External Audit Completion Report The Westgate School Period ended 31 August 2016

Transcription

1 External Audit Completion Report The Westgate School Period ended 31 August 2016

2 Contents Page 1 Introduction 3 2 Key reporting matters 4 3 Significant risks and audit approach 10 4 Risk of fraud and independence 11 5 Recommendations 12 Appendix 1 Summary of adjusted and unadjusted mistatements 17 Appendix 2 FRS 102 and Charities SORP FRS Appendix 3 Academy sector developments 28 This document has been prepared for the intended recipients only. To the fullest extent permitted by law Moore Stephens does not accept or assume liability, responsibility or duty of care for any use or reliance on this document by anyone other than the intended receipient or as expressly agreed by Moore Stephens in advance Moore Stephens. All rights reserved. Moore Stephens is a member firm of Moore Stephens International Limited, a worldwide network of independent firms. Moore Stephens International Limited and Moore Stephens and its member firms are legally distinct and separate entities. Moore Stephens is 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. 2 External Audit Completion Report 2016

3 1 Introduction The purpose of this document We are pleased to present a summary of our audit findings of The Westgate School ( the Academy ) for the period ended 31 August Our audit work is now complete and we take this opportunity to draw your attention to those matters we have noted during the course of the audit. As auditors, we are also required under the International Standard on Auditing 260 (ISA 260) to communicate certain matters arising from the audit of the financial statements to those charged with governance. Audit approach We performed our audit work using the audit approach we communicated to you in our audit planning letter. Our audit work is designed to consider whether the financial statements of the Academy give a true and fair view of the state of affairs of the Academy and of its results for the year under review taking into account the requirements of: UK Accounting Standards (UK Generally Accepted Accounting Practice); Companies Act 2006 (Company Limited by Guarantee) Charities Act 2011 (exempt Charity) and Charities SORP 2015 (FRS 102) Academies Accounts Direction 2016 issued by the Education Funding Agency ( EFA ) Academies Financial handbook 2015 issued by the EFA Audit opinion on regularity In addition to our report expressing an opinion on the financial statements, we also produce a report providing a conclusion on regularity. Our limited assurance regularity report must state whether anything has come to our attention which suggests that in all material respects the expenditure disbursed and income received during the period of account has not been applied to purposes intended by Parliament and the financial transactions do not conform to the authorities which govern them. Acknowledgments We would like to thank the Academy s finance team, especially Charmaine Lawrence, for her help and co-operation during our audit fieldwork. Disclosure We take this opportunity to remind you that: This report has been prepared for the sole use of the Academy; It must not be disclosed to any third party without our written consent; and No responsibility is assumed by us to any other person who may choose to rely on it for his or her own purposes. 3 External Audit Completion Report 2016

4 Key reporting matters Financial statements audit conclusion In our opinion the financial statements give a true and fair view and comply with UK Generally Accepted Accounting Practice, the Statement of Recommended Practice Accounting and Reporting for Charities SORP 2015 (FRS102) and the requirements of the Accounts Direction. We are pleased to report that our audit report, which will be included in the financial statements will be unmodified. In our opinion, from information provided to us during the audit, no events or conditions appear to exist which cast doubt on the academy s ability to continue as a going concern. We are therefore satisfied with the disclosure in the financial statements. Our audit opinion is based on your approval of the financial statements and signing of the letter of representation. Within the letter, you have confirmed that there are no subsequent events that require amendment to the financial statements. Regularity audit conclusion Based upon our work carried out we have issued an unmodified regularity audit opinion. Section of the Academies Financial Handbook requires an academy to undertake a programme of risk review and checking of financial controls. It is not prescriptive as to how this is done but 4 options are given, including appointment of internal auditors, requesting additional work from external auditors, a peer review or work undertaken by a non-employed trustee. For the current year K Brown, as Responsible officer performed termly check that included, testing a sample of controls (payroll, expenses and bank reconciliation). The regularity self-assessment was provided for audit, which was completed by the Business Manager and Administration and reviewed by The Accounting Officer. The regularity selfassessment confirms the processes in place to ensure regularity, propriety and compliance within the Trust. In particular, the Trust s self-assessment confirms that: Procedures are in place in connection with general procurement, tendering, use of credit cards and expenses; Procedures are in place in order to ensure appropriate remuneration of payroll staff, agency staff and consultants; Procedures are in place to ensure that conflicts of interest and related party transactions are identified and the disclosures in the financial statements are appropriate. The Trust has not informed us of any control weakness or irregularity in these areas. We have identified matters reported in Section 5 on recommendations but no matters that we consider represent a material instance of irregularity. Based upon our work carried out to date we anticipate issuing an unmodified regularity audit opinion. Significant audit risks At the planning stage we issued our audit planning letter which highlighted three significant audit risks we had identified and the work we planned to perform to address them. We carried out these procedures during our audit and have summarised our findings and conclusions in Section 3. Identified misstatements Uncorrected misstatements would increase the deficit and decrease net assets by a further 28,500. The adjustments are detailed in Appendix 1 to this report. The schedule does not include matters we believe to be clearly trivial. 4 External Audit Completion Report 2016

