1. Financial Statements Outcomes 2012 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 2010/112011/122012/13 No. of financial statements 4501,4722,256 Submitted by 31 December 83%87%92% Submitted by 31 March-98%

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 2010-112011-122012-13 Total qualified audit opinions 129 (2.0%)27 (1.2%) Qualified audit opinions (salary disclosure only) -26 (1.8%)21 (0.9%) Total management letter recommendations n/a4,250+11,500+ Range of recommendations n/a0-460-93 Avg. recommendationsn/a35

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 2010-112011-122012-13 Modified regularity report n/a35 (2.4%)83 (3.7%) Disclosures within AO statement n/a 44 (1.9%) Auditor provided unsigned statement n/a 17 (0.8%)

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-officershttps://www.gov.uk/government/publications/letter-to-academy- trust-accounting-officers  Key themes:  Fraud and irregularity Correct implementation of internal controls can reduce the risk of fraud and the EFA has a zero tolerance approach to fraud  Connected party transactions Annex B provides key considerations for transactions and could be used as a checklist for AO  Special payments Severance 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

20. Webinar timetable  You can register for the webinars at https://registration.livegroup.co.uk/academyfinance/ 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 webinarsDate Academies Financial Framework (academies) 15 July 2014 at 11am Academies Financial Framework (auditors) 15 July 2014 at 2pm

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