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Academies: Accounts Direction 2019/20

Academies: Accounts Direction 2019/20

Gemma Roger

The Education and Skills Funding Agency (ESFA) have released their annual guidance on accounts preparation for academies and Multi-Academy Trusts in the Accounts Direction 2019 to 2020.   There have been some minor changes and clarifications in this year’s publication which apply to Academy accounts for accounting periods ending 31 August 2020.

The full accounts direction 2019/20 is available here.

While the changes and clarifications are not significant and are unlikely to result in substantial additional work for academies, we should expect some of the disclosures and reports within the annual accounts to look slightly different this year.

Trustees’ Report – new disclosures required
In line with the Charity SORP (Statement of Recommended Practice), Trustees are now required to disclose the following details as part of the Trustees’ Report to the accounts:
  • The success of the company – the report should include reference to the measures used to evaluate success as well as statements on the performance and achievements of the academy.
  • Employee engagement – for companies with more than 250 employees a statement is required to summarise action taken in the period with regards to arrangements made for informing, consulting and engaging employees in the company’s performance. The Trustees should also disclose specifically the policies in respect of considering disabled persons for employment, the treatment of employees who have become disabled and the training, career development and promotion of disabled persons.
  • Business relationships – large companies* are required to include a statement as to their approach in fostering the company’s business relationships with its suppliers, customers and others (including stakeholders).
  • Streamlined energy and carbon reporting – this is an additional disclosure required of large companies* consuming in excess of 40,000kWh energy in the accounting period. Applicable companies are required to disclose:
    • total energy usage,
    • a relevant chosen emissions intensity ratio (e.g. emissions per pupil),
    • the methodology used in the calculations, and
    • details of measures taken in the period to improve efficiencies (or a statement of no such measures).
 *Large companies are those that satisfy two of the following turnover (income) in excess of £36m; net assets in excess of £18m; more than 250 employees.
Statement of Regularity (and regularity report) – disclosure clarification
The 2019/20 direction has clarified that where instances of irregularity, impropriety or non-compliance are reported on, the relevant monetary amounts should be stated as far as possible.
Governance Statement – new disclosure
Where applicable, Academy Trusts are required to disclose how their audit arrangements are affected by the revised FRC Ethical Standard (which states that, with the exception of audit arrangements existing at 15 March 2020, an audit firm should not provide both external and internal audit services).

The Trust should also disclose the impact of the revised FRC Ethical Standard on its internal scrutiny arrangements where applicable.

The direction also encourages explicit statement of compliance with guidance in the Governance Handbook and Competency Framework for Governance where this is the case.
Additional disclosures and notes to the accounts
The following new notes and disclosures have been announced in the 2019/20 Direction:
  • Disclosure of legal costs as a separate category within the analysis of support costs note.
  • Inclusion of a new “changes in net debt” note reconciling net debt (cash/cash equivalents less borrowings) from the start to the end of the accounting period.
Guidance and further clarifications
The 2020 Direction refers to the ESFA’s checklist to assist in the preparation for external audit. The ESFA guidance provides a “good practice” checklist of documents, schedules and supporting evidence and would be particularly useful for Academy Trusts leading up to their first year of audit.

In line with the updated SORP, the following have been confirmed:
  • The transfer of activities to a wholly owned subsidiary should be accounted for as a merger.
  • Two or more subsidiaries must be immaterial to the accounts in total to be excluded from consolidation.
  • The Teachers’ Pension Scheme notes in the example Coketown Accounts have been updated to take into consideration the actuarial valuation report published on 5 March 2019.
Finally the Direction clarifies that, for any applicable Trusts, the requirement for an Accounting Officer to sign off the Regularity Statement extends to the date of closure.

If you need further advice on any of the above changes, please contact your local Moore adviser.