Key findings from the DfE’s 2024 - 2025 Assurance Work
The Department for Education (DfE) has published its latest report outlining common issues identified through its 2024 - 2025 assurance programme. This annual review provides valuable insights into the financial health, governance and compliance of academy trusts across England, and is aimed at both trusts and their auditors.
In this blog, we take a look at the key findings.
Key themes and findings
1. Review of academy trust financial statements
- Submission rates: Nearly 96% of academy trusts submitted their 2023 – 2024 financial statements by the 31 December deadline, which is a slight improvement from the previous year, despite the main reasons given for delays continuing to be closed trusts not submitting accounts as part of their closure process and trusts in intervention missing the deadline.
- Qualified opinions: 6% of financial statements received qualified audit opinions, primarily due to issues with Local Government Pension Scheme (LGPS) valuations. This is up from 0.4% in the previous year. Although the number of qualified opinions due to LGPS valuation has more than doubled from five to 12, the exact reasons leading to the qualifications were not given. However, one issue that has become much more prevalent in recent years has been around whether to recognise a net surplus as an asset (and, if so, at what value), whilst other issues might be caused by asset valuation reports not being obtained or not being obtained to the correct date. Whilst the pension figures are likely to be amongst the largest in the accounts, the nature of the schemes means that their impact on trusts’ financial health is perhaps not as direct or immediate as other figures and so a qualification in this area, whilst still significant, should be considered through this lens.
- Emphasis of matter and material uncertainties: There was a notable increase in ‘emphasis of matter’ and ‘material uncertainty’ modifications to audit reports, rising to 13.4% from 9.9% in the previous year. The most common causes of these related to trusts closing or transferring, followed in second place by the presence of financial health concerns.
2. Regularity conclusions and compliance issues
- Modified regularity conclusions: 9% of trusts had modified regularity conclusions, broadly consistent with the previous year.
Common issues:
- Poor internal financial reporting, including:
- Management accounts missing key sections, simply not being produced at all or being produced but not shared with the board.
- Weak internal control frameworks.
- Fixed asset registers not being kept or updated.
- Non-compliance with related party transaction rules:
- Failing to report the trust’s intention to enter into related party transactions.
- Failure to seek prior approval for related party transactions over £40,000.
- Failing to manage conflicts of interest properly.
- Failing to maintain evidence that ‘at cost’ requirements had been complied with.
3. Internal scrutiny
- Compliance: The most common issue around the internal scrutiny report was, alarmingly, that no internal scrutiny had taken place.
- Quality and consistency: Of those trusts that did submit their reports to the DfE, it was noted that there was a wide range in quality across the board.
4. Financial management and governance reviews
- Overall compliance: 98% of reviewed trusts were rated as fully compliant, good or satisfactory. This is in line with the findings in the previous year.
Areas for improvement:
- Establishing effective audit and risk committees.
- Delivering robust internal scrutiny programmes, with oversight of implementation of recommendations.
- Monitoring budgets, including through the production of appropriate management accounts.
- Publishing registers of business and pecuniary interests on the trust website.
- Oversight of risk registers and executive pay decisions.
5. Academy funding audits
- Error rates: While overall error rates remain low, there was an increase in errors related to free school meals eligibility, affecting pre-16 funding, with trusts not retaining sufficient documentation to support eligibility.
- Early years census: New testing for this year revealed higher error rates in early years data when compared with school census data, particularly around attendance records and evidence of entitlement.
6. Schools resource management self-assessment checklist
- Submission rates: 87.8% of trusts submitted the checklist by the deadline, up from 84.7% the previous year.
- Validation findings: Most self-assessment checklists were found to be completed accurately, but some trusts were noted to encounter issues in areas such as:
- Trustees’ awareness of health and safety duties.
- Trustees not having clear plans for using trust balances.
- Trustees being able to confirm there are no outstanding audit matters.
The findings from the DfE’s assurance work are perhaps not that surprising when considered against the backdrop of ongoing changes to the sector as whole. While compliance levels are generally strong, recurring issues around the basics - internal scrutiny, related party transactions and other reporting - highlight the need for ongoing improvement and further attention from trustees and accounting officers.
Notably, these types of issue point to both a lack of awareness from finance staff and a lack of effective oversight from trustees, and so the starting point to rectify these errors should be a robust and honest root cause analysis, highlighting areas of ineffective or weak internal controls and individuals and teams who require additional training and support. This should cover every level of the trust right up to the trustees themselves, who should be suitably qualified, experienced and available to carry out the duties expected of them.
In some cases, it’s likely that limited, informal on-the-job training will be all that is required. In other cases, more formal training courses or qualifications might be the answer.
How can Mercia help?
Mercia offers a range of training courses and support products, including manuals, to aid compliance with the regulations. Mercia also provides a comprehensive technical query service for advice on your specific circumstances.