Academies accounts direction 2016 to 2017

For accounting periods ending 31 August 2017

June 2017

Contents

Introduction to thecurrentedition5

Action forexternalauditors5

Coverageandqueries6

What has changed inthisedition?6

Membersandtrustees7

Part 1: Basic requirementsandtimetable8

1.1Who the Accounts Directionisfor8

1.2Basis forpreparingaccounts8

1.3Summary of AccountsDirection contents9

1.4Periodofaccount9

1.5Dormantaccounts10

1.6Timetable for submission and publicationofaccounts11

Part 2: Elements of the reports andfinancialstatements13

Part 3: Model reports andfinancialstatements14

Contents16

Reference andAdministrativeDetails17

Trustees’Report18

GovernanceStatement23

Statement of Regularity, ProprietyandCompliance28

Statement ofTrustees’Responsibilities29

Independent Auditor’s Report on the Financial Statements to the Members ofCoketownAcademyTrust 30

Independent Reporting Accountant’s Assurance Report on Regularity to CoketownAcademy Trust and the Education and SkillsFundingAgency 31

Statement ofFinancialActivities33

BalanceSheet35

Statement ofCashFlows36

Notes to the Financial Statements for the year ended 31August201737

Part 4:Academyreports65

4.1Trustees'report65

4.2Governancestatement69

4.3Statement on regularity, proprietyandcompliance71

4.4Statement oftrustees’responsibilities72

Part 5:Auditor’sreports73

5.1Independent external auditor’s report on thefinancialstatements73

5.2Independent reporting accountant’s reportonregularity73

Part 6:Financialstatements75

6.1Statement offinancialactivities75

6.2Balancesheet83

6.3Statement ofcashflows86

Part 7: Notes to thefinancialstatements88

7.1Introduction88

7.2List ofnotesrequired88

7.3Note onaccountingpolicies89

7.4Note on GAGcarriedforward95

7.5Note onstaffcosts97

7.6Notes on related party transactions includingtrustees’remuneration98

7.7Notes onfunds101

7.8Note on financial commitments(operatingleases)101

7.9Note on events after the end of thereportingperiod101

Part 8: Specific topics and relatedaccountingtreatments103

8.1Multi-academytrusts103

8.2Subsidiary companies andgroupaccounts108

8.3Connectedcharities110

8.4Accounting forgovernmentgrants110

8.5Accounting for abatementofGAG112

8.6Accounting forsponsorshipdonations112

8.7Accounting for landandbuildings114

8.8New converter accounting recognitionanddisclosure119

8.9Accounting for academy combinationsanddissolutions125

8.10Accounting foragencyarrangements129

8.11Accounting for riskprotection arrangements130

8.12Treatment ofcomparativeinformation130

8.13Apprenticelevy131

8.14Teachingschools132

Part 9:Regularityreporting133

9.1Introduction133

9.2Reporting on regularity for theaccountingofficer136

9.3Reporting on regularity for thereportingaccountant139

9.4Evidence to support conclusiononregularity145

9.5Letterofengagement148

9.6Termsofreference149

Annex A: Further sourcesofinformation155

Acknowledgements157

Introduction to the current edition

This Academies Accounts Direction 2016 to 2017 (hereafter referred to as Accounts Direction) is a guidance pack for academy trusts and their auditors to use when preparing their annual reports and financial statements for accounting periods ending on 31 August 2017.

This Accounts Direction is based on Charities SORP (Statement of Recommended Practice) [SORP] 2015 as amended by Charities SORP (FRS102) Update Bulletin 1, and Financial Reporting Standard [FRS] 102.

The Accounts Direction is published by the Education and Skills Funding Agency (ESFA) as the agent of the Secretary of State for Education. The Department for Education (DfE) has ultimate responsibility and accountability for the financial framework for academy trusts, which it describes in the Academies Financial Handbook(hereafter referred to as the Handbook). It supplements the Handbook and has the same status in that it derives from requirements set out in academy trusts’ funding agreements with the Secretary of State for Education.

