So, in order to be as prepared as you can for the year-end process, here are a few handy hints and tips:
- Ensure all income is recognised in the period in which the academy trust becomes entitled to the funds, the receipt is probable and can be measured reliably. It is important to be familiar with the accounting periods which all grants relate to as it is likely that adjustments will be required to deliver this requirement.
- Ensure all expenditure relates to the accounting period and accrue or prepay anything which does not.
- Reconcile all balance sheet control accounts at 31 August.
- Reconciled payroll reports to the staffing ledger balances.
- Ensure the final trial balance is fully evidenced and supporting documents are in place.
