Mid-year audits could stop academy failings going on public record

Academies minister Lord Agnew has written a letter to auditors of and accounting officers at academy trusts, saying that mid-year financial audit reviews would avoid failings going onto the public record.

This would gives management teams the time to resolve the issues before the accounts have to be signed, the letter says.

Agnew says that management letters - which must be signed to confirm an academies finances are accurate - are being increasingly used these to help inform the DfE assess the quality of governance and control frameworks in trusts.

The letter says: "If you identify serious concerns about an academy trust, we would always encourage you to speak to us early in the process. Whilst this is a matter for your professional judgment, there may be rare occasions where delay, and reliance on the standard channels for reporting audit findings, runs the risk of significant irregularity or impropriety.

"At the other end of the spectrum, whilst management letters containing no recommendations can be a sign that a trust’s financial management and governance is in good shape, we will still look at these cases for indications of concern elsewhere. We will consider the volume and nature of adjusted and unadjusted errors that you report, to gain an insight into the quality and rigour of the trust’s financial accounting procedures.

"We are particularly concerned where we see issues raised in one year that remain unresolved in the following year. Our view is that a simple way to avoid these failings going onto the public record is through mid-year audit reviews. This gives management teams the time to resolve them before the accounts have to be signed. Siren voices that complain about the cost of this action should be cause for concern in itself. Normally the failings identified will have a cost well in excess of an audit review. The sooner they are rectified the less risk and cost to the trust."

The letter says that the DfE will be bringing a sharper focus on governance including the need for financial statements, under ISAs700 and 720, to state explicitly that the trust’s governance statement has been reviewed and whether it is materially inconsistent with the financial statements or knowledge obtained during the audit.