5 Significant difficulties We are required to communicate to you if we encounter significant difficulties while performing our work. We have not experienced any significant difficulties during our audit and we have not identified any significant matters which we consider should be reported to you. Internal controls During the course of our audit we reviewed the principal internal controls that Management has established to enable them to ensure, as far as possible, the accuracy and reliability of the Academy accounting records and to safeguard the assets. The purpose of our audit is to express an opinion on the financial statements and not to express an opinion of the effectiveness of the internal control environment. Any weaknesses we have identified and reported should not therefore be regarded as a complete list of all deficiencies which may exist. Response to queries and information requests throughout fieldwork All staff worked hard to assist us during the audit and were quick in responding to our queries. Deadlines Greater emphasis is placed on the timely submission of the statutory financial statements. The accounts and management letter must be submitted to EFA electronically through Document Exchange in accordance with EFA s submission guidance. The EFA note that they are taking the 31 st December submission deadline very seriously and will consider action against academies which do not comply, including issuing a Financial Notice to improve. The deadline for publishing the audited financial statements on the Trust s website is the 31 st January. During the course of our audit we have identified internal control weaknesses. These along with the recommendations for improvement are summarised in section 5. Required communications Auditing standards require us to communicate further matters to you by exception and to evaluate the adequacy of the communication process between us. We confirm that there are no further matters to be communicated and that we are satisfied with the adequacy and effectiveness of the communication between us. Readiness for audit The Academy s finance team were not as prepared for our audit as we would have expected. We note that the accruals and prepayments schedule was not completed before the on-site fieldwork. The Trustees report was also not available at the agreed time. 5 External Audit Completion Report 2016

6 Qualitative aspects of accounting practices and financial reporting During the course of our audit, we consider the qualitative aspect of the financial reporting process, including items that have a significant impact on the relevance, reliability, comparability and materiality of the information provided by the financial statements. The following observations have been made: The appropriateness of the accounting policies used The timing of the transactions and the period in which they are recorded The appropriateness of the accounting estimates and judgements used We have reviewed the significant accounting policies which are disclosed in the financial statements and consider these to be appropriate, and consistent with the Accounts Direction 2015/2016. We did not identify any significant transactions where we had concerns over the timing or the period in which they were recognised. Specifically we confirm that we have assessed the timing of recognition of grants, and agree with the treatment adopted. The main estimates requiring the judgement of Trustees are linked to fixed assets and pension scheme valuations. Fixed assets Fixed assets on transfer to the academy were included at Trustee s valuations, based upon insurance valuations undertaken at the date of transfer. No value for land is included and this is clearly stated within the financial statements. Depreciation: the accounting policies provide the estimate period over which assets are expected to have useful life. Periods used are consistent with previous years. The most significant assets are freehold and leasehold properties which are being depreciated over a period of between 25 and 50 years. Based on the age and condition of the buildings the useful life needs to be reviewed annually to ensure policies and depreciation charges are appropriate. Pension Schemes The pension scheme deficits inherited from The Cippenham Schools' Trust amounted to 1,148,000. As at 31 August 2016 the deficit amounted to 2,083,000. Although prepared by the actuary it is the Trustees who are responsible for confirming that the principal actuarial assumptions are appropriate. Disclosed assumptions are: Rate of increases in salaries - 4.1% Rate of increase in pensions 2.3% Discount rate 2.2% Inflation CPI 2.3% We reviewed the assumptions made in arriving at the actuarial valuation and assessed them against our technical accounting team s accepted range of pension scheme assumptions. These were found to be consistent and on that basis we consider the assumptions to be appropriate. The pension scheme deficits are long term liabilities and it is the actuary who advises a contribution 6 External Audit Completion Report 2016