Academy trusts are not permitted to claim small companies exemptions and must report as a “larger” charity in the context of bulletin 1 amended SORP FRS 102. The requirements for academy trusts are to:

prepare an annual report and financial statements (sometimes referred to in this document as ‘accounts’) to 31 August2017

have those accounts audited by an independent registeredauditor

submit the audited accounts to ESFA by 31 December2017

file the accounts with the Companies Registrar as required under theCompanies Act2006

arrange an independent review of regularity at the academy trust and includean independent reporting accountant’s report on regularity as part of theaccounts

Action for external auditors

Academy trusts’ external auditors should ensure they are familiar with all the reporting, disclosure and audit requirements set out in the Accounts Direction. The following sections are particularly relevant to auditors:

Part 5: Auditor’sreports

Part 9: Regularityreporting

Academy auditors should notify National Audit Office (NAO), as group auditor, as soon as possible, where there is:

a qualified audit report on the academy trust’s financialstatements

a modified regularityreport

Before notifying NAO, auditors should discuss fully the issues leading to the qualification or modification with the academy trustees and should also inform ESFA. Further information on NAO’s role as group auditor is in their publication Communication withAcademy Auditors 2016

Coverage and queries

The Accounts Direction deals with circumstances applicable to the majority of academy trusts and does not seek to cover all eventualities. Academy trusts should therefore ensure they have access to adequate professional advice so all relevant requirements are met. They should share the Accounts Direction, and discuss any queries regardingits content, with their external auditor in the firstinstance.

What has changed in this edition?

The main changes in this Accounts Direction are as follows:

removing the section devoted to transition to FRS 102 [s8.13 in the 2016edition]

removing the option for academy trusts to defer accounts [s1.4.4 in the 2016 edition]

including financial instruments within accounting policies [note1]

including disclosures required for transfers of existing academies [note 1, note34, note 35, S6.1.19, S8.9.10, S8.9.11 andS8.9.12]

including consideration regarding accounting for land and buildings[S8.7]

including requirement for accounts to be audited by auditors to be appointed under the Companies Act 2006 unless dormant accounts are produced and clarification over appointment of auditors [S1.3.1 andS5.1]

including that under the funding agreement trusts that may have qualified assmall companies under the Companies Act can not take advantage of filing options and must submit accounts that are compliant with the Accounts Direction[S1.2]

including requirement that all academy trusts in receipt of a fundingagreement and an open academy in 2016/2017 must submit audited accounts[S1.1.2]

including recognition of income where an asset is being constructed under the Free Schools or Priority School Building Programme for the trust [note 1, S7.3.7 andS8.4.3]

enhanced disclosures of pension obligations to accord with reports provided by actuaries [note29]

including Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017[S7.5.2]

including disclosures required on dissolution of an academy trust[S8.9.20]

including information on the apprenticeship levy[S8.13]

including information on teaching schools[S8.14]

Members and trustees

All academy trusts have both members and trustees, whose roles are described in DfE’s Governance Handbook. The members have a similar role to the shareholders of a company limited by shares. The trustees are the trust’s company directors but the Accounts Direction refers to them as trustees in recognition of the charitable status of trusts.

Part 1: Basic requirements and timetable

1.1Who the Accounts Direction isfor

1.1.1This Accounts Direction must be used by academy trusts and their auditorsto produce audited financial statements for the period to 31 August2017.

1.1.2The Accounts Direction applies to all types of academy trust with a funding agreement with the Secretary of State for Education and an open academy at any point during the accounting period. In all other circumstances the expectation is that the Accounts Direction isfollowed.

1.1.3The Accounts Direction is for useby:

  • academy trusts’ chief financial officers (eg financedirectors)
  • academy trusts’ external auditors/reportingaccountants
  • academy trusts’ accounting officers (principals and chief executives), in particular part9
  • academy trustees, in particular the trusteesreport

1.2Basis for preparingaccounts

1.2.1Academy trusts are both exempt charities and companies limited byguarantee. This meansthat:

  • as exempt charities they are exempt from registration at theCharity Commission and are instead regulated by the Secretary of State for Education, with ESFA as theiragent
  • as charitable companies they must comply with company law (set out in the Companies Act 2006) and charity law (set out in the Charities Act2011)

1.2.2One of the key requirements of the Companies Act 2006 is for companies to produce annual accounts that are ‘true and fair’ and to have these independently audited. There is a hierarchy of rules and documents that supports thepreparation of theaccounts:

  • Companies Act 2006 –sets out the statutory form, content and audit arrangements for accounts in broadterms
  • Accounting standards – the Financial Reporting Council converts the Companies Act’s requirements into detailed accounting rules in the form of accountingstandards
  • Charities SORP (2015) – the Charity Commission takes the accounting standards and translates them into a form relevant to the charities sector, called ‘Accounting and Reporting by Charities: Statement ofRecommended

Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) (effective 1 January 2015)’ usually referred to as the CharitiesSORP (2015) or ‘SORP 2015’

  • Academies Accounts Direction – ESFA takes the Charities SORP and translates it into a form relevant to academy trusts, as an AccountsDirection
  • Some Trusts may qualify as small companies under the Companies Act and opt to take advantage of certain filing options. Trusts with a Funding Agreement and an open academy can not take advantage of these options and accounts that are compliant with the Accounts Direction must be submitted to the ESFA and CompaniesHouse.

