Common themes arising from the ESFA’s assurance work

Posted on November 10th, 2022

The government has just issued a briefing note that provides an overview of the key findings from the ESFA’s assurance work in the 2021 to 2022 assurance year. We summarise these findings.

Academy trust financial statements

The deadline for submission of the 2020/21 financial statements was 31 December 2021. By that date, trusts were required to submit three returns, their audited financial statements, the auditor’s management letter and their annual summary internal scrutiny report.

  • Just under 97% of accounts were received by 31 December 2021. The reasons for the number of delays were similar to previous years. By the date of publication of this briefing note (2 November 2022) there were still three trusts which had not submitted their 2020/21 audited financial statements.
  • The percentage of qualified financial statements was 0.5%. The main reasons for qualified opinions were local government pension scheme (LGPS) valuations and the accounting treatment for land and buildings.
  • There was a 0.5% increase in ’emphasis of matter’ or ‘material uncertainty opinions’.
  • The percentage of modified regularity opinions was 7.9%. The main issues were: no internal scrutiny reviews, management accounts not produced and trusts failing to adhere to preapproval requirements for related party transactions with a monetary value of over £20,000.

Financial statements audit opinions

The briefing note provides two charts showing the reasons for qualified opinions and material uncertainty opinions.

Qualified opinions

  • LGPS valuation.
  • Accounting treatment of land and buildings.
  • Inadequate accounting records.

Material uncertainty opinions

  • Going concern –transferring.
  • Going concern – financial issues.
  • Accounting treatment for land and buildings.
  • PFI charges.

Financial statements regularity opinions

The highest number of reasons for modified regularity opinions related to internal financial reporting:

  • Not sharing management accounts with the board.
  • Trusts not documenting reviews of trade debtors, creditors or bank reconciliations.
  • ESFA deadlines not met.

The second highest number of modified regularity opinions was in relation to related party transactions:

  • Prior approval not sought.
  • ‘At cost’ policy not adhered to.
  • Pecuniary interests not declared.

Internal scrutiny

In the case of some trusts, an annual summary internal scrutiny report was either not submitted or did not meet the minimum requirements.

Financial management and governance reviews

All trusts reviewed were making good progress towards compliance with the academy trust handbook.

The areas where further development is required include:

  • Establishing an audit and risk committee.
  • Delivery of an appropriate internal scrutiny programme.
  • Ensuring management accounts contain all the required elements.
  • Maintenance and publication of a register of pecuniary and business interests of trustees and governors.
  • Better oversight and review of the risk register.

Academy funding audits

These audits consider error rates in the reporting of pupil census numbers, FSM and therefore pupil premium eligibilities, EAL pupils, high value and premium courses, previously looked-after children and service children.

  • The level of census errors remains low at 0.033% for pre-16 year olds and 0.13% for post-16 year olds.
  • For pupil premium funding, the error rate was 0.87%, largely due to schools submitting incorrect FSM data.

Schools resource management self-assessment checklist

This had to be submitted by 15 April 2022. Of the 2,546 academies expected to submit their checklist, 2,268 did so by the deadline (88.9%) However, 99.5% of all expected returns were eventually received.

The main areas where trusts were unable to self-assess as compliant in April were:

  • Not having an appropriate business continuity or disaster recovery plan.
  • Still having outstanding matters from audit reports.
  • Trust balances not assessed at a reasonable level and no clear plan in place for using the money held in balances at the end of the financial year.
  • Inadequate procedures in place for purchasing goods and services.

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