7 plan to ensure that the liability is met. However it is essential that Trustees take into account future funding requirements and the cost of running the scheme when setting budgets and when reviewing salary levels. No other significant accounting estimates or judgements were required in the preparation of the financial statements. The potential effect on the financial statements, of any uncertainties, including significant risks and disclosures such as pending litigation that are required to be disclosed in the financial statements The extent to which the financial statements have been affected by unusual transactions during the period and the extent that these transactions are separately disclosed in the financial statements There are no uncertainties including any significant risk or required disclosures that should be included in the financial statements. On 1 September 2015, The Westgate School left The Cippenham Schools' Trust and entered into a separate funding agreement with the EFA as a new multi academy trust. All the operations, assets and liabilities were transferred for nil consideration. The following table sets out the fair values of the identifiable assets and liabilities transferred and an analysis of their recognition in the SOFA. Unrestricted Funds 000 Restricted General Funds 000 Restricted Fixed Asset Funds 000 Total Tangible fixed assets - Freehold land and buildings - Other fixed assets , , Budget surplus on School funds 1,081 1,709-2,790 LGPS pension deficit - (1,148) - (982) Net assets 1,081 (561) 15,921 17,563 The above net assets includes 2,932,704 that was transferred as cash. Two operating leases for equipment were also transferred, the total annual commitment under these leases are 5, External Audit Completion Report 2016

8 Apparent misstatements in the Trustees report or material inconsistencies with the financial statements Any significant financial statement disclosures to bring to your attention There has been no misstatement or material inconsistency with the financial statements included in the Trustees report. Format of the Financial Statements The financial statements follow the presentation required by the Education Funding Agency (EFA) in the Academies Accounts Directions The Accounts Direction incorporates the requirements of the charity Statement of Recommended Practice (SORP FRS 102) issued by the Charity Commission. Key points introduced by the FRS 102 and the SORP FRS 102 are summarised below: Key changes due to FRS 102 and SORP 2015 (FRS 102): Key management personnel - The trustees annual report, within the structure, governance and management section, now explains the arrangements for setting the pay and remuneration of the academy s key management personnel and any benchmarks, parameters or criteria used in setting their pay. Key management personnel is a term used by FRS 102 for those persons having authority and responsibility for planning, directing and controlling the activities of the academy, directly or indirectly, including any director (whether executive or otherwise) of the academy. This definition includes trustees and those members of staff who are the senior management personnel to whom the trustees have delegated significant authority or responsibility in the day-to-day running of the charity. For The Westgate School, the key management personnel identified by yourself have been the Trustees and head teacher, duty head and business manager. Principal risks and uncertainties has replaced the Risk management statement in the Trustees report. The trustees are now required to provide a description of the principal risks and uncertainties facing the academy, together with a summary on the plans and strategies for managing those risks. Disagreement over any accounting treatment or financial statement disclosure Reserves - The academy should compare the actual level of reserves held with the level stated in the reserves policy and identify the level of free reserves held. See Appendix 2 for further details on the changes due to the introduction of FRS 102 and SORP FRS 102. There was no disagreement during the course of the audit over any accounting treatment or disclosure. 8 External Audit Completion Report 2016

9 Other Matters Reserve Policy - The term reserves has a variety of technical and ordinary meanings. In the Charities SORP it is used to describe funds that are freely available i.e unrestricted funds. This definition therefore normally excludes restricted funds. For an academy where there is no restriction on GAG carry forward free reserves would generally be the sum of the general restricted funds plus unrestricted reserves. We understand the School does not have a formal policy on free reserves. This area is increasingly being reviewed by regulators to ensure that not only have schools retained sufficient funds to continue to operate but also they do not hold excessive funds, that should either be utilised by the school or returned to the EFA. The Trustees should aim to put into place a reserve policy that demonstrate that funds are being held appropriately. This should cover the following: - Why reserves are held; - What level of free reserves are held at the year end; - What level or range of reserves is considered appropriate for the academy; - How the academy is going to achieve the desired level or range of reserves; and - Actual reserves compared to the reserve policy Related Parties The 2013 Academies financial Handbook introduced at cost requirements for transactions with connected parties entered or renewed on or after 7 November These transactions should not include an element of Profit. We are aware the Trust has an agreement with a Trustee for data service on an arms length basis, and that the engagement is continuing unchanged from before 7 November In light of the requirements in the Academies Financial Handbook, the Board should document how value for money is being obtained. 9 External Audit Completion Report 2016

