Academy trusts: key findings from the Department for Education assurance report

The Department for Education’s (DfE) latest report on common issues identified in their assurance work suggests that financial governance across the academy sector remains strong. But beneath the encouraging headline figures are some recurring issues that academy trusts should not overlook.

Many relate not to complex matters, but to the fundamentals of good governance: timely financial reporting, effective internal controls, related party transactions and oversight of risk.

So, what can trustees and finance teams take from the findings?

The overall picture is positive

Almost 97% of academy trusts submitted their 2024/25 audited financial statements on time, up slightly from the previous year. The proportion receiving a qualified audit opinion remained low at just 0.6% with the qualifications mainly being due to the accounting treatment of land and buildings, followed by local government pension scheme actuarial valuations.

There was also a fall in ‘material uncertainty’ or ‘emphasis of matter’ opinions, from 13.4% to 10.7%. Most of these related to trusts closing or transferring to other trusts or to financial health issues.

Modified regularity conclusions also fell slightly, from 7.9% to 7.6%. However, the reasons behind those conclusions highlight some familiar areas where academy trusts can encounter problems.

Familiar governance issues remain

The most common reason for a modified regularity conclusion related to internal financial reporting. Issues included the production and distribution of management accounts, weaknesses in internal controls and trusts not meeting website publication, GIAS reporting and DfE submission requirements.

Related party transactions were the second most common area. The report identified cases where transactions had not been reported to the DfE in advance, or where prior approval had not been obtained for transactions over £40,000. It also highlighted failures to manage conflicts of interest appropriately.

A notable new entry in third place was human resources and payroll. Issues included off-payroll expenditure for chief financial officers or chief executive officers, as well as trusts operating without an accounting officer or chief financial officer in place.

What is perhaps most striking is that many of these findings relate to routine compliance matters and disciplines of good financial governance, rather than unusual or highly technical problems.

Effective oversight matters

This theme is also evident in the DfE’s financial management and governance reviews. Overall, the findings were encouraging: 98% of trusts reviewed were assessed as making at least satisfactory progress towards compliance with the Academy Trust Handbook.

However, the report identified several areas where trusts could develop their arrangements further. These included establishing an audit and risk committee, delivering an appropriate internal scrutiny programme, overseeing the implementation of recommendations and regularly reviewing the risk register.

Taken together, these findings underline the importance of effective oversight. Having appropriate policies and processes in place is only part of the picture. Trustees also need assurance that controls are working in practice, recommendations are being acted on and risks are being identified and managed.

The DfE also identified areas for improvement through the schools resource management self-assessment checklist. The main areas where trusts did not self-assess themselves as compliant were in respect of not publishing the number of employees whose total benefits exceeded £100,000 on the website and being unable to confirm that there were no outstanding matters raised from audit reports.

A useful prompt for academy trusts

The findings are reassuring about the overall strength of financial governance across the academy sector, but they also show how relatively routine processes can result in compliance issues when they do not work as intended.

For academy trusts, the DfE’s findings are a useful reminder to look again at internal controls, compliance and risk requirements.

The full Department for Education assurance report provides further detail on the findings.

If you would like to discuss any of the themes raised in the report and what they could mean for your academy trust, please contact us.