How To Run An Ebs Free School

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1 Registered number: THE ACORN EBS FREE SCHOOL LTD. ANNUAL REPORT AND FINANCIAL STATEMENTS

2 CONTENTS Page Reference and administrative details of the academy, its governors and advisers 1-2 Governors' report 3-8 Governance statement 9-11 Statement on regularity, propriety and compliance 12 Governors' responsibilities statement 13 Independent auditors' report Independent reporting accountant's assurance report on regularity Statement of financial activities 18 Balance sheet 19 Cash flow statement 20 Notes to the financial statements 21-40

3 REFERENCE AND ADMINISTRATIVE DETAILS OF THE FREE SCHOOL, ITS GOVERNORS AND ADVISERS Members and Governors C F White #, Chair of Governors D A Parr-Burnam N Buckingham Governors I H Jones #, Chair of Finance Committee (resigned 14 November ) J M Tucker, Head Teacher J C Dobbs # N J Sansum A E Young # (appointed 1 September 2013) A Needham * (resigned 18 May ) J Richmond * (resigned 6 May ) A Morris Sir B Day * (resigned 7 July ) L Day * (resigned 7 July ) A S De Vries (appointed 8 December ) Z Watts (appointed 8 December ) # Members of the Finance Committee * These governors were never officially appointed as Director at Companies House. Company Registration Number Registered Office 248 Calder Road, Lincoln, Lincs, LN5 9TL Accounting Officer J M Tucker Senior Management Team J M Tucker, Head Teacher H Clayton, Inclusion Manager L Shury, Senior Teacher Independent Auditors Streets Audit LLP, Windsor House, A1 Business Park at Long Bennington, Notts, NG23 5JR Solicitors Langleys Solicitors LLP, Olympic House, 995 Doddington Road, Lincoln, Lincs, LN6 3SE Page 1

4 REFERENCE AND ADMINISTRATIVE DETAILS OF THE FREE SCHOOL, ITS GOVERNORS AND ADVISERS Administrative details (continued) Internal Auditor Julia Raftery Consulting Ltd, Suite 2, Concorde House, Kirmington Business Park, Kirmington, North Lincs, DN39 6YP Page 2

5 GOVERNORS' REPORT The Governors (who are also directors of the charity for the purposes of the Companies Act) present their annual report together with the audited financial statements of The Acorn EBS Free School Ltd. (the free school) for the year ended. The Governors confirm that the Annual report and financial statements of the free school comply with the current statutory requirements, the requirements of the free school's governing document and the provisions of the Statement of Recommended Practice (SORP) "Accounting and Reporting by Charities" issued in March In September 2013 the school opened as a Free School to cater for secondary aged children with emotional and behavioural difficulties throughout Lincolnshire and neighbouring counties. Children are referred from local partner schools and academies and remain dual registered with their home school whilst positive interventions take place. It had a pupil capacity during 2013/14 for 24 FTE placements, which equated to 95 pupils over the academic year. STRUCTURE, GOVERNANCE AND MANAGEMENT CONSTITUTION The free school is a charitable company limited by guarantee and an exempt charity. The charitable company's memorandum and articles of association are the primary governing documents of thefree school. The governors act as the trustees for the charitable activities of The Acorn EBS Free School Ltd. Details of the governors who served throughout the year are included in the Reference and Administrative Details on page 1. MEMBERS' LIABILITY Each member of the charitable company undertakes to contribute to the assets of the charitable company in the event of it being wound up while they are a member, or within one year after they cease to be a member, such amount as may be required, not exceeding 10, for the debts and liabilities contracted before they ceased to be a member. METHOD OF RECRUITMENT AND APPOINTMENT OR ELECTION OF GOVERNORS The management of the free school is the responsibility of the Governors who are elected and co-opted under the terms of the Articles of Association. The members may appoint additional govenors. Governors may be removed by the person or persons who appointed them. No additional trustees were appointed nor made by the Secretary of State in the year. The members who were in office at, and served throughout the year, are listed on page 1. The Articles of Association require that the Members of the free school shall comprise: (a) the signatories to the Memorandum (b) one person appointed by the Secretary of State, in the event that the Secretary of State appoints a person for this purpose (c) the Chair of Governors Under the requirements of the Memorandum and the Articles of Association the governors are appointed to serve at the annual general meeting, one third of the governors are required to retire each year and submit themselves for re-election if they desire. As this is the first year of operation this provision will not come into force until September Page 3

