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Comptroller and Auditor General’s Report on the Department for Education financial statements 2013-14

Amyas Morse, the Comptroller and Auditor General, has provided an adverse opinion on the financial statements of the Department for Education. An adverse opinion indicates that he considers the level of error and uncertainty in the statements to be both material and pervasive. He has also qualified his opinion because the Department has exceeded one of its expenditure limits authorized by Parliament.

Today’s report comments on the financial management challenges faced by the Department and the impact this has on the ability of the Department and the Treasury to discharge their accountabilities to Parliament. Since 2012-13, the Department’s group financial statements have consolidated the financial statements of academy trusts, alongside those of the Department itself, its executive agencies and NDPBs. For 2013-14, there are 2,591 bodies consolidated into the group financial statements. This includes 2,585 academy trusts operating 3,905 individual academies.

The Department has a different reporting period from that of the academy trusts. The former must produce its financial statements by a year end of 31 March whereas the trusts have a year end of 31 August (to align with the end of the school year). This presents the Department with the significant challenge of preparing financial statements which provide a true and fair view of the financial activity for the period in question and the financial position at the end of that period.

The Department has chosen not to change the reporting period for the trusts. Nor has it requested a second set of statements to cover the period to the end of March on the ground that the extra resource needed would be better spent on providing education. Instead it has sought to prepare the group financial statements by using the academy trusts statements to the end of August and then making adjustments using centrally collated information where necessary. The Department has hypothesized that financial data for the year to the end of August, with the adjustments, would not be materially different for the equivalent to the end of the following March.

The Department has made improvements to the consolidation process but, with the number of academies growing by a further 1,082 during the year thereby increasing the amount of potential error in the extrapolation process, the C&AG considers that the approach adopted by the Department does not give a true and fair view of its financial performance or position. Furthermore, the approach does not provide the required accountability to Parliament. The C&AG has not, however, identified material inaccuracies in the financial statements of the individual bodies making up the group.

The C&AG has also qualified the financial statements of the Department because the Department has spent £166 million more than the Resource Annually Managed Expenditure limit authorized for it by Parliament. This breach was primarily down to the Department’s underestimating the increases to pension costs relating to the academy sector.

 

“I recognize the importance of not placing unnecessary additional burdens on the academy sector. But the inability of the Department for Education to prepare financial statements providing a true and fair view of financial activity by its group of bodies means that it is not meeting the accountability requirements of Parliament. In particular, I believe that, if the challenge posed by consolidating the accounts of so many bodies and the fact that so many have a different reporting period is to be surmounted, the Department and Treasury need to work together to find a solution.”

Amyas Morse, head of the National Audit Office

Notes for Editors

  1. The C&AG has also provided an adverse opinion on the Education Funding Agency group financial statements as academies were consolidated into the Agency financial statements.
  2. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained by using the relevant links on our websit
  3. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 820 employees. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.1 billion in 2013.

PN: 06/15