Written evidence from The United Learning
Trust
Sir Ewan Harper has asked me to set out for you the
method of accounting for grant income that has been adopted by
ULT, following the National Audit Office comment on Wednesday
at the Public Accounts Committee Hearing that Paddington Academy
was in financial difficulties. The NAO cited a loss of £300,000
Statement of Financial Activities (SOFA) as evidence of this.
Unless given to an academy for a specific time period,
grant income is accounted for by academies in the year in which
it is received. Start up grant, for instance, is not time based
but is generally spent by ULT academies over more than one year.
In the year of receipt there is a surplus of income against expenditure
(in the SoFA) and that excess is hold in reserves (in the company's
balance sheet) for future years. However, in subsequent years,
when the income is spent there is an excess of expenditure against
income (in the SoFA), a book 'loss' for the year. In reality the
reserves in the balance sheet are being used. So long as this
is planned expenditure it is quite normal and is in accordance
with UK Generally Accepted Accounting Practice which academies
have to follow as they are UK registered companies.
The alternative would be to show the excess of income
again expenditure as income in the following year. This is general
practice in maintained sector schools but would not be permissible
by a UK company as it would be recognising income twice in the
SOFA.
Please do let me know if you require any further
information about this. I can confirm that Paddington Academy
is currently operating within its cash reserves.
January 2011
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