ESFA | Alan Patient, Accountants South Woodford

How to make your Academy’s year end audit easier

September 3, 2019 By Chris James Leave a Comment

If you run an Academy you need to start planning your year-end audit in September, even better in July or August. This financial audit will cover all income, expenditure, prepayments, accruals and depreciation – in fact anything that relates to the financial management of your Academy.

Financial Managment for Academies

What do Academies need to do for their audit?

Academies need check all financial information on their finance system, so everything is accounted for. This includes all income, expenditure, prepayments accruals and depreciation. Read on for some specific tips.

Why do Academies have to complete a year end audit?

Academies, like charities and other larger businesses, have to have an annual financial audit. This provides an external opinion whether the finances are in accordance with required criteria.

The auditors check your financial statements against evidence they gather (i.e. they check and review a percentage of your transactional data) so they can give independent confirmation that your finances are as stated. The results of this audit must be published to the ESFA and to your local stakeholders on your website.

What is the academies year end audit?

The government requires you, as an Academy trust to complete the following:

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 your year end (that’s highly likely to be 31 December)
file the accounts with the Companies Registrar as required under the Companies Act 2006
publish your audited accounts on your trust’s website by 31 January

What is the year end date?

Your auditors need to complete the year end audit by 31^st of December for the year that has just ended on 31^st of August. If your year end isn’t the 31st of August, you have four months from the year end.

Tips to make your year end audit easier

Let’s be honest, some accounting entries are best left to your accountants (e.g. depreciation and movements in pension fund liabilities), but your finance department can make your (and their) lives easier by checking your balance sheet and accounts now, by doing things like:

Get in touch with your auditors (if you haven’t already), ask them for the list of what they will require and confirm the dates they will visit.
Check your pupil premium funding from July and August (will be received from the ESFA in October). It needs to be included as accrued income, and in primary schools deferred income for UIFSM.
Accruals. Consider all expenditure that will be paid in the next accounting year, which relates to amounts for last year (before August). These amounts should be accrued for. As an example, this includes fees for auditing your accounts for the year just completed.
Reconciling all bank accounts
Check and reconcile all purchase ledger accounts, if possible, with supplier statements.
Inspect sales ledger accounts, looking out for potential bad debts.
Reconcile your Salaries and PAYE/NIC accounts. At the year-end your Salaries control account should probably be zero and your PAYE/NIC control accounts should probably show just your August deductions and employers’ contributions.
Submit a VAT repayment claim (VAT 126 or VAT 100) as soon after the 31st August as is practical.
Check your VAT repayment claim balances with the VAT control account as at the year end.

In Academies that are running well (from a financial management perspective) most of these points are completed at the end of each month. However, a double check between year end and your audit will make the process smoother, that’s one of the reasons we often recommend finance departments work throughout the academic holiday period.

Check with your auditors

Your auditor should provide you with a detailed list of required audit information. Getting this ready early will reduce the time your auditors spend with you during the audit visit. This may include non-financial information such as minutes of meeting held and any internal audit reports.

Need some more help?

We don’t audit Academies, but as specialists in the sector we may be able to help you. If you want help understanding your previous audits, or want help preparing for this year’s audit – call Karen on 0203 984 8686 or email us Karen@alanpatient.co.uk

We specialise in helping Academies in London and the Home Counties focus on education, rather than financial management.

How could we help you?

Financial Management Services for Schools in London and the Home Counties.

July 30, 2019 By Chris James Leave a Comment

Not many teachers, or head teachers went into education to be involved in financial management of schools; yet that’s where many find themselves. Some Academies have Business Managers to help, but most School Business Managers are not Accountants, they’re expert in managing business. There is a better way! This article is based on a podcast by Chris James, our Academies Finance Specialist, click here and listen to it.

Converting to Academy status

The first academy we took on converted in 2011 and we have worked with them for three years. When they were going through the conversion process they realised there were at a turning point where they had done some serious work which was sponsored by the ESFA.

Ongoing Financial Management for Academies

Once this work had been completed they decided they needed ongoing help with their finances, managing them, improving ongoing budgeting, and ensuring that auditor reports are actioned.

We’ve been working with Stratford School Academy since then, and we help with:

Tendering internal and external audit services
Monthly Management accounts for Trustees
Interviewing process for finance department

“Alan Patient & Co have assisted us through a period of change. They have helped update our financial controls, advised on and implemented new accounting software and aided us in maintaining budgetary controls to help us grow from 900 going up to 1,500 pupils.”

