Academy Accounts Direction 2020/21 – Supplementary Bulletin
Summary of key points
The ESFA has released a Supplementary Bulletin to Academy Accounts Direction 2020/21 which provides guidance to Chief Finance Officers, Accounting Officers, trustees and external auditors on matters arising from the Covid-19 pandemic.
The bulletin which is available here has the same status as the AAD in that compliance is mandatory for all open academy trusts.
These notes aim to summarise the key points – please refer to the bulletin for its full wording.
Procurement policy notes and value for money
Under Public Procurement Policy Note PPN 04/20, academy trusts were given consent to make payments for supplies in advance of need where its accounting officer was satisfied that a value for money case was made by virtue of securing continuity of supply of critical services in the medium and long term. Examples of such costs have included exam fees, catering services, swimming baths etc.
The PPN expired on 31 October 2020 but it was followed by further guidance issued by DfE in February 2021 which gave consistent guidance. Hence, the same principles continue to apply.
It is important that trusts retain a trail of the decision-making process, including documentation so that this can be reviewed as part of the regularity audit.
In their Value for Money review within the annual financial statements, the Accounting Officer must explain where they have acted to support suppliers during the year. They must also explain any situations where Covid-19 has adversely impacted on value for money.
Reporting accountants such as BHP need to consider how the Procurement Policy guidance has been applied by the trust as part of their regularity audit testing.
Trustees Annual Report
Your 2019/20 trustees report will have included details of the impact of Covid-19, but these should be updated to reflect the particular challenges experienced during 2020/21.
Academies Accounts Direction 2020/21 has provided more detailed guidance about the contents of the financial review section of the trustees’ report. One requirement is to explain the impact of Covid-19 on the trust’s finances.
If the pandemic has created any uncertainties about the trust’s future finances, these should be explained in the trustees’ report. This includes non-educational activities such as a sports centre and those which are operated through a subsidiary of the trust.
The governance statement should include consideration of
- the effect of Covid-19 on the governance arrangements during the year; and
- the suitability and effectiveness of the trust’s risk and control framework in the light of the pandemic.
During 2020/21, trusts have continued to receive a range of additional funding from ESFA in relation to Covid-19 and brief notes of the main sources are included in Annex A to the Supplementary Bulletin.
As in 2019/20, this funding needs to be disclosed in the financial statement note about funding for educational operations.
This must include disclosure of the amounts received in relation to Catch-up Premium and Coronavirus Job Retention Scheme, regardless of materiality. Trusts must also disclose the costs incurred in relation to these two funding streams as a footnote to the income note.
Other Covid-19 funding streams which are material must also be disclosed separately but the non-material streams can be shown as either “Other (DfE/ESFA) Covid-19 funding” or “Other Covid-19 funding” as appropriate.
An illustrative funding note is provided in the Supplementary Bulletin.
Income and expenditure in relation to these funding streams will be recognised in the accounts under basic accounting principles. If you would like guidance on this in relation to a particular funding stream, please ask one of your usual academy contacts at BHP.
Free school meals support through the national free school meals voucher scheme will not be included in the financial statements because the trusts were only acting as facilitators for its distribution. However, trusts could disclose their involvement in the scheme within the trustees’ report.
Accounting for laptops and other devices
During 2020/21, trusts have received laptops and other devices from DfE and, in some cases, from other sources, to support disadvantaged students.
The accounting treatment for these devices depends initially on whether the trust is acting as principal or agent in the transaction. From our experience, they have generally acted as principal because they have had discretion over how the devices are used, and this applies to the DfE scheme. However, there may be other schemes where the trust has acted as agent and this can be determined by the terms and conditions of the particular scheme.
When acting as agent, the details should be included in the same agency note as 6th Form bursaries.
When acting as principal, the value of the devices should be recognised as notional income. The accounting treatment of the matching notional cost depends on the arrangements under which the devices have been made available to students.
- If they have been given/donated to students, the notional cost will be included as an expense in the SOFA.
- If they have been loaned to students or retained by the school for use in classrooms, the devices should be capitalised as fixed assets (subject to the trust’s own capitalisation policy) and depreciated over their expected useful lives.
The devices should be initially recognised at their ‘fair value’ – from our experience, trust IT managers can provide a suitable estimate of this.
If you would like to discuss any of the points in these notes, please contact one of your usual academy contacts at BHP.
We have produced similar notes of the key changes in the Academy Accounts Direction 2020/21.