Academies Accounts Direction 2019 to 2020 – supplementary bulletin for COVID-19
The Education and Skills Funding Agency (ESFA) have released a supplementary bulletin to the Academies Accounts Direction (AAD) 2019 to 2020 released in June. This bulletin introduces a number of requirements which academy trusts must comply with and is there for the ESFA to draw further information from trusts on matters arising from the COVID-19 pandemic which will have impacted on your 2019-20 accounts.
So, what additional requirements are included in the bulletin?
The bulletin makes it clear that any COVID-19 income and expenditure will fall under the scope of the regularity audit however, the ESFA is not seeking any additional assurance from the auditors.
However, as a trust you should be prepared for your auditors to request to see audit evidence which supports any income or expenditure relating to COVID-19.
Your auditors will be considering the following:
- Capacity – How much impact was there on the Trust? Where alternative procedures were required, are they reasonable under the circumstances?
- Proactivity – when were issues identified? Before or after ESFA advice? Was advise sought from professional advisors or other Trusts?
- Reaction – Was retrospective action taken after an event (if appropriate – for example where later guidance clarified a situation)?
- Evidence – is there full documentation around the decision making progress?
Has your trust retained a documented trail of its decision-making process, including the rationale for the decision(s) and details of those employees, trustees and advisors involved?
This will be vital information for you auditors to have sight of and if you have not already, work needs to begin now on collating this evidence. Without this how can the auditor assess whether the payments or income is irregular or not?
Procurement and value for money
PPN 02/20 (released in March and April) and PPN 04/20 (released in June) were key documents released by the Cabinet Office to granting trusts consent to make payments (Within limits) outside of normal Managing Public Money rules. This consent is only granted where the trust’s accounting officer is satisfied a value for money case is made by virtue of securing continuity of critical services in the medium and long term.
Application of these notices will be assessed as part of any regularity testing performed by the auditors. As stressed above, documentation is vital here and trusts should have records of all decisions made during the pandemic including value for money assessments.
We would recommend that the PPNs are used as a checklist to collate supporting documentation around the decisions made at the time. For example:
- How did you assess the supplier was at risk? Document your discussions, place on file evidence provided by them.
- How were you satisfied the supplier has not received any other funding? For example, from the Coronavirus Job Retention Scheme.
- Was there a variation to your contract? Provide a copy of this.
- If making a claim for exceptional COVID-19 costs, do you have a forecast which shows your trust’s financial positioning worsening as a result of the costs incurred and hence you can make the claim?
- Did certain decisions require Trust Board consultation? Provide evidence of these discussions.
In addition, accounting officers will be expected to reflect where the PPNs have been applied in their value for money review which is included in the governance statement. Trusts should explain any situations where COVID-19 has adversely impacted on value for money.
Trustees will need to be aware that it will be important to provide users of the financial statements with information about material decisions made during the pandemic.
Below is a table of areas trustees may wish to consider covering when preparing their 2019/20 trustees report and the expected location of these comments in the report.
|Area to cover||Location||Sub-location|
|The impact of the virus-related control measures on any wider network of which the academy trust is a part and how this affects the academy trust’s operations||Structure, governance and management||Related Parties and other Connected Charities and Organisations|
|Explaining how the contribution of volunteers, where appropriate, assisted the academy trust in its work in managing in the changed circumstances||Objectives and Activities||Objectives, Strategies and Activities|
|Explaining how the virus control measures affected their activities and achievements||Achievements and Performance||N/A|
|The impact on the academy trust’s ability to fundraise and how the trustees managed this situation||Achievements and Performance | Fundraising||N/A|
|How the outbreak of the virus has affected staff, volunteers and beneficiaries (such as the academy trust’s pupils) and the implications for the academy trust’s operations and activities for the coming year||Achievements and Performance||Promoting the success of the company|
|Explain any financial uncertainties regarding the academy trust’s financial sustainability and consideration of going concern and the steps being taken to address these uncertainties||Achievements and Performance | Financial Review||Going Concern|
|Any impact on the academy trust’s reserves policy, level of reserves and any change to funds set aside for future commitments||Financial Review||Reserves Policy|
|Any implications for any existing or potential defined benefit pension liability and investments the academy trust holds||Financial Review||Financial Review | Investment Policy|
|How the financial and operational effects of the virus and the control measures relating to the virus affected the principal risks and uncertainties facing the academy trust during the reporting period||Financial Review||Principal Risks and Uncertainties|
|The likely impact of the virus control measures and potential duration of the control measures on the future aims and activities of the academy trust||Plans for future periods||N/A|
Where trusts have received (or is yet to receive) funding for exceptional COVID-19 costs then this is to be disclosed as a separate line in the financial statements under the other grant income headings.
In addition, if the trust has also received Coronavirus Job Retention Scheme support then this must also be included in the same location.
Trusts should ensure this grant income is clearly identifiable on their trial balances so the auditors can clearly identify these for disclosure.
In addition, some narrative as to why the funding was received (or is yet to be received) must be disclosed in the financial statements. There is no need to split out the costs incurred as a separate line, but a schedule detailing the costs alongside supporting paperwork will prove valuable to the auditors. Remember, documentation is key.
If the trust receives any other funding to support its COVID-19 response then this must be disclosed as “other coronavirus funding” with some narrative describing its purpose.
National free school meals support
Those trusts who used the national free school meals voucher scheme will not have to make any disclosures around this as they merely acted as a facilitator for the distribution of the vouchers to parents of eligible pupils.
However, those that used an alternative scheme, due to issues surrounding the scheme at the time, will be claiming these costs back under the “exceptional costs” heading.
The ESFA do however state that some trusts may wish to include some narrative around their involvement in the scheme as part of the trustees’ report – try to avoid criticism here!!
The bulletin does not cover other funding such as the COVID-19 Catch-up Premium as this relates to costs incurred for 2020/21.
Therefore any pre-31 August 2020 costs connected to this funding should be treated as a prepayment in your financial statements so that the costs match the funding in 2020-21.
Overall the impact should be minimal to you but a great deal of time will be required in writing the Trustees Report and documenting your decisions for COVID-19 expenditure and income.
We strongly suggest work commences on this as soon as possible so that everything is in good order for your auditors when they undertake their fieldwork.
This is your opportunity to explain the accounts and how you as a trust reacted so well to COVID-19.
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