Medr/2026/29: Accounts direction for further education colleges in Wales for 2025/26

Introduction

1. This accounts direction advises colleges of Medr’s requirements for the format of their audited financial statements for the year 2025/26.

2. We use the term “college” to refer to further education and sixth-form college corporations, established under the provisions of the Further and Higher Education Act 1992.

3. Medr publish the accounts direction on behalf of the Welsh Government, who are the principal regulator of Welsh further education colleges as exempt charities. Compliance with this accounts direction is a requirement of colleges terms of funding with Medr and other public funders.

4. Colleges in Wales remain subject to the Welsh Government’s Financial Memorandum until Medr’s own regulatory framework comes into effect from 1 August 2026.

5. References to Medr are assumed to refer to the collective responsibility to Welsh Government via Medr.

6. This accounts direction is primarily for use by:

1. principals, chief executives / accounting officers, and finance directors
2. governors
3. external auditors / reporting accountants

Background

7. Paragraph 36 of the Financial Memorandum between the Welsh Government and institutions, issued in March 2015 (guidance document no: 160/2015), requires institutions to comply with the Accounts Direction issued periodically by Medr. The direction will cover information to be contained in the financial statements, the manner in which they are to be presented, the methods and principles according to which they are prepared, and that they will be in accordance with UK Generally Accepted Accounting Practice and the Statement of Recommended Practice: Accounting for Further and Higher Education 2019 (‘FE and HE SORP’).

8. In issuing this direction Medr wishes to ensure the form, content and disclosures within institution’s financial statements follow good practice, are consistent across the sector and meet any specific requirements of the Welsh Government.

Updated since the previous version

9. The following amendments have been made to this document since the final version for 2024/25:

1. Minor narrative / typographical changes and updated internet links
2. Annex D (v) – higher paid banding – clarification on treatment of staff not working a full year

Application

10. This guidance is reviewed annually and is applicable for all accounting periods commencing on or after 1 August 2025. It will remain in force until such time as it is replaced.

Statement of recommended practice

11. In preparing their financial statements, Medr requires all institutions to comply with FRS 102: the Financial Reporting Standard applicable in the UK and Republic of Ireland (‘FRS 102’) and the FE and HE SORP.

College accounts direction handbook

12. Further guidance can be found in the College Accounts Direction handbook published by the Association of Colleges. Please note that this includes specific references to English funding bodies and guidance which should be replaced with the Welsh equivalent. An example set of financial statements – Casterbridge College – has been produced as part of the handbook.

13. In addition to the requirements of the FE and HE SORP, Medr requires that institutions’ audited financial statements be prepared in accordance with UK Generally Accepted Accounting Principles.

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

15. Where an institution has subsidiaries that are limited companies, they will also be subject to the requirements of the Companies Act 2006.

16. Institutions are also required to include in their financial statements the following:

1. a strategic report (can also be called the treasurer’s report, members’ report, directors’ report, report of the governing body or trustees’ annual report);
2. a statement covering the responsibilities of their governing body in relation to corporate governance. This statement, that includes a statement on internal control, is required to indicate how the institution has complied with current best practice in this area, an example can be found in Annex A. The Code of Good Governance for Colleges in Wales was published by Colegau Cymru in January 2016;
3. a statement of the responsibilities of the governing body, an example can be found in Annex C;
4. an independent auditor’s report.

Charities Act 2011

17. Welsh institutions are subject to the requirements of the Charities Act 2011. They should also have regard to the additional requirements of the Charities Statement of Recommended Practice (Charities SORP). However, as the FE sector has special financial and reporting issues that are different from other organisations that have charitable status, the FE and HE SORP takes precedence over the Charities SORP.

18. The following information must be included in the college’s audited financial statements and related reports:

1. the legal status of the college;
2. the trustees who served at any time during the year and until the date the financial statements were formally approved;
3. a statement that the college has had due regard to the Charity Commission’s guidance on public benefit (if the college is a charity);
4. a report on how the college has delivered its charitable purposes for public benefit;
5. information about payments to or on behalf of trustees, including: expenses, payments to trustees for serving as trustees (and waivers of such payments), and any related party transactions involving trustees. This should be, as a minimum, the total of such payments made in the year (or if none, a statement to that effect) and the number of trustees who received the payments. Comparative figures should also be included.

Further specific guidance

19. Additional guidance is included in Annex D.

External audit

20. Institutions are required to ensure that their contracts for external audit make provision for an opinion on whether the institution has applied income, where appropriate, in accordance with the Financial Memorandum , and whether Medr grants and other public funding have been used for the purposes for which they were received.

21. Institutions should be aware that their external auditors will be reviewing the corporate governance and internal controls statement as part of their audit work and will be including a reference to this work in their audit opinion.

22. The form of the audit report is governed by International Standards on Auditing (UK) (ISAs). The particular standard is ‘ISA 700: Forming an Opinion and Reporting on Financial Statements’.

23. This Accounts Direction and the Financial Memorandum should be copied to the external auditors.

24. External auditors are reminded that where they are unable to express an unqualified opinion on the institution’s financial statements, they should immediately communicate this to the Principal, the Chair of the College and the Chair of the Audit Committee. They should also inform Medr.

25. Audit firms cannot be appointed as internal and external auditors at the same time or for the same financial year under any circumstances.

26. In accordance with the Financial Memorandum and Charity Commission guidance, all colleges must make their annual reports and statutory accounts promptly available on their websites. This may require an extra statement from external auditors. The auditors may also require an additional statement in the governing body’s responsibilities in regard to the website if the audit opinion is to be published.

Accounts timetable

27. Paragraph 35 of the Financial Memorandum requires institutions to provide Medr with a signed copy of its financial statements no later than 31 December each year. Medr also requires the external auditor’s management letter, including the institution’s response, to be submitted at the same time. Colleges should also submit their Finance Record return by the same date.

28. Please note that these documents can be submitted electronically.

29. In accordance with the Financial Memorandum, institutions must make their annual reports and accounts publicly available, and should publish them on their websites by 31 January following the period end.

Financial difficulties

30. Colleges are reminded that if they are experiencing financial difficulties or bank covenant breaches which may impact on the college’s ability to continue as a going concern and thus the external auditor’s ability to conclude their work based in this area, the college should notify Medr as soon as any such situation arises. This is irrespective of whether there is a risk that the submission deadline may be missed.

Further information

31. Any queries regarding this publication should be directed to [email protected].