1.3Summary of Accounts Directioncontents

1.3.1All of the above documents apply to academy trusts but the AccountsDirection aims to bring them together and act as the primary reference source for trusts when they produce their accounts. It does thisby:

  • defining the reporting timetable to which academy trusts must work [part1]
  • clarifying the elements making up the accounts [part2]
  • providing model accounts (Coketown), so trusts can see what the accounts need to look like [part 3]. The accounts must be prepared in accordance with SORP 2015 and the Accounts Direction, unless dormant accounts are produced. The figures included in Coketown are for illustrative purposesonly
  • giving guidance on each component of the accounts [parts 4 to7]
  • explaining the audit requirements [parts 5 and 9]. The accounts must be audited in all cases by an auditor appointed under the Companies Act 2006, unless dormant accounts are produced. Aside from the requirements in the Companies Act, an annual audit is a requirement of academy trusts’ funding agreements
  • discussing accounting issues that trusts will commonly encounter [part8]
  • providing guidance on the review of regularity [part9]
  • giving links to other sources of information [annexA]

1.3.2In prescribing the format of accounts the Accounts Direction aims to provide consistency in accounting practice within the sector, so results can be compared morereadily.

1.4Period ofaccount

1.4.1When preparing accounts, academy trusts must be clearabout:

  • the duration of their accountingperiod
  • the end-date of their accountingperiod

1.4.2The position for established academy trusts (those that have previously published at least one set of accounts) and new academy trusts is thesame.

1.4.3Accounts must be produced and audited for the accounting period ending on 31 August as a condition of their funding agreement unless DfE has specified, exceptionally and in writing, that another date can beadopted.

1.4.4Accounting referencedates

1.4.5Companies House refers to the date up to which accounts are prepared as the ‘accounting reference date’ and is held as part of the company’srecord.

1.4.6New academy trusts must ensure that their accounting reference date is set at Companies House to 31 August. When the academy trust is first formed the accounting reference date will be set by Companies House to the last day of the month in which the trust’s first anniversary falls. For example a trust incorporated on 6 April 2017 has its first accounting reference date as 30 April 2018, and 30 April for every year thereafter. The trust must change the date to 31 August as soon as possible after incorporation as explained in GP2 - Life of aCompany.

1.5Dormantaccounts

1.5.1If an academy trust has been dormant for the full period between its incorporation date and 31 August 2017 it can apply section 480 of the Companies Act 2006and prepare dormant accounts. In this context ‘dormant’ means the trust has made no accounting transactions in theperiod.

1.5.2Dormant accounts are simpler than full accounts. They must contain a balance sheet and a signed statement by a trustee (director) to the effect that thecompany was dormant during the period, but they do not need to include a statement of income and expenditure or a trustees’ (directors’) report. Dormant accounts donot usually need to be audited and a pro-forma is included inGP2.

1.5.3If an academy trust prepares dormant accounts they must report to a period end date of 31 August 2017. Academy trusts that are dormant for only a portion of the period up to 31 August 2017 will instead need to produce full auditedaccounts.

1.5.4Submission and publication of dormant accounts is subject to the samedeadlines as full accounts, including submission to ESFA by 31December.

1.6Timetable for submission and publication ofaccounts

1.6.1Action required by four months after the accounting period end – reporting to ESFA. For most academy trusts this will be 31 December 2017. Section 8.9.17 explains arrangements for dissolution of an academytrust.

1.6.2The following documents must be submitted to ESFA four months after the accounting period end, by 31 December 2017 for most academytrusts:

a copy of the audited accounts, including the reporting accountant’s report onregularity
  • a copy of the auditor’s management letter – this should usuallycontain:
  • the auditor’s approach to theaudit
  • the areas covered by theaudit
  • the auditor’s findings, including any significant concerns, if arising, including ratings of the importance/risk, e.g.high/medium/low
audit recommendations for theperiod
  • the trust’s response to the auditor’s recommendations including timescale foraction
  • the status of any audit recommendations from the previousyear
  • an accounts submission cover (on-lineform)

1.6.3The accounts and management letter must be submitted to ESFA electronically. ESFA will produce guidance on this submissionguidance.

1.6.4Timely submission of accounts is essential for giving assurance to Parliament that academy trusts have used public money for the purposes intended. ESFA takes compliance with the deadline of 31 December seriously and may consider action against trusts that do not comply including issuing a Financial Notice to Improve.

1.6.5The board of trustees should agree with their auditor an accounts preparationand audit timetable that enables achievement of the 31 Decemberdeadline.

