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This update considers the impact of the COVID-19 (coronavirus) and government measures on the financial statements of schools for 2020.
This has been a challenging year for schools as they have responded to the raft of measures introduced by the Government to contain the spread of the virus. Although schools have now re-opened, there remains the challenge of operating safely within a socially distanced society and the risk of further restrictions and measures being re-introduced as the Government seeks to bring the current outbreak under control
All of these developments and measures have had and are likely to continue to have a range of implications for schools. It is important that carrying values of assets are reconsidered and grants received through the CJRS are properly accounted for. In particular the Trustees report and notes to the accounts need to carefully consider and explain the going concern status of the school.
This guide will aid Bursars and Governors when reporting on the school’s activities and financial position.
Areas of focus
The key areas of focus of this update are as follows:
- Income recognition
- CJRS grants
- Asset values/impairment
- Going concern
- Other financial statements disclosures
- Trustees’ Annual Report
- Government support
- Gift Aid payments from trading subsidiaries
Key messages
The key message is that management and Governors will need to carefully consider the impact of coronavirus on the school’s Trustees’ report and financial statements to ensure that these continue to reflect the financial activities and position of the school in accordance with the Charities SORP.
- While the general rules relating to entitlement, probability of receipt and measurement for income recognition remain unchanged, the impact of coronavirus may require Governors to reconsider these criteria for their different sources of income.
- Consideration of school fees and summer term reductions and accounting for the Coronavirus Job Retention Scheme (CJRS).
- Assets where the value has suffered an impairment will need to be reviewed and the impairment reflected in the financial statements.
- Schools will have to review debtors to determine if the third parties remain in a position where they will be able to settle the amounts due or whether there will be a need to write down the carrying amounts.
- Borrowings need to be considered by the School to ensure that it is not in breach of any related terms and covenants.
- A key message to be considered within the Trustees’ Annual Report will be the impact of the coronavirus on the school and how the school has and is continuing to adapt going forward. Governors will need to assess how they can best explain the impact of coronavirus on the school’s financial results and financial position, and what their plans are for the school to manage the financial impact going forward, including a discussion of the impact on the school’s reserves and reserves policy and the level of reserves held.
- The Governors’ assessment on each school’s ability to continue as a going concern is already a key area of emphasis and importance and Governors will need to take particular account of the impacts from the coronavirus outbreak and ensure they have the appropriate disclosures. This may also lead to a modified audit report.
- The government has implemented a number of business support schemes, some of which have been/are available to Schools and / or their trading subsidiaries depending on their circumstances. Where a School has benefited from any of these support schemes, in particular CJRS, Governors will need to determine when and how any such benefit should be reported in the financial statements.
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