Medr/2025/03: Accounts direction to higher education institutions in Wales for 2024/25

Introduction

1. The purpose of this accounts direction is to inform institutions of Medr’s requirements for the format of their audited financial statements for the year 2024/25.

2. Higher education institutions in Wales remain subject to the framework of the HEFCW financial management code (FMC) (HEFCW circular W17/16HE) until Medr’s own regulatory framework comes into effect.

Changes from 2023/24 accounts direction

3. The following amendments have been made to this document since the final version for 2023/24:

a. A contents page has been added for ease of navigation.
b. Minor narrative / typographical changes and updated internet links.
c. Paragraph 10 has been added, further highlighting the importance of consistency between analysis within the published financial statements and the HESA finance record.
d. Paragraph 12 has been added to support transparency.
e. Paragraph 32 has been added, clarifying Medr’s expectation of notification and explanation where the required deadlines are not expected to be met.
f. Paragraph 33 has been added. This amends the submission date of immaterial subsidiaries, should certain requirements be met and notified to Medr.
g. Referencing and links have been updated from HEFCW to Medr as appropriate.

Accounts direction for 2024/25

4. Higher education institutions are required to follow the Statement of Recommended Practice: Accounting for Further and Higher Education 2019 (FEHE SORP), or any successors to this SORP, when preparing their financial statements. Links to the FEHE SORP and guidance on implementation of some areas can be found in the SORP area of the British Universities’ Finance Directors’ Group (BUFDG) website. If there are any inconsistencies between the requirements of the FEHE SORP and this accounts direction then this accounts direction will prevail.

5. As noted in the SORP, institutions must apply all requirements under FRS 102: the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102).

6. In the case of an institution which is also a company limited by guarantee, this direction is subject to the requirements of the Companies Act 2006.

7. The financial statements shall be signed by the Accountable Officer and by the Chair or one other member of the governing body appointed by that body.

8. Institutions should note that the formats of the primary accounting statements (consolidated statement of comprehensive income and expenditure, consolidated statement of changes in reserves, balance sheet, and consolidated cash flow statement) should be followed. The financial statements should follow BUFDG’s latest model financial statements where possible to promote consistency of treatment within the sector, whilst having due regard to the diversity of institutions, and clarity of presentation to users. The model can be found in the SORP area of the BUFDG website.

9. With the move by the Higher Education Statistics Agency (HESA) to the provision of open data, third party users are increasingly extracting institutional and sector data for comparison and comment from this source as opposed to the published financial statements. We would therefore expect Institutions to have due regard to HESA definitions and guidelines for categorisation within the financial statements in order to ensure that the financial statements as approved by the governing body are in line with the HESA finance record submitted subsequently.

10. Consistency between the HESA finance record and published financial statements promotes improved comparability between institutions and consistency of data used for UK sector analysis.

11. The notes to the accounts should contain analyses of income and expenditure and balance sheet items consistent with recognised good accounting practice and should be sufficiently detailed to enable users to obtain a clear understanding of how the institution is performing financially.

12. Where the accounts include material items of income or expenditure that are unlikely to recur and/or do not reflect the underlying financial performance this should be explained.

13. The financial statements should further comply with any relevant requirements of the Charities Act 2011 in so far as it relates to an institution.

14. Institutions should also:

a) Ensure that contracts for external audit provide that the external auditor must include a report to the governing body in the financial statements on whether in all material respects:

i. the financial statements give a true and fair view of the state of the higher education institution’s affairs, and of its income and expenditure, gains and losses, changes in reserves and cash flows for the year. They should take into account relevant statutory and other mandatory disclosure and accounting requirements, and Medr requirements;

ii. the financial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice, being the financial reporting standard (FRS102), the statement of recommended practice: accounting for further and higher education (FEHE SORP), and relevant legislation;

iii. funds from whatever source administered by the higher education institution for specific purposes have been properly applied to those purposes and managed in accordance with relevant legislation;

iv. the institution has applied income, where appropriate, in accordance with the Financial Management Code (FMC) (HEFCW W17/16HE) paragraph 145, and whether Funding Council grants (including grants from Medr) have been applied in accordance with terms and conditions attached to them and used for the purposes for which they were received, including the Terms and Conditions of Funding; and

v. the requirements of Medr’s accounts direction have been met.

b) Provide detailed analysis and disclosure within the financial statements of audit and other fees paid to external auditors, in accordance with Statutory Instrument SI 2008 No 489 – The Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008 and the Amendments to these Regulations encompassed within Statutory Instrument SI 2011 No 2198. This is required for those institutions to which company law applies. The Statutory Instrument can be viewed at the Office of Public Sector Information website (www.legislation.gov.uk).

c) In their management letters or reports, auditors should have regard to the specific requirement of Medr, such as compliance with increases in financial commitments thresholds, or other issues of non-compliance.

Going concern and liquidity risk

15. The members of the governing body must confirm in the annual report that the financial statements are prepared on a going concern basis. They must also confirm that they have carried out a robust assessment of the principal risks and material uncertainties facing the institution, including those that would threaten its business model, future performance, solvency or liquidity. The report must describe those risks and explain how they are being managed or mitigated.

Sustainability reporting

16. It is expected that the operating and financial report section of the financial statements should state how the institution is ensuring its sustainability, including through its strategy, quality of teaching and research, financial sustainability metrics, management of key risks including cash flow management, proposed financial commitments and material leases, and investment in estates and infrastructure. Institutions should present this information using the format agreed for the annual governance reporting template created following the Review of Governance of the Universities in Wales.