Mr Seager, Stratford School Academy

Financial Management for Schools

We also help schools with their finances, even when they are not planning to convert to Academies. They struggle with many of the same issues, albeit they get some extra support from he local authority. We help them with:

Budget Forecast
Pre-conversion work

This article is a very brief summary of a discussion between Chris James and Tim Warneford, about Accountancy services to schools. Click here to hear the whole article.

We help Schools and Academies with their financial management, see the results of good practices (and hear about less good practices). If you would like to discuss how to improve financial management in your school, please call. In the last few weeks we have been able to give good schools ideas simply by talking, visiting, or as part of a paid project.

BFR Deadline 30 July 2019

July 3, 2019 By Chris James Leave a Comment

Hopefully by now you (and all other Trusts) have at least had your Finance Committee and Local Governing Board review and agreed your budget for 2019/20 and the 3-year forecast through to 2021/22.

Key points on the BFR

With many Trust Board’s meeting to approve this prior to submission to the ESFA on 30 July it is important to remember these key points: –

What assumptions have been made?
Are those assumptions the right ones?
Does this include the plans of the Trust to improve or maintain high standards?
If we have set a deficit budget in year, do we have the GAG reserves to cover this?
If we do not have sufficient reserves what affirmative action had the Board taken?

Assumptions in the BFR

The person or people in the Trust who are compiling the budget will need to make assumptions about future events, funding and expenditure in order reflect what the finances of the Trust will look like for the next 3 years. The things to look out for are where funding or expenditure doesn’t change from year to year or are significantly different from one year to the next without explanation. Brexit, the upcoming spending review and teachers pay and conditions will all need assumptions made about them that could drastically change the look of the budget. Challenging these may have been done by the Finance Committee or Local Governing Board and reviewing their discussions is key but if not, it is up to the Trust Board to challenge those assumptions as the Board is ultimately responsible for the Financial Management of the Trust.

The bottom line on the BFR

Once the Board are happy with the assumptions and that the figures reflect the plans of the Trust the bottom line should be their where they focus next. A Trust can bring forward surplus GAG reserves from previous years to plug a gap in funding for the next year. If not, then the budget cannot be approved and changes must be made to show a balanced budget before it is approved. If the 3-year position shows a significant deficit after taking into account those reserves brought forward then what action will the Board make to ensure that they can continue to function must be discussed and explanations provided to the ESFA in the submission.

Following Teachers pay and conditions and the forthcoming Pension on cost increases many Trusts will be struggling more than ever to balance their budgets. With no general increase in funding to meet the increase in costs on the horizon it is important for Trusts and their Trustees to ask the difficult questions and to ensure that they can continue to provide the education their pupils deserve.

Are School Leaders the best people to run their schools?

June 12, 2019 By Chris James Leave a Comment

School leaders and governors are not often not trained finance professionals. School leadership is far more than “just” finances (in fact that applies to leadership in general and maybe we’d be better off if we had more leaders in the country). A good leader needs to be able to inspire, move her school towards a successful future, deal with a wide range of views and have a strong grasp of the financial information as well.

Business failure

In about 80% of failing businesses there is poor financial management. That’s about cash flow, budgeting, planning, dealing with external bodies (ESFAS and HMRC anybody?) and ensuring that finances are up to date and in the right place.

Schools are not in a position where failure is an option as the consequences are too great for the hundreds of lives that would be affected. The average primary school budget is over £1m and for secondary schools that’s in excess of £4.5m. Understanding and managing a budget of this size is not something that can be left to chance.

The challenges in schools and businesses

Most business leaders that we deal with are interested in saving tax, maximising profits, earnings and keeping the books well enough to keep the VAT man at bay.

In schools the incentives are drastically different. Your school is challenged to deliver ever-higher standards with increasingly lower budgets. When you get it right there’s a far greater sense of accomplishment, ranging from the number of people your work affects to the fact that you are directly helping children get the best possible education.

Financial management in schools

Juggling budgetary constraints with curriculum goals is one of the great challenges of every school leader.

This is only possible by having the correct financial information and understanding that financial information; allowing you to achieve your curriculum goals and keeping to budget.

As Accountants that specialise in working in the Schools and Academies we help our clients by creating a financial model that works for their school, ensuring that they can get the most out of their limited budgets and releasing as much of your time for curriculum needs rather than financial management. We also help them to manage their finances to the standards required by their authorities.