1.6.6The timetable should incorporate the date of the trustees’ meeting at whichthe accounts will be approved andsigned.

1.6.7The board should consider arrangements in the event of the departure or long term absence of key signatories. If the trust’s accounting officer leaves before the accounts are signed there should be sufficient briefing and/or information available to enable the new accounting officer to understand the key issues in the previous year, and to ensure the relevant reports accompanying the accounts are signed on time. If a replacement accounting officer (principal/chief executive) has not yet been appointed the trust should appoint an interim accounting officer (e.g. the senior leader acting as principal/chiefexecutive).

1.6.8Action required by 31 January 2018 – publication of accounts on trust’s website

1.6.9Academy trusts must publish their accounts, in full, on their website. To maximise transparency and openness this should be done as soon as possible after the accounts are signed, but must be done by no later than 31 January 2018. The inclusion of a link to the Companies House website does not remove the requirement for full accounts to be published on the trust’swebsite.

1.6.10Academy trusts should retain accounts in respect of at least the previous two years on its website. For example the accounts for the period ending 31August 2015 should remain on the website when the accounts for 31 August 2017 are uploaded.

1.6.11Action required by 31 May 2018 – reporting to CompaniesHouse

1.6.12Under section 442 (2a) of the Companies Act 2006 accounts must be also be filed with Companies House within nine months of the end of the accounting period. For most trusts this will be no later than 31 May2018.

1.6.13Companies House levy a penalty of at least £150 if accounts are filedlate.

Part 2: Elements of the reports and financial statements

2.1The accounts tell us about the trust’s financial performance during the year and its financial position at the end of the year and must include the followingelements:

Reports
  • a trustees’ report – signed by a trustee (usually thechair)
  • a governance statement – signed by both a trustee (usually the chair) and the accounting officer, including a review of value formoney
  • a statement on regularity, propriety and compliance – signed by the accountingofficer
  • a statement of trustees’ responsibilities – signed by a trustee (usually thechair)
  • an independent auditor’s report on the financial statements – signed by theauditor
an independent reporting accountant’s assurance report onregularity

– signed by a reporting accountant, who must be the same person as the external auditor of the financial statements

Financialstatements
  • a statement of financial activities(‘SOFA’)
  • a balance sheet – signed by a trustee (usually thechair)
a statement of cashflows
  • notes which expand on thestatements

2.2Part 3 sets out a model format for the accounts. Each element is discussed individually in the subsequent parts of the AccountsDirection.

Part 3: Model reports and financial statements

3.1In this modeldocument:

  • text in black providesexamples
  • [text in red (and square brackets) indicates the source of referencematerial]


3.2The examples provided include income and expenditure lines with nil balances in the current period. These lines are included to illustrate where such items should be disclosed but, if there is nothing to report, you shouldomit.

3.3Notes to the accounts that are not relevant to the academy trust may be omitted, unless specifically statedotherwise.

Coketown Academy Trust

(A Company Limited by Guarantee) Annual Report and Financial Statements Year ended 31 August 2017

Company Registration Number: 01234567 (England and Wales)



Coketown Academy Trust

Contents

Page
Reference and Administrative Details / x
Trustees’ Report / x
Governance Statement / x
Statement on Regularity, Propriety and Compliance / x
Statement of Trustees’ Responsibilities / x
Independent Auditor’s Report on the Financial Statements / x
Independent Reporting Accountant’s Report on Regularity / x
Statement of Financial Activities incorporating Income & Expenditure Account / x
Balance Sheet / x
Statement of Cash Flows / x
Notes to the Financial Statements, incorporating:
Statement of Accounting Policies / x
Other Notes to the Financial Statements / x

Coketown Academy Trust

Reference and Administrative Details


Members

Include members in office on the date the financial statements are approved and any others who served during the year. This is an additional disclosure requirement in the Accounts Directionto promotetransparency.

Trustees

Include trustees in office on the date the financial statements are approved and any others who served during the year.

D Black A Cook

S Martin (until 30 April 2017)

T South (from 30 April 2017) C Turner

P S Small (chairman) C J Goodyear

K Harris (appointed 2 March 2017) A McGuire

L Miller

J Murray (staff trustee)

O Reville (resigned 1 February 2017) T Sheraton

A Smith (staff trustee)

G Smith (principal and accounting officer) C Wilkins

CompanySecretaryP HDaniels

Senior Management Team:

  • PrincipalGSmith
  • DeputyprincipalTHarvey
  • DeputyprincipalLJones
  • DeputyprincipalMPatel
  • Director of financeandadministrationMConnor

CompanyNameCoketown AcademyTrust