ESFA Update – Academies Accounts Direction for 2021 – 2022

  • 22nd April 2022

The ESFA have recently published the Academies Accounts Direction 2021 – 2022 along with their model accounts and framework and guide for external auditors and reporting accountants of Academy Trusts.

We have provided a summary of the main changes to the Direction below, however, to view the full document please follow the link here.

Main changes to this year's edition

1 – Reliance on “boilerplate” text

The ESFA have noted that they have come across a number of instances where wording from the Coketown model accounts has been over-relied upon and has not been relevant to the Academy Trusts performance and circumstances. Specific examples have been provided in paragraph 1.21 of the Direction.

The ESFA are therefore taking the opportunity to remind trustees that it is their responsibility to ensure the content of their accounts fairly reflects their Academy Trust and is compliant with the financial reporting framework.

2 – Disclosure of subsidiaries

The ESFA would like to remind Academy Trusts that they must disclose the organisational structure of any subsidiaries, joint ventures or associates within the “structure, governance and management” section of the trustees’ report.

3 – Conflicts of interest

There is now a new section within the governance statement which requires academy trusts to explain how conflicts of interest are managed.

4 – Severance payments

Although the disclosures currently in place for special staff severance payments have not changed, the ESFA have highlighted that any severance payments made by the Academy Trust must be disclosed in set bandings. This is in line with changes to the guidance issued by HM Treasury for public sector bodies.

5 – Service concession arrangements

The ESFA are encouraging Academy Trusts with these types of payments to provide narrative to support the numerical disclosures to describe what these payments relate to. An example of this can be seen in paragraph 3.44 of the Direction.

6 – Construction of new buildings

The ESFA have provided guidance on the accounting treatment of buildings whose construction was overseen by the Department for Education (DfE) or a local authority and transferred to the academy trust on completion.

This guidance states that any construction through Free Schools (FS) or Priority Schools Building Programmes (PSBP) should not be recognised in the Academy Trust’s financial statements. If the Academy Trust is partly funding any part of the construction then only this element should be shown as assets under construction in the financial statements.

Once control of the site is handed over to the Academy Trust, the assets may then be recognised in the financial statements. The accounting entry will generally be to recognise freehold or leasehold buildings, and to also recognise the value within “donations and capital grants” in the Statement of Financial Activities (SOFA).

Church Academy Trusts should refer to guidance in paragraphs 3.28 onwards in the Direction in determining whether to recognise assets in these circumstances.

7 – Treatment for business rates

From the 1 April 2022 business rates billing authorities can now opt in to receive rates directly from the ESFA. This means Academies will no longer have to make business rates payments to the billing authority and then recoup this from the ESFA. Instead, the ESFA will pay the bills on behalf of the Academy direct to the billing authorities which have opted in to the new scheme.

However, despite not making these payments directly, academies will still retain the liability for their business rates and will therefore still need to account for their business rates within the financial statements. To do this, Academy Trusts will need to gross up the value of GAG received by the value of their business rates bills and include a matching expense.

For those billing authorities who do not opt in to the new process, the previous process for paying bills will remain unchanged.

8 – Dormant accounts

Academy Trusts are no longer required to submit dormant accounts to ESFA however they will still have submission obligations to Companies House.

9 – Hub activity disclosure

Where an Academy Trust delivers hub activities such as a teaching school provision, it must determine the status of the entity delivering the activities and whether this would be classed as a separate legal identity or if it is part of the Academy Trust. Where the former applies there is now no requirement to include a separate note to the financial statements which shows the financial transactions of the activity.

If the transactions relating to the activity are material, then they should be shown as a separate line on the face of the SOFA and analysed in the relevant notes to the accounts. The model accounts have been updated to reflect this change.

Feedback from the sector

The ESFA are continuing to seek feedback on the Direction from Academy Trusts and request that you complete a short survey which can be found here.

As a result of the feedback from the 2020/21 Direction the ESFA made the following changes:

  • Clarified why financial reporting requirements may differ between the Direction and the Academies Accounts Return (paragraph 1.4).
  • Provided additional clarity on financial reporting requirements relating to service concession arrangements (paragraphs 3.42 to 3.46).

Contact Us

Following the publication of the AAD 2021-22, if you have any queries or need any help with any information published in the documents, please do not hesitate to contact us.


Read more on: Academies

Written by: Mike Hall

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