6 GOVERNORS' REPORT (continued) Due to the nature of much of the schools, governors seek to ensure that their group is diverse and contains governors who have a background that reflects both knowledge of and empathy for the vulnerable youngsters at risk of disengaging. The governors together bring a diverse range of skills and knowledge, and in the event of particular skills being lost due to retirements individuals are approached to offer themselves for election to the Trustees. All governors give their time voluntarily and received no benefits from the company. POLICIES AND PROCEDURES ADOPTED FOR THE INDUCTION AND TRAINING OF GOVERNORS Prior to taking up his appointment as Chair, C F White served as a Deputy Headteacher at a local secondary school for twenty years. C F White is also a qualified Headteacher. All new governors are offered governor training and are invited to spend time in the school to familiarise themselves with the work of all the departments. In addition each governor is encouraged to take an interest in one aspect of the work of the school by service on one of the committees. All new governors are briefed on our Memorandum and Articles of Association. They also receive the Charity Commission information on the responsibilities of governors. ORGANISATIONAL STRUCTURE The Acorn EBS Free School Ltd. has a minimum of five governors, there is no maximum number. The governors meet termly and are responsible for the strategic direction and policy of the school. At present there are six Trustees. The Head Teacher also attends Trustee meetings but has no voting rights. The Trustees do not involve themselves in the day to day running of the organisation, this is delegated to the Head Teacher via the formal scheme of delegation. The Head Teacher is responsible for ensuring that the school delivers the services specified and the key performance indicators are met. The Head Teacher is also responsible for the individual supervision of the staff team to ensure that they are meeting the requirements of their roles and that they are able to access relevant CPD opportunities. CONNECTED ORGANISATIONS, INCLUDING RELATED PARTY RELATIONSHIPS The work of the free school reflects both National and Local strategy in relation to educational services. The free school works alongside Social Services, Lincolnshire schools and Academies, Health Services, The Police. In addition we belong to a variety of multi-agency groups. RISK MANAGEMENT The Governors have assessed the major risks to which the free school is exposed, in particular those related to the operations and finances of the free school, and are satisfied that systems and procedures are in place to mitigate our exposure to the major risks. Page 4

7 GOVERNORS' REPORT (continued) OBJECTIVES AND ACTIVITIES OBJECTS AND AIMS The Acorn EBS Free School Ltd. objects and principal activities relate to the following statement, which is taken from our Memorandum of Articles of Association: "To advance for the public benefit education in the United Kingdom, in particular but without prejudice to the generality of the foregoing by establishing, maintaining, carrying on, managing and developing an educational institution which is principally concerned with providing full-time or part-time education for children of compulsory school age who, by the reason of illness, exclusion from school, or otherwise may not for any period receive suitable education unless alternative provision is made for them". In furtherance of our objectives but not otherwise the free school may exercise the powers stated in the single academy model alternative provision document (DFE Articles Ref 19 December 2012 Version 1, Section 4 p5 p8). OBJECTIVES, STRATEGIES AND ACTIVITIES The main objectives and activities for the year continued to focus on the support for our students and schools, enabling those who are disengaged to access learning. During the course of the year, the free school reached its capacity and worked with 95 students. In addition to our academic curriculum at key stages 3 and 4, we also offered programmes of study in the following; Mechanical Engineering, Princes Trust, Asdan, Paddle Power and Stable Management. We review our aims, objectives and activities each year, to look at the achievements of each key activity in the previous 12 months to ensure beneficial outcomes for our target groups. PUBLIC BENEFIT The educational activities undertaken by the The Acorn EBS Free School Ltd. are entirely for the public benefit. The Trustees have complied with their duty to have due regard to the guidance on public benefit published by the Charity Commission in exercising their powers and duties. Page 5

