NAO gives ‘qualified’ opinion on DfE’s first academies accounts

NAO gives 'qualified' opinion on DfE's first academies accounts

The Department for Education’s first consolidated annual report and accounts for the academies sector has been met with a “qualified” opinion by the National Audit Office.

Sir Amyas Morse, the comptroller and auditor general at the NAO, has found that despite improvements on previous years, the DfE was unable to provide “adequate evidence” about the £45 billion of academy land and buildings included in the accounts.

A qualified opinion is provided by auditors when the information provided to them is too limited in scope.

This is the first time the DfE has prepared separate accounts for the academies sector, instead of consolidating them into its own accounts.

The department was prompted to put together the new report by ongoing problems with rolling the accounts of more than 3,000 academies into its main accounts.

Although the DfE has “significantly improved” the timeliness and quality of its financial reporting and made “good progress” in addressing issues relating to accounting for land and buildings, “significant weaknesses remain”, the NAO said.

“The Department is unable to provide me with sufficient, appropriate evidence that the carrying value of the academy trust land and buildings it has recognised is a materially accurate reflection of the fair value of the underlying estate,” said Morse.

He had noted “a number of weaknesses” in the department’s approach to valuing its land and buildings in his report on the 2015-16 departmental accounts.

“The department has made good progress in addressing these issues for the 2015/16 Academy Sector Accounts. It has reviewed its valuation methodology and strengthened its controls over its professional valuation process.

“However, significant weaknesses remain, particularly around the department’s processes to ensure that the asset valuations included in the accounts reflect the current condition of the sector’s estate.”

According to Morse, further improvements are needed if the DfE is to receive an unqualified audit opinion on future accounts.

“The introduction of the academy sector accounts has allowed the department to publish information on the academic performance of academies in the same document as the sector’s financial position for the first time,” he said.

“Further improving the timeliness and accuracy of the accounts will support more effective parliamentary scrutiny of how taxpayer’s money has been spent and what has been achieved.”

The department can also “make greater use” of the data it collects to “inform its oversight of academies” and help them improve their financial management, Morse added.

A spokesperson for the DfE said: “We will continue to work closely with academies and professional valuers to make sure we have the most accurate information on the value of their land and buildings. Although academy trusts are responsible for their own accounts, they are rigorously scrutinised according to strict rules.

“We are pleased that the National Audit Office has recognised the improvements that have been made to our accounting process and we will continue to work with academies to provide greater transparency over their finances and assets.”