Quarterly update for academies from the Department for Education (DfE)

Each week, the Department for Education (DfE) publishes information for academies on the GOV.UK website which lay out the latest updates, things to be actioned and reminders on previous updates. Previously these updates were from the Education and Skills Funding Agency (ESFA). On 1 April 2025 ESFA became part of the DfE with future news updates transferring to DfE.

All ESFA guidance should still be followed by academy trusts.

Below, our expert academies team has provided a round-up of everything you need to know from a financial perspective from January 2025 to March 2025.

January 2025

• Review of qualifications reform – The government announced the outcomes of the review, retaining 157 qualifications that were due to be defunded and confirming that T Levels are the primary technical route for 16 to 19-year-olds.
• Guidance on procuring SEND education placements and services – DfE published non-statutory guidance on procuring SEND education placements and services, to help providers understand how the Procurement Act will affect procurement of these services.
• General Annual Grant (GAG) allocations – DfE announced GAG allocation statements will be issued during March and April, these will be available on manage your education and skills funding (MYSEF). The GAG allocation guide 2025 to 2026 has also been published.

February 2025

• Care to Learn (C2L) and 16 to 19 bursary scheme changes – DfE published the expected C2L claim window dates and payments schedule for the revised C2L process. Arrangements are not yet finalised.
• Financial benchmarking and insights tool (FBIT) – FBIT now includes Academy Accounts Return Data from 2023 to 2024. This will allow trusts to benchmark against similar providers and identify areas for improvement. The dataset is much more up-to-date than previous DfE benchmarking information.
• Procurement Act 2023 - The Procurement Act 2023 came into force on 24 February 2025. This affects purchases academy trusts make over the public procurement threshold (currently £214,904 for goods and most services, and £5,372,609 for works - figures are including VAT). A procurement process that started before that date can continue to run under the old rules. Trusts are exempt from the below-threshold requirements of the new legislation. Meaning any purchasing below the threshold remains unchanged. DfE have published guidance on Transforming Public Procurement (TPP).

March 2025

• 16 to 19 funding arrangements 2025 to 2026 – DfE confirmed the national funding rates for 16 to 19 study programmes will increase by 3.78% for academic year 2025 to 2026.
• 16 to 19 in-year growth funding – DfE announced an update to the methodology for in-year growth funding and that the funding would be reduced to approximately two thirds of that previously announced, due to high demand.
• Post-16 budget grant – DfE announced a one-off post-16 budget grant, to be paid from April 2025 for the 2024/25 academic year only. From September 2025 this will be brought into the National Funding Formula.
• PE and sport premium 2024 to 2025 - 2024-2025 allocations for PE and sport premium were published.
• 16 to 19 and adult education and skills funding - Updated guides to 16 to 19 education and skills funding and adult education and skills funding were published.
• ESFA closed 31 March 2025 – ESFA closed and its functions transferred to DfE, with further information in a letter from David Withey. Any existing ESFA guidance and contracts continue to apply.
• National Insurance Contributions (NIC) grants – DfE announced additional funding to support schools with the increases to NIC. Funding will continue to August 2026 for academies, from then the amount will be included within the National Funding Formula. Don’t forget when putting together your budgets that you are now entitled to claim £10,500 of employer’s NIC allowance (previously companies with NI bills in excess of £100,000 could not claim the allowance), so if you are doing your own payrolls ensure you are claiming this through your software or checking that your payroll service provider has done this from 1 April 2025.
• Pupil premium funding rates 2025 to 2026 – DfE confirmed pupil premium funding rates for the 2025 to 2026 financial year will increase by 2.39% from 1 April.
• Academies Accounts Direction (AAD) – DfE published the AAD 2024 to 2025, along with the model accounts and external auditor guide for periods ending 31 August 2025. Further information of the changes introduced in these documents can be found below.
• Novel, contentious and repercussive (NCR) transactions – DfE published new NCR guidance to clarify the requirements for these types of transactions and when DfE approval is required.

There have also been a couple of Notices to Improve issued recently that we wanted to particularly highlight around financial governance:

• Case 1 – The notice highlights several instances of non-compliance with the Academy Trust Handbook (ATH), including concern over novel, contentious and repercussive expenditure, without ESFA approval. There was also a lack of consideration of conflicts of interest, including not maintaining adequate documentation or appropriately reporting to or seeking approval from ESFA. Furthermore, the trust failed to notify or obtain ESFA approval for an off-payroll arrangement for the chief financial officer and the trust had a majority of members who were also trustees. In addition, instances of non-compliance were identified in respect of the ATH and the terms and conditions of the grant funding agreement (Condition Improvement Fund) and the trust’s own funding agreement.
• Case 2 – The notice highlights concerns over the trust’s inability to approve a balanced budget (ATH 2.10) and remaining in cumulative deficit for future years, leading to concerns over financial management. Eligible staff were not given access to the Local Government Pension Scheme, a requirement of the trust’s funding agreement, leading to concerns over governance oversight.

Academies Accounts Direction (AAD) changes

As noted above, DfE published the AAD 2024 to 2025, along with the model accounts and external auditor guide for periods ending 31 August 2025. The changes over the prior year are minimal and include:

Academies Accounts Direction 2024-2025

• alerting academy trusts to the Companies Act 2006 requirement for the inclusion of a non-financial and sustainability information statement within the strategic report (for companies with turnover in the year of more than £500m and 500 or more employees) (AAD 2.13)
• reflecting the freedom, which allows academy trusts to take out certain finance leases (AAD 2.137), and providing model disclosures for the notes to the financial statements to assist those academy trusts that may have entered into such leases (AAD 3.128)

Academies Model Accounts for the period ended 31 August 2025

• reflected the Academy Trust Handbook 2024 requirement on how trusts, with an annual revenue income over £50 million, should deliver internal scrutiny
• reviewed the wording in the accounting officer’s statement of regularity, propriety and compliance to make the statement clearer
• updated the wording of the auditor’s report on the financial statements and the reporting accountant’s report on regularity, to reflect their review of the Framework and Guide for Academy Trust External Auditors and Reporting Accountants (“Auditor Framework and Guide”)
• updated note 32, valuation of teacher’s pension fund, to reflect the implementation date for the next valuation
• throughout the document they have reflected the transfer of ESFA functions to DfE

Framework and guide for external auditors and reporting accountants of Academy Trusts (2024/25)

• included a list of the range of other assurance activities which DfE’s accounting officer relies upon, and that the external auditor will want to be aware of (paragraph 1.3)
• set out in a new Annex A, clause for inclusion in the letter of engagement, relating to both the audit of the annual accounts and the regularity engagement
• reviewed the pre-agreed terms of engagement for regularity, to make the academy trust’s responsibilities clearer and to recognise the role of each party in data protection (Annex B)
• clarified the reporting accountant’s discretion to report matters of impropriety (paragraphs 4.50-4.51)
• updated the types of tests that can be used to provide evidence for the reporting accountant’s regularity report (Annex C)
• made minor edits to the reporting accountant’s regularity report consistent with its limited assurance basis (Annex D)
• throughout the document they have reflected the transfer of ESFA functions to DfE

If you work for an academy trust and are looking for support - whether it’s external audit, internal scrutiny, VAT, cyber-security, budget forecast, charitable objects or Teachers’ Pensions EOYC audit - our expert team can help. 

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