8 GOVERNORS' REPORT (continued) ACHIEVEMENTS AND PERFORMANCE KEY PERFORMANCE INDICATORS This is just the first year of operation of the The Acorn EBS Free School Ltd. and performance indicators for the first year have been focused upon the effective set up and running of the school. The free school now has a detailed 3 year strategic development plan with challenging targets for attainment, behaviour and attendance. During the course of our first year, we received two monitoring visits from Ofsted, the first in Term 2, and the second in Term 6. We are pleased to report that the issues that arose from the first visit were successfully addressed and whilst we are not able to publish the full report (Ofsted guidance regarding first year monitoring of Free Schools), the governors are confident that the provision of the free school is now meeting its objectives and providing a good education for our cohort of pupils. The free school has a 3 year strategic development plan with challenging targets for attainment, behaviour and attendance. The free school has controlled and managed its expenditure to ensure that it has operated within the funding available from EFA and commissioners. This has been the key performance indicator during its initial year of opening when forecast budgets, staffing costs, and pupil numbers are not static or based on any historical information. REVIEW OF ACTIVITIES During the course of the year, the free school reached its capacity of 24 FTE students, however as most placements are part-time we worked with 95 students over the year. The free school has offered an increased range of curriculum enrichment which includes; mechanical engineering, Junior Sports leadership, Activities Away -Paddle Power, Horse riding and Stable management. These enrichment activities serve to re-engage students with their learning and enhance co-operation and social skills alongside learning. We have worked extensively with local partners to deliver inclusive services. The school has positively promoted joint working with parents, Team Around the Child, Educational Psychologists, Social Care, Addaction, Community Therapists and Paediatricians, Phoenix Stop Smoking service and Families Working Together. All of our pupils have remained registered with their mainstream school and have returned to their education or an appropriate educational or work placement. GOING CONCERN After making appropriate enquiries, the board of governors has a reasonable expectation that the free school has adequate resources to continue in operational existence for the foreseeable future. For this reason it continues to adopt the going concern basis in preparing the financial statements. Further details regarding the adoption of the going concern basis can be found in the Accounting Policies. INVESTMENT POLICY Aside from retaining a prudent amount in reserves each year most of the free school s are to be spent in the short term so there are few for long term investment. The governors will in the longer term look towards an investment policy to ensure any available reserves are maximised. Page 6

9 GOVERNORS' REPORT (continued) FINANCIAL REVIEW The Acorn EBS Free School Ltd. has developed a stable service as a provider of alternative education throughout Lincolnshire. Effective monitoring and evaluation of service provision has enabled the organisation to respond to the changing needs of both the students and the commissioning schools; this has been a vital component in enabling the school to seek continued funding and justify expenditure. Whilst maintaining good working relationships with colleagues in the statutory sectors of Health, Social Care and Education, The Acorn School has been able to demonstrate, at grass roots level, the need for provision of the services currently being offered, sensitive to the needs of the rural nature of Lincolnshire and the needs of individuals. Whilst the number of commissioners and students has continued to increase, the school has consistently been able to meet the demands of an increased workload, demonstrating both good value for money and the need to adapt, prioritise and strategise. PRINCIPAL RISKS AND UNCERTAINTIES The governors have implemented a full risk management programme to assess all areas of risk to the Acorn Free School and actions to mitigate these risks. The main risks to the school would be a reduction in pupil numbers and funding, however for the academic year 2013/14 all pupil places were commissioned. During /15 the FTE pupil roll increased by 12, however all places were commissioned at the start of the academic year. RESERVES POLICY The governors have examined the schools requirements for reserves and will look to build and maintain a reserve in the course of the next three years of operations. The free school holds an annual contingency budget agreed by the governors. PRINCIPAL FUNDING The principle funding sources for the free school are the EFA and our commissioning schools. The management are, however, in constant scrutiny of the schools provision in meeting both the student and commissioner needs whilst keeping the school financially sustainable in a rapidly changing climate of funding. Page 7

10 GOVERNORS' REPORT (continued) PLANS FOR FUTURE PERIODS FUTURE DEVELOPMENTS Funding is always in the forefront of our minds with constant changes to service provision and delivery at both national and local levels. The Acorn EBS Free School Ltd. will continue to work closely with current commissioners to provide the best services available whilst looking for new opportunities to attract new funding to develop required services within the core aims of the school. Due to the economic climate it is both wise and prudent to constantly evaluate what we as an organisation are doing both in parts and as a service as a whole. The nature of need and demographic of vulnerable students is constantly changing in the county, it is in the best interest of all our school users and future users for us to anticipate their needs, work in partnership to maximise all provision to best meet individual needs that have been prioritised and to avoid any duplication. Full details of the specific objectives for the coming year are detailed in the school development plan. DISCLOSURE OF INFORMATION TO AUDITORS Each of the persons who are Governors at the time when this Governors' report is approved has confirmed that: so far as that Governor is aware, there is no relevant audit information of which the charitable company's auditors are unaware, and that Governor has taken all the steps that ought to have been taken as a Governor in order to be aware of any relevant audit information and to establish that the charitable company's auditors are aware of that information. This report was approved by order of the board of governors on 28 December and signed on the board's behalf by: C F White Chair of Governors Page 8

