Part 4: Annual accounts and external audit
How academy trusts must report on their finances to give assurance to Parliament and the public about the use of resources.
4.1 The academy trust must maintain adequate accounting records and prepare an annual report and accounts in line with the Charity Commission’s Statement of Recommended Practice (SORP) and ESFA’s Accounts Direction.
4.2 The accounts must be audited.
4.3 The accounting period of an academy trust will end on 31 August.
4.4 The audited report and accounts must be:
- submitted to ESFA by 31 December
- published on the trust’s website by 31 January
- filed with Companies House by 31 May
- provided to every member and to anyone who requests a copy.
Find out more about:
- preparation, audit and submission of your annual accounts in the Accounts Direction and Charites SORP
- the requirement to submit an annual confirmation statement to Companies House.
Appointment of external auditors
4.5 Academy trusts must appoint an auditor to give an opinion on whether their annual accounts present a true and fair view of the trust’s financial performance and position (appointment being by the members, other than where the Companies Act permits the trustees to appoint) and, as reporting accountant, provide a regularity assurance conclusion. Trusts should retender their external audit contract at least every five years and must consider the relevant points in 4.15 when evaluating.
4.6 The audit contract and regularity engagement must be in writing and must not cover other services. If additional services are purchased, a separate letter of engagement must be obtained specifying the work and the fee.
Find out more about choosing an external auditor.
Removal of external auditors
4.7 The letter of engagement must allow for removal of auditors, before the expiry of the term of office, in exceptional circumstances. Proposals to remove auditors must require a majority vote of the members, who must provide reasons for their decision to the board. There must be a requirement in the letter of engagement for the auditors to provide the trust with an explanation within 14 calendar days if the auditors resign.
4.8 The board of trustees must notify ESFA immediately of the removal or resignation of the auditors. For removal, the trust must notify ESFA of the reasons, copying to ESFA any statement received from the auditor on this matter. For resignation, the trust must copy to ESFA an explanation from the auditors. A change in auditor at the expiry of their agreed term of office does not require notification to ESFA.
Group auditors and sector account
4.9 DfE will consolidate each academy trust’s accounts into a sector annual report and accounts (SARA). As each trust is a component of the SARA, the trust must prepare the financial information requested by DfE for this purpose.
4.10 Academy trusts’ auditors will be required by DfE to audit certain information, and this requirement should be incorporated within the terms of engagement.
4.11 The NAO must reach an opinion on regularity for ESFA’s own accounts, and for this will draw on the regularity conclusions of trusts’ auditors.
Find out more about the academies sector annual report and accounts.
Accounting officer's statement
4.12 An accounting officer’s statement on regularity, propriety and compliance must be included in the academy trust’s annual accounts. This is a declaration by the accounting officer that they have met their responsibilities to Parliament for the resources under their control during the year.
Auditor's review of regularity
4.13 A review of the accounting officer’s statement must be included within the remit of academy trusts’ external auditors. The auditor’s conclusions on regularity must be addressed jointly to the trust and ESFA.
Find out more about the accounting officer's statement and review of regularity in the Accounts Direction.
4.14 The board of trustees, taking advice from the audit and risk committee, must ensure there is an appropriate, reasonable and timely response by the trust’s management team to findings by external auditors, taking opportunities to strengthen systems of financial management and control.
4.15 Specifically the audit and risk committee must:
- review the external auditor’s plan each year
- review the annual report and accounts
- review the auditor’s findings and actions taken by the trust’s managers in response to those findings
- assess the effectiveness and resources of the external auditor to provide a basis for decisions by the trust’s members about the auditor’s reappointment or dismissal or retendering. Considerations may include:
- the auditor’s sector expertise
- their understanding of the trust and its activities
- whether the audit process allows issues to be raised on a timely basis at the appropriate level
- the quality of auditor comments and recommendations in relation to key areas
- the personal authority, knowledge and integrity of the audit partners and their staff to interact effectively with, and robustly challenge, the trust’s managers
- the auditor’s use of technology
- report the committee’s conclusions annually to the board of trustees and members, including recommendations on the reappointment or dismissal or retendering of the external auditor, and their remuneration.