Financial Statements Outcomes 2012 to 2013

1. Financial Statements Outcomes2012 to 2013

2. Overview • Outcomes of academy trust financial statement reviews 2012/13: • Submission requirements and timeliness of returns • EFA review process • Key themes • Statistics

3. 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

4. Submission requirements Key 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

5. 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

6. 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

7. 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

8. Financial statements outcomes

9. Audit qualification reasons: • Main reasons for audit qualification: • Salary disclosure • Land and building valuations and accounting treatment • Actuarial information outstanding

10. 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

11. Regularity outcomes

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. ‘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 moneyAn ex-gratia payment (e.g. honorarium) will always require prior approval

20. 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

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