Published in April, the 2023 College Accounts Direction includes all the new disclosure requirements for a college’s Financial Statements forthe Year Ending 31 July 2023. The main changes for this year’s Direction have arisen from the reclassification of the College sector.
These requirements mean that colleges and their subsidiary companies must now meet the overall requirements in HM Treasury’s Managing Public Money (MPM) document, and other related obligations. In our Spring Issue of FE/HE Digest we provided a summary of the key considerations of MPM and have been strongly encouraging our clients to ensure they update their Financial Policies and Procedures to ensure they capture all the new reporting and regulatory requirements.
Turning back to the 2023 Direction, the additional reporting requirements are as follows:
‘Statement of Corporate Governance and Internal Control’
The Statement of Corporate Governance and Internal Control must now specifically address whether policies, procedures and approval processes were updated to ensure compliance with the new MPM requirements following reclassification. In particular, the Statement must disclose whether the college has established systems and processes to identify and handle any transactions for which DfE approval is now required.
Therefore, an updated Financial Policy document is a MUST – this will likely adversely affect the regularity opinion if not actioned.
‘Statement of Responsibilities of the Members of the Corporation’
The Statement of Responsibilities of the Members of the Corporation must now include the following words “...that any transactions entered into by the corporation are within the delegated authorities set out in the “Dear accounting officer” letter of 29 November 2022 and ESFA’s bite size guides.”
This disclosure is also mirrored in the Statement of Regularity, Propriety and Compliance, which requires the signature of both the Accounting Officer and Chair of the Corporation (noting that a separate signature
and statement is required for each individual as effected by the 2022 Accounts Direction). Accordingly it follows that all Governors should be aware of and MUST have read the Accounting Officer letter and listened to the bite size guides.
‘Payments for loss of office’
Colleges must disclose the individual value of all special staff severance payments (which are amounts paid to employees outside of statutory and contractual requirements) made during the period of the financial statements. This is regardless of value however the names of the recipients do not need to be disclosed.
Helpfully, a note is not required if no transactions arose.
Furthermore, colleges are now required to disclose the number of severance payments they made by band during the period of the financial statements, as well as the individual value of any special severance payments. This disclosure is in addition to existing staff pay disclosures requirements.
’Write-offs and losses’
Colleges MUST disclose the total value of any debts written off or other losses incurred. There must also
be individual disclosure of any such transactions where the value was £5,000 or more and the rationale provided. For the avoidance of doubt, all such transactions must be disclosed not just those where consent was obtained from DfE.
‘Guarantees, Letters of Comfort, and Indemnities’
Colleges must disclose the total value of any guarantees, letters of comfort, and indemnities not entered into in the normal course of business, and which it has provided during the year (including any issued to a wholly owned subsidiary). There must also be individual disclosure of any instances above £5,000 and the rationale provided.
For the avoidance of doubt, all such transactions must be disclosed, not just those where consent was obtained from DfE.
‘Compensation Payments and ex-gratia payments’
Colleges MUST disclose the total value of all compensation payments during the period. There must also be individual disclosure of items over £5,000 and the rationale provided. Again, all such transactions must be disclosed not just those where consent was obtained from DfE. No disclosure is required if no transactions took place. In the case of ex-gratia payments, all payments must be disclosed, regardless of value, including an explanation of the nature of the payment and the legal authority, although payments may be aggregated where they are of a similar nature and where this does not impact on the understanding of the arrangement.
‘Coverage’
The board should ensure there is adequate coverage in the event of the departure or absence of key signatories, including the Accounting Officer. The board should decide what interim arrangements are required. However, at all times the corporation is required to have an Accounting Officer.
‘Key Management Personnel’
Key management personnel disclosures have been simplified with the following requirements having been removed:
- The number of key management personnel whose emoluments received in the year (gross of any salary sacrifice arrangements and excluding any employer pension costs) that fall within each band of £5,000 from a starting point of £nil
- Aggregate emoluments due to key management personnel but waived.
