Themes from the EFA
September 7, 2015
The EFA held a workshop for auditors on 3 September 2015 and I thought it would be useful to highlight some of the key themes of the day.
Not surprisingly, the implication of funding reductions was discussed. The election commitment of maintaining funding on a flat cash per pupil basis means that funding in real terms is going to fall. Coupled with the increases in staff costs as a result of pension contribution and national insurance changes, this is an area of concern for many Academies. It is important that Academies address any issues as early as possible. In order to achieve this, Academies should be budgeting for the next three years based on expected pupil numbers and funding levels.
An area of emphasis, due to political concerns, is the level of reserves and cash held by Academies. Where Academies are holding either reserves or large cash balances, it is important that sufficient disclosures are made as to why the reserves are being held and how the Academy is planning to spend them. This may be due to reduced funding in future years or plans for a capital spend. The reserves policy should be reviewed so that the Academy has a clear picture of the level of reserves it would like to hold, how the current level compares with this ideal and the actions to be taken to correct the shortfall or surplus.
Salaries of key management personnel
One of the contentious areas, which is regularly identified by the press, relates to the remuneration of key management personnel, particularly Executive Principals. It is likely that that this will come under scrutiny by the EFA and ,as a starting point, additional disclosures will be required.
FRS102 will apply for most Academies in the accounts to 31 August 2016. In these accounts, the Academy will be required to disclose details of the arrangements for setting the pay and remuneration of the academy’s key management personnel and any benchmarks, parameters or criteria used in setting their pay. Key management personnel are defined as those individuals having authority and responsibility for planning, directing and controlling the activities of a reporting entity, directly or indirectly. It is recommended that these individuals are identified and that the Academy ensures that a clear remuneration policy is in place. Any delegated authorities with regards to pay should also be clearly set out and approved. This is likely to involve Trustees and members of the Senior Leadership Team. Additional consideration will need to be made for Multi-Academy trusts as there may be local Governors who fall under the definition of Key Management Personnel.
The risks faced by the Academy are currently disclosed in the accounts together with details of how these risks are mitigated. It is advised that the risk policy and risk register are reviewed and updated on a regular basis to ensure that any changes to risks are identified at an early stage and addressed. The Academy should have a clear risk management plan. This should be a working document which identifies who is responsible for proposed actions to mitigate risks and a timescale by which actions are to be completed.
If you would like advice in any of these areas, please do not hesitate to contact a member of our Academies team on 01772 821021.