As I sat looking through the accounts for the academy that my kids go to, I found myself falling into file reviewer mode. Picking out the areas where I think the school (and their accountants) could do better and thinking about just how common these issues are in the academy accounts we see every year.
This multi-academy trust comprises a couple of smallish rural primaries. It was preparing its first set of accounts, which is no mean feat. As I'd imagine most parents would (OK - maybe not) I scribbled some notes on the accounts that I thought I'd share.
Nice little trustees' report
I might have scribbled the word 'little' but, as an academy trustees' report, it wasn't really. It did manage to be relatively concise, though. As with many academies, it rightly emphasised the importance of education and how proud they were of their sports and SATs results they had worked hard to help the kids achieve. Financial review and reserves policies are also pretty good, which is becoming more common as the sector is developing. The word deficit jumps out of the page at me and there's a pretty honest appraisal as to how it happened - pupil numbers down and one of the schools had to lose staff. Good narrative reporting...bit concerned as a parent.
Except for the matters listed below...
I underlined these words and then scribbled some bits I couldn't really share today. I'd hit the Accounting Officer Statement on Regularity, Propriety and Compliance then quickly flicked to the Regularity Assurance Report.
My kids' school was one of 5% of academies that had a modified regularity report in the 2014 year (up from half of that the year earlier) - Cue feelings of guilt that I hadn't made the time to go and help them out...maybe this year I'll try harder...
So, what seems to have happened here? Well, to me, from the outside in, this looks like a trust that was possibly a bit naïve at conversion. Whilst there isn't any finding that I'd say is particularly barnstorming, it strikes me that this could be a 'modification-by-totting-up' due to the sheer number of issues noted.
With the knowledge that the head-teacher doesn't know his bank reconciliation from his elbow, I am at least reassured to note that nothing criminal has been identified (other than the head's crimes against fashion in all likelihood). Some slightly confusing language in the report wording aside, the clarity of the annual report is, so far, pretty good.
Just looks like another story of a school that converts for the right reasons but without having the foggiest about what is involved in running a charity.
Errrm...and you're paying for that how?
I'm a little concerned when I see the SOFA to be honest. And when I scan through the supporting notes, things don't look much rosier. Staff costs = 108% of GAG funding? Negative unrestricted funds? Things look pretty bad, though the trustees' report at least tried to tell me why.
They aren't going to be the only academy that struggles over the coming years as funding gets tighter and costs go up. I hope they've managed to budget more tightly for this year.
Looking at the MAT analysis in the notes, my kids' school actually looks alright, but the one it has buddied up with is a bit of a bloater. Maybe this is my parent head, rather than the nasty file-reviewer one, speaking - but I do hope this academy experiment isn't going to end in tears.
That's not right? Is it?
With my file reviewer head firmly back on I find an unusual revaluation treatment on land and buildings. An example of a lack of understanding of how to account for the difference between a LA valuation and the EFA procured one? Looking at the two values, I know which one I'd have tried to use. The MAT used the EFA procured desktop valuation.
Never look at mortality assumptions...
...unless you want to be reminded that this is probably a little rough and ready as far as pension valuations go. A quick check to the local authority accounts confirms that these are standard assumptions...I would hope to live somewhat longer!
And no review of a set of academy accounts is complete without...
Looking at the trustees' remuneration disclosure of course! This is a 7 month accounting period and, whilst I'm not a big fan of the EFA disclosure compromise, from the wording in the trustee remuneration and the wages notes I think I'm happy that the newspapers won't be onto this one!
My overall conclusion was one that was more personal than professional in all honesty. I think I need to see whether these guys need any help. The financial position presented in this year's accounts appeared borderline precarious. Certainly up there with some of the worst I'd seen in a first year set of accounts.
From an accounting perspective, as is normal, the narrative parts were pretty good but there appeared (and without the detail, it's difficult to be more conclusive) to be some fairly big mistakes in the accounts.
I'm certainly not a typical parent looking at the accounts but I could see that the 49 pages prepared by this relatively small operation would be pretty difficult to interpret for anyone that was.
I'll be looking at some of the common current accounting issues for academies within our regional Academies Audit and Accounts Update courses running over the summer.
I'll also be considering whether academy accounts are likely to become more understandable to the lay-user at our June and September Mercia Academy Update Conferences when I look at implications of a new GAAP for academies. Other speakers on the day include:
- Tina Allison (Crowe Clark Whitehill) - Practical MAT issues
- Adrian Shardlow (Browne Jacobson) - Post-election legal update
- Stephen Morales (NASBM) - School budget pressures and 'The Perfect Financial Storm'
- Neil Owen (VAT Advisory Services) - VAT issues
- Douglas Green / Steven Law (Hymans Robertson) - Pensions update
- Sally Flett / Jennie Griffiths (EFA) - EFA hot topics and case studies
For further details click here.