Financial Statements Outcomes

2012 to 2013

Overview Outcomes of academy trust financial statement

reviews 2012/13:

Submission requirements and timeliness of returns

EFA review process

Key themes

Statistics

Academy trusts are:

Companies limited by guarantee

Exempt charities

Obliged to follow the EFA requirements set by: Funding agreement Academies Financial Handbook Academies Accounts Direction

Submission requirementsKey requirements for academy trusts for 2012/13: Financial statements to 31 August 2013 Must be audited, and include a report on regularity Submit to EFA by 31 December 2013 File with Companies House by 31 May 2014 Publish on trust website by 31 May 2014

NB: For 2013/14, trusts will need to publish their financial statements on the trust website by 31 January 2015

Timeliness of returns

2,076 trusts submitted returns by the deadline of 31 December Thank you to academy trusts who met the deadline Late submission can in some instances indicate a lack of

financial planning or management It can also impact on the EFA consolidation and submission of

its own financial statements

2010/11 2011/12 2012/13No. of financial statements

450 1,472 2,256

Submitted by 31 December

83% 87% 92%

Submitted by 31 March - 98% 98%

First financial statements Financial statements must be to 31 August First accounting period can be up to 18 months The accounting period starts from the date of incorporation,

not the date of opening or conversion If incorporated before 1 March 2013, financial statements to 31

August 2013 were required Cannot prepare dormant financial statements covering

incorporation to just before opening (to defer first non-dormant financial statements)

New trusts should change their accounting reference dates to 31 August with Companies House promptly

EFA review process Risk based approach

Financial statements checks include: Reviewing opinions Checking disclosures

Management letter checks include: Reviewing recommendations to assess potential

irregularity Review of management response

Financial statements outcomes

2010-11 2011-12 2012-13Total qualified audit opinions

1 29 (2.0%) 27 (1.2%)

Qualified audit opinions (salary disclosure only)

- 26 (1.8%) 21 (0.9%)

Total management letter recommendations

n/a 4,250+ 11,500+

Range of recommendations

n/a 0-46 0-93

Avg. recommendations n/a 3 5

Audit qualification reasons:

Main reasons for audit qualification:

Salary disclosure

Land and building valuations and accounting treatment

Actuarial information outstanding

Key themes from management letters Poor governance

Lack of financial management

Issues with accounting policies

Poor internal controls

Related party transactions and declaration of interests

Payroll/HR issues

Reconciliation of control accounts

Regularity outcomes

2010-11 2011-12 2012-13Modified regularity report

n/a 35 (2.4%) 83 (3.7%)

Disclosures within AO statement

n/a n/a 44 (1.9%)

Auditor provided unsigned statement

n/a n/a 17 (0.8%)

Consistency between accounting officer statement and regularity report We expect to see consistency between:

the accounting officer statement on regularity, propriety and compliance

the independent auditor’s report on regularity.

Surprisingly, several sets of financial statements contained clean accounting officer statements yet regularity issues were raised in the auditors report on regularity

Reasons for modified regularity report Lack of approval for leases

Lack of approval for non-contractual severance payments on or over £50k

Lack of independent checking e.g. Responsible Officer

No audit committee in place

Weak internal controls and lack of authorisation of expenditure

Severance payments Followed up on disclosures in financial statements

149 trusts disclosed payments within the accounts return but not financial statements. Reasons were: Academy and auditor oversight Immaterial

We require compliance with the accounts direction and the transaction is material by nature.

The EFA will follow up where non-contractual severance payments >= £50k are disclosed and approval is not clear

Also performed a 5% review of all non-contractual payments made

Related party transactions (RPTs)

Be aware of, and follow, the requirements of the Academies Financial Handbook in respect of connected party transactions

RPTs must be disclosed within the financial statements in line with the Academies Accounts Direction

We will follow up if financial statements do not make clear whether or not the academy trust had any RPTs

We will follow up if financial statements disclose RPTs, but the disclosures are not sufficient for us to tell if those transactions were properly entered into

Disclosures Disclosures must follow the requirements and format of the

Academies Accounts Direction Particularly relevant for the accounting officer statement and

the auditors opinions Don’t simply carry forward wording from the previous year

without checking the latest Academies Accounts Direction Multi-academy trust financial statements require disclosure

information at individual academy level, including the share of funds attributable to each academy within the funds notes

Value for Money statement

Academy trusts open at 31 August 2013 were required to complete and submit Value for Money (VfM) statements for the first time by 31 December 2013

Guide to the VfM statement suggested a number of areas that a Trust should consider in assessing value for money

74% of statements were received by the deadline of 31 December 2013

Some academies just wrote out their best value policies, providing no specific examples of VfM achieved in the period

Value for Money good practice

Examples of good practice included:

Savings from large contracts and use of options appraisal

Economies of scale and shared services

Improvements in students gaining access to HE and reduction in NEETs

Provision of in-house school meals to provide improved nutritional meals at better value

Reduction in the achievement gap between free school meals pupils and non- free school meals pupils

Academy trusts open at 31 August 2014 will again be asked to submit and publish VfM statements

‘Dear Accounting Officer’ 2014

Peter Lauener wrote to all Accounting Officer’s (AO) on 19 May 2014. A copy of the letter can be found at https://www.gov.uk/government/publications/letter-to-academy-trust-accounting-officers

Key themes:

Fraud and irregularityCorrect implementation of internal controls can reduce the risk of fraud and the EFA has a zero tolerance approach to fraud

Connected party transactionsAnnex B provides key considerations for transactions and could be used as a checklist for AO

Special paymentsSeverance payments subject to £50k self approval, but values under this amount still need to be justified and show value for money

An ex-gratia payment (e.g. honorarium) will always require prior approval

Webinar timetable

You can register for the webinars at https://registration.livegroup.co.uk/academyfinance/

• You can submit questions for the panel in advance when you register, or log back in later and submit your questions

• If you can’t attend on 15 July, you can watch a recording of the webinar online after the event

Interactive webinars DateAcademies Financial Framework (academies)

15 July 2014 at 11am

Academies Financial Framework (auditors)

15 July 2014 at 2pm

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