Just before Christmas, accountants all over the country shut up shop and went home to relax with their families. The Annual Report and Accounts had finally been filed with Companies House and the EFA in respect of numerous academies to meet the deadline of 31 December. Whilst this isn’t a new phenomenon for the accountants, it is painfully new for many academies. In fact, the financial aspects of running an academy are, for most, the single largest difference from being a maintained school.
Academies are strange beasts with many guises: companies limited by guarantee, charities and public bodies. They are required by the conditions contained in their Funding Agreement to comply with the Academies Financial Handbook which sets out the responsibilities and requirements relating to the financial governance and management of academies.
The Handbook states that the EFA expects academies ‘to take full control of their financial affairs’:
- As companies, academies must produce audited company accounts
- As charities, academies must maintain accounting records and provide publicly accessible accounts in line with the statement of recommended practice (SORP) for charities
- As public bodies, academies must ensure regularity, propriety and value for money in their management of public funds
The financial year for an academy will run from 1 September to 31 August so that, unlike maintained schools, the academic year and the financial year will be brought into line. However, the Accounts Direction produced by the EFA which supplements the Academies Financial Handbook, also states that the audited accounts must be submitted to the EFA by 31 December – a mere 4 months after the end of the financial year and not the 9 months from the accounting reference date required by Companies House for any other private limited company. As most schools (and their accountants) will now tell you, this is too tight a deadline!
The Accounts Direction provides guidance for academies and their auditors when preparing and auditing the trust’s annual reports and financial statements. In essence, the financial statements to 31 August must be prepared and audited by an independent auditor prior to submission to the EFA by 31 December, and to the Companies Registrar as required under the Companies Act 2006.
The annual reports must also be prepared alongside the financial statements which include a report on behalf of the Directors, a governance statement, a statement on regularity, propriety and compliance and a statement of trustees’ responsibilities. These are submitted together with reports from the independent auditor on the financial statements and on regularity.
The reports are central, outlining the governance structure and confirming that there is an acceptable system of internal control. Academies are recipients of public funding and so must prepare a Governance Statement in accordance with HM Treasury requirements.
Rather than being simply a cumbersome reporting mechanism, it should be remembered that the annual report and accounts are an important opportunity to demonstrate the accountability and transparency which the academy holds dear. Instead of reluctantly publishing the accounts information simply to comply with the legal requirement, it is a way to encourage those who are involved with the academy to have confidence in it and the way that it is run.
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