Simon Newland - Assistant Director (Education Provision and Access) Waqaas Munir - Finance Manager - Education & Early Years

Transcription

1 Internal Audit Report Themed Audits - SFVS 2014/15 Interim Report Issued to: Simon Newland - Assistant Director (Education Provision and Access) Waqaas Munir - Finance Manager - Education & Early Years Sarah Pickup - Deputy Chief Executive and Director of Resources and Performance Andrew Simmons - Deputy Director for Children's Services, Education Gillian Cawley - Assistant Director (Commissioner for Education Services) Claire Cook - Assistant Director - Finance Cheryl Faint - Head of Financial Services for School Report Status: Final Reference: 19935/14/005 Overall Assurance: Substantial

2 SIAS Themed Audit SFVS INDEX Section Page 1. Executive Summary 3 Appendix A Management Action Plan 6 Appendix B - Definitions of Assurance and Recommendation Priorities 22 2 of 21

3 SIAS Themed Audit SFVS EXECUTIVE SUMMARY Introduction 1.1 All Hertfordshire maintained schools have to complete a Schools Financial Value Standard Return (SFVS) and submit this to SIAS. SIAS has to demonstrate that there is a system of Internal Audit in place and that the information contained within the SFVS returns has been used to guide its audit testing. 1.2 As part of this process themes are selected for audit review. In the summer term of 2014, the SFVS theme was covered and a sample of twenty nine schools were visited. Following the audit visit, each sample school was issued with a report which detailed audit findings and associated recommendations to improve internal control, risk management or governance arrangements. 1.3 This report summarises the findings made and gives details of the related recommendations. A schedule containing this information can be found in Appendix A. The learning points from this review are circulated to all schools via the School Bulletin and The Grid and are also made accessible to school governors. 1.4 Our specific objective in undertaking the SFVS audits was to provide Hertfordshire County Council, its external auditor and the sample schools with assurance on the adequacy and effectiveness of internal controls, processes and records in place to mitigate risks in the following areas: a) Governing Body and School Staff b) Setting the Budget c) Value For Money d) Protecting the Public Purse Overall Audit Summary 1.5 Following each audit, the SFVS arrangements in place in each school were assessed using the following criteria (See Appendix B for detailed explanations of each assurance level): Full Assurance Substantial Assurance Moderate Assurance Limited Assurance Assurance. 1.6 The table below shows the number of sample schools in each assurance category based on the outcomes of the summer term 2014 audit visits. 3 of 21

4 SIAS Themed Audit SFVS Assurance level Number of schools ( ) Full 1 (3.5%) Substantial 23 (79.3%) Moderate 5 (17.2%) Total schools audited Based on the outcomes of audits carried during the summer term 2014, it can be concluded that 83% of the sampled Hertfordshire schools had adequate or better arrangements in place to mitigate risks in assurance areas covered by the SFVS requirements. Implementation of agreed recommendations following an audit will assist those 17% of sample schools assessed as having moderate arrangements to move to having adequate or better arrangements in place. Where moderate assurance has been given, arrangements will be made to ensure the adequate implementation of recommendations. 1.8 A high level summary of areas where in general schools had effective arrangements in place in summer are listed below: Governing Body and School Staff Minutes of committee meetings indicate that governors are effective in their critical role capacity, are well-informed of the issues facing their individual schools and are aware of relevant legislative and local requirements. Setting the Budget Evidence was provided that governors are engaged in the process of setting a school s budget to maximise the learning outcomes for pupils on roll. Value for Money Schools are aware of the need to ensure that value for money is achieved in decision-making. In some areas, groups of schools have joined together to jointly procure resources or in some cases share a specialist resource.. Protecting the Public Purse Evidence collected during audits indicates that in general, schools implement audit recommendations made. They also have adequate arrangements in place to guard against theft and fraud. The majority of schools visited have made arrangements for the audit of their voluntary funds now this is no longer undertaken by Internal Audit. Summary of Recommendations 1.9 We made 167 recommendations across the 29 schools visited. The table below shows the number of schools where a recommendation was made in one of the SFVS assurance areas. Also shown are the number of recommendations made per 4 of 21

