There are a number of specialist software packages for Academy schools, which can greatly vary in price. There are also some generally available commercial software packages, such as Sage or Xero (which is cloud based), which have been tailored to work just as well for academies.
Provided your chosen software facilitates the provision of accurate and meaningful reports and represents good value for money you should use the package you are most comfortable with.
New accounting period
The conversion to Academy status means closing your old accounting period on the date of conversion and starting a new one (even if the conversion takes place in the middle of an academic year).
If you intend to change your software, this is the ideal time to do so.
Accounting reference date
All Academy schools are required, by the DfE, to have a reporting date of 31 August.
However, a company’s first accounting reference date will automatically default to one year after the end of the month from incorporation; for example, a company incorporated on 18th April 2017 will have an accounting reference date of 30 April 2018.
So, unless the company is formed in August the accounting reference date will need to be changed soon after incorporation.
The Academy will need to agree the value of assets & liabilities acquired from the local education authority, and then enter those balances in the accounting records of the Academy.
These entries will include bank balances, fixed assets, debtors, and creditors that were formerly the responsibility of the Local Authority.
You will also need to record how you spend the start-up grant of £25,000, both for submission to the DfE and for writing up your accounting records. The grant is intended to help you cover conversion costs such as new software, company formation, advice on governance, transfer of leasehold etc., but any unspent funds can be retained by the Academy.
The importance of a properly structured nominal ledger & chart of accounts
The nominal ledger in your accounting software should be organised in a way that allows you to analyse, summarise and report in a meaningful way.
If you get this right, it should be easier to monitor performance, safeguard assets, and produce reports that demonstrate compliance with the terms of your funding agreement, your Articles of Association and ‘EFA accounts directions’.
A new bank account
The School must open a new bank account, in the name of the new Academy, to receive its funding.
The Academy is responsible for its own insurance from the day of conversion.
You will need to either:
- Obtain adequate insurance cover from a commercial provider; to cover land and property, business interruption, employer’s liability, vehicles etc.
- Opt into the government’s ‘Risk Protection Arrangement’ (RPA) (from September 2016 the cost is reduced from £25 per pupil to £20 per pupil)
NB. The RPA does not cover some items, such as motor vehicles cover.
Fixed Asset Register
You must create and maintain a Fixed Asset Register, to record the nature and value of all assets transferred from the Local Authority and any subsequent additions, disposal, depreciation etc.
Teaching staff are members of the National Teachers’ Pension Scheme and non-teaching staff are members of the Local Government Pension Scheme (LGPS).
You will be obliged to continue membership of both schemes, and whilst both Schemes are ‘final salary schemes’, there are significant differences in funding them.
The Teachers’ Pension Scheme is an ‘unfunded scheme’, which means benefits are paid out by the government from central funds , so other than to make its regular contributions and to reflect those payments in the Statement of Financial Activities, the Academy has no further obligation.
By contrast, a Local Government Pension Scheme is a ‘funded’ scheme, which means that the Academy is responsible for ensuring it is sufficiently well funded to pay out all the accrued benefits.
Ensuring that you will be able to do this entails obtaining annual actuarial valuations to assess whether there is a surplus or a deficit in the pension fund and adjusting contributions accordingly.
The surplus or deficit will be reflected in the Academy’s Balance Sheet. However, the liability is underwritten by the DfE, so should never become payable by the academy.
All Academy’s must have financial policies to govern procedures for the management and allocation of resources and the approval of expenditure.
In the case of a Multi-Academy Trust it may be easier to try and manage with one set of consistent policies and procedures, but the overarching aim of the policies should be to ensure that they are effective, so in some cases it may be appropriate to adapt the main policy to accommodate the needs of an individual school or schools.
Many schools will have separate funds for specific expenditure on such things as school trips.
Such funds must be included in the statutory accounts if they are under the same control as the day to day budget.
Alternatively, if the fund is not controlled by the academy, it is possible to register these funds as individual charities with the Charity Commission and if that is the case they need not be included in the statutory accounts.
In most cases the school fund should be included in the statutory accounts, and many academies actually find this easier to maintain throughout the year.
The ‘accounting officer’ is ultimately responsible for the success of financial control systems which allow for proper oversight of financial transactions.
Amongst other things, the control systems must ensure that:
- Full and accurate accounting records are kept
- Key accounting duties are segregated to help prevent error or fraud
- Assets in general are safeguarded
The trust must also appoint a ‘chief financial officer’ (the equivalent of a finance director) to lead on implementation and monitoring of the Academy’s financial management.
All of the trust’s accounts staff must be appropriately qualified and/or experienced.
The trustees must approve a balanced budget each year, then consider actual information on financial performance at least 3 times a year, taking action wherever it is appropriate.