Preparing for your academy trust year-end

Finance Team

July 13 2021
As we hurtle towards the end of the academic year, preparing robust and sustainable budget plans (whilst maintaining a focus on the production of accurate monthly management accounts), it's important to begin planning for the year-end process.

The Academy Accounts Direction was published by ESFA in March and contained only minimal changes to the requirements expected in the academy accounts for 2020/21.

The main changes to be aware of are largely around the structure of the document, which is now split into three parts: the main guidance document; the “Coketown” model accounts document, compliance with both being a requirement of each trust’s funding agreement; and lastly an auditor/reporting accountant framework and guide.

Although there are only few technical changes this year, there is increased guidance around expectations in terms of the financial review section of the trustee’s Report and it is stressed that trusts should avoid using the template ‘Coketown’ narrative to make this report more appropriate and relevant. The ESFA expects that academy trusts should take the opportunity to shed light on the numbers shown in the financial statements, including why and how they have arisen, in terms that a non-accountant would understand.

Therefore, it’s advisable to set aside sufficient time this year to prepare this report, due to the importance of including comment on all key areas:

  • detailing financial performance during the year
  • the final position at year-end
  • key factors looking into the future
  • identification and management of key financial risks and the impact of significant events.

Greater emphasis on this comprehensive part of the annual statements may mean that this section requires a more thorough update, as opposed to a simple ‘rolling forward and annual update’ of what has been included in previous years.

Staffing disclosures required for key management personnel and higher-paid staff must now also be applied where the academy trust has entered an ‘off-payroll’ arrangement with someone who is not an employee. There is also further clarification around the classification of funding sources to further align academies’ financial statements to the Academy Accounts Return (AAR).

All other expectations in the Accounts Direction document remain relevant.

So, in order to be as prepared as you can for the year-end process, here are a few handy hints and tips:

  • For newly converted schools it’s vitally important to establish with the predecessor local authority how much of any grants/funding streams have been received, prior to conversion. This will have an impact on any adjustments to be actioned in the accounts.
  • Spend time ensuring your month-end processes are robust and comprehensive. This should ensure the year-end process is relatively pain free.
  • Ensure all income is recognised in the period in which the academy trust becomes entitled to the funds, the receipt is probable and can be measured reliably. It is important to be familiar with the accounting periods which all grants relate to as it is likely that adjustments will be required to deliver this requirement.
  • Ensure all expenditure relates to the accounting period and accrue or prepay anything which does not.
  • Ensure all balance sheet control accounts are balanced at 31 August. This includes ‘clearing’ the suspense file.
  • Ensure the final trial balance is fully evidenced and supporting documents are in place.
If you’re looking for support with managing finances, budgets and reporting or would like to learn more about our finance briefings and relevant training, please talk to us.

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