5 SIAS Themed Audit SFVS assurance area and the recommendation priority. For information, no recommendations were made at one of the sampled schools. Breakdown of SFVS Recommendations Assurance Area Governing Body and School Staff Number of schools occurring 23 Setting the Budget 10 Value For Money 18 Protecting the Public Purse 15 Signing School Financial Value Standard Return Number of recommendations and priority 2 High High High High Annual Governance Statement 1.10 The work undertaken by Internal Audit in respect of SFVS compliance provides the Council and its external auditors with substantial assurance in respect of the Council s Annual Governance Statement. 5 of 21

6 A Governing Body and School Staff 1 Identification of Governors Skills and Experience Seven schools were unable to provide evidence of a completed Governors Skills Matrix, or details of Governors relevant skills and experience. There was a further school where governors had completed competency matrices, but these had not yet been subject to a full review. The school is unaware of skills gaps and associated training needs. These may compromise the governing body s ability to act as a critical friend or evidence that it is matching governor skills and experience to the responsibilities of governor committees. Associated Opportunity The school is able to make best use of the skills that governors can offer, enhancing governance, financial management and decision-making. Schools should assess the depth of skills and knowledge across the Governing Body by requiring all governors to complete competency matrices. Thereafter, a review of these should be completed to ensure that the governing body as a whole has the necessary skills and experience to effectively run the school. Any skills gaps should be addressed by training or recruitment. The review of skills and training needs should form part of the Programme of Business and any new governor who joins the governing body should be requested to complete the matrices. 2 Governors training/ Register Three schools did not have a Governors Training Register and in another four schools we noted that the governors had received little or no training in respect of the following; Safeguarding Children, the SFVS, being a critical friend and financial management. Failure to keep up-to-date with developments in the field of education generally and schools finance in particular exposes the school to the risk of poor decision-making and leaves governors open to allegations that they are not appropriately skilled to undertake their role. Governors should make full use of the training that is available to them in order to ensure that the governing body has a full range of skills required. A Training Register, should be maintained to evidence training undertaken. 6 of 21

7 3 Programme of Business Eight schools did not have a programme of business and three others had programmes that required improvement to ensure that all essential items of business were covered. The absence of an accurate schedule detailing committee business exposes the school to the risk that : Essential items of business are not dealt with Key statutory and Council deadlines are not being Key documents and policies are not subject to regular review and updated to reflect legislative, Council and school changes. A programme of business should be produced for the Full Governing Body (FGB) and its committees identifying the term where items of business need to be considered along with any external deadlines. The programme of business should be reviewed, updated and agreed at least annually by the FGB. 4 Reporting the Financial Position of School In five schools, the financial position of the school had not been reported to parents and the wider community. In two other schools the report gave budget information rather than actual expenditure details. A lack of transparency surrounding the financial management of the school could negatively impact on the school s reputation and raise concerns about its ability to effectively manage its financial affairs. Associated Opportunity Reporting the actual figures for both income and expenditure will increase transparency around the school s finances. A process for reporting the year-end financial position to parents and the wider community should be agreed and adhered to in future years. This should include the actual and budgeted figures for both income and expenditure. A template to report the financial position of the school is available at: vs_guidance.shtml 7 of 21

8 5 Full Governing Body (FGB) and Resources/Finance/General Purpose committee Minutes In seven schools, we noted that minutes for the FGB and finance related committees included evidence of financial matters being presented to the governors. However, the minutes lacked evidence of: the follow up of actions or questions from the previous meeting the opportunity to declare conflicts of interest challenge provided by governors on the financial information presented approval of the Budget, MTFP, Year End Return or SFVS return. The school is unable to evidence that governors are providing robust challenge and that the necessary approval has been obtained, leaving the school open to challenge. If the opportunity to declare a conflict of interest is not made available at each committee meeting, the school is unable to evidence that: Decisions are being made in the best interests of the school and its pupils Individual governors have not personally benefited from a decision made by the FGB or a committee Minutes should record all approvals, capture evidence of the challenge provided at the meetings, the opportunity to declare interest and note the reports that the governors were provided with. Where no questions have been raised by Governors this should be stated within the minutes to ensure that they present a complete record. 6 Approval/Submission of the Budget In one school, the 2014/15 budget was submitted by the school to HCC before being formally approved by Governors. This contravenes HCC s financial This exposes school governors to the risk of being answerable to a budget that they did not agree. It also leaves them open to allegations that they are not appropriately skilled to undertake their The school should ensure that the budget is approved by governors before it is submitted to HCC. Committee meeting dates should be set to 8 of 21

