NAO: Academy regularity audit opinion would provide better assurance

The Comptroller and Auditor General (C&AG) to the Houses of Parliament has qualified his audit opinion on the Young People's Learning Agency (YPLA) 2011-12 financial statements.

The YPLA doesn't exist anymore, but there are a number of important messages for the Education Funding Agency (EFA) who took over responsibility for academy funding in April this year.

The YPLA's framework for providing assurance over the way that an academy spent public money was principally reliant upon the opinion issued by the external auditors and the review and inspection of academy Financial Management and Governance Evaluation (FMGE) self-assessment returns.

The C&AG noted that in 2011 21% of academy accounts were not filed on time. 54% of FMGE returns were also filed late. The assurance gap created was not deemed sufficient for modification of the opinion but the EFA has been asked questions over what they can do in future years as the number of academies and hence the assurance gap increases.

The report notes that the current assurance framework, which monitors compliance with the academy's funding agreement, is insufficient to allow for anything other than a qualified opinion over regularity of the spending of public money. This is due to the current funding agreements and accompanying Academies Financial Handbook not fully reflecting requirements for central government entities. In particular with the requirements of HM Treasury's "Managing Public Money."

Instead of the current audit opinion, which only covers funding agreement compliance, the CA&G recommends that the EFA should consider a standard regularity opinion on academy financial statements. This would need to be supported by a robust audit code to ensure that both the EFA and auditors have a common understanding of the work required to provide such an opinion.

Let's hope that lessons have been learned from previous guidance which has come to the table too late. Inconsistency in 2011 academy financial statements could be partly attributed to guidance in the 2011 Accounts Direction being issued on 31 August, the last day of the academy financial year. Any audit code, and new framework for academy assurance laid out therein, must come early enough to give academy auditors time to provide their staff with the skills needed to provide government with the levels of assurance they require.