Academies: update to guidance on pension reserve treatment

The Young People's Learning Agency (YPLA) has issued a number of items over the past month which academies and their advisers ought to be aware of.

• A Financial Management and Governance Evaluation return has been requested from new and existing academies alike. This self-assessment form is in a similar format to that completed by existing academies earlier this year and should be submitted by 29 February 2012 for academies preparing audited financial statements to 31 August 2011. The submission date for academies not yet required to prepare audited financial statements is dependent upon the opening date and may be as early as 31 December 2011. Further information is available here.
• Chapter 4 of the 2010/11 Accounts Direction has also been issued which includes the Abbreviated Accounts Return and guidance for its completion and submission by 31 December 2011 by academies preparing audited accounts to 31 August 2011. For further details click here.

As expected, the Abbreviated Accounts Return has treated the pension reserve on the Local Government Pension Scheme as a restricted fund. This differs from the guidance within the Academies Accounts Direction which states the reserve should be treated as unrestricted, though is now consistent with the Charities SORP recommended treatment.

The YPLA have since communicated the reasoning for their guidance change:

'Since the issue of the 2010 /11 Accounts Direction, we have received several queries regarding the recognition of local government pension surplus/deficits against unrestricted funds. We have consulted further with the DfE and the outcome of these discussions is to confirm that any surplus/deficit on local government pension funds should be recognised against restricted funds in order to match it against GAG.

This is the default position and how the YPLA and DfE expects 2010/11 financial statements to be prepared. However, if an Academy Trust and/or its auditors believe that it is more appropriate, for any reason, to recognise the surplus / deficit against unrestricted funds then they ought to do that, but will then need to disclose in their financial statements the rationale behind the decision.'

Just in time for those academies who haven't yet signed off their August accounts!