9 regulations. role. align with the budget submission deadline and give ample time for budget discussion and approval. 7 Finance/Resources/General Purpose Committee Terms of Reference (TOR) In eight schools the TOR for the Finance / Resources Committee needed amendment to: Include all delegated responsibilities detailed within the Schedule of Financial Delegation (SoFD) State the next review date Include an appropriate quorum. In one school a meeting was said to be quorate with two governors rather than the minimum requirement of three. A lack of clarity surrounding responsibilities may result in: Committee members being unclear about their responsibilities and authorities decisions made being subject to challenge significant decisions not being made / deadlines not met. Where a meeting is not quorate, decisions made are null and void. The TOR for the Finance / Resources Committee should be updated to either include all delegated responsibilities within the SoFD or a link to the SoFD. The date of the most recent review and that of the next review should be included. All TOR should be formally approved by the FGB. The minimum number of governors required for a quorate meeting is three. 8 Structure of the Governing Body and its Committees One school has dispensed with a committee structure and all business is taken by the FGB. However, the corresponding changes had not been made to the Governing Body TOR and the A lack of clarity surrounding responsibilities may result in: governors being unclear about their responsibilities and authorities decisions made being subject to challenge High The school should draft a TOR for the FGB that formally outline its roles and responsibilities, current legal requirements and school practices. The SoFD should be reviewed and updated 9 of 21

10 SoFD referred to committees/ former sub-committees rather than the new single tier model. significant decisions not being made / deadlines not met. to reflect arrangements currently operating at the school. 9 Finance Policy, financial policies and SoFD The school maintains an umbrella Finance Policy, along with local financial policies and a SOFD. There may be confusion around decisionmaking with decisions taken that are out of step with the intended overarching Finance Policy. Governors should use the planned review of financial policies to streamline the school s policies to ensure clarity in the school s arrangements. 10 Schedule of Financial Delegation (SoFD) In seven schools, the SoFD was in need of review as: reference was made to FMSiS instead of the SFVS reference was made to the Department of Children, Schools and Families instead of the Department for Education the signing of cheques below 2,000 was delegated solely to the Deputy Headteacher (HCC s scheme for financing schools only allows this delegation to the Headteacher.) the School Fund account return was to be sent to Internal audit An out-of-date / incomplete SoFD could lead to: decisions being inappropriately taken the decision-making process being challenged which could negatively impact on the reputation of the school key activities not being undertaken value for money not being obtained from the decision-making process unnecessary expenditure being incurred The SoFD should be reviewed and updated to reflect the current internal and external requirements to ensure that all aspects of financial control have the appropriate delegations. The SoFD should only delegate the sole signing of cheques under 2,000 to the Headteacher. The programme of business for the governing body should include an annual review and update of the SoFD. 10 of 21

11 which is no longer a requirement. The Statement of Internal control had to be sent to Internal Audit which is no longer a requirement. Tenders/quotes requirements had not been updated in line with current guidance. 11 Finance Staff - Separation of Duties In one school, the Finance Secretary has total responsibility for income from receipt through to banking and the recording of this. Lack of separation of duties increases the risk of the misappropriation of income. The responsibilities of the Finance Secretary should be reviewed and amended to ensure that adequate separation of duties exists in the income process. If this is not possible sample checks should be introduced. 12 Finance Staff Job descriptions In one school, the Finance Officer does not have a job description. A lack of a job description could result in individuals: being unaware of their roles and responsibilities and tasks being omitted / inappropriately performed being appointed who lack the values, skills and experience necessary to work effectively as the post holder. Job descriptions for finance staff should be drafted to reflect current responsibilities. Job descriptions should be referred to as part of the performance management process to ensure that staff continue to have the skills required to perform their role. 11 of 21

