FEATURE FOCUS: SCHOOL FINANCES This change can be particularly difficult to

adapt to as you must not only learn a new way of accounting your figures, but also, to some extent, unlearn the previous methods you may have used!

New systems and software If you’re integrating into a new MAT, you may well have to get to grips with entirely new software to ensure consistency with the rest of the MAT, or at a minimum you will be using familiar software in a new way, including new processes and reporting. Setting up your chart of accounts The concept of fund accounting is important,

and your chart of accounts should be structured to facilitate reporting by fund type. All monies received for a specific purpose are classified as restricted funds (and must be classified as such). In fact, the majority of an academy’s income falls into this category as your grant funding is provided to you for the restricted purpose of educating your pupils. Only less significant funds, such as fundraising

for the school with no specific intention, may be regarded as unrestricted funds. In practice most of your income and spend will be restricted, and you could almost deal with this correctly without knowing it, but it is still important to get the accounting right, and should you spend, for example, General Annual Grant (GAG) income on something for which it is not intended, there could be serious consequences.

Restrictions on borrowing Academy schools manage all of their finances through their own bank accounts, but they are prohibited from borrowing without the prior consent of the Secretary of State, and this is not given frivolously. You will need to carefully manage your bank account, as an overdraft constitutes borrowing. You will also need to watch out for leases. What may look like an operating lease (or rental agreement) may in reality be a finance lease, which constitutes borrowing.

Calculating your financial position when your convert At the point of conversion, you will either have a surplus or deficit position with the Local Authority. This position needs to be established within four months of conversion. Your school will take this position forward with them. If you’re in a surplus, you will need to receive funds from the Local Authority (and you may need to wait a while for much needed cash). On the other hand, if your school is in a deficit, do you have the cash to pay the Local Authority back?

Dealing with public perception There may be misconceptions among parents and the local community of the financial implications of converting to an academy. When your accounts are published they may show you holding a great deal of cash, and parents may wonder why it’s not being spent on the current pupils. However, your reserves policy should help explain this. For example, you may be holding cash to settle liabilities due, maintain, say, one month’s running costs, or as a contingency due to maintenance work that may be needed on old buildings. You also have a risk of financial scandals

arising; academy schools have a high public profile and they can be an easy target for the press.

Falling foul of rules Now that you will be managing your own finances with new incomings and outgoings, you will need to deal with collecting from debtors and paying your creditors, as well as reclaiming Value Added Tax (VAT). These rules can be complex and easy to get wrong, so you need to ensure you have expert advice to help steer you through the legislation.

Developing robust internal controls The potential for fraud is very real, so you need to ensure any fraud threat it mitigated. Schools are an easy target as there tends to be a lot of information on Academy websites detailing the roles of individuals, such as the Senior Leadership Team and Governors, including e-mail addresses in many instances. A potential exposure could arise, for example, where you are undertaking a large capital project such as a new building. You are likely to be keen for this to be reported in the local press to demonstrate how good your school is! This could, however, alert fraudsters that large payments will be made to construction firms who you are not necessarily familiar in dealing with, giving them the opportunity to pose as your suppliers and potentially extract large sums by supplier payments fraudulently. Be sure to undertake an initial self-assessment

to determine what controls you currently have in place, and where weaknesses appear. A regular review process to update systems and maintain relevance will not eliminate every possible loss, but it is a strong line of defence and ensures they


are as robust as possible. And while having an effective internal control policy in place is important, it must operate in practice to be effective.

Related parties Related parties can include staff and trustees of the school. Any transactions with them need to be disclosed in your accounts and must not involve the related party making a profit on the transaction. Keeping your register of interests up- to-date and ensuring new interests are regularly declared is key.

Multi Academy Trusts While joining a Multi Academy Trust can bring significant financial benefits to your school, there can be a number of issues your team may need to address. This can include issues with cost allocation across the academies, and also issues with identity and culture – how does your school fit in with the new structure, and how do staff feel about the integration?

How we can help If you are in the process of converting to an Academy, or are looking to convert in the near future, it’s best to get professional advice as early as possible. The information provided in this article is a very

brief overview of what can be a complex area, but our dedicated Academies Team can help guide you through the conversion process.

uIf you have any questions, please get in touch with Robin Evans for an informal chat on 01903 234094 or visit

November 2018

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