No Accountants are specialists in delivering a broad and balanced curriculum, which is why we help you build the best finance team possible with the right mixture of skills and expertise for your school.

Financial controls in schools and Academies

It starts with strong financial controls, but financial management is more than that. Finance officers and school business managers are a key part of the school’s financial processes and systems. Helping the school’s finance staff understand how their work affects decisions taken by school leaders is critical. Helping Governors with a basic understanding of finances so they can support you as a school leader is also key.

Local Authorities are handing over more and more control and decision making to schools each year, so reporting responsibilities of schools keep increasing. The ESFA and DfE are asking for more and more information in a number of different formats. A strong finance function is essential to deliver this and an external perspective can really help.

Then there’s the complexity of understanding audit reports. Auditors are specialised and highly trained, but without the right training it’s hard to understand what they are talking about. You might not be surprised to hear that many school leaders and governors don’t fully understand their audit reports. Don’t be afraid to ask them questions if you don’t understand, good auditors will take the time to explain any queries you may have.

The problems of being a school leader

Your ultimate goal, as a school leader is to provide the best education for the children in their school, so they are prepared to go out into the world.

Technology, the world and school requirements are changing rapidly. As a school leader you can only meet your ultimate goal with a clear understanding of your financial plan and good management of your finance function combined with outstanding teaching and learning.

It is possible for you to achieve these seemingly divergent requirements. School Leaders will always be best placed to run their schools, although it often needs more financial knowledge than most school leaders have.

How Alan Patient and Co help Academies and Schools

Helping schools and school leaders understand their finances and make the right decisions based on those finances is key. We often:

act as a go between for schools and auditors, making sure the auditors have the financial information in a format they expect and their requests and audit issues raised make sense to school leaders.
help schools prepare their budgets and manage those budgets
ensure the relevant financial controls are in place

Most importantly we don’t deliver numbers, we help you to make decisions about the future of your schools, based on your numbers.

How can I make BFRO returns easier in my Academy?

May 8, 2019 By Chris James Leave a Comment

This is the time when stress levels rise even higher in many Academies as they are now working on their BFRO (budget forecast returns outturn) submissions for the ESFA. As we help a number of schools and academies with their financial management, we often get asked a few questions about the BFRO.

What happens with the BFRO data?
Why do Academies have to complete a BFRO?
How can I complete my BFRO more easily?

Please note we are not from the ESFA and you should seek detailed advice from the ESFA via their website or call them.

What happens with the BFRO data?

The BFRO is a return giving information on what has happened in your Academy for the year ending 31^st March. The ESFA compile the data you submit and submit a large amount of it to HM Treasury. They also use it, in conjunction with BFR data to examine the health of the Academies sector as well as predicting the financial health of your academy.

Why do Academies have to complete a BFRO?

So that government can be satisfied that money they invest in the sector is being used wisely. The ESFA’s year end of 31^st of March, so you need to complete it for this deadline.

In essence it’s a summary of income and expenditure, which is good practice for Academies (like every business) to have anyway. Without the ability to see what you’ve spent differently to budget and previous years it’s very hard to improve your financial status and make the money go further (which is something we help Academies with).

How can I complete my BFRO more easily?

The biggest thing is to keep accounting records up to date and accurate throughout the year, this means it’s easier to transfer the data onto your BFRO.

Other things that have helped clients include:

Ensure your accounting software can produce a BFRO and that your chart of accounts is mapped to the BFRO report in the software
Having an up to date forecast to the end of the academic year (as part of the BFRO asks for a forecast to the upcoming 31 August).
Producing a Balance Sheet to 31 March (monthly Balance Sheets are effectively required since the latest Academies Financial Handbook requirements).

How can I keep my financial records up to date more easily?

The first thing I’d say, of course, is to ask us to help you! However, some other issues we’ve seen are:

Do regular monthly reconciliations including bank, debtors and creditors reconciliations
Create a monthly checklist to complete monthly and then again for 31 March and ensure Finance staff are aware of the requirements
While sometimes unpopular and controversial is make sure your Finance function is all year round rather than just during term time

How else could you help me?

Although we are Accountants, we don’t deliver numbers, we spend time turning them into information and assist you with taking actions based on that information. So, we could help you:

Understand the financial statements, so you can present them more confidently
Understand the results of your audit
Manage your financial information throughout the year, so you save time to focus on teaching

If you have a specific question on the finances in your Academy and would appreciate a third-party viewpoint, give us a call 020 8 532 9843 or email us on Karen@alanpatient.com, we are always happy to talk.