11 GOVERNANCE STATEMENT SCOPE OF RESPONSIBILITY As Governors, we acknowledge we have overall responsibility for ensuring that The Acorn EBS Free School Ltd. has an effective and appropriate system of control, financial and otherwise. However such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. The board of governors has delegated the day-to-day responsibility to the Head Teacher, as Accounting Officer, for ensuring financial controls conform with the requirements of both propriety and good financial management and in accordance with the requirements and responsibilities assigned to it in the funding agreement between The Acorn EBS Free School Ltd. and the Secretary of State for Education. They are also responsible for reporting to the board of governors any material weaknesses or breakdowns in internal control. GOVERNANCE The information on governance included here supplements that described in the Governors' report and in the Governors' responsibilities statement. The board of governors has formally met 4 times during the year. Attendance during the year at meetings of the board of governors was as follows: Governor Meetings attended Out of a possible C F White, Chair of Governors 4 4 D A Parr-Burnam 4 4 N Buckingham 3 4 I H Jones, Chair of Finance Committee 4 4 J M Tucker, Head Teacher 4 4 J C Dobbs 3 4 N J Sansum 1 4 A E Young 4 4 A Needham 1 2 J Richmond 2 2 A Morris 4 4 Sir B Day 1 3 L Day 2 2 A S De Vries 0 0 Z Watts 0 0 The board contained experienced educationalists and others experienced in both finance and safeguarding. During the course of the year, a number of Trustees resigned as a result of personal and professional circumstances e.g. Sir Barry Day as Chairman of the Greenwood Dale Academy left our board after taking over the Al Medina Free School in Derbyshire, Mr John Richmond following the death of his father. Governance reviews: No governance reviews were undertaken during the year, nor are any planned for the next financial year. Page 9

12 GOVERNANCE STATEMENT (continued) The Finance and Audit Committee is a sub-committee of the main board of governors. Its purpose is set out in detail in the School Financial Procedures Document. Attendance at meetings in the year was as follows: Governor Meetings attended Out of a possible C F White 5 5 I H Jones 5 5 J Dobbs 4 5 A E Young 4 5 THE PURPOSE OF THE SYSTEM OF INTERNAL CONTROL The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of free school policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. The system of internal control has been in place in The Acorn EBS Free School Ltd. for the year 1 September 2013 to and up to the date of approval of the annual report and financial statements. CAPACITY TO HANDLE RISK The board of governors has reviewed the key risks to which the free school is exposed together with the operating, financial and compliance controls that have been implemented to mitigate those risks. The board of governors is of the view that there is a formal ongoing process for identifying, evaluating and managing the free school's significant risks, that has been in place for the year 1 September 2013 to and up to the date of approval of the annual report and financial statements. This process is regularly reviewed by the board of governors. THE RISK AND CONTROL FRAMEWORK The free school s system of internal financial control is based on a framework of regular management information and administrative procedures including the segregation of duties and a system of delegation and accountability. In particular, it includes: comprehensive budgeting and monitoring systems with an annual budget and periodic financial reports which are reviewed and agreed by the board of governors; regular reviews by the Finance and Audit Committee of reports which indicate financial performance against the forecasts and of major purchase plans, capital works and expenditure programmes; setting targets to measure financial and other performance; clearly defined purchasing (asset purchase or capital investment) guidelines. delegation of authority and segregation of duties; identification and management of risks. The board of governors has considered the need for a specific internal audit function and has decided to appoint Julia Raftery Consulting Ltd as internal auditor. The internal auditor's role includes giving advice on financial matters and performing a range of checks on the free school's financial systems. On a semi-annual basis, the internal auditor reports to the Finance and Audit Committee on the operation of the systems of control and on the discharge of the board of governors' financial responsibilities. Page 10

13 GOVERNANCE STATEMENT (continued) As a result of internal audit visits, action plans are drawn up and any recommendations followed. The annual report has been received in draft format and has not yet been seen by the board of governors, however the Finance and Audit Committee can confirm that assurance has been provided. An action plan has been devised as a result of the the internal auditor's recommendations. REVIEW OF EFFECTIVENESS As Accounting Officer, the Head Teacher has responsibility for reviewing the effectiveness of the system of internal control. During the year in question the review has been informed by: the work of the internal auditor; the work of the external auditors; the financial management and governance self-assessment process and audit carried out by the EFA; the work of the executive managers within the free school who have responsibility for the development and maintenance of the internal control framework. The Accounting Officer has been advised of the implications of the result of their review of the system of internal control by the Finance and Audit Committee and a plan to address weaknesses and ensure continuous improvement of the system is in place. Approved by order of the members of the board of governors on 28 December and signed on its behalf, by: C F White Chair of Governors J M Tucker Accounting Officer Page 11

14 STATEMENT ON REGULARITY, PROPRIETY AND COMPLIANCE As Accounting Officer of The Acorn EBS Free School Ltd. I have considered my responsibility to notify the free school board of governors and the Education Funding Agency of material irregularity, impropriety and noncompliance with EFA terms and conditions of funding, under the funding agreement in place between the free school and the Secretary of State. As part of my consideration I have had due regard to the requirements of the Academies Financial Handbook. I confirm that I and the free school board of governors are able to identify any material, irregular or improper use of by the free school, or material non-compliance with the terms and conditions of funding under the free school's funding agreement and the Academies Financial Handbook. I confirm that no instances of material irregularity, impropriety or funding non-compliance have been discovered to date. If any instances are identified after the date of this statement, these will be notified to the board of governors and EFA. J M Tucker Accounting Officer Date: 28 December Page 12

