Over the last few years the government’s Academies programme has expanded at a rapid rate, and in conjunction with Free Schools and Studio Schools, have establishing an exciting new sector within the Not for Profit market.

As charities and companies, Academies face the challenges of the interaction of company and charity legislation and the Charities SORP together with fulfilling the specific requirements of the Department for Education (DfE) It is essential they have an adviser who can assist them in complying with these regulations and at the same time add value to their business.

At ABDS, we see that Academies have a huge opportunity to do things differently and better. The task is in achieving that objective. This is why Academy Principals have told us they feel both daunted and excited at the prospect.

We are fully aware of the issues facing you in considering this option and we can assist you in preparing for the conversion process and the challenges in operating your school independent of local authority support and control.

Academy status: Financial and Regulatory Compliance

Converting to Academy status has been rationalised since its inception, but it is even more imperative that the governing bodies are fully informed of the full implications involved in the new freedom and responsibilities that are ahead when Academy status is achieved.

There are numerous financial, regulatory and compliance procedures that need to be put into place before the status in finalised, such as:

• The opening financial position, what where and how concerning any outstanding funds, the transfer of property and capital assets and on-going procurement processes
• Key financial policies and procedures
• Liaison with the YPLA’s Finance Management and Governance Evaluation
• Governing Body/Board Policies
• Recruitment, training and guidance for governors in establishing their key roles and responsibilities
• Company secretarial position under company law (accounting reference, audit, valuations, board meetings and AGM’s).
• The position of Responsible Officer
• Contributions to Local Government Pension Schemes and Financial Reporting Standard 17, including understanding year-end actuarial valuations for the purposes of statutory accounts
• Charity Law and its compliance
• Setting up an accounting system and the implementation of accounting software

How can ABDS help?

We can offer guidance and support in all these areas depending on an initial assessment of your needs. We recognise that most academies will have an established finance function, but this may well require adjustment to fulfil the role of a stand-alone finance function supporting management, governance and external accountability requirements. This will include:

• Preparation of Budgets
• Preparation of Management Accounts on a monthly and term basis
• Transaction processing (accounts payable and receivable).
• Submissions to YPLA
• Payroll
• Employees pensions – including Teachers Pension Scheme and TR17a returns
• Outsourced Accounting and software solutions.
• Provision of a Responsible Officer
• Drafting the Trustees’ Annual Report
• Employment tax issues
• Peripatetic teachers
          Employed or self-employed?
          National Insurance regulations for teachers
• Voluntary disclosure
          The benefits
          How and when to do it?
• Living accommodation
         Will it be exempt from tax?
          How do you calculate the benefit?

We will also keep you updated on the minutiae of the never the ending legislative changes and by ensuring that you have the correct systems and processes in place to certify not only good governance but the maintenance of controls to fulfil all your legal and regulatory requirements.

An effective accounts preparation service

We can prepare accounts from the academy’s year end trial balance and management accounts, assist management and governors in drafting their Trustees’ Annual Report including key board policies on risk and reserves, and deal with all aspects of accounts submission to YPLA and Companies House, as needed.

Governance arrangements and regulatory compliance

We will provide a comprehensive package of guidance, templates, best practice tools and training. We also have a good understanding of the requirements underlying the EFA's Financial Management and Governance Evaluation and how academies can adopt good practice.

Statutory audit services

The provision of a comprehensive audit and a full verbal and written communication with the governors on its findings and any recommendations we see as appropriate.

Taxation and VAT issues

In the past, VAT has not been a significant issue for academies. However, recent changes, with the Finance Act of 2011, mean that both existing phase 1 academies as well as new converters, this has become an area that requires greater attention.

All academies have to deal with VAT; it can no longer be left to local authorities or for themselves to apply for grants to mitigate the charge. To address this issue, academies will now have to look very closely at all their income producing activities for the year ahead and determine which of these are non-business related activities (largely grants, donations, and those directly related to the delivery of education), and those that are business activities (fundamentally anything else). See list below for some examples of what HMRC may regard as business/non-business activities

It is also important to note that every academy retains the option to register even if they do not exceed the VAT threshold of £73,000 per annum. The reason why those below the threshold may want to consider this is because VAT registration could enhance the VAT recovery on business expenditure. It could also produce a more Tax efficient result than merely submitting VAT refund claims for non-business expenditure. This is all due to current HMRC partial exemption rules.

VAT registration will depend on individual circumstances and academies should consider undertaking heathchecks/reviews to determine the suitability of VAT registration and any exposure to direct tax as a result of non-primary trading income.

Academies are encouraged to submit VAT claims as soon as possible based on actual non-business VAT incurred from 1st April 2011 (or the relevant date it converts to academy status if later) thereby securing a cashflow advantage before the current year VAT grant is deducted from the 2011/2012 grant. The grant already received is not based on ‘Actual’ VAT costs, and as the claim will be calculated on VAT invoices received, there will be a difference between the two figures.

At ABDS we offer advice and recommendations regarding tax and VAT and how to minimise its effects on the trust, especially in compliance with the Finance Act of 2011. We can also advise on capital spend and charity exceptions.

The future.

We like to develop a close relationship with our clients so that we may ensure that a strong and robust financial base is in place so that strategic planning can be made for future growth and development.

If you would like further details on what we can do to help your academy’s finance function run smoothly give us a call and our academy and trust team will be pleased to help.

Typical non-business/business activity of Academies.

Non-business activity

• Statutory education provided free of charge
• Accommodation/transport/field trips/school trips free of charge or at or below cost food, drink free of charge or at or below cost and sales of goods to students at or below cost which are closely related to the supply of education to students.
• Other supplies closely related to the supply of education where the goods/services are free of charge or sold at or below costs for the direct use of the student.

Business activity.

• Meals to visitor/staff
• Sporting admissions/lets
• Charges for education (adult classes/sports coaching)
• Hall/room hire and function catering
• School photographs/photographic facilities
• Uniforms/sales of sporting clothing
Some of the business activities will be exempt which can be disregarded when considering VAT registration.

Disclaimer:
This communication is designed for the information of readers and is correct at the time of going to print. While every effort has been made to ensure accuracy information contained in this communication may not be comprehensive and recipients should not act upon it without seeking professional advice.