Acting for academies: practitioner update

The introduction of the Academies Act 2010 has seen a significant increase in the number of schools opting out of local authority control and converting to academy status.  Many firms are now involved with the audit and accounts preparation of such academies and for those that do act for academies, there have been some updates that practitioners need to be aware of.

Young People’s Learning Agency (YPLA)

With effect from April 2012, the remit and responsibilities of the YPLA have now moved to the Education Funding Agency (EFA).  The YPLA were the party responsible for the issuance of the Academies Annual Accounts Direction 2010/11 (AAD) and we are expecting that the EFA will update the AAD for August 2012 year ends (certainly by 31 August 2012).  In addition, we are also expecting the EFA to have an updated Academies Financial Handbook in place for 2012/13 and firms that are responsible for auditing academies need to be aware that there may be additional ‘regulatory reporting’ as part of the 2012 audit, although this is still subject to ministerial approval.

Whole of Government Accounts 2011-12

On 20 June 2012, the EFA issued the arrangements for the completion of the Whole of Government Accounts (WGA).  The Office for National Statistics classifies academies as central government public sector bodies and therefore academies are subject to reporting in relation to WGA.

The WGA is a return relating to income and expenditure for the year 1 April 2011 to 31 March 2012.  If an academy has opened after 1 April 2011 the WGA will be from the date of opening but before 31 March 2012.  It is worth mentioning that academies that filed audited financial statements with the YPLA for August 2011 year ends will not be required to submit a WGA return for 2011/12.

The information contained in the WGA will all depend on the size of the academy concerned.  Academies which have less than £4m estimated annual income are deemed to be ‘small’ academies and therefore need to submit a Small Academy Return.  This will need to be completed for small academies that were open by 31 March 2012 and who have not submitted 2011 audited financial statements.  The return contains a summary Statement of Financial Affairs (SoFA) and a balance sheet to 31 March 2012.  The EFA has issued detailed guidance on how to complete the return which can be found by clicking on the link.

Where an academy was open by 31 March 2012, and did not submit 2011 audited financial statements and has estimated annualised income greater than £4 million, a WGA Large Academy Return will need to be filed with the EFA by 28 September 2012.  Again, detailed guidance can be found by clicking on the link.

A special purpose grant (between £1,600 and £2,000) is available to fund the work required on preparing the WGA return, but there are conditions attached to this:

• The WGA return must be submitted by 28 September 2012.
• The accounting officer must confirm that the academy received professional financial support from named advisors in preparing the return.
• The accounting officer must also confirm that, as far as they are aware, the professional financial advisors are satisfied that entries made in the return are a fair reflection of the academy’s financial position related to those entries.

Practitioners that have academy clients should make sure their clients are aware that a completed return should be uploaded between 3 September 2012 and 28 September 2012.

Budget Forecast

All academies that were open by 31 May 2012 will be required to submit a budget forecast to the EFA by 28 September 2012, regardless of size.  Academies would have previously submitted a General Annual Grant 2 (GAG 2) return, but this return has been replaced by the budget forecast with immediate effect.

The EFA has issued guidance on completing the forecast and the EFA has confirmed that they will pay a grant, provided that academies:

• submit the forecast by 28 September 2012;
• confirm that they have obtained professional support from named advisors at additional cost to the academy;
• confirm that the academy’s professional advisors, if involved in the preparation of the budget forecast, consider the forecast to fairly represent the academy’s financial position for the academic year 2012/13.

The completed budget forecast should be uploaded between 3 September 2012 and 28 September 2012.

Land and Buildings Valuation

In the majority (if not all) cases, land and buildings will be a material amount on the academy’s balance sheet and as a consequence, up to date and comprehensive valuations need to be obtained.  The EFA needs an up to date and comprehensive valuation of an academy’s land and buildings in order to prepare a valid 2011/12 WGA consolidated return for academies which includes a balance sheet for academies’ assets.  In order to do this all academies open before 31 March 2012, regardless of size, and whether, or not, financial statements have been produced will be required to produce a valuation of land and buildings statement.  This valuation has to be at a consistent date, being 31 August 2012 (i.e. academies’ financial year-ends), and the valuation must use a consistent valuation method permitted under HM Treasury financial reporting requirements.

The EFA have confirmed that because there is a large variation in timings and the methods used to generate the valuations, they will procure and pay for valuations of land and buildings of all academies which were open by 31 March 2012.