15 GOVERNORS' RESPONSIBILITIES STATEMENT The Governors (who act as governors of The Acorn EBS Free School Ltd. and are also the directors of the charitable company for the purposes of company law) are responsible for preparing the Governors' report and the financial statements in accordance with the Annual Accounts Direction issued by the Education Funding Agency, United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) and applicable law and regulations. Company law requires the Governors to prepare financial statements for each financial year. Under company law the Governors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the charitable company and of its incoming resources and application of resources, including its income and expenditure, for that period. In preparing these financial statements, the Governors are required to: select suitable accounting policies and then apply them consistently; observe the methods and principles of the Charities SORP; make judgments and accounting estimates that are reasonable and prudent; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the charitable company will continue in business. The Governors are responsible for keeping adequate accounting records that are sufficient to show and explain the charitable company's transactions and disclose with reasonable accuracy at any time the financial position of the charitable company and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the charitable company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Governors are responsible for ensuring that in its conduct and operation the charitable company applies financial and other controls, which conform with the requirements both of propriety and of good financial management. They are also responsible for ensuring grants received from EFA/DfE have been applied for the purposes intended. The Governors are responsible for the maintenance and integrity of the corporate and financial information included on the charitable company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Approved by order of the members of the board of governors on 28 December and signed on its behalf by: C F White Chair of Governors Page 13

16 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF GOVERNORS OF THE ACORN EBS FREE SCHOOL LTD. We have audited the financial statements of The Acorn EBS Free School Ltd. for the year ended which comprise the Statement of financial activities, the Balance sheet, the Cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law, United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) and the Academies Accounts Direction 2013 to issued by the Education Funding Agency. This report is made solely to the charitable free school's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act Our audit work has been undertaken so that we might state to the charitable free school's members those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charitable free school and its members, as a body, for our audit work, for this report, or for the opinion we have formed. RESPECTIVE RESPONSIBILITIES OF GOVERNORS AND AUDITORS As explained more fully in the Governors' responsibilities statement, the Governors (who are also the directors of the charitable free school for the purposes of company law) are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the free school's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Governors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Governors' report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. OPINION ON FINANCIAL STATEMENTS In our opinion the financial statements: give a true and fair view of the state of the charitable free school's affairs as at and of its incoming resources and application of resources, including its income and expenditure, for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006 and the Academies Accounts Direction 2013 to issued by the Education Funding Agency. Page 14

17 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF GOVERNORS OF THE ACORN EBS FREE SCHOOL LTD. OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion the information given in the Governors' report for the financial year for which the financial statements are prepared is consistent with the financial statements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of Governors' remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit; or the Governors were not entitled to take advantage of the small companies' exemption from the requirement to prepare a Strategic report. Mark Bradshaw (Senior statutory auditor) for and on behalf of Streets Audit LLP Windsor House A1 Business Park at Long Bennington Notts NG23 5JR 30 December Page 15

18 INDEPENDENT REPORTING ACCOUNTANTS' ASSURANCE REPORT ON REGULARITY TO THE ACORN EBS FREE SCHOOL LTD. AND THE EDUCATION FUNDING AGENCY In accordance with the terms of our engagement letter dated 18 October 2013 and further to the requirements of the Education Funding Agency (EFA) as included in the Academies Accounts Direction 2013 to, we have carried out an engagement to obtain limited assurance about whether the expenditure disbursed and income received by The Acorn EBS Free School Ltd. during the year 1 September 2013 to have been applied to the purposes identified by Parliament and the financial transactions conform to the authorities which govern them. This report is made solely to The Acorn EBS Free School Ltd. and EFA in accordance with the terms of our engagement letter. Our work has been undertaken so that we might state to The Acorn EBS Free School Ltd. and EFA those matters we are required to state in a report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than The Acorn EBS Free School Ltd. and EFA, for our work, for this report, or for the conclusion we have formed. RESPECTIVE RESPONSIBILITIES OF THE ACORN EBS FREE SCHOOL LTD.'S ACCOUNTING OFFICER AND THE REPORTING ACCOUNTANT The accounting officer is responsible, under the requirements of The Acorn EBS Free School Ltd.'s funding agreement with the Secretary of State for Education dated 3 September 2013, and the Academies Financial Handbook extant from 1 September 2013, for ensuring that expenditure disbursed and income received is applied for the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. Our responsibilities for this engagement are established in the United Kingdom by our profession's ethical guidance and are to obtain limited assurance and report in accordance with our engagement letter and the requirements of the Academies Accounts Direction 2013 to. We report to you whether anything has come to our attention in carrying out our work which suggests that in all material respects, expenditure disbursed and income received during the year 1 September 2013 to have not been applied to purposes intended by Parliament or that the financial transactions do not conform to the authorities which govern them. APPROACH We conducted our engagement in accordance with the Academies Accounts Direction 2013 to issued by EFA. We performed a limited assurance engagement as defined in our engagement letter. The objective of a limited assurance engagement is to perform such procedures as to obtain information and explanations in order to provide us with sufficient appropriate evidence to express a negative conclusion on regularity. A limited assurance engagement is more limited in scope than a reasonable assurance engagement and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express a positive opinion. Our engagement includes examination, on a test basis, of evidence relevant to the regularity and propriety of the free school's income and expenditure. Page 16

