The latest Academies Accounts Direction (AAD) and letter from Lord Agnew - PKF Francis Clark
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The latest Academies Accounts Direction (AAD) and letter from Lord Agnew

Both the Academies Accounts Direction and a letter from Lord Agnew have recently been published.  The key matter that has been emphasised for me is around governance and regularity and the increasing role that external auditors are taking in this regard – in terms of areas to be looked at and reporting back to the ESFA.

The AAD now refers to a number of tests that the auditor should undertake as part of their regularity testing.  There are 14 of these tests – which are all focussed on governance of the trust and represent core ‘musts’ or best practises from the Academies Financial Handbook.  The tests essentially seek to check that the Board are properly carrying out the business of the Trust with focus on general finance, risk, capital expenditure, executive pay and internal control.  (See AAD 18/19 4.14).

Where any shortcomings or non-compliances are spotted, the expectation is that these will be reported in the regularity conclusion or through the management letter, depending on the severity of the issue.  Indeed, control and other points reported in the management letter continue to be a focal point of the ESFA’s – with ‘no points’ equally not avoiding scrutiny.  Lord Agnew’s letter even hints at the recommendation of a mid-year audit review – to potentially avoid points on the management letter.

Besides the encouragement for management letter control points and more prescription on regularity testing, Lord Agnew encourages the auditor to include a summary of the trust’s financial position and performance in the management letter as well as audit issues.  Increasingly then, it can be seen that the management letter is becoming a very more important document that appears to be much more closely scrutinised than the annual accounts.  Lord Agnew’s aspiring vision appears to be for a short document collating various pieces of salient information for the attention of governors and the ESFA – that, to some extent, de-mystifies the annual accounts.

Another regularity matter that is clarified in the latest AAD is that all alcohol purchases from academy funds, whether from restricted or unrestricted funds, would represent ‘irregular’ spending.  This is also true of excessive gifts.  It follows then that any trust that has purchased alcohol should expect a comment in their management letter or regularity opinion.

Katie Skea, ACA BSC (Hons), is a director working in the Healthcare team of the Truro office. Katie looks after a large number of our… read more
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