Budget Forecast Return – deadline extended and major changes for academies

Last updated 5 June 2020

The ESFA announced today that the deadline for academy trusts to submit their Budget Forecast Return 3 Year (BFR3Y) has now been extended from 30 July 2020 to 29 September 2020 due to the impact COVID-19 is having upon educational establishments. This will come as welcome news to many Academy Trusts who have only just finished or are still finalising plans to re-open for more pupils within health and safety guidelines. We know all too well from our client base that many CFOs have been involved in these plans/discussions and therefore unable to focus on some of their day to day tasks around this time of year such as the Budget Forecast.

In addition to the extended deadline, the ESFA have also announced some key changes to the BFR3Y, these are namely:

• removing the need to submit forecasts for academic years 2021/22 and 2022/23 for this year only
• including 8 summary revenue fields for 2018/19

The removal of the need for forecasts will be a welcome relief as many academy trusts would struggle looking into their crystal ball in the current climate to pre-empt what might be next for schools and indeed the whole country. However, it should be noted this “relief” is only for one year and the requirement to include forecasts will return for the 2021 BFR3Y.

In view of the lack of requirement to produce a forecast, the ESFA still require some information to enable them and the Treasury to assess the future for schools. This is where these additional summary revenue fields come in.

The new summary revenue fields will allow u\the ESFA to understand the financial position of trusts before and after school closures. The ESFA will then use this information to review financial trends in the sector and to supply HM Treasury with a financial forecast for the next year.

Audit impact and Academies Financial Handbook compliance

However, before trusts etc get too excited by the news that forecasts are not required, it is worth reminding academy trusts that your external auditors require sight of budgets and forecasts to enable them to assess going concern for a period of 12 months from the date of signing the accounts. That timeline is the key element here….”12 months from the date of signing”  i.e. not 12 months from 31 August 2020. External auditors will therefore need to see forecasts covering this period, particularly if your trust is struggling financially to balance budgets. Therefore at the very least a forecast produced to the end of 31 December 2021 would assist in covering the post balance sheet period before accounts are signed.

In addition, in their announcement, the ESFA have included the comment “Please note that all academy trusts must still compile longer-term forecasts for their own internal financial planning as required in the Academies Financial Handbook (section 2.11).” Therefore best practice and compliance with the Academies Financial Handbook would be to still continue to produce forecasts as best as possible and this would certainly be welcomed by your external auditors as well as being Kreston Reeves’ recommendation.

Further details regarding the BFR3Y can be found here on the ESFA website.

If you would like to discuss the impact of this announcement further then please do get in touch with one of our academies team.