19 INDEPENDENT REPORTING ACCOUNTANTS' ASSURANCE REPORT ON REGULARITY TO THE ACORN EBS FREE SCHOOL LTD. AND THE EDUCATION FUNDING AGENCY (continued) CONCLUSION In the course of our work, nothing has come to our attention which suggests that in all material respects the expenditure disbursed and income received during the year 1 September 2013 to have not been applied to purposes intended by Parliament and the financial transactions do not conform to the authorities which govern them. Mark Bradshaw Streets Audit LLP Windsor House A1 Business Park at Long Bennington Notts NG23 5JR 30 December Page 17

20 STATEMENT OF FINANCIAL ACTIVITIES (incorporating income and expenditure account and statement of total recognised gains and losses) INCOMING RESOURCES Unrestricted Note Restricted Restricted fixed asset Total Total 2013 Incoming resources from generated : Activities for generating 2 6, ,225 - Investment income Incoming resources from charitable activities 4-700,291 42, , ,408 TOTAL INCOMING RESOURCES 6, ,291 42, , ,435 RESOURCES EXPENDED Charitable activities 6 5, ,044 30, ,204 28,222 Governance costs 5-12,533-12,533 3,420 TOTAL RESOURCES EXPENDED 7 5, ,577 30, ,737 31,642 NET INCOMING RESOURCES BEFORE TRANSFERS ,714 11, , ,793 Transfers between Funds (38,914) 38, NET INCOME FOR THE YEAR ,800 50, , ,793 Actuarial gains and losses on defined benefit pension schemes - (3,000) - (3,000) - NET MOVEMENT IN FUNDS FOR THE YEAR ,800 50, , ,793 Total at 1 September ,963 1,833,994 1,882,076 1,126,283 TOTAL FUNDS AT 31 AUGUST 1,000 98,763 1,884,256 1,984,019 1,882,076 All activities relate to continuing operations. The Statement of Financial Activities includes all gains and losses recognised in the year. The notes on pages 21 to 40 form part of these financial statements. Page 18

21 REGISTERED NUMBER: BALANCE SHEET AS AT 31 AUGUST FIXED ASSETS 2013 Note Tangible assets 12 1,884,256 1,833,994 CURRENT ASSETS Debtors 13 72, ,726 Cash at bank 55,055 56, , ,801 CREDITORS: amounts falling due within one year 14 (26,415) (474,719) NET CURRENT ASSETS 100,763 48,082 TOTAL ASSETS LESS CURRENT LIABILITIES 1,985,019 1,882,076 Defined benefit pension scheme liability 22 (1,000) - NET ASSETS INCLUDING PENSION SCHEME LIABILITY 1,984,019 1,882,076 FUNDS OF THE ACADEMY Restricted : Restricted 15 99,763 47,963 Restricted fixed asset 15 1,884,256 1,833,994 Restricted excluding pension liability 1,984,019 1,881,957 Pension reserve (1,000) - Total restricted 1,983,019 1,881,957 Unrestricted 15 1, TOTAL FUNDS 1,984,019 1,882,076 The financial statements were approved by the Governors, and authorised for issue, on 28 December and are signed on their behalf, by: C F White Chair of Governors The notes on pages 21 to 40 form part of these financial statements. Page 19

22 CASH FLOW STATEMENT year ended period ended 2013 Note Net cash flow from operating activities 17 79, ,719 Returns on investments and servicing of finance 18 (67) (27) Capital expenditure and financial investment 18 (80,627) (753,890) (DECREASE)/INCREASE IN CASH IN THE YEAR (1,020) 30,802 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS year ended period ended 2013 (Decrease)/Increase in cash in the year (1,020) 30,802 MOVEMENT IN NET FUNDS IN THE YEAR (1,020) 30,802 Net at 1 September ,075 25,273 NET FUNDS AT 31 AUGUST 55,055 56,075 The notes on pages 21 to 40 form part of these financial statements. Page 20

