Our team has compiled this guide to provide an overview of the key changes that you need to be aware of.

Transcription

1 Guide to changes to financial and accounting rules for academies 2018

2 At Smailes Goldie Group, we are experienced in assisting Academy Schools and Multi-Academy Trusts (MATs) with the full range of their accounting, financial reporting and audit requirements. There are a number of changes to the financial and accounting rules that academy schools have to adhere to, which come into effect following the publication of this year s editions of the Academies Financial Handbook and Academies Accounts Direction. Our team has compiled this guide to provide an overview of the key changes that you need to be aware of. For specialist advice on the full range of accounting and financial reporting requirements for Academy Schools and MATs, contact us today. Changes to the Academies Financial Handbook 2018 The most significant changes relate to budget monitoring. The Academies Financial Handbook now states that the trust must prepare management accounts every month setting out its financial performance and position. This needs to include: Budget variance reports Cash flow forecasts Sufficient information to manage cash, debtors and creditors. Management accounts must also be shared with the chair of trustees every month irrespective of the size of the trust, and with the other trustees six times a year. The board must consider these when it meets and ensure appropriate action is being taken to maintain financial viability, including addressing variances between the budget and actual income and expenditure.

3 The format of management accounts should be adjusted to be suitable for different users, including summaries and supporting narrative as appropriate. Trusts must also select key financial performance indicators and measure their financial performance against them regularly, including analysis in the annual trustees report. Where the board has concerns about financial performance, it should consider whether additional financial reporting is appropriate. The full list of changes are catalogued in the handbook as follows [section references relate to the Academies Financial Handbook 2018]: Highlighting directions the Secretary of State may make in relation to members, trustees and other individuals [1.2.7 and 1.2.8]. Referring to the Charity Commission s role in addressing non-compliance [1.2.9]. Greater emphasis on trustees applying high standards of governance, the role of the chair, working with ESFA, and updated references to church academies [1.3.1 to 1.3.5]. Updating the description of the role of members to align with the Governance Handbook [1.4.1 to 1.4.5]. Removing the term ex-officio to avoid suggesting an academy trust s senior executive leader would automatically act as a trustee [1.5.1]. Explaining reporting requirements if the board meets less than six times a year [2.1.2]. Confirming that trusts must apply robust cash management [2.2.1, and 2.3.5]. Setting clearer requirements for budgeting [2.3.2 and 2.3.3]. Recommending the national deals for schools [2.4.2]. Strengthening expectations about the process for setting executive pay and highlighting gender pay gap reporting [2.4.4 and 2.4.5]. Clarifying the section on the risk protection arrangement [2.6.2 and 2.6.3]. Emphasising the proper handling of whistleblowers [2.7.1]. Confirming reporting requirements in relation to internal scrutiny [2.9.7 to 2.9.9]. Explaining new requirements for related party transactions [3.10.4, and ] and arrangements with dioceses [ ]. Moving to the conventional term related parties. Focussing on the importance of acting on audit advice [4.3.1]. Highlighting how ESFA may take action where trusts do not comply with requirements for submitting financial information [4.8.4]. Annex C now identifies some musts that are particularly relevant to boards.

4 The Academies Accounts Direction The Academies Accounts Direction is the reference pack for academy trusts and their auditors to use when preparing and auditing financial statements for the accounting period ending on 31 August annually. The Accounts Direction outlines the requirements for each academy trust to: Prepare an annual report and financial statements to 31 August Have these accounts audited annually by independent registered auditors Produce a statement of regularity, propriety and compliance and obtain a regularity assurance report on this statement from the auditor Submit the audited accounts and auditor s regularity assurance report to ESFA within 4 months of its year end, usually by 31 December File the accounts with the Companies Registrar as required under the Companies Act 2006 Publish the audited accounts on the trust s website by 31 January.

5 Changes to the Academies Accounts Direction 2017 to 2018 The key changes that affect the academy trust relate to additional reporting requirements in the Trustees Annual Report and Governance Statement as follows: Include information on trade union facility time Include information on fundraising practices The full changes are catalogued in the Direction as follows [section references relate to the Academies Accounts Direction 2017 to 2018]: being clear that accounts are required to be submitted 4 months after the accounting period end date. For academy trusts where all academies have been transferred or trust closed this may be before deadline of 31 December [S1.6] including requirement to include information on trade union facility time in trustees report to comply with the Trade Union (Facility Time Publication Requirements) Regulations 2017 including requirement to include information on fundraising practices in trustees report to comply with the Charities (Protection and Social Investment) Act 2016 including areas to be covered in the auditors report to comply with revised ISA700 analysing expenditure on raising funds between direct costs and support costs to reflect SoRP Information Bulletin 1 [note 7] expanding funds note to include comparative information in respect of the preceeding period and, where the current and prior periods have been 12 months long, an analysis showing the combined position to reflect SoRP Information Bulletin 1 [notes 19 and 20, S7.7] including treatment of capital grants where a site is not recognised as land and buildings in the accounts [note 8, S8.4] including treatment of the apprenticeship levy payment and funded training received [note 10a, S7.5, S8.13] revising fixed asset note to include classifications to align with the accounts return, introducing an assets under construction category, and specifying acquisitions and additions [note 14, S6.2] enhancing the related party transaction note to distinguish between income and expenditure related party transactions and include confirmation that any element above 2,500 is provided at no more than cost and supported by a statement of assurance from the related party confirming this [note 31, S7.6] including disclosure of activities relating to teaching schools [note 36, S8.14] updating the irregularity within academy trusts section to reflect findings from our investigations, including specifying alcohol and excessive gifts as irregular expenditure not for the purpose intended (S9.1.20)

6 About Smailes Goldie Smailes Goldie Group is a leading independent firm of accountancy and business advice professionals, based in Hull and North Lincolnshire. We create advantage and add value through the range of services we are able to offer. Our team of specialist accountants can assist with: Preparation and audit of the year end financial statements Completion of financial returns required by the EFSA Budgeting and forecasting support Teachers pension scheme audits VAT issues, including registration and reclaiming VAT Corporation tax issues arising from commercial and community activities Growing your MAT Due diligence for potential additions to the MAT Financial issues relevant to the conversion process Governance policies and process The roles and responsibilities of governors, finance committees and audit committees Setting up an accounting system that complies with the Charities Statement of Recommended Practice Payroll support Our Academies Partners Our Partners understand the distinctive pressures that Academies and MATs face when it comes to financial reporting, accounting and audit and can help you navigate through the complexities these create. Luke Taylor luketaylor@smailesgoldie.co.uk Peter Duffield peterduffield@smailesgoldie.co.uk Nicki Shipley nickishipley@smailesgoldie.co.uk

7 Contact us For further information about any of the issues raised in this guide, or to find out more about Smailes Goldie Group s expert tax, business and accountancy services, please contact us. Hull office: Regent s Court Princess Street Hull HU2 8BA T: F: Barton office: 2 Market Lane Barton-upon-Humber North Lincolnshire DN18 5DE T: F: Registered to carry on audit work in the UK and Ireland and regulated for a range of investment business activities by The Institute of Chartered Accountants in England and Wales.