'Financial issues' threatened 90 academy trusts, auditors warned

DfE funding body says auditors found about 15 academy trusts where related party transactions were not 'at cost'

Martin George

The ESFA published a note outlining its “key assurance findings” from work it carried out in 2017-18.

Auditors raised concerns that financial issues could threaten the future of more than 90 academy trusts, new data from the Department for Education has shown.

The Education and Skills Funding Agency (ESFA) today published a note outlining “key assurance findings” from work it carried out in 2017-18, which included a review of academy trust financial statements, funding audits and financial management and governance returns.

It breaks down the reasons auditors gave for raising concerns about 2016-17 academy trust accounts.

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A graph in the document shows that in just over 90 cases, auditors gave an “emphasis of matter” in the category of “going concern – financial issues”.

An emphasis of matter is a way of flagging up important issues within accounts. It is used when something in the accounts is "appropriately presented or disclosed in the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental to users’ understanding of the financial statements".

And the ESFA note shows there were about 80 cases where auditors gave an emphasis of matter in the category “going concern – transferring”, meaning the academy trust was due to be transferred to another trust.

The document says that there was a “significant increase” in emphasis of matter opinions.

It adds: “The main increase in emphasis of matter opinions was due to ‘going concern’ as a result of the trust closing within in the following 12 months.”

Auditors also have to provide an "assurance report on regularity" for an academy trust's accounts.

Today's ESFA note outlines the number of times it found auditors had raised different types of concerns about regularity, propriety and compliance.

In about 15 cases, the auditors said that related-party transactions were not at cost, breaching government rules.

The report says that the top three reasons that auditors raised concerns were: non-compliant procurement practices, weak internal control arrangements, and inadequate financial management and reporting arrangements.

This was "consistent with the previous year".

The report adds that non-compliant procurement practices included "trusts unable to demonstrate goods and services procured ‘at cost’, non-compliance with own procurement procedures including single supplier arrangements, urgent purchases and sponsor procurements”.

The report also notes a slight increase in the percentage of accounts received by the 31 December deadline – rising from 93 per cent in 2015-16 to 94 per cent in the following year.

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Martin George

Martin George

Martin George is a reporter at Tes

Find me on Twitter @geomr

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