23 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES 1.1 Basis of preparation of financial statements The financial statements have been prepared under the historical cost convention, with the exception of investments which are included at market value. The financial statements have been prepared in accordance with the Statement of Recommended Practice (SORP), 'Accounting and Reporting by Charities' published in March 2005, the Academies Accounts Direction 2013 to issued by EFA, applicable accounting standards and the Companies Act The company was incorporated on 1 June 2011 and commenced as a free school on 1 September Accordingly the prior year comparative represents 2 months of operation. 1.2 Fund accounting Unrestricted income represent those resources which may be used towards meeting any of the charitable objects of the free school at the discretion of the Governors. Restricted fixed asset are resources which are to be applied to specific capital purposes imposed by funders where the asset acquired or created is held for a specific purpose. Restricted general comprise all other restricted received and include grants from Education Funding Agency. Investment income, gains and losses are allocated to the appropriate fund. 1.3 Incoming resources All incoming resources are included in the Statement of financial activities when the free school has entitlement to the, certainty of receipt and the amount can be measured with sufficient reliability. Grants are included in the Statement of financial activities on a receivable basis. The balance of income received for specific purposes but not expended during the period is shown in the relevant on the Balance sheet. Where income is received in advance of entitlement of receipt, its recognition is deferred and included in creditors as deferred income. Where entitlement occurs before income is received, the income is accrued. General Annual Grant is recognised in full in the year for which it is receivable and any unspent amount is reflected as a balance in the restricted general fund. Capital grants are recognised when receivable and are not deferred over the life of the asset on which they are expended. Unspent amounts of capital grant are reflected in the balance in the restricted fixed asset fund. Other income, including the hire of facilities, is recognised in the period in which it is receivable and to the extent the goods have been provided or on completion of the service. Page 21

24 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES (continued) 1.4 Resources expended Expenditure is recognised in the period in which a liability is incurred and has been classified under headings that aggregate all costs related to that category. Where costs cannot be directly attributed to particular headings they have been allocated on a basis consistent with the use of resources, with central staff costs allocated on the basis of time spent, and depreciation charges allocated on the portion of the asset's use. Other support costs are allocated based on the spread of staff costs. Charitable activities are costs incurred in the free school's educational operations. Governance costs include the costs attributable to the free school's compliance with constitutional and statutory requirements, including audit, strategic management and Governors' meetings and reimbursed expenses. All resources expended are inclusive of irrecoverable VAT. 1.5 Going concern The Governors assess whether the use of going concern is appropriate, i.e. whether there are any material uncertainties related to events or conditions that may cast significant doubt on the ability of the free school to continue as a going concern. The Governors make this assessment in respect of a period of one year from the date of approval of the financial statements. 1.6 Tangible fixed assets and depreciation All assets costing more than 1,000 are capitalised. Where tangible fixed assets have been acquired with the aid of specific grants, either from the government or from the private sector, they are included in the Balance sheet at cost and depreciated over their expected useful economic life. The related grants are credited to a restricted fixed asset fund in the Statement of financial activities and are carried forward in the Balance sheet. Depreciation on such assets is charged to the restricted fixed asset fund in the Statement of financial activities so as to reduce the fund over the useful economic life of the related asset on a basis consistent with the free school's depreciation policy. The Academy incurs significant repair and replacement costs such that the Governors believe the property s residual value is not materially different to the cost. Accordingly no depreciation is charged. A review for impairment of a fixed asset is carried out if events or changes in circumstances indicate that the carrying value of any fixed asset may not be recoverable. Shortfalls between the carrying value of fixed assets and their recoverable amounts are recognised as impairments. Impairment losses are recognised in the Statement of Financial Activities. Assets in the course of construction are included at cost. Depreciation on these assets is not charged until they are brought into use. Page 22

