COVID-19 AAD overview

The addendum to the 2020 Academies Accounts Direction has now been released by the ESFA, and it supplements the existing Academies Accounts Direction with reference to the impact of COVID-19. 

What is the impact of this addendum?

Trustees Report
First there is the impact of the Trustees Report. Whilst COVID-19 does not in itself change the headings or sections in the report, it will without a doubt impact on what you have to report upon. The COVID AAD is not 100% prescriptive, but does give some suggestions for areas to focus on including:

• In reporting the activities for the year it is expected there will be significant mention of the impact of COVID-19.
• Explaining the financial implications, including any impact on the going concern assessment.
• The impact on fundraising activities.
• The impact on staff, volunteers and beneficiaries (pupils).
• Impact on your reserves policy (consider if designated funds may be required for future costs to be funded from reserves).

Governance statement

• It is clear that the application of the PPN may have had an impact on the academy trust. It is noted that the Accounting Officer MUST reflect on cases where PPN has been applied within their Value for Money Statement. They should also explain where any situations where COVID19 has adversely impacted on the trust being able to achieve value for money.

Accounting considerations
The impact on accounting considerations is relatively minor, with income expected to be recognised for additional grants where there is entitlement, it is probable, and it can be reliably estimated at the year end. For example any claims for additional costs where you are confident it is a valid claim should be recognised in the year, even if it is not received at the year end.

Where there are additional government grants, such as the exceptional costs and furlough grants, these should be separately disclosed in the accounts. The note (note 4 of the AAD) which details educational income between the ESFA, the local authority, and other sources will include this additional analysis. 

Regularity audit work
As we expected, the ESFA have not been prescriptive in their approach to COVID-19 costs. Instead it will be left to the auditors to decide on the level of work required. That said, the ESFA have made it clear that they would expect items such as PPN payments to be within the scope of regularity testing. It is therefore essential that all records of decisions made and rationale behind them is clearly kept by the academy trust. As auditors we will focus on the decisions made and the governance around such decision making. 

When considering our specific regularity work, the main factors we will consider will be:

• Capacity – How much impact was there on the Trust? Where alternative procedures were required, are they reasonable under the circumstances?
• Proactivity – when were issues identified? Before or after ESFA advice? Was advise sought from professional advisors or other Trusts?
• Reaction – Was retrospective action taken after an event (if appropriate – for example where later guidance clarified a situation)?
• Evidence – is there full documentation around the decision making progress?

Overall impact of COVID-19 AAD
Overall the impacts on your year end accounts will be fairly minimal to Trust – but remember to use your Trustees Report to explain your Trust to anyone reading the accounts. It’s your opportunity to explain the accounts and all about your Trust and we expect that COVID-19 will be a significant element in most Trustees’ Reports this year.

For further reading please read the full release here.