12 13 Governors/Staff Register of Pecuniary Interests In nine schools, the Registers of Pecuniary Interest for governors and staff were not completed for each individual, were incomplete or were out of date. In one school, none of the staff had completed a Pecuniary Interests form. Without a Register of Pecuniary Interests, the school is unable to evidence that: Decisions are being made in the best interest of the school and its pupils Individuals have not personally benefited from a decision made by the school. Unrecorded pecuniary interests which influence an individual s decision-making could threaten value for money and expose the school to legal and reputational risks. Individual governors and staff who have yet to complete or up-date the Register of Pecuniary Interests should be asked to complete/up-date this at the earliest opportunity. On an annual basis, staff and governors should be reminded of the interests that are to be declared including relationships with staff, governors and contractors / other voluntary roles and are asked to submit updated returns. 14 Staff Competency Matrix In six schools, staff with financial responsibilities had not completed a competency matrix which helps to demonstrate that the school has access to an adequate level of financial expertise. The school may not have the full range of financial skills required. Associated Opportunity Training needs of school staff may be highlighted through completion of the competency matrix. All members of staff with financial responsibilities should complete the competency matrices. These should then be reviewed to identify any skills gaps to be met by training. The competency matrix form can be found at m/uploads/attachment_data/file/286583/sfv S_additional_resources.docx 12 of 21

13 15 Finance Staff Resilience In two schools, we noted a dependency upon the expertise of the Bursar to complete strategic tasks with other staff available in school lacking the ability to cover in the case of unplanned or long term absence. Effective cover cannot be provided in the absence of a key member of staff which could result in critical activities not being undertaken. The financial and capacity implications of purchasing additional services from FSS in the event that the Bursar is unable to work should be quantified. Depending on the outcome of this, governors may wish to consider whether some additional internal training or shadowing is appropriate to ensure resilience. 16 Review of Staffing Structure In two schools, a full review of the staffing structure has not been completed. Current staffing structures may be unsustainable within the current or future finances of the school. The staffing structure of the school may not match its current / anticipated future needs. The school should review its staffing structure to confirm its continued relevance and effectiveness and thereafter a programme for full review should be set at least biannually. B Setting the Budget 17 School Development / Improvement Plan (SDP/SIP) One school had no SDP/SIP and a second had an incomplete SDP/SIP. In nine other schools the SDP/SIPs had been completed and a cost attributed to each The absence of a fully costed development / improvement plan with clear links to the school s priorities/ improvement activities and budgets to be used may result in the school s priorities Schools should complete a SDP/SIP. Costs (estimated if not known) and budget codes should be included in the development plan to provide a link between the school s budget and its proposed development activities, to 13 of 21

14 objective where appropriate. However, the budget from which the expenditure will be funded was not stated. not being met as they are unaffordable. This may impact negatively on the educational experience of the children in the school. ensure that the school s aspirations are affordable. 18 MTFP There is an expectation that the figures included in the first column of the MTFP agree with the Approved Budget Return (ABR). However, in one school, the 2013/14 MTFP available at the audit was significantly different from the ABR for 2013/14 and no explanation was given. Inaccurate financial forecasts could result in the school being: In deficit and required to redefine their priorities Unable to fund unanticipated expenditure Unable to maintain the fabric of buildings to an acceptable standard. High The MTFP should have the ABR figures as its starting point to ensure that accurate information is used to provide estimated funds available for future years. Where adjustments are necessary for the current year these should be fully documented and approved. C Value for Money 19 Financial Benchmarking Six schools have not benchmarked their income and expenditure against similar schools. Another school had completed a benchmarking exercise but it was not clear whether the results had been discussed with governors. By not benchmarking its financial activity against that of similar schools, the school and its governors miss the opportunity to either evidence best value is being obtained or highlight areas where expenditure is higher than average / income generated is lower than average and hence would warrant further investigation. Annual benchmarking of all areas of income and expenditure should be undertaken to consider potential improvements to use of resources and to identify where any changes could be made. The benchmarking information should be reported to the governing body for discussion and this recorded in the minutes along with any agreed actions for their future follow up. 14 of 21

