Financial audits may be daunting, but they’re vital for revealing important information about an organisation’s financial position.
Maintained schools aren’t obliged to publish accounts, but they are required to submit returns to their LA. This information is used to populate the government’s ‘Schools financial benchmarking’ website, following a 2011 decision by the DfE to begin publishing financial data from all schools in England as part of the coalition government’s broader data transparency agenda.
Academies, on the other hand, are run by charitable trusts and companies limited by guarantee. As such, they’re required to submit audited annual financial statements to Companies House and report to a 31st August academic year-end.
The first priority ahead of an audit should be to find out what information the auditors need to see and ensure that both electronic and paper copies are readily available. Ensure that your income and expenditure is coded to the correct financial year, and see to it that staff will be on hand to support the auditors and respond to any requests.
Many schools present simple income and expenditure accounts generated from computerised accounting packages, with the ‘income’ side recording the school’s sources of funding, and the ‘expenditure’ side providing a breakdown of what the school spends that income on.
For academies, it’s very different. As per the Academies Financial Handbook, their financial management and control requirements include preparing financial statements each year that give a ‘true and fair’ view of the academy’s financial position, and providing details of their financial activities and cash flows.
Academies that operate subsidiaries to generate extra revenue – by renting out school facilities after hours, for example – also need to produce consolidated accounts outlining the subsidiary’s results.
All academies and MATs are required to abide by the Companies Act, which each year involves conducting and submitting the following:
Governors’ report This describes the academy’s objectives for the year ahead and future plans, and how it intends to achieve them.
Independent auditors’ report An outline of whether or not an auditor believes the academy’s financial statements give a true, fair view of its finances.
Statements of financial performance These include a statement of financial activities, a summary income and expenditure account and statement of total recognised gains and losses.
Balance sheets Shows the financial position of an academy, covering assets, liabilities and ownership interest.
Cash flow statements A report on the academy’s financial performance in cash terms – ie. all funding entering the school via bank transfers.
Accounting is a precise activity, but there can still be a significant degree of judgement involved. Figures in reports may be affected by an academy’s preferred accounting policies and techniques for estimating, making it important for academies to provide notes and details of their working.
Su Johal is the founder and director of SAAF Education, a provider of financial management services to schools, academies and MATs.
