06 August 2020
As you know, the ESFA publish an Academies Accounts Direction each year providing guidance to the sector in dealing with annual financial accounts. We blogged about the changes coming into effect in June 2020 when this was published - but now the ESFA have published a supplementary bulletin to address the issues being raised by COVID-19.
So what are the key points?
The bulletin is eight pages long and focuses on regularity and audit implications, Trustees report and financial support for COVID-19.
Regularity and audit implications
The bulletin makes it clear that any additional funding that your Trust has received will fall under the scope of the regularity audit, however currently your auditor is not being asked for any additional assurance in this area. Your auditor will need to consider the following, so as a Trust you should be prepared to provide this information should it be requested:
- Capacity - What was the impact on the Trust? Was the approach taken by the Trust necessary, and reasonable given the circumstances at the time?
- Proactivity - When were the issues identified? Was advice sought from professional advisors, the ESFA or other Trusts?
- Reaction - Was retrospective action taken after an event? If so what, and why?
- Evidence - Is there documentation around the decision making process covering the rationale for decisions made and who was involved in the process?
Procurement, and specifically value for money is always important for an Academy Trust - and the rules and guidance notes issued by the Government continue to apply in respect of the COVID-19 pandemic, specifically PPN02/20 and PPN 04/20 which should be used by the Trust as guidance.
The rules around managing public money are often complex but essentially they prohibit payment in advance of need without the advance consent of HM Treasury. However, the Treasury has granted consent for such payments where an Academy Trust’s Accounting Officer is satisfied that a value for money case is made by virtue of securing continuity of supply of critical services in the medium and long term. Auditors will be reviewing these decisions as part of the regularity work, and therefore Trusts should consider the information they have to support any decisions that they made in this area.
If your Trust made any of these decisions regarding payments to suppliers, or consider that COVID-19 has adversely impacted on value for money achieved by the Trust, your Accounting Officer may wish to consider including this within their governance statement within the financial statements.
Trustees’ report
COVID-19 has had a huge impact on Academies across the country, and the Trustees should consider the impact that the pandemic has had on the Trust, and how this should be disclosed in the financial statements. The Charities SORP committee has issued some guidance which aims to assist the preparers and auditors of Academy Trusts accounts and can be found here. The financial reporting council has also published some guidance which can be found here.
In essence, these are the main points that the Trustees should consider:
- how the virus control measures have affected the activities of the Trust, and the impact on the achievements of the Trust
- explaining any financial uncertainties regarding the Trusts financial sustainability and going concern, and the steps being taken to address these
- the contribution of volunteers, if any, in assisting the Trust in managing the changed circumstances
- the impact on the Trusts ability to fundraise, and how this has been managed by the Trust
- how the virus outbreak has affected staff, volunteers, students and the implications for the Trust
- how the principal risks and uncertainties facing the Trust have been affected by the virus
- if there are any implications for any existing defined benefit pension liability and/or investments the Trust holds
- the impact on the Trust’s reserves policy, and any funds set aside for future commitments
- the impact of any virus control measures on the future aims and activities of the Trust, and how this might impact on the wider operation of the Trust and its network.
Financial Support for COVID-19
Some Trusts may have incurred costs in relation to COVID-19 and may have received, or be eligible to receive, funding from the Government’s support packages. Normal accounting principles will apply to this income and expenditure, however additional disclosures will be required in the financial statements for those Trusts that have received this funding.
If a Trust received financial support under the Financial Support Scheme for Schools and they have incurred exceptional costs, and/or have furloughed staff and have claimed on the CJRS they will need to disclose this with note four to the accounts. The bulletin then provides an example of the disclosure it requires in the accounts.
There is however no need to split out or disclose separately the costs within notes seven, nine and 10 to the accounts.
Where the Trust has participated in the national free school meals voucher scheme, they have acted as a facilitator for the distribution of vouchers from the scheme provider to parents. As such, they will not have incurred any exceptional costs or received additional funding in respect of the scheme and therefore no additional disclosure is required. However, Trust’s may wish to include this within their Trustees report.
What to do now?
Every Trust will have a different experience of the COVID-19 pandemic, and therefore what they include in the accounts and how they do it will be unique to each Trust. This is a sizeable amount of work, and therefore I would suggest that Trustees start the process now, so that everything is ready as early as possible, as Trusts are still expected to file audited financial statements for the year ending 31 August 2020 by 31 December 2020.
If your trust needs any support regarding the above please do not hesitate to contact either myself or your usual UHY contact.
