Common audit and accounting issues for MATs

2 February 2018

As academy season draws to a close, we thought it would be useful to summarise some of the common accounting and audit issues that we came across during our 2017 audits and which often arise when schools or established academies join or leave a trust, along with some pointers as to what you can do to approach these.

Accounting systems – Although financial statements are at trust level, certain disclosures are required at academy level. It is essential that accounting systems are geared towards being able to extract individual transactions and balances per academy.

Accounting systems also need to be set up in advance in terms of cut-off.  Transactions must be recorded from the date of acquisition for schools coming into a trust and must be excluded from the date of disposal for schools leaving a trust.  Again, it is important that accounting systems are able to separately identify transactions and balances so that the correct cut-off can be applied on acquisition or disposal of a school or academy.

Treatment of land and buildings – As more and more schools convert and academies transfer between trusts, it is crucial to consider the treatment of school property sooner rather than later. This area can be complicated, especially as we are starting to see more and more faith schools joining multi academy trusts where property may be owned by the diocese.  We are also seeing more complex arrangements such as PFI and shared use arrangements.  It is likely that a surveyors’ valuation will be required for schools being acquired into a trust.  Ask your accountant for advice prior to date of acquisition.

Local Government Pension Scheme – It is essential that you keep your actuary up to date with the changes to your trust. It is important that when an academy leaves the trust, its share of the LGPS deficit/surplus should go with it.  On acquisition you will need to bring into your accounts an opening asset or liability.  We can advise you in advance of the requirements.

VAT and Corporation Tax – As your trust grows and new academies are acquired, trading income must be considered and monitored against the statutory thresholds. Here at UHY we have a dedicated team who can take a closer look at new income streams and advise you accordingly.

Due diligence in relation to MATs – When looking at potential academies to join your trust you must ensure that you fully understand all of the risks, assets and liabilities and other relevant information about the target academy. It is important that fully informed decisions are made.  Our team at UHY are experienced with due diligence in this sector and can provide you with information to ensure that you make the right decision for your own organisation.

Audit committee requirement – As per the 2017 Academies Financial Handbook, trusts with an annual income greater than £50 million must have a dedicated audit committee. Trusts below this level have more flexibility and may choose to include the audit committee functions within another established committee.  Here at UHY we have a dedicated team who can guide you on structuring your committee and can carry out the internal audit function on your behalf.

To help you develop a greater understanding of MATs we have developed our first MAT focused white paper which focuses on appropriate structures, the advantages and disadvantages, the ideal MAT size, the practicalities of forming a MAT and more, which can be downloaded here.

If you need assistance with any of the above points, please contact your usual UHY adviser or nearest academy schools specialist.