10 3 Significant risks and audit approach Significant audit risk Our response to the audit risk Conclusion Revenue Recognition This is considered to be a fraud risk area under International Standards of Auditing (UK and Ireland). We consider that the specific revenue risk relates to rights and obligations of your EFA funding and cut off. We reviewed EFA grants received in the period and considered whether grants are recorded in line with the terms and conditions set. This included the assessment of claw back of grants received and the treatment of any accrued or deferred elements. We reviewed all sources of income and controls pertaining to these sources of income to determine whether there was a risk of a material misstatement. Our audit work in this area has been successfully completed. We have obtained the audit evidence we require to conclude that revenue recognition is not materially misstated and there are no significant matters which need to be reported to you. Defined Benefit Pension Scheme Accounting for defined benefit pension schemes is complicated and requires assumptions to be made of future changes in scheme membership, life expectancy and other factors. For this reason the accounting entries required under Financial Reporting Standard 102 are calculated by the scheme actuary. We reviewed the assumptions made in arriving at the actuarial valuation and assessed them against our technical accounting team s accepted range of pension scheme assumptions. These have been identified from assessing a large number of defined benefit schemes and other statistical data. We also ensured the accounting entries have been correctly accounted for and presented in the accounts. The assumptions made were within our technical teams accepted range of pension scheme assumptions. The accounting entries have been correctly accounted for in accordance with FRS 102. Risk of management override The International Standards on auditing (ISAs) presume that management at various levels within an organisation are in a unique position to perpetrate fraud because of their ability to manipulate accounting records by overriding internal controls that otherwise appear to be operating effectively. Due to the unpredictable way in which such override could occur, there is an inherent risk of financial misreporting due to fraud which represents a significant risk on all audits. We updated our understanding of the Academy s internal control procedures including those which are in place to address the risk of fraud or error occurring. Our testing strategy included general ledger journal testing coupled with consideration and review of: key accounting policies: material accounting estimates; use of management judgement; and any unusual or individually significant business transactions There is no indication that the financial statements are misstated as a result of management override. We did not identify any additional significant risks during the course of performing our audit. 10 External Audit Completion Report 2016

11 4 Risk of fraud and independence Fraud International Standard on Auditing (UK & Ireland) 240 The Auditor s responsibilities relating to fraud in an audit of financial statements sets out our responsibilities as auditors for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. Our key objectives in connection with this responsibility are: To identify and assess the risks of material misstatement of the financial statements due to fraud; Independence We confirm there are no relationships between Moore Stephens and the Academy, the Trustees and senior management and its affiliates that we consider may reasonably be thought to bear on the objectivity and independence of the audit engagement lead and audit staff. We also confirm that we have complied with the requirements of auditing standards (ISAs UK & Ireland) and UK Ethical Standards in relation to independence and objectivity. To obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and To respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with management and the Academy. It is important that management place a strong emphasis on fraud prevention by putting in place a structure which deters individuals from committing fraud because of the likelihood of detection and punishment. This involves a commitment to creating a culture of honesty and ethical behaviour. The Academy also have a responsibility to consider the potential for override of controls or other inappropriate influence over the financial reporting process, such as efforts by management to manage results. Where applicable, all known frauds and attempted frauds have been disclosed as part of the audit process. Our audit concludes that no matters have arisen to suggest that the financial statements are misstated due to fraud. 11 External Audit Completion Report 2016

12 5 Recommendations During the course of our audit of the financial statements for the year ended 31 August 2016, we examined the principal internal controls which the Trustees of the Academy have established to enable them to ensure, as far as possible, the accuracy and reliability of the Academy s accounting records and to safeguard the Academy s assets. It should be noted that our audit was planned and performed in order to allow us to provide an opinion on the financial statements and it should not be relied upon to reveal all errors and weaknesses that may exist. Management have responded to the recommendations noting the person responsible for action and an agreed timescale for implementation. We have also discussed a number of minor control and disclosure matters arising with Management as part of the audit debrief. The significant material recommendations noted from our audit work are detailed in the action plan below. Action plan audit recommendations We identified a number of observations which we consider require management action. Recommendations to address the observations are detailed in the action plan below, together with management responses. Grade High Medium Low Definition major issues for the attention of senior management which may have the potential to result in a material weakness in internal control important issues to be addressed by management in their areas of responsibility problems of a more minor nature which provide scope for improvement. 12 External Audit Completion Report 2016

