28 August 2018
According to new Department for Education (DfE) figures, the number of academy transfers between trusts has increased by 30% in the last year.
The actual number of academies moving trust was 255 in 2017-18 compared with 196 in the previous year. This does not come as surprise as the DfE has always suggested that the future development of the academy sector lies in consolidation of more schools into multi academy trusts (MATs).
One of the areas which is sometimes not given the priority or the resources it deserves is due diligence. This is the process of by which both parties gather information about each other in order to identify the risks, liabilities, potential cultural differences and practical issues which may cause difficulties later.
Depending on the level of risk of the proposed transfer, the work involved in respect of a due diligence assignment can vary. There are a few things to consider if a school is moving in or out of a trust:
Accounting systems
Transactions must be recorded from the date of acquisition of the individual school coming into a trust and must be excluded from the date of disposal for a school leaving a trust. Although the financial statements are for the MAT as a whole, a considerable number of disclosures in the financial statements are on an academy basis.
The acquiring MAT also needs to be aware that all balances at the transfer date will also be moving over and will be included in the trust’s year-end financial statements.
Some consideration might be needed on the accounting software used by the new academy. There is some benefit to the whole trust using the same software especially with the new requirement of preparing monthly management accounts; it would certainly make it easier to produce consolidated accounts for the members, as the same chart of accounts could be used across the trust.
Local Government Pension Scheme
It is essential that you keep the actuary up to date with any changes to the trust, whether a school is leaving or joining. It’s important to note that when an academy moves it takes its share of the Local Government Pension Scheme (LGPS) surplus or deficit.
VAT & Corporation Tax
As a trust grows the trading income needs to be considered and monitored against the statutory thresholds. We have a dedicated team who can review the trust’s income streams and provide advice.
It is important that a certain amount of due diligence is carried out before a MAT takes on a new school. We can assist you so that the financial position of any new school joining the MAT is clear from the outset, in order to avoid any potential issues in the future.
If you would like further information due diligence for academies, or anything else around academy schools, please contact your local UHY academy expert or visit our contact us page.
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