ESFA Update – Academies Accounts Direction for 2020 – 2021

  • 27th April 2021

The ESFA recently published the Academies Accounts Direction 2020-2021 along with the model accounts and framework and guide for external auditors and reporting accountants of Academy Trusts.

We have briefly summarised the main changes to the direction in this publication. To view the full direction, please follow the link here.

Please note – the ESFA intends to publish a supplementary bulletin to the Direction and the framework and guide which separately covers the reporting and auditing of COVID-19 related matters.

What are the main changes to this edition?

1 – Structure of the Direction

The ESFA have split out the “Coketown” model accounts into a separate document. It can be found here.

2 – ESFA’s “good practice guide”

The Direction has made greater reference to the ESFA’s good practice guides. These guides do not replace or modify any requirements set out in the Academies Financial Handbook 2020 (AFH) and the Academies Accounts Direction 2020-2021 (AAD), but they do aim to provide suggestions about good practice with Academy Trusts.

3 – Trustees’ report – financial review

Further clarity has been provided by the AAD in relation to the content required to be published within the financial review section of the trustees’ report. This is primarily around looking at financial risks and significant events in the year. It has always been best practice to include this information, but it is not included as a ‘must’ in the AAD.

There is also a requirement for Academy Trusts who have had a Financial Notice to Improve in place during the year to declare this and provide more information.

4 – Clarification and description of the main types of audit opinions

The AAD has included a section (paragraph 2.76) explaining the main types of audit opinion on the financial statements and when they will be expressed by an auditor.

5 – Staff costs disclosure

Where the Academy Trust has entered into an “off-payroll” arrangement with someone who is not an employee (including but not limited to where the ESFA has exceptionally approved the appointment of an Accounting Officer or Chief Financial Officer), the amount paid by the Academy Trust for that person’s work in this role must be disclosed with the key management personnel costs in “Note 10 – Staff“ as if they were an employee. The prior year figure should also be reported and restated if necessary.

6 – Note on funding received for the Academy Trust’s educational operations

Further clarification has been included which details the sources of funding that should be classed under each heading, to align more closely with the Academies Accounts Return. Note 4 of the model accounts shows what should be included within funding for the Academy Trust’s educational operations.

If this has been reported differently in previous years, then this must be restated with some narrative to explain the reclassification.

7 – Leases

A reminder has been included to ensure the correct identification, classification and treatment of finance and operating leases. Particular care should be given of the possibility of embedded leases being present as part of larger contracts, such as catering contracts.

Academy Trust’s should be reminded that prior approval from the ESFA must be sought on all leases considered to be finance leases, to avoid a breach in their funding agreement.

8 – Long-term commitments

The document has clarified that service concession commitments (e.g. payments made under secondary agreements with local authorities) should be disclosed as part of the long term commitments note.

These include premises held and subject to a private finance initiative (PFI) contract with a third party, private sector contractor.

Feedback to the ESFA

This year the ESFA are requesting auditors and Academy Trusts to provide feedback on the AAD, including the model accounts document. They have urged as many participants to complete a short survey which will help to ensure that the AAD continues to meet the needs of the users of the financial statements.

The survey can be found here.

Contact us

Following the publication of the AAD 2020-21, if you have any queries or need help with any information published in the documents, please do not hesitate to contact us.

All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.