ESFA Academies Accounts Direction 2019-2020

For larger trusts, there are new elements of statutory reporting required in the trustees’ report arising from The Companies (Miscellaneous Reporting) Regulations 2018 (3.1.11 p12):

• Trusts with more than 250 employees must include a statement summarising the actions taken during the period to introduce, maintain or develop employee engagement within the trust (see Coketown p90).
• Large companies (trusts which meet two of the following three criteria: turnover in excess of £36m, a balance sheet total in excess of £18m, more than 250 employees) must include a statement summarising how they have had regard to the need to foster the trust’s business relationships with suppliers, customers and others (see Coketown p90).
• Large companies must include a statement describing how they have had regard to the matters contained in section 17(a) to (f) of the Companies Act 2006, which relates to the requirement for the directors of a company to promote the success of the company, and in doing so, having regard to various factors (see Coketown p92).

Again mainly for larger trusts, there are new statutory requirements for streamlined energy and carbon reporting (3.1.25 p16): 

• Large companies (trusts which meet two of the following three criteria: turnover in excess of £36m, a balance sheet total in excess of £18m, more than 250 employees) who consume more than 40,000 kWh of energy in a reporting period must disclose their UK annual energy use (in kWh) related to gas, purchased electricity and transport fuel, and associated greenhouse gas emissions (in tonnes of CO2 or equivalent). An emissions intensity ratio must be chosen by the trust, the methodologies used in the calculation of disclosures described, and a narrative of measures taken to improve energy efficiency included. The ESFA encourages this information to be published on the trust’s website before the 31 March each year too. An illustrated example of these disclosures is on Coketown p96, and the ESFA has also published separate guidance online as one of their good practice guides.
• Large companies who consume less than 40,000 kWh are exempt from this requirement and need only include a statement in the trustees’ report to that effect.
• Non-large companies and large companies who consume less than 40,000kWh are encouraged by the ESFA to report this information on their website anyway on a voluntary basis, but there is no requirement.

The Accounts Direction also makes changes to the governance statement, there is now a requirement for the trust to explain how its audit arrangements are affected by the newly revised FRC Ethical Standard, specifically in relation to internal scrutiny (3.2.11 p19). 

Explicit wording in Coketown (p102) clarifies the position and is as follows “The revised FRC Ethical Standard for auditors states that a firm providing external audit to an entity shall not also provide internal audit services to it, subject to transitional arrangements which permit existing audit engagements at 15 March 2020 to conclude.” 

Where trusts have reviewed and taken into account guidance in the DfE’s Governance Handbook and competency framework for governance, there is an encouragement that this is explicitly stated.

The 2019-20 Accounts Direction clarifies that instances of irregularity, impropriety or non-compliance noted in this statement and in the reporting accountant’s report on regularity should state the relevant monetary amounts, if known (3.3.2 p20, Annex B 2.18 p150).

Additional clarification surrounding the inclusion of relevant monetary amounts in respect of any modifications is also provided see 4.2.1 p22, Annex B 3.12 p152.

There should now be new lines for legal costs within ‘analysis of support costs’ in charitable activities expenditure note (Coketown p122). Furthermore an introduction of an ‘analysis of changes in net debt’ note to the financial statements is now required to comply with the updated SORP (Coketown p134). There has also been an update to the requirements for the Teachers’ Pension Scheme note to reflect the latest actuarial valuation (Coketown p135).

In addition to the above, further key points to note from this year’s Accounts Direction are:

• An issued explanation that the transfer of activities to a wholly-owned subsidiary should be accounted for as a merger, to comply with the updated SORP (7.2.2 p53).
• Confirmation that two or more subsidiaries may only be excluded from consolidation if they are not material when taken together, to comply with the updated SORP (7.2.4 p54).
• Clarification that where a MATs constituent academies all have £nil fund balances the usual funds by academy note can be omitted and replaced instead by some short narrative (model wording at 7.1.9 p52).
• Clarification that the requirement to have the Accounting Officer sign off the statement of regularity, propriety and compliance includes the period in the run-up to trust closure (Annex B 2.26 p151).
• Reference to the ESFA’s checklist to help trusts prepare for external audit (4.1.5 p22). This can be accessed online and is one of the ESFA’s Academy trust financial management good practice guides.