2015 School Audit – Summary of key findings

Internal Audit has recently completed a number of audit reviews across a sample of both secondary and primary schools. Based on our observations during these reviews we have summarised some of the common control issues that schools should be aware of when reviewing their own systems and processes.

It is worth noting that some of the points relate directly to requirements within the Schools Financial Values Standard (SFVS).

Governance

  • All meetings of the Full Governing Body (FGB) or their committees should be quorate. If a decision is taken when a meeting is not quorate, governors would be acting outside of their powers and the decision could be challenged.
  • Terms of Reference for the FGB and their committees should be clearly detailed, approved annually by the FGBand be in line with the approved Scheme of Delegation. This will ensure that governors are aware of their responsibilities and any decisions taken, for example approval of the budget, will stand up to scrutiny and may not be challenged. This is a requirement of the SFVS which asks:“Does the governing body have a finance committee (or equivalent) with clear terms of reference and a knowledgeable and experienced chair?”
  • All key documents and policies should be reviewed and approved regularly by the FGB or a committee, if appropriate. If such review and approval is not undertaken, inappropriate or out dated procedures may be followed.
  • Minutes should always reflect explicitly the actions / decisions that have been taken, including when governors approve key documents and policies,
  • Service Level Agreements should be shared with and approved by governors annually to ensure that they continue to reflect best value for the school.
  • Regular benchmarking exercises should be performed and the outcomes shared with governors to ensure that the school is achieving best value.This is a requirement of the SFVS which asks: “Does the school benchmark its income and expenditure annually against that of similar schools and investigate further where any category appears to be out of line?”
  • The school fund should be properly administered, be audited annually by a person that is independent to its administration, and the results of the audit should be shared with governors. This ensures that funds are used appropriately. This is a requirement of the SFVS which asks: “Does the school have adequate arrangements for audit of voluntary funds?”
  • Schools should maintain an up to date gifts and hospitality register detailing boththat has beengiven and received. It should also detail offers made but refused by both staff and governors. This will ensure full transparency and assist in removing any potential allegation of favouritism or collusion with suppliers or service providers.
  • Declarations of Interest forms should be completed annually by governors and any staff who have control over spend, to ensure, again, full transparency in decision making. This is a requirement of the SFVS which asks: “Are business interests of governing body members and staff properly registered and taken into account so as to avoid conflicts of interest?”
  • All schools should have a complaints procedure that is readily available to parents.

Payroll

  • All payroll output should be checked with evidence of any verification undertaken retained to vouch that the checks have been made.
  • All payroll amendments should be appropriately authorised with adequate separation of duties exercised. There should never be a situation where a staff member may potentially be able to cause an unauthorised increase to their own salary.
  • All additional payments (mileage, overtime, sessional payments etc) should be paid through the payroll system and not in cash. The school may be liable for tax penalties if cash payments are made.
  • Periodic verification should be undertaken between payroll output and staff conditions of service to ensure that correct payments are made. Changes in conditions that may not have been actioned may result in substantial overpayment of salary.

Creditors & Procurement

  • All purchases made should be in line with the schools own Standing Orders and Financial Regulations.
  • To ensure that the school continues to achieve best value, all Service Level Agreements should be reviewed and approved annually by governors. In addition, any contracts should be periodically reviewed / market tested to ensure that they remain financially sound.
  • All orders should be raised in advance of the receipt of goods and services where possible to ensure that effective commitment accounting is exercised with accurate budget monitoring reports produced.

Income & Debtors

  • All schools should have a fully documented, approved debt recovery policy to ensure that debts are pursued in a standard and equitable manner.
  • Schools that hire facilities should ensure that invoices are raised in a timely manner in order to realise income due.

Cash & Bank

  • All bank reconciliations should be independently authorised as accurate to ensure appropriate separation of duties is achieved. When undertaking the reconciliations every effort should be made to clear all unreconciled items in a timely manner.
  • Petty cash limits set in the school’s financial regulations should always be applied and purchases should not be artificially split to achieve this. Any purchases made in excess of limits set may more appropriately be made through the order route.
  • In all instances reference should be made to Liverpool City Council in the school’s bank account and bank mandate. This ensures that, should it be necessary, the Local Authority is approved to administer the account.

Asset Management

  • Schools should maintain detailed inventories which are independently sample checked throughout the year with a full annual independent check, the results of which should be reported to governors. This will help to effect adequate control over assets owned by the school. This is also a requirement of the SFVS (see Business Continuity below).
  • If items are removed from school an appropriate loans record should be maintained in order to track items not on school premises.
  • All items included on the inventory should have appropriate security markingto assist in tracking should any items be lost or stolen.

Budget Setting & Budgetary Control

  • It is good practice for School Development Plans (SDP)to cover a three year rolling period and be linked to the approved three yearbudget, with sufficiently detailed financial implications contained to evidence the link. This will help ensure that the school has affordable future plans. This is a requirement of the SFVS which asks: “Is there a clear and demonstrable link between the school’s budgeting and its plan for raising standards and attainment?”
  • The SDP should always be shared with the FGB on an annual basis with any comments and their explicit approval clearly detailed in minutes to show that they agree with future plans for the school.

Risk Management & Business Continuity

  • All schools should ensure that they have undertaken a Business Impact Analysis which should then inform the contents of the School Emergency Management Plan (SEMP). Once produced the SEMP should be shared with and approved by governors. There should be a nominated owner of the SEMP who should test it periodically to ensure that it remains fit for purpose. This is a requirement of the SFVS which asks: “Does the school have an appropriate business continuity or disaster recovery plan, including an up-to-date asset register and adequate insurance?”
  • All major systems operating within the schools should be risk assessed on an annual basis to ensure that they continue to operate effectively. A report should be produced and shared with governors, with any issues to be addressed included in an action plan.

School Meals

  • School should periodically market test their service provision to ensure that it represents the best service for the school and offers best value. In addition, if the school has control over prices charged, they should ensure that these are also reviewed regularly to ensure that the service is operating effectively.

Internal Audit

November 2015