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FEATURE FOCUS: SCHOOL FINANCES


Top financial considerations when converting to an academy


academies. However, it wasn’t until 2011 that academies properly gained momentum. At the end of 2010, there were only 329 academies; in 2011 alone over 1,000 were created and that figure has continued to grow ever since. As of August 2018, there were 7,475 academy


schools in England, sitting within 2,679 trusts. Just over 20% were single academy trusts, but the most popular size of trust is a Multi Academy Trust with 3-10 schools. Nearly half of academies (44%) sit within this structure. Note however that this still leaves nearly two-thirds of all English schools as Local Authority maintained. If your school is considering a conversion to a


I


n our second feature this month looking at academy financing, Robin Evans, Partner


and Head of Academies at Sussex and Gatwick-based chartered accountants, tax, and business advisers, MHA Carpenter Box, discusses the steps to consider when converting to an academy and the possible pitfalls along the way.


The academy movement first began back in 2002, with the Labour government launching city


Multi Academy Trust (MAT), there are many things to consider. And once your conversion has taken place, there are many additional areas of compliance which need to be addressed.


Here are ten areas to consider for your academy conversion process, and what you need to be aware of.


A different way of accounting Local authority maintained schools report their income and expenditure on a simple cash basis, as


34 www.education-today.co.uk


well as focussing on committed spend at a point in time. Academies must conform to accounting principles, requiring them to adopt accrual accounting, recognising for example that the lump sum cost of an annual insurance premium is a prepayment and should be spread equally over twelve months; likewise, an expense for unbilled electricity should be estimated and included in order to reflect performance more accurately. You will also need to get to grips with the


concept of fixed assets, such as computer equipment or a school minibus, which will be used in the academy for a number of years. Its use over these future years is reflected by recognising a depreciation charge as an expense each year – if a computer costs £600 and is expected to be used for 3 years before it becomes obsolete, you will see a charge of £200 for each of those three years. This can be useful in planning future replacement of assets and ensuring that such replacement is included in budgets and cash flow projections going forward. By posting depreciation each month and looking at the remaining net book value, the Trust will have a good idea of how soon assets will need replacing.


November 2018


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