The idea of a financial audit can be frightening, but don’t fear it just yet. We are here to provide you with useful information that will help you prepare for audits and manage your accounting and reporting in a more efficient manner.
The differences for schools and academies
Maintained schools are not obliged to publish their accounts, but are required to submit a return to their local authority (LA).
The LA uses this information to consolidate their accounts for submission to Central Government. The Department of Education (DfE) then use this information to populate the schools’ benchmarking website and publish a copy of all schools’ financial data online as part of the coalition government’s data transparency agenda.
Academies and trusts on the other hand, are required to submit an audited annual financial statement to Companies House and report to a 31st August financial year-end.
So, how do you prepare for an audit?
Here are some tips that will help you when preparing for an audit:
- Find out exactly what information your auditors need and structure your filing system to reflect this.
- Ensure that you have both electronic and paper copies of important files.
- Complete month end in a timely manner and deal with variances as soon as you spot them.
- Minute governing body meetings accurately and complete actions within their prescribed deadlines.
- Ensure income and expenditure is coded to the correct financial year.
- Follow all procedures within your finance policy throughout the year.
- Make sure your employees know how to properly support the auditors and that they respond to all queries they are asked.
If the idea of a financial audit is too frightening, then SAAF can help. Click here to find out how SAAF can help you prepare.
Academies account management
Where schools present a simple income and expenditure accounts system, academies have a slightly different, more complex way of dealing with theirs.
Academies must follow the “Academies Financial Handbook”, which outlines the financial management and control requirements for academy trusts.
The requirements are as follows:
- Financial statements are to be prepared each year that show a “true and fair” view of the academy’s financial position.
- To give details of the financial activities and cash flows.
- Information must be provided on incoming resources from all sources, resources expended on all activities, all assets and liability of the academy, all cash received and expended, and notes to the accounts.
If an academy has a separate company as a subsidiary to carry out activities to make extra profit - such as renting out their sports hall after hours – then they will also have to produce a consolidated account outlining their subsidiary results.
Steps of the annual report and financial statements
The Academies Act 2010 states that to qualify as an academy, the proprietor has to be a charity and a limited liability company registered under the Companies Act 2006.
This means that academies must provide the following in order to comply with the company law requirements:
- Governors’ Reports
- This describes the academies intentions and how it is going to achieve it, outlining targets for the year and plans for the future.
- Independent Auditors’ Reports
- This outlines whether or not an auditor believes the financial statements give a true, fair view on the academies finance and if the accounts have been properly prepared.
- Statements of Financial Performance
- This includes: a statement of financial activities, a summary of the income and expenditure account, and a statement of total recognised gains and losses.
- Balance Sheets
- This shows the financial position of an academy and will include assets, liabilities, and ownership interest (Its funds).
- Cash Flow Statements
- This is a report on financial performance, which refers to all types of incoming funds through bank transfers.
- Accounting policies and Notes to the Accounts
- Even though accounting is a very precise activity, there is a significant degree of judgement involved. Therefore, academies must provide their notes or a breakdown of their workings out.
- Supplementary Detailed Income and Expenditure Accounts.
- This gives a further analysis of the financial information provided in the summary income and expenditure account.
So, hopefully now you are feeling a bit more confident about preparing for your financial audit, but, if not, don’t panic. SAAF can provide the advice and support you need, just click the link below to learn more about our external audit preparation service.