13 Observation Risk Recommendation Managements Response Purchase orders Many expenses, within our controls testing, did not have a purchase order because head of department makes purchases online and inform finance last minute in regards to the purchase. Thus documents such as purchase orders were not kept by the department head, and only invoices are kept. Low Reinforce to staff the importance of purchase order and the authorisation from relevant personnel in regarding purchasing goods detailed on the purchase order. The invoice should be agreed to the purchase order and goods received to ensure the right order has been received. Recommendations actioned Fixed Assets On the fixed asset register, there are no details of the sources of funding. Upon questioning the Business Manager, the sources of funding detail are not entered into the FAR. This was because they have a large surplus of unrestricted fund, in which additions are bought using. Low We recommend a process is established which records the funds from which assets are purchased to ensure acceptable restricted funds are not used to purchase capital items. Funding source is now recorded as general unrestricted There is the potential that restricted funds may be used inappropriately to purchase fixed assets. Trustee Declarations The register of pecuniary interests completed by the Trustees do not appear to be regularly reviewed (some not updated since September 2015). High Ensure that the forms are regularly reviewed (at least once a year but ideally at every full meeting of the board). This is recorded in the minutes of all Governing Body minutes. Declared on school website from Sept 16 There is potential that business interests may not be properly declared and related party transactions entered into without proper consideration. 13 External Audit Completion Report 2016

14 Observation Risk Recommendation Managements Response Catering income We understand the School has catering contract in place. We note the school is not recording catering income. Low Although the School does not collect the money, the risks and rewards of the catering contract remain with the school, therefore gross income and expenditure should be recorded. Recommendations to be actioned after support from the Catering Contractors. Jan 17 Income and expenditure is being posted net. Website information The website should include details of the structure and remit of the members, trustees and how each committee or sub-committee is used in the governance of the School. These details do not seem to be included. Medium The school website should be updated with these details as required by the EFA. Recommendations actioned. Website to be updated by Feb half term. Gifts and Hospitality policy The School does not have a formal policy or procedure in place for gifts and hospitality. Low Gifts or excessive hospitality can damage the school s reputation. By establishing a policy it seeks to protect staff from suspicion of dishonesty and ensure that they are free from any conflict of interest with respect to the acceptance or provision of gifts, hospitality, or any other inducement from or to suppliers of goods or services to the school. Gifts and hospitality policy actioned. Will be ratified at next FGB meeting (dates to be confirmed) We recommend a policy being established with consideration of setting a minimum level at which items should be reported. The school should maintain a register if hospitality is provided and received, as well as a register of gifts and donations received by the school and members of staff. 14 External Audit Completion Report 2016

15 Observation Risk Recommendation Managements Response Trustee Resignations It was noted that for the resignations of Mr S Sidhu and Mrs D Searle, the EFA were not informed via the EFA information exchange within the 14 days required. Low The Academies Financial Handbook requires the EFA should be informed within 14 days of any change to Trustees (either resignation or appointment). Clerk now aware Overtime Authorisation During our payroll overtime walkthrough, we noticed that Business manager did not physically sign the overtime claim form, in accordance with School policy. Low While it was confirmed that Business Manager had reviewed the form, physical signature should be included on the overtime claim form to properly evidence that this has been reviewed Actioned with immediate effect. Staff Expenses When reviewing regularity we noticed that there was a hotel booking that could be considered excessive in terms of the cost. On further discussion it was noted that the School does not have an expenses policy in place to give staff any guidance on what is and is not considered Value for money. Medium It is important from a regularity perspective that expense policy is established. Expense policy actioned. Will be ratified at next FGB meeting (dates to be confirmed) Staff Contracts It was noted that notifications of pay rises awarded to support staff had not been retained in the August 2016 financial year, due to issues with IT. Medium It is of great importance that record is kept of any pay increases awarded to staff members, in particular where this includes key management such as the business manager. Therefore in future, a signed copy of all incremental pay increase notifications should be retained in the employees HR file. Actioned with immediate effect 15 External Audit Completion Report 2016

16 Observation Risk Recommendation Managements Response Business Continuity Plan As part of our review of regularity we are required to obtain a copy of the School 'Business Continuity Plan' (BCP). The copy retained by the School has not been updated since 2012 and does not properly reflect the fact that the School has now left The Cippenham Schools Trust. Low The business continuity plan should be properly updated to reflect the current circumstances at the School. This should be regularly reviewed to ensure that the plan remains relevant. On agenda at the next FGB meeting (dates to be confirmed) Timely posting of expense invoice Within our post year end testing, we found many invoices dated pre-year end that have not been posted. The Finance team currently post invoice upon payment, however classification error occur whereby in the accruals schedule, we identified invoices that are dated pre-year end and should be included in as creditor. Medium Finance team should post invoices upon receipt of the invoice and check it is for a business expense; and thus classification of invoices between accrual and prepayment can be identified. Noted and actioned Bank reconciliation We noted in our review of the amounts held at bank, that bank reconciliations had not been properly completed at the year end. This had meant that the majority of the transactions in August 2016 were incorrectly posted into September This meant more time than would usually be necessary had to be spent in ensuring the bank was properly reconciled. Medium It should be ensured that all bank transactions are posted and that bank accounts are reconciled on a monthly basis. This should be done before any transactions from the next month are posted onto the system. This should prevent this issue arising again. Noted and actioned 16 External Audit Completion Report 2016

