Changes to Academies Accounts Direction 2024 to 2025

The Department for Education (DfE) has released the Academies Accounts Direction (AAD) for accounting periods ending on 31 August 2025.

While the overall structure remains consistent, there are specific updates that academy trusts must be aware of.

The key points are:

The closure of ESFA on 31 March 2025 and transfer of functions to the Department of Education is now reflected in the AAD, Model accounts and the Framework and guide for external auditors and reporting accountants where all references to the ESFA have been replaced by references to the DfE.

Focus on clarity and consistency:

• This year’s direction emphasizes clarifying existing responsibilities rather than introducing numerous new requirements. This aims to promote greater consistency in reporting. Emphasis on clearer and more consistent reporting means that the academies will need to pay close attention to the details of their financial statements. This will require meticulous record-keeping and a thorough understanding of the updated guidelines.

Finance leases

• The direction now addresses DfE-approved finance leases. It provides guidance on accounting for those leases in accordance with FRS102 section 20.
• Academy trusts utilising these leases must include a specific accounting policy in their notes to the financial statements, detailing the treatment of these leases.
• Academies will need to ensure their accounting policies and financial statement notes accurately reflect the treatment of these financial leases, potentially requiring new internal accounting procedures.
• Auditors will need to pay close attention to how academies are accounting for finance leases, ensuring compliance with both FRS102 section 20 and the DfE’s specific guidance.

Non-financial and sustainability reporting

• For larger academy trusts (those with income exceeding £500 million and at least 500 employees), there’s a requirement to include a non-financial and sustainability information statement within their strategic report, as mandated by the Companies Act 2006.
• Even for smaller trusts, there’s a growing trend of including environmental impact details in line with the strategic goals. This will require academies to gather and report on data related to their environmental impact.

Supporting documents

• Alongside the AAD, the DfE has also published updated versions of the Academies Model Accounts which provides a visual guide for preparing financial statements and The Framework and Guide for External Auditors and Reporting Accountants which outlines auditor obligations and regularity review requirements.

Enhanced regularity reporting

• There are updates regarding how auditors report irregularities, particularly “matters of material significance”. This could lead to increased reporting from auditors directly to the DfE.

Key considerations for Academy Trusts:

• Ensure that financial reporting aligns with the updated guidance, particularly regarding finance leases and sustainability reporting
• Maintain close communication with external auditors to ensure compliance

It is important for academy trusts to read the official documents published by the DfE to ensure full compliance. The AAD; Framework and Guidance for Auditors; Model Accounts (Coketown model) and any Supplementary bulletins can be accessed via the gov.uk website: Academies accounts direction and submitting your audited financial statements – GOV.UK