Agnew: Mid-year audit reviews avoid academy failings being made public

The academies minister has suggested academy trusts take part in mid-year financial audit reviews to avoid “failings going onto the public record”.

In a letter sent to auditors and accounting officers of academy trusts, published today, Lord Agnew also warned auditors to ensure they are reporting on any issues discovered – threatening if not his department will take “appropriate action”.

External auditors must sign a management letter to confirm the accuracy of financial statements and flag any issues within them. Agnew said the DfE is increasingly using the letters to assess the quality of governance and control within the trusts, and said the expertise of auditors in writing the letters is “therefore vitally important for getting to grip with issues early”.

In the letter, Agnew suggested the best way to ensure errors in financial management do not have to be flagged by auditors in a trust’s annual accounts and “avoid these failings going onto the public record” is to warn trust leaders of any problems mid-year so they have “time to resolve them before the accounts have to be signed”.

He added: “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 said “comprehensive reporting” of areas of concern may involve “sensitive or difficult conversations” with a trust, but added it is “hugely beneficial” to trustees.

“Whilst a robust exchange of views between the client and auditor is healthy, it will be an immediate warning if trustees are in denial on material issues that you raise.

“If serious issues develop in a trust that are linked to previous audits, but they were not flagged in management letters, we will take any appropriate action open to us.”

He added that any “serious concerns” about an academy trust should be reported to the DfE early in the process, and warned that “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.”

The letter also said this year the DfE was bringing a “sharper focus on governance” in the academies accounts direction, and said the conclusions of auditors in the regularity report should “reflect any findings about trusts’ compliance with the Department’s governance requirements”.

Thousands of council schools have not had their finances independently scrutinised for more than five years, including three which were last audited by their local authority nearly 20 years ago, Schools Week revealed in December.