Barbara Sims, Audit Director and academy specialist at PKF Smith Cooper, gives her advice on how you can best prepare your academy for the external audit.
It is that time of year again. Hopefully, the following advice and resources will help you prepare for your annual external audit and make the preparation process more efficient and less stressful.
As an auditor with 19 years’ experience and academy trust audits as a specialism, the most valuable piece of advice I can give you is to make sure you dedicate adequate time to preparing for your audit. Preparation is key to achieving successful audit outcomes.
Consult critical guides and documents while preparing
To make sure you are fully compliant with ESFA audit requirements, you should keep any critical guides and documents close to hand for reference purposes. I am slightly old-fashioned and like to print copies of these so I can flick through to the relevant sections with ease, but everyone is different and digital copies will also do the job.
The Academy Accounts Direction has the same format as previous years and has been split into three separate documents:
- Academies Accounts Direction 2022 to 2023
- Academies Model Accounts 2022 to 2023
- Framework and guide for external auditors and reporting accountants of academy trusts (if you want a sneak peek at the work the auditors will be doing!)
Here are some other documents that you may find useful to refer to:
Be aware of key changes to the Academies Accounts Direction
Any changes to the Academies Accounts Direction will impact your audit. The following key changes were introduced in the Academies Accounts Direction 2022 to 2023:
- Signposted resources to understand the relationship between accounts and Academies Accounts Return, as the accounting treatment differs (1.4).
- Clarified expectations if the key signatories are absent for long periods including importance of a handover where a new Accounting Officer is appointed (1.18).
- Feedback on non-compliance with AAD in previous years and themes arising from ESFA’s assurance work (1.21 & 1.22).
- Additional considerations relating to building safety:
- Trustees’ report on principal risks and uncertainties should consider those relating to the trust’s estate (2.14).
- Value for money statement should encompass estate’s safety and management. Include as one of the Value for Money examples in the Governance Statement if possible (2.40 & 2.42)
- Statement on regularity, propriety and compliance includes estates management (2.60)
- Guidance on loans updated to consider any ‘concessionary loans’ that have interest charged at below market rates. (2.113)
- Material income sources must be disclosed separately in note 4 of the financial statements (2.130)
- Clarified that teaching assistants are categorised as support staff in the staff costs note (2.137)
- There is a useful summary of each section of the financial statements including who approves each section (1.17 & 1.19).
Do not leave the front section of the financial statements to the last minute
Remember the front section of the financial statements must be compliant with the Accounts Direction. While I appreciate it is quite lengthy to write, the ESFA will use this document as part of the audit process and their investigation work.
This section of the financial statements invites you to tell the story of what has happened at your academy trust during the past year. Be transparent and discuss areas of improvement as well as your successes, using the opportunity to set out any changes and improvements you plan to make in the future.
Familiarise yourself with any changes to the Academy Trust Handbook 2022/2023
You need to make sure you are compliant with the mandatory requirements in the Academy Trust Handbook. Changes are made to the handbook each year, so it is important to be aware of these as and when they happen. In this year’s handbook, all changes were minor:
- Withdrawal of budget forecast return outturn
- Prior approval of staff severance only applies to ‘special’ non-statutory / non-contractual payments
- No pre-approval required for indemnities if in normal course of business
- Meeting the ‘at cost’ requirement for RPTs extended for academies with religious designation from dioceses to all religious authorities
As auditors, we complete two reports: the statutory audit report (i.e. do your accounts give a true and fair view) and a regularity assurance report.
The regularity assurance report incorporates a review of your compliance with the mandatory requirements of the Academy Trust Handbook. There is a handy summary of these requirements at the back of the handbook.
Some of the key areas of focus and areas of regularity issues continue to be:
- Financial management issues (poor management accounts, lack of or inappropriate authorisation, breach capital funding terms and conditions, late submission of ESFA returns, lack competitive tendering)
- Conflicts of interest not managed appropriately
- Irregular expenditure e.g. excessive gifts and alcohol purchases
- Use of public funds for personal benefit
- Related party transaction issues (prior approval not sought, at cost not adhered to, issues relating to pecuniary interests e.g. not published on website)
Keep track of key deadlines in the ESFA audit process
I have put together a list of the key deadlines you need to be aware of for the ESFA audit process. Save this list of deadlines to your desktop or better still print them out and display them in a visible place to avoid missing any dates.
|Submission audited accounts, audit findings report, accounts submission cover and annual internal scrutiny report to ESFA||31 December 2023|
|Submission of Academy Accounts Return to ESFA||30 January 2024|
|Publish accounts in full on academy trust’s website (retain previous 2 years)||31 January 2024|
|It is encouraged that large academy trusts reproduce the ‘streamlined energy and carbon reporting’ disclosures in a suitable format and publish on their websites||31 March 2024|
|File accounts with Companies House||31 May 2024|
|Also remember to send copy of accounts to all members and every person entitled to receive notice of general meetings.|
I hope that this article has provided you with some valuable information that will make the audit process smoother.
If you have any queries about the audit process or would like further guidance on preparing your academy for external audit, get in touch today to talk through your needs with one of our audit experts.