14 education & business A time of change for independent


schools and academies The General Election and change in government may well bring change in regulation for independent schools and possible changes in funding for academies and free schools. No doubt both sectors wait with bated breath as to the changes to come, writes Kerry Gallagher of Baker Tilly


Items already trailed in the run up to the Election include OFSTED taking over independent school inspections and the potential removal of business rates relief for charitable independent schools. Discussion over greater collaboration between the independent, academy and maintained school sectors will no doubt continue, irrespective of the outcome of the Election.


Recent case law and technical guidance has also impacted those charitable independent schools and academies with trading subsidiaries.


On October 31, 2014, the ICAEW issued its technical release, Guidance on donations by a company to its parent charity, which considers the accounting implications of legal


advice that donations of taxable profits by a subsidiary company to its charitable parent constitute distributions rather than donations.


It is expected that HMRC will publish guidance on the tax impact in due course.


In a recent tribunal case, HMRC has also challenged the VAT exempt status of sports facilities operated via trading subsidiaries.


Many schools have set up subsidiaries in order to maximise lettings income from sports and other facilities but now need to ensure their subsidiaries remain fit for purpose and are being operated correctly.


The Charities: Statement of Recommended Practice (SORP)


Choosing your academy


school? – What to look for which must also be independently audited and which must be published on the school’s website. These cover each academic year and essentially present a picture of how efficiently and well run the school is from a financial perspective.


Andy Jones, director and member of Whitley Stimpson’s specialist education team, outlines what to look for when choosing your academy school. With over 4,800 academies and free schools now open throughout England, what information is available on these schools to look at when considering which school to send your children to?


Well, there is the usual plethora of information available to look at when weighing up the options, ranging from the school’s website, prospectus and open day, through to Ofsted reports, the DfE’s school performance tables and various other review and feedback sites. For academies however, there is some additional information you can obtain, all of which is publically available.


Annual report and financial statements


All academies must produce an annual report and financial statements (the accounts) just like any other company or business,


www.businessmag.co.uk


The accounts for some academies can be quite large so it can be daunting as to where to start. The key areas to look are the trustees’ report (often called a governors' report or a directors' report), the governance statement and the statement on regularity, propriety and compliance (often referred to as the regularity statement).


The trustees’ report is the school’s opportunity to tell its ‘story’ of what’s happened during the year from an educational and financial perspective, and what are the key plans and objectives for the coming years. The key areas in the report to look at are the “Objectives and Activities”, “Achievements and Performance” and “Plans for Future Periods” headings.


It’s also important to look at the


“Financial Review” section and link this back to the “Funds” note included in the detailed accounts as this provides a summary view of the income and expenditure of the school for the year and, importantly, the level of reserves held by the school at the end of the year which are a good indicator of the financial health of the school.


The governance statement should include details of any governance review that has been undertaken in the year, including the overall effectiveness of the governing body and what impact or changes were made as a result.


The regularity statement confirms whether or not the school has complied with the terms of the funding provided to it and if it hasn’t, in what ways it hasn’t complied, so is also important to look at.


has been reissued and came into effect for accounting periods commencing on or after January 1, 2015. The SORP affects academies and charitable independent schools and will first be adopted for their 2016 financial statements. With many areas impacting the comparative (2015) period, schools should be thinking about how the SORP will impact them now rather than later.


Particular areas impacting schools include, accounting for fees in advance, accrual of untaken or carried forward holiday pay, or the opportunity to revalue buildings.


For academies, the new SORP will be incorporated into future editions of the Academies Accounts Direction, issued by the Education Funding


Agency to assist academies in preparing their annual accounts.


One positive piece of recent legislation that could benefit some schools is the recent raising of the charity audit threshold from £500,000 to £1 million. This will reduce the regulatory burden (and cost) for smaller charities which could include fundraising foundations and parents’ associations that raise funds for schools. This came into effect on April 1, 2015.


Details: Kerry Gallagher 0118-9554195 kerry.gallagher@bakertilly.co.uk www.bakertilly.co.uk /sectors/ education


Value for money statement


All academies must also produce an annual value for money statement, which must also be published on the school’s website. This statement essentially sets out how the school has delivered value for money in the use of the public funds under its control. It’s not just about the best price but is more about ensuring that good educational and wider societal outcomes have been achieved with the public funds provided to it.


Investigation reports


Although hopefully not something that you will need to look at, the Education Funding Agency (EFA) publish periodic reports of investigations into some academies' financial affairs, although the main action here may be to see that your school isn’t on the list.


For further information or details of Whitley Stimpson’s education services see details below.


Details: academies@whitleystimpson.co.uk www.whitleystimpson.co.uk


THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2015


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