2024-25 Academies Accounts Direction published

The Department for Education (DfE) has published its Academies Accounts Direction for 2024-2025. Changes have been kept to a minimum, with clarifications rather than disclosure or accounting changes.

What is The Accounts Direction (AAD)?

The Accounts Direction (AAD) sets out the requirements and provides guidance for academy trusts preparing their annual report and financial statements for the period ending 31 August 2025. A full copy of the new AAD and accompanying documents can be obtained here.

What’s in the AAD?

As in previous years, the AAD is divided into three parts:

• The Academies Accounts Direction,
• Model Accounts, and
• Framework and guidance for auditors.

What are the main changes to The Accounts Direction (AAD) this year?

The main changes this year are:

• Alerting academy trusts to the Companies Act 2006 requirement for the inclusion of a non-financial and sustainability information statement within the strategic report (for companies of a certain size) (paragraph 2.13)
• Reflecting the freedom, which allows academy trusts to take out certain finance leases (paragraph 2.137), and providing model disclosures for the notes to the financial statements to assist those academy trusts that may have entered into such leases (paragraph 3.128)

Non-Financial and Sustainability Information Statement

Purpose: This statement aims to provide a comprehensive overview of a Trust’s impact on environmental, social, and governance (ESG) factors. It is part of the strategic report and is intended to offer transparency to stakeholders about the Trust’s non-financial performance.

Applicability: The requirement applies to large companies, specifically those with:

• More than 500 employees.
• A turnover exceeding £500 million.

Content Requirements:

• 1. Environmental Matters: Information on the Trust’s impact on the environment, including policies implemented to address environmental concerns and the outcomes of these policies.
• 2. Social and Employee Matters: Details on how the Trust manages social issues and employee-related matters, including policies and their effectiveness.
• 3. Human Rights: Information on the company’s approach to human rights, including any policies and their outcomes.
• 4. Anti-Corruption and Anti-Bribery: Details on the Trust’s policies to prevent corruption and bribery, and the effectiveness of these measures.
• 5. Diversity: Information on the diversity of the company’s board of directors, including age, gender, educational, and professional background.

Additional Requirements:

• Business Model: A brief description of the Trust’s business model.
• Principal Risks: Information on the principal risks related to the Trust’s operations, including how these risks are managed.
• Non-Financial Key Performance Indicators (KPIs): Relevant KPIs that help stakeholders understand the company’s non-financial performance.

Compliance and Reporting:

• Trust’s must ensure that the information is presented in a manner that is understandable and useful to stakeholders.
• The statement should be included in the strategic report, which is part of the annual report.

These requirements are designed to enhance transparency and accountability, ensuring that stakeholders have a clear understanding of the company’s non-financial impacts and sustainability efforts

Leases for Academy Trusts

From 01 September 2024 Academy trusts have the freedom to enter into certain finance leases, as outlined in paragraph 2.137 of the Academies Accounts Direction and detailed within the leases for academy trust guidance issued by the ESFA. This delegated authority allows trusts to engage in finance leases that are listed on the Department for Education (DfE) approved list.

Model Disclosures for Financial Statements: To assist academy trusts that have entered into finance leases, paragraph 3.128 provides model disclosures for the notes to the financial statements. These disclosures include:

• Accounting Policy: Updated wording to describe how leasing agreements that transfer substantially all risks and rewards incidental to ownership are treated as finance leases. Assets held under finance leases are recognized initially at fair value or the present value of minimum lease payments.
• Critical Areas of Judgement: Additional wording may be required if the judgement of whether leases are operating or finance leases is deemed critical.
• Tangible Fixed Assets: Disclosure of the type and amount of assets held under finance leases within the tangible fixed asset note.

These model disclosures help ensure transparency and consistency in financial reporting for academy trusts that utilise finance leases.

Novel, Contentious and Repercussive Transactions

In addition to this, the DfE have also published good practice guidance for colleges and academy trusts on novel, contentious and repercussive transactions. Whilst not an exhaustive list, the guidance provides both academy trusts and colleges with further considerations of the requirements based on a series of fictitious examples.

Each case must be carefully considered based on its own specific facts. The illustrative examples highlight the types of factors that you will need to consider, rather than provide definitive advice on the cases you may have to consider.

The full guidance can be found here.

Fraud and Cyber Ransoms

Finally, in line with the Academy Trust Handbook update for Cybercrime section 6.14. The DfE have also added a new section to the Framework and guide for External Auditors titled ‘Fraud and cyber ransoms’ to check that academy trusts have complied with the requirements set out in the Academy Trust Handbook relating to fraud reporting and cyber ransoms, taking appropriate action to meet DfE’s cyber security standards, which were developed to help them improve their resilience against cyber-attacks.

If you have any questions on the AAD changes or the guidance on novel, contentious and repercussive transactions please contact us.