17 Appendix 1 Summary of unadjusted mistatements Under the requirements of ISA 260 Communication of audit matters we are required to communicate all adjusted and unadjusted audit differences, other than those which are clearly trivial, to the Business Committee. Based on your income and expenditure account, our materiality was 130,000. This section contains details of unadjusted and adjusted misstatements, which we have found during the course of our audit work and are obliged to bring to your attention. Identified adjusted misstatements and unadjusted misstatements are detailed below: Unadjusted misstatements No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 1 Bank account Main 28,500 Income & Expenditure 28,500 (28,500) Being: Unidentified difference on the year-end bank reconciliation Impact on I&E Surplus (28,500) 17 External Audit Completion Report 2016

18 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) Adjusted misstatements No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 1 Furniture & Equipment Cost 13,374 Furniture & Equipment Depreciation 13,374 Computer Equipment Cost 292,805 Computer Equipment Accumulated Depreciation 292,805 Plant and Maintenance Cost 907 Plant and Maintenance Accumulated Depreciation 907 Building Cost 1,143,880 Building Accumulated Depreciation 1,143,880 Vehicle Cost 5245 Vehicle Accumulated Depreciation 5245 Reserves Account 17,481,366 Fixed Donated on conversion 15,920,745 15,920,745 LGPS - donated on conversion 1,148,000-1,148,000 Surplus - donated on conversion 2,708,621 2,708,621 Being presentational journal adjustment for donated on conversion to the School Fund 2 Reserves Account 81,450 Surplus - donated on conversion 81,450 81,450 Being presentational journal adjustment for donated on conversion to private fund 18 External Audit Completion Report 2016

19 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 3 Other DfE income 6,801-6,801 Ed Mats 6,801 6,801 Being reverse bursary received on an agency basis 4 Pupil Premium Income 3,268-3,268 Accrued Income 3,268 Being adjust pupil premium accrued income 5 Misc. Income (provision of teacher) 6,900 6,900 Other DfE Income 20,500 20,500 Devolved Formula Capital 21,381 21,381 Other Grants 48,781-48,781 Being correctly allocate income 6 Accrued income 19,090 LA SEN income 19,090 19,090 Being accrued LA SEN income for August Prepayments 5,535 Trip Expense 5,535 5,535 Being client adjustment for refund due on year 7 trip 19 External Audit Completion Report 2016

20 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 8 Buildings Depreciation Cost 3,054-3,054 Buildings Accumulated Depreciation 3,054 Being prior year audit adjustment for depreciate building improvements 9 Free School Meals 40,388-40,388 Catering expense 112, ,367 Catering Income 152, ,755 Being gross up catering income and expense 10 Fixture & Fittings 74,934-74,934 Building Maintenance 8,380 8,380 Premises Health and Safety 58,066 58,066 Repairs and Maintenance 8,488 8,488 Being the reversal of expenditure of capital item 11 Fixture & Fittings Deprecation 21,007-21,007 Fixture & Fittings Accumulated deprecation 21,007 Being the adjustment for depreciation 20 External Audit Completion Report 2016

21 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 12 Fixed Asset Cost 10,505-10,505 Computer Minor Purchase 10,505 10,505 Being adjustment for incorrect entry. 12 Prepayment 12,534 Creditor 12,534 Being the accrued expense for an invoice in relation to next school year. 13 Wages 7,063-7,063 Accrual 7,063 Being the holiday accrual 14 Misc Income 9,690 9,690 ICT Contract Charges 9,690-9,690 Being move ICT services provided to CIS 15 Photocopying 36,873-36,873 Paper 36,873 36,873 Being move photocopy departmental recharges to support costs 21 External Audit Completion Report 2016