Valuers will be appointed under a contract to prepare such valuations by 26 September 2012.  As the valuations will not be available in time for submitting a 2011/12 WGA return, academies will be able to enter their own values for land and buildings at 31 August 2012 into the 2011/12 WGA return (although the EFA may need to replace the values entered by academies with those provided by the valuers to ensure consistency).  Alternatively the academy may leave the entries for land and buildings blank and the EFA will update the academy’s 2011/12 WGA return once submitted.

The deadline for submission of the statement giving the EFA information about assets that academies lease from local authorities was quite tight in order to allow valuers to prepare their valuations and statements should have been submitted by email to academieswga.efa@education.gsi.co.uk by 5 July 2012.

Counter Party Balances Return 

Firstly, academies that filed audited financial statements for August 2011 year ends with the YPLA will not be required to file a 2011/12 WGA return but will need to file a Counter Party Balances Return.  Academies that have audited financial statements and total income in excess of £4 million for 2010/11 (large academies) will be required to file a Counter Party Balances Return for the academic year 2010/11.  A Counter Party Balances Return is a simple statement that provides the EFA with additional information concerning balances with other government bodies for the year to 31 August 2011 that had previously not been disclosed within the financial statements.  The deadline for submission of the Counter Party Balances Return is 28 September 2012 and guidance has been issued by the EFA as to how to complete this statement. Small academies (those with total income of less than £4 million for the academic year 2010/11) will not need to complete a Counter Party Balances Statement.

Please note, that no financial support is offered by the EFA for the work involved in producing this statement and a completed statement must be uploaded between 3 September 2012 and 28 September 2012.

Local Government Pension Scheme (LGPS) Valuations

All academies that are open by 31 March 2012, regardless of size and whether, or not, financial statements to 31 August 2011 have been produced will have to obtain a valuation of the LGPS.  The accounting and reporting for LGPS are determined by FRS 17 Retirement Benefits and the valuation report must comply with the principles in FRS 17.

Where LGPSs are in deficit, this will be shown as a liability on the academy’s balance sheet, hence the importance of accurate information being obtained.

The EFA has confirmed that funding is available to each academy in order that they can meet the cost of obtaining an LGPS FRS 17 valuation.  There are conditions attached to this support grant, and an academy needs to ensure that they:

• confirm in their 2011/12 WGA return or LGPS FRS 17 valuation statement that they have paid their administering local authority for the valuation for the 2011/12 academic year;
• confirm that the EFA can, by exception, approach the LA for a copy of the valuation either through the WGA return, or valuation statement; and
• must have submitted their budget forecast for the academic year 2012/13 and as appropriate 2011/12 WGA return or Counter Party Balances Statement to the EFA by 28 September 2012.

Completed valuation statements must be uploaded between 28 September 2012 and 31 October 2012. 

Further Deadlines

• July 2012 will see valuations start to commence in respect of land and buildings that academies occupy.
• The academic year ends on 31 August 2012, and this date also sees the target date for publication of annual updates for the academic year 2011/12 to the EFA Accounts Direction.
• FRS 17 valuations of LGPS balances must be received in September 2012 and in September 2012, land and buildings valuations will be made available to academies.  28 September 2012 sees the final deadline for academies to upload their completed 2011/12 WGA return, budget forecast for 2012/13 and counter party balance statement and hence be eligible to claim a grant for professional financial support and LGPS valuations.
• By 31 October 2012, academies will upload their LGPS FRS 17 valuation statements.
• October and November sees the EFA validating academies 2011/12 WGA returns.  The EFA will visit a sample of academies to validate the 2011-12 returns to records as well as validating academies’ budget forecasts for the academic year 2012/13, undertake assurance work at a sample of academies preparing 2011/12 WGA returns and also pay academies the grants for valuations and professional financial support.
• The deadline for the EFA to submit the interim 2011/12 WGA return to HM Treasury is 16 November 2012.
• Academies must submit their audited financial statements for the academic year ended 31 August 2012 by 31 December 2012 to the EFA.
• In January 2013, the EFA will validate academies’ 2011/12 WGA returns to their academic year 2011/12 financial statements.
• By 31 January 2013, the EFA will submit a final consolidated 2011/12 return to HM Treasury.
• By 28 February 2013, HM Treasury will submit the WGA return to the National Audit Office for audit.

Category: Accounting and standards, Audit