17. We would expect the institutional strategy to be clear and in alignment with other published documents.

Environmental reporting

18. Institutions must include commentary on the steps taken and planned to ensure wider sustainability of social and environmental resources. This should include, but not be limited to, a statement of the net zero target of the institution (where this has been publicly stated) and progression towards achievement of this. Areas to consider might include improvements in the efficiency of estates, energy usage, waste minimisation, resource efficiency, water usage, procurement, biodiversity, travel and reduction of other environmental impacts. We refer institutions to Welsh Government guidance in this area, which identifies prioritisation based on the classification of direct emissions (scope 1), indirect emissions (scopes 2 and 3) and Land Use, Land Use Change and Forestry. Further guidance can be found in the Standardised Carbon Emissions Framework (SCEF) and the Task Force on Climate Related Financial Disclosures.

Corporate governance and internal control

19. Institutions must include a ‘statement of corporate governance’ in its financial statements. This statement must set out a description of the institution’s corporate governance arrangements and a statement of the responsibilities of the governing body. It must explicitly relate to the period covered by the financial statements, and the period up to the date of approval of the audited financial statements.

20. Institutions must include a ‘statement of internal control’ in the financial statements. The statement of internal control relates to the institution’s arrangements for the prevention and detection of corruption, fraud, bribery and other irregularities. It must include how the principles of internal control have been applied.

21. Institutions may combine the statement of corporate governance with the statement of internal control, provided that all of the disclosures required are made. In formulating their statements, institutions should refer to best practice guidance, including guidance from the British Universities Finance Directors Group (BUFDG). Further guidance on these requirements is set out in Annex C.

22. The CUC Higher Education Code of Governance (CUC Code), which was refreshed and re-issued in 2020, recommends that institutions include in their annual audited financial statements a statement which sets out governance arrangements and confirms that they have had regard to the CUC Code in adopting those arrangements. The financial statements should include an explicit statement to either confirm that the institution has complied with all of the principles of the Code or, where there are exceptions, to provide details of how these are being addressed, including timelines.

23. The annual report must include an explicit statement that the institution has adopted the Governance Charter for Universities in Wales (the Governance Charter) based on the Review of Governance of the Universities in Wales by Gillian Camm.

24. The annual report must utilise the annual governance reporting template developed in response to the Camm review as a guide to structuring the annual report.

25. The annual report must include a statement on the institution’s compliance with the Camm review Commitment to Action, including progress on achieving full implementation where this has not yet been achieved.

Related party disclosures

26. Institutions are reminded of the disclosure requirements for related party transactions. Such transactions involving trustees, irrespective of whether or not they are undertaken on an arm’s length basis, must be disclosed with the name(s) of the transacting related party or parties. The disclosure should also include a description of the relationship between the parties (including the interest of the related party or parties in the transaction, a description of the transaction, and the amounts involved).

27. Institutions must disclose a list of trustees holding office during the year with details of appointments and resignations to the date of signing.

Remuneration of higher-paid staff

28. In line with Welsh Government requirements for openness and transparency, institutions are required to disclose:

a. the actual total remuneration of the head of institution;

b. the basic and total remuneration of the head of institution expressed as a ratio of basic and total full time equivalent staff salaries;

c. justification of the remuneration of the head of institution;

d. the remuneration of higher paid staff in bands of £5,000 from a starting point of £100,000;

e. aggregate total remuneration paid to key management personnel, together with either the number of key management personnel or a list of eligible posts; and

f. details of any compensation paid or payable to the head of institution and to staff whose annual remuneration exceeds £100,000, or a statement confirming that no compensation was payable to staff at this level in the year.

Institutions are urged to pay particular attention to the disclosure requirements for higher paid staff as detailed above, particularly in respect of the definition of ‘remuneration’ and the analysis of salary, benefits in kind and employer’s pension contributions. Further detail of the requirements is set out in Annex A for remuneration and Annex B for compensation.

Charities Act 2011

29. Institutions are advised that under the Charities Act 2011 the following information should be included in their audited financial statements and related reports:

a. the charitable status of the institution;

b. the trustees who served at any time during the financial year and until the date the financial statements were formally approved;

c. a statement that the charity has had regard to the Charity Commission’s guidance on public benefit;

d. a report on how the institution has delivered its charitable purposes for the public benefit; and

e. information about payments to or on behalf of trustees, including expenses; payments to trustees for serving as trustees (and waivers of such payments); related party transactions involving trustees.

Date of submission of audited financial statements to Medr

30. The annual report and accounts should be prepared with a 31 July year-end.

31. The final deadlines for submission to Medr and publication of audited financial statements are as follows:

	Deadline
Audited financial statements	30 November 2025
Publication on website	31 January 2026
Audited subsidiary financial statements	31 December 2025

32. Should an institution become aware that the above deadlines will not be met, Medr expect to be notified in advance with the rationale for the delay and an expected timeline, and be kept regularly updated.

33. Where subsidiary financial statements are clearly immaterial to the group audit opinion, the normal Companies House (30 April) or Charity Commission (31 May) deadline may be utilised. Institutions and their auditors must notify Medr in writing in advance of 31 December 2025 confirming that the named subsidiary(ies) will not impact the group audit opinion individually or in aggregate and they are able to utilise this dispensation. This dispensation does not apply to subsidiaries undertaking tertiary activities that would fall within the remit of Medr.

34. Financial statements should be submitted to [email protected].

35. The accounts direction is reviewed annually. This accounts direction will remain in force unless institutions are notified otherwise.

36. We recommend placing a copy of this circular and its annexes before your Finance and Audit Committees for information.

Further information

37. For further information, contact Diane Rowland ([email protected]).