DCH 203 FULLBROOK
A Specialist Mathematics & Computing
College
Head: Richard Elms JP BEd MEd FRSA
30 June 2004
Ms F Graham
Scrutiny Unit
Committee Office
House of Commons
7 Millbank
LONDON
SW1P3JA
Dear Ms F Graham
Draft Charities Bill —
May 2004
I am writing in order to make representations on
the question of exempt charity schools to the Joint Committee
which is considering the draft Charities Bill. Under Schedule
2 of the Charities Act 1993, grant maintained schools, as established
under the Education Reform Act 1988, were listed as exempt charities.
As exempt charities, they were not required to comply with Sections
41-45 of the Charities Act 1993 referring to accounts, reports
and returns. The obligations of the 'Trustees' (ie the Board of
Governors) were set out in Section 46, being to maintain books
of account and prepare periodic statements of account for periods
of not more than 15 months, and a balance sheet as at the end
of each period. Until 1997, grant maintained schools were regulated
by the Funding Agency for Schools, which additionally required
the schools to prepare annual accounts in a prescribed format
showing a true and fair view and to have these audited in accordance
with Auditing Standards.
With the demise of grant maintained status, grant
maintained schools were required, under the School Standards and
Framework Act 1998, to opt for foundation/voluntary/foundation
special, or community/community special school status. Those opting
for foundation, voluntary or foundation special school status
remained as exempt charities regulated, via Ofsted in the main,
by the Department for Education and Skills (DfES). Effective oversight
of the schools reverted to Local Education Authorities.
As an ex-grant maintained school we have continued
to retain auditors and continue to prepare
accounts showing a true and fair view but in the
format previously required by the Funding Agency for Schools (ie
they do not comply in full with the Statement of Recommended Practice,
Accounting and Reporting by Charities —
the Charities' SORP).
The proposal in the draft Bill is that all exempt
charity schools under the Schools Standards and Framework Act
(a total of 8,300 according to Annex A of Chapter 4 of the explanatory
notes to the draft Bill) would be required to register with the
Charity Commission and to adhere, inter alia, to the sections
of the Charities Act that relate to accounts and audit requirements.
No doubt the Commission would oblige the Schools to comply in
full with the requirements of the Charities' SORP and to prepare
accounts in the required format.
We believe that the requirement for exempt charity
schools to register would result in the following:
- Additional cost to the schools.
- . Differences in reporting
— the
Consistent Financial Reporting (CFR) Returns to LEAs are not in
themselves sufficient for the purposes of producing 'true and
fair' financial statements in accordance with the Charities Act.
A separate exercise to prepare these financial statements would
need to be undertaken and the income and expenditure account and
balance sheet reformatted.
- Charities' SORP requirements —foundation
schools do not capitalise their fixed assets, which is a significant
departure from the SORP but is consistent with LEA practice for
all schools. The cost of requiring to change accounting policy
in order to capitalise fixed assets would be considerable and
inconsistent with reporting requirements to LEAs. There are other
potential areas of difficulty, for example employee remuneration
bands, which would require the effective disclosure of the headteacher's
salary. The move towards such a disclosure was resisted very strongly
by headteachers when proposed by the Funding Agency for Schools
some years ago and was never introduced in the financial statements
of grant maintained schools.
If it is beneficial to impose more rigorous accounting
and audit requirements on state schools, it does not appear to
make sense to do this for some but not for all such schools. The
funding and control of foundation schools is fundamentally the
same as for community. It does not seem logical for a significant
proportion of the total state school population to be regulated
in some respects by the Charity Commission (auditing and reporting)
and in others (principally educational) by Local Education Authorities
and the DIES.
We do hope that further consideration is given to
this proposal and, in particular, that individual schools, as
well as the DIES, are consulted. We do not feel that the case
has been made for imposing additional regulation and cost on all
foundation and voluntary aided schools, if it is not similarly
to be applied to all state schools.
Yours faithfully
D Munson
Finance Manager
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