25 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES (continued) Tangible fixed assets are stated at cost less depreciation. Depreciation is not charged on freehold land. Depreciation on other tangible fixed assets is provided at rates calculated to write off the cost of those assets, less their estimated residual value, over their expected useful lives on the following bases: Long-term leasehold property - Not depreciated Property improvements - 2% straight line Computer equipment - 33% straight line 1.7 Operating leases Rentals under operating leases are charged to the Statement of financial activities on a straight line basis over the lease term. 1.8 Taxation The free school is considered to pass the tests set out in Paragraph 1 Schedule 6 of the Finance Act 2010 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the free school is potentially exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11 of the Corporation Tax Act 2010 or Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied exclusively to charitable purposes. 1.9 Pensions Retirement benefits to employees of the free school are provided by the Teachers' Pension Scheme ("TPS") and the Local Government Pension Scheme ("LGPS"). These are defined benefit schemes and the assets are held separately from those of the free school. The TPS is an unfunded scheme and contributions are calculated so as to spread the cost of pensions over employees' working lives with the free school in such a way that the pension cost is a substantially level percentage of current and future pensionable payroll. The contributions are determined by the Government Actuary on the basis of quinquennial valuations using a prospective benefit method. As stated in note 22, the TPS is a multi-employer scheme and the free school is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. The TPS is therefore treated as a defined contribution scheme and the contributions recognised as they are paid each year. The LGPS is a funded scheme and the assets are held separately from those of the free school in separate trustee administered. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent term and currency to the liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The amounts charged to operating surplus are the current service costs and gains and losses on the settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the Statement of financial activities if the benefits have vested. If the benefits have not vested immediately, the costs are recognised over the period vesting occurs. The expected return on assets and the interest cost are shown as a net finance amount of other finance costs or credits adjacent to interest. Actuarial gains and losses are recognised immediately in other gains and losses. Page 23

26 NOTES TO THE FINANCIAL STATEMENTS 2. ACTIVITIES FOR GENERATING FUNDS Unrestricted Restricted Total Other income Catering income 5,411-5,411 - Total ,225-6, INVESTMENT INCOME Unrestricted Restricted Total Total 2013 Bank interest INCOMING RESOURCES FROM CHARITABLE ACTIVITIES Unrestricted Restricted Total Total 2013 Educational Operations - 742, , ,408 Page 24

27 NOTES TO THE FINANCIAL STATEMENTS FUNDING FOR ACADEMY'S EDUCATIONAL OPERATIONS DfE/EFA revenue grants Unrestricted Restricted Total Total 2013 General Annual Grant (GAG) - 250, ,562 - Other DfE/EFA grants - 123, ,666 33,518 Start Up grants - 107, ,987 - Capital grants - 42,097 42, ,890 Other funding - 524, , ,408 Outreach and placement - 218, , , , , , , GOVERNANCE COSTS Unrestricted Restricted Total Total 2013 Auditors' remuneration - 4,750 4,750 3,000 Legal and professional fees - 6,329 6, Support costs - 1,454 1, ,533 12,533 3,420 Page 25

28 NOTES TO THE FINANCIAL STATEMENTS 6. CHARITABLE ACTIVITIES DIRECT COSTS Total Total 2013 Wages and salaries 255,640 - National insurance 19,229 - Pension cost 25,755 - Educational supplies 67, Staff development 2,493 - SUPPORT COSTS 370, Wages and salaries 85,153 17,699 National insurance 2,869 1,750 Pension cost 7,334 1,407 Depreciation 30,364 - Maintenance of premises 25,365 - Rates 2,698 - Water rates Energy costs 7,037 - Insurance 9,385 1,594 Transport 33,056 - Catering 5,796 - Technology costs 42,239 - Occupancy costs Other support costs 7,840 5, ,319 28, ,204 28,222 Page 26

29 NOTES TO THE FINANCIAL STATEMENTS 7. RESOURCES EXPENDED Staff costs Non Pay Expenditure Total Total Premises Other costs 2013 Direct costs 300,624-70, , Support costs 95,356 28, , ,319 28,145 Charitable activities 395,980 28, , ,204 28,222 Governance ,533 12,533 3, ,980 28, , ,737 31, NET INCOMING RESOURCES This is stated after charging: year ended period ended 2013 Depreciation of tangible fixed assets: - owned by the free school 30,365 - Auditors' remuneration - audit 3,750 3,000 Auditors' remuneration - non-audit 1,000 - Operating lease rentals: - other operating leases 9,009 - Page 27

30 NOTES TO THE FINANCIAL STATEMENTS 9. STAFF a. Staff costs Staff costs were as follows: year ended period ended 2013 Wages and salaries 340,793 16,659 Social security costs 22,098 1,750 Other pension costs (Note 22) 33,089 1, ,980 19,816 b. Staff numbers The average number of persons employed by the free school during the year expressed as full time equivalents was as follows: year ended period ended 2013 No. No. Teachers 3 0 Administration and Support 8 1 Management c. Higher paid staff The number of employees whose emoluments fell within the following bands was: year ended period ended 2013 No. No. In the band 60,001-70, The above employees participated in the Teachers Pension Scheme. During the year ended, pension contributions for these staff amounted to 8,945. Page 28