22 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 16 Net Interest Cost on LGPS 42,000-42,000 Current Service Cost LGPS 97,000-97,000 Actuarial Loss (LGPS OCI) 885, ,000 Return of Fund Assets (LGPS OCI) 89,000 89,000 Defined Benefit Pension Liability 935,000 Being post defined benefit scheme 17 Accrual 30,633 Audit and Accountancy 30,633 30,633 Being the reversal of prior year audit fees 18 Other Income 8,400-8,400 Deferred Income 8,400 Being client adjustment for deferred income. 22 External Audit Completion Report 2016

23 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 19 Buildings Maintenance incl. grounds maintenance 6,251 6,251 Repairs and Maintenance Premises Health and Safety Educational Subscriptions 6,755 6,755 Ed. Mats/Equip 6,139 6,139 Exam Fees Educational Subscriptions Vehicle Insurance 1,725 1,725 Insurance School Trips and 1,136 1,136 Admin Licences & Subscriptions 9,397 9,397 HR and Legal Services 8,333 8,333 Licences & Subscriptions 7,649 7,649 Staff Training Prepayments 48,872 Being client adjustment for Prepayment 23 External Audit Completion Report 2016

24 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 20 Furniture & Equipment Cost 3,379-3,379 Agency Supply Teachers Travel and Subsistence - non training Buildings Maintenance incl. grounds maintenance 1,969-1,969 Repairs and Maintenance Gas Electricity 4,952-4,952 Water Rates 1,106-1,106 Rates 3,628-3,628 Educational Books 2,653-2,653 Ed. Mats/Equip 6,857-6,857 Vehicle Costs - tax, diesel etc Audit and Accountancy 15,000-15,000 Photocopier 1,553-1,553 Stationery Telephone Costs 1,328-1,328 Staff Recruitment Costs 1,476-1,476 Other Staff Costs 4,599-4,599 Payroll Services Financial Support Fees Hospitality Computer Minor Purchases Licences & Subscriptions ICT Consultancy 2,625-2,625 Staff Training Accruals 56,073 Being client adjustment for accruals 24 External Audit Completion Report 2016

25 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr Other Educ Serv incl Educ Library Serv Behav ser 6,900-6,900 Buildings Maintenance incl. grounds maintenance 10,750-10, Buildings Maintenance incl. grounds maintenance 1,587-1,587 Ed. Mats/Equip 2,850-2,850 Creditor 22,087 Being the client audit adjustment for creditors 22 Furniture & Equipment Cost 40,411-40,411 Accruals 40,411 Being the audit adjustment for post year end invoice that hasn't been accrued. 23 Repairs and Maintenance 10,128-10,128 Buildings Maintenance incl. grounds maintenance 3,490-3,490 Buildings Maintenance incl. grounds maintenance 6,812-6,812 Creditor 20,430 Being the audit adjustment for pre year end invoice that hasn't been accounted for as creditor. 25 External Audit Completion Report 2016

26 Appendix 1 Summary of adjusted and unadjusted mistatements (continued) No Description Income & Expenditure Balance sheet Surplus Impact Dr Cr Dr Cr 24 Accrued Income 19,090 Current Account 414,631 Payroll Control Account 232,735 Payroll Control (Pensions) 76,782 Payroll Control (HMRC) 106,074 Payroll Control (Child Care) 962 Interest Received Misc. Income Lettings Income Accruals 18,626 Buildings Maintenance incl. grounds maintenance Ed. Mats/Equip HR and Legal Services Being post August 2016 bank transactions (misposted into September 2016) 25 Payroll control 93,180 Pension control 93,180 Being correct posting of March 2016 PAYE/NI payment Impact on I&E Surplus 16,551, External Audit Completion Report 2016

27 Appendix 2 FRS 102 and Charities SORP FRS 102 The financial statements for the Academy Trust have been prepared in accordance with FRS 102 and the Charities SORP The following table summarises the impact of these financial reporting requirements. Area Impact of SORP 2015/FRS 102 Trustee s Report Changes required by SORP 2015 are minimal. These changes include: 1. Explaining arrangements and policies for setting pay and remuneration of the academy trust s key management personnel, including an explanation of any benchmark or criteria used for setting pay. 2. The academy should compare the actual level of reserves held with the level stated in the reserves policy and identify the level of free reserves held. 3. Risk management disclosures now require a description of the risk identified and a summary of the Trust s plans and strategies for managing them. Statement of Financial Activities: Governance Costs Balance Sheet: Employee benefits holiday pay accrual Accounting disclosures: Key management personnel Accounting disclosures: Employee benefit pensions Accounting disclosures: Operating leases Governance costs will no longer be separately disclosed on the face of the SOFA but will be included within charitable activities as support costs. Under FRS 102 there is a requirement to recognise a liability in the balance sheet for any outstanding paid annual leave, if material. Such a circumstance may arise when the holiday year is not coterminous with the financial year. Key management personnel are considered to be related parties SORP 2015 requires the total remuneration and benefits paid to key management personnel to be disclosed. An additional disclosure will be required in the staff costs section of the financial statements. There are changes in the recognition of interest costs in the SoFA. Rather than an expected return on plan assets and interest on pension liabilities there will be a net interest charge on the net defined benefit pension liability. The disclosure of commitments under operating leases must now show the expected future minimum lease payments over the remaining life of the lease (under existing UKGAAP disclosure was only required of the annual commitment). 27 External Audit Completion Report 2016

