UHY Hacker Young | Chartered Accountants

Letter from Lord Agnew to Academy Trust Auditors

8 May 2019

On 30 April, Lord Agnew wrote to all Academy Trust Auditors and whilst this letter was clearly addressed to auditors, it made some interesting points that should be of interest to all academy trusts, not just their auditors.

Management Letters

Two main issues seem to have been raised regarding the auditors’ management letters.

This first relates to trustees being in denial about material issues raised in the management letter, particularly if these issues remain outstanding from previous audits. The introduction of the disclosure requirement within the AAR on auditor’s management points, allows the ESFA to see how many points have not been addressed from the previous year.  Clearly this remains a concern and focus for the Department of Education.

The second, is where the management letter contains no management points whatsoever.  Lord Agnew notes that while this may be an indication of an exemplary academy, they would still look for indications of concern elsewhere.

Probably the most interesting comment within the letter was the encouragement of a mid-year audit review to address and resolve management point issues before the year-end, thereby negating the need to include them in the management letter and preventing them from becoming a matter of public record. As we are all aware, the Academies Financial Handbook already requires all trusts to have a programme of risk review and checking of controls, so this seems to imply additional work or maybe a move towards the use of external auditors to undertake this work, rather than using the option of peer reviews or non-employee trustees.

Regularly and Governance

In our recent summary, we spoke about the changes within this year’s Academies Accounts Direction (AAD). Lord Agnew has made it very clear that the department wishes to place greater reliance on good governance and points out that the AAD includes ‘a sharper focus on governance’

His letter to auditors clearly indicates his expectation of auditors to test the rigour of governance within their regularity reporting, specifically mentioning the items within paragraph 4.14 annex b (pages 152 & 153) of the AAD.  It is worth reading this section of the AAD, to ensure you are fully compliant, as these items will be checked by your auditors as part of their expected regularity reporting requirements.

One final point to note, is Lord Agnew’s statement that more than 50% of pupils are being educated by academies, making academies the new norm, rather than the exception.

You can read Lord Agnew’s letter in full by clicking here.

Click here to read the 2018-2019 academies accounts direction.

To read more academy schools blogs please click here.