On 26 March 2025 the Department for Education (DfE) published the academies accounts direction 2024 to 2025.

The latest accounts direction provides guidance for academy trusts preparing their annual accounts for periods ending on 31 August 2025 and is published alongside a model set of accounts and a framework and guide for external auditors working in the sector.

There are no significant changes in the latest direction compared to prior years, and the amendments for 2025 relate to disclosure additions or clarifications as set out below:

• Academy trusts are already required to include a strategic report in their accounts setting out their achievements and performance and explaining compliance with the Companies Act 2006. The latest accounts direction confirms that for academy trusts with income of over £500 million and at least 500 employees a non-financial and sustainability information statement should be included within the strategic report as required by the Companies Act 2006. Whilst this requirement will not apply to many academy trusts, those trusts who are large companies under the Companies Act 2006 will still need to report their energy usage under the streamlined energy and carbon reporting provisions, as has been the case for a number of years. We are also seeing a shift in reporting in the charity sector in general where many entities are choosing to include additional details of their environmental impact in line with their strategies in this area.
• Under the Academy Trust Handbook 2024, academy trusts have delegated authority to enter into certain finance leases, which should then be accounted for in accordance with Financial Reporting Standard 102 (FRS102). The 2025 accounts direction now suggests accounting policies for finance leases to be included in the notes to the accounts, and highlights the FRS102 requirement to state the net book value of assets held under finance lease in the accounts, and the expected disclosures within the creditors note and cash flow statements. Whilst these disclosure requirements are not new concepts, it's helpful to see them explicitly referenced in the direction. It's expected that future versions of the direction will include more guidance on leases to align with the changes in UK accounting standards which will apply to academies’ 2027 financial statements.

There are also no major changes to the DfE’s framework for external auditors, however some additional guidance is now included around how auditors report irregularities identified during their work, and in particular if “matters of material significance” are identified. This is a Charities Act 2011 concept and whilst there have been no significant changes to the Charity Commission principles, the DfE’s framework now explicitly notes that auditors have a duty to directly report such matters to the DfE (the principal regulator for the sector). This could lead to an increased level of reporting from audit firms directly to the DfE, in addition to any regularity breaches identified during their work, where direct reporting remains discretionary in some cases.

Other amendments to the DfE’s framework for external auditors relate to changes which should be incorporated in the annual letter of engagement between academy trusts and their auditors, and minor updates to the types of tests auditors may carry out in support of their regularity assurance work. These suggested tests now explicitly include consideration of whether an academy trust has correctly dealt with unspent grant funding where it is required to be declared or repaid to the DfE, and reference to the reporting requirements relating to fraud and cyber ransoms.

Please feel free to get in touch if you would like to discuss any of these changes or require support with your year-end process.