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Phil Reynolds

Updates to the Academy Accounts Direction 2015

Phil Reynolds summarises the key changes to AAD2015 that academies need to be aware of

Posted by Stephanie Broad | August 17, 2015 | Law, finance, HR

Two versions of the Academy Accounts Direction 2015 (AAD2015) have recently been released – a SORP 2005 version and a SORP 2015 version. The SORP 2015 version will only apply to academy trusts incorporated after 1 January 2015 and therefore all existing academy trusts should not use the SORP 2015 for the 2015 accounts and audit season. However, we have included a summary of the main differences between the 2005 and 2015 version at the end of this article for future reference ahead of the 2016 accounts and audit season.

What’s new in the SORP 2005 version?


  • The auditor is now required to notify the National Audit Office (NAO) and EFA as soon as possible, following discussion with the academy trustees, if they are issuing either a qualified audit report or a modified regularity report – further details are included in section 9.3.9.


  • The governance statement re-emphasises that academy trusts must carry out a governance review in their first year and should, as a matter of best practice, also be doing this annually.
  • Key Change! The requirement to submit a separate Value for Money (VfM) statement to the EFA has now been removed. However, academy trusts must include a section discussing VfM in the governance statement of the financial statements. Further details can be found in section 4.2.5.

Financial reporting

  • Key Change! Non-contractual severance payments should now be disclosed on an individual basis regardless of value. No names are to be disclosed however. For example disclosure would be: “total non-contractual severance payments were £12,000. Individually these payments were £1,000, £6,000, £2,000 and £3,000.”
  • The AAD2015 has clarified that Trustee Remuneration includes employer pension contributions. Therefore Staff Trustees and the Accounting Officer will now have their pension contributions from the academy trust disclosed separately e.g. J Bloggs Remuneration £75,000 Employer’s Pension Contributions £12,000.
  • The AAD2015 includes a new section to help clarify the term ‘connected charities’ – this is section 8.3. The section states that the presence of a connected charity should be disclosed in the trustees report in all cases.
  • Key Change! Recognition of property (including church academies’ buildings) has been clarified with additional guidance. This states that recognition should follow the substance of the arrangement rather than its legal form. Further details can be found in section 8.7.5 and this is recommended reading for any church academies.
  • Section 8.9 is a new section that clarifies the accounting treatment of any academy combinations or dissolutions. It is more likely the dissolution part of this section will apply here, in particular where an academy leaves an existing multi-academy trust. In addition, the section also covers where an additional academy joins an existing academy trust. Again, this is recommended reading if this applies to your academy trust.
  • Key Change! Section 8.10 is another new section and discusses agency arrangements. This will apply to academy trusts who receive 16-19 Bursary Funding from the EFA. Disclosure of this arrangement will now be required and the undistributed funds will have to be included as a repayable amount to the EFA in creditors. This is quite a significant change and will mean academy trusts should ensure that they encourage pupils to apply for bursaries to avoid having funds repaid to the EFA. The guidance in this section also covers school trip and catering income. Therefore again, this is recommended reading to ensure your academy trust’s agency arrangements are correctly treated in the financial statements.
  • Section 8.11 clarifies that for those academy trusts who have opted into the EFA’s Risk Protection Arrangement (RPA), they must gross up their GAG income in the year where deduction has been made for the cost of this arrangement.

Other changes not highlighted by the EFA include:

  • Confirmation on page 13 that a link to the Companies House is not sufficient when publishing your academy trusts on the website

What differences are there between the SORP 2005 and SORP 2015 versions?

The Trustees’ report is required to contain sections on setting the pay and remuneration of key management personnel and reviewing reserves policies. In addition, the total employee benefits paid to key management personnel are to be disclosed in the financial statements. Academy schools will also have to accrue for holiday pay where it has not been taken at 31 August. The majority of schools will no doubt see their holiday run coincide with the financial period but those where this may not be the case will have to calculate the value of the amount owed and introduce this to their balance sheet – thus reducing the funds position at 31 August. Schools where this does apply may wish to consider amending their holiday years to 31 August to remove this adjustment having to implemented. Otherwise, the SORP 2015 version is as per the SORP 2005 version discussed above.

There has been some debate already as to who are the ‘key management personnel’ of an academy trust. Page 48 of the SORP 2015 version helps clarify this by stating the key management personnel are those disclosed in the Legal and Administrative pages of the financial statements – which is of course the Senior Management Team. No individual disclosure is required, just the total cost to the academy trust in the accounting period.

No confirmation has been made regarding submission of the audited accounts and auditor’s management letter other than this will be via the EFA’s Document Exchange and by 31 December 2015.

Both versions of the AAD2015 can be found here.

Phil Reynolds is Audit and Assurance Manager and Academies and Education specialist at Kreston Reeves LLP.    

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