28 Appendix 3 - Academy sector developments Dear Accounting Officer Letter In his letter to Accounting Officer on 6 October 2016, Peter Lauener, Chief Executive, Education Funding Agency highlighted some important financial management and governance issues for the academy sector. He reminded Accounting Officers of their personal responsibility to set the standards of financial management and governance alongside the Trustee board and the senior management team. Compliance with the Academies Financial Handbook is the bedrock by acting in line with the Nolan seven principles of public life, namely Selflessness; Integrity; Objectivity; Accountability; Openness; Honesty; and Leadership. He asked Accounting Officers and Trustee boards to consider the following issues in your Academy: Be satisfied that lines of internal accountability are appropriate; Establish and monitor policies that you and your Trustees would be comfortable defending in public; Ensure you can evidence compliance; Have the right mix of skills on the board; and Manage transactions with related parties appropriately. New Academies Financial Handbook 2016 The new handbook came into effect on 1 September It is pleasing to report that there are no new requirements in this edition, but more emphasis on key points about management and governance, in particular: Embeds the requirement to address skill gaps in the Trustee board through further recruitment, induction or training; Every Trust must have a senior executive leader (principal, chief executive or equivalent) to act as the Accounting Officer and this role should not be rotated between the senior management team; Every Trust must now have a whistleblowing policy so that staff can raise concerns and know that they will be dealt with properly; For Multi Academy Trusts your audit committee oversight must extend to the financial controls and risks at constituent academies; Further guidance is provided to develop awareness of the risk of fraud; and Clarification of who must publically disclose matters on the register of interests. 28 External Audit Completion Report 2016

29 Financial heath and efficiency Academy budgets are facing pressure so it is critical that Trustee boards have robust oversight of financial heath and efficiency. There are a growing number of Academy Trusts facing financial difficulties and EFA interventions such as financial notices to improve. The EFA have expanded the tools and guidance available to Academies to develop your financial management covering subjects such as budget planning, benchmarking, financial governance and effective procurement including examples of good practice across the sector. Where your Academy is having difficulties in balancing your budget now and in the next three years we would encourage you to review the guidance issued by the EFA and discuss with your Moore Stephens team as soon as possible. Annual accounts return Each Academy with a year end on 31 August who have not converted during the year is required to submit and annual accounts return (AAR) to the EFA by 31 January. The AAR helps the EFA to consolidate all of the academies accounts into the Department for Education annual accounts. The process for submitting the AAR for submission by 31 January 2017 has changed to an on-line portal. If you require any help or assistance with the AAR please contact your Moore Stephens team. The EFA are looking to bring forward the submission date. There was an initial proposal for this year s AAR to be submitted by mid January 2017, but this has been abandoned reverting back to the original deadline of 31 January We expect the EFA to bring forward the submission date in future years. Apprenticeship levy In April 2017 the way the government funds apprenticeships in England is changing with the introduction the Apprenticeship Levy. Some employers will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers. The Levy will be payable by all employers in the UK at 0.5% of pay bill and paid through PAYE alongside income tax and National Insurance. Each employer will receive one allowance of 15,000 to offset against their Levy payment. This effectively means that the Levy will only be payable on a pay bill in excess of 3 million per year. However, this does not mean that the Levy will not be payable by small schools. There will be a connected persons rule, similar to the Employment Allowance connected persons rule, so employers who operate multiple payrolls will only be able to claim one allowance. This also means that schools who are part of a larger group, such as Multi-Academy Trust, may still be subject to the levy because the group payroll is in excess of 3 million per year. If you would like to know more about how the Levy may affect your Academy please make contact with your Moore Stephens team. 29 External Audit Completion Report 2016