15 20 Contract Register Eight schools do not have a contract register, although one of these does maintain file records of current and expired contracts. The school may be unaware of the date when a contract expires and may find itself with no service provision / additional costs whilst cover arrangements are obtained. Best value may not be achieved for the school. A contract register should be drafted, to include details of all existing contracts. A template register is available on the grid. ( ioning/documents/t1_school_contract_regist er_template_dec11.xls Once drafted, review of the register should be built into the Programme of Business to identify those contracts that are to be retendered. 21 Contract Register Five schools had incomplete contract registers which did not record all relevant expected details such as leased equipment, the contacts relating to the contract and the date the contract requires review. Clear responsibilities for the contract are identified / key activities are undertaken by an inappropriate person. The contract register should be reviewed making use of the template on the grid: ( ioning/documents/t1_school_contract_regist er_template_dec11.xls to ensure that all the requisite information is included. 22 Contract Register Governing Body review In two schools governors declined to review the contract register even though this was their responsibility as per the school s SoFD With no oversight of contracting activity, governors cannot gain assurance that the school is getting best value in this area. It is best practice that the Governing Body, via the Resources / Finance Committee or a nominated individual reviews the Contract register on an annual basis, usually at budget 15 of 21

16 setting time. 23 Contract Management In one school, all roles relating to contract management were fulfilled by the Headteacher. A lack of separation of duties in contract management arrangements may lead to inappropriate behaviour. The school should ensure adequate separation of duties for contract management by identifying different officers for the roles of Chief Officer, Contract Manager and Contract Officer. 24 Quote and Procurement Form In six schools, the reason for the selection of contractors was not evidenced. Failure to evidence why a particular quote has been selected particularly if the decision has been taken not to take the lowest quote, leaves the school open to allegations of collusion or an inability to evidence that best value has been obtained. This lack of transparency leaves the school open to the possibility of challenge. The school should utilise the quote and procurement form available on the Grid to clearly demonstrate the reason for selecting particular suppliers. oning/documents/t8c_procurement_quotes_r ecord_dec11.doc All quotes, or a summary of the quotes received should be retained to provide an audit trail to indicate all options have been considered. 25 Asset Management Plan Six schools had no asset management plan in place. In a further school, there was an Asset Management Plan in place, but this With no asset management plan in place, the school cannot evidence how it strategically plans to: Manage and track its assets An asset management plan should be drawn up / reviewed to demonstrate formal long term planning of premises maintenance and improvement works that are required, along 16 of 21

17 was not costed. Finance and schedule the on-going repair and maintenance of school buildings, fixtures and fittings Purchase new items as they become obsolete / reach the end of their useful life. with relevant timescales and estimated costs. ments/school_asset_management_plan_201 2.xls Additionally, the school is exposed to the risk that unexpected expenditure is incurred for which there is no allocated budget and hence requires the redirection of funds from priority areas. 26 Lettings contracts In one school, the school s letting policy and current lettings agreements were out-of-date. Responsibilities and liabilities are not understood by both parties. The school suffers financial loss and reputational damage. The Resources /Finance Committee should review and update the school s letting documentation. Current lettings agreements should be reviewed, updated and signed. Arrangements should be put in place to monitor on-going compliance with the terms of the agreed lettings agreements. D Protecting the Public Purse 27 Implementation of audit recommendations In one school there was no Controls weaknesses remain that expose Responsibility for monitoring the 17 of 21

18 mechanism in place to monitor the implementation of audit and other recommendations. Seven recommendations from the previous internal audit had not been actioned. the school to risks relating to the financial governance at the school. implementation of audit and other recommendations should be included in the work programme of the FGB or delegated to an appropriate committee. Implementation of the recommendations should be recorded in the appropriate minutes. 28 Whistleblowing Policy In two schools the Whistleblowing policy was out of date. Concerns about improper behaviours may go unreported and continue to take place resulting in the potential for financial loss and / or reputational damage. The Whistleblowing Policy should be updated to reflect the guidance at man_resources/policies/documents/csf0027_ model_whistleblowing_procedure_june2014.d oc 29 School Fund Account audit In two schools, the fund account audit had not been undertaken. In a further two schools the review was undertaken by a person who was not independent of the administration of the account. Monies are being inappropriately spent and this is going undetected. This could have a negative impact on the educational experience of pupils. Arrangements should be made for the annual audit of the school fund account to be undertaken by an individual independent of the running of the school. The audited annual accounts should then be presented to the governors for scrutiny. 30 School Fund Accounts In one school the account had not been written up since April 2012 and had not been audited since the end of 2011/12 financial year. Monies have not being spent as intended causing reputational risk and possible accusations of fraudulent fund raising. Funds may be inappropriately spent and High The School Fund Account should be written up with arrangements made for the annual audit of the account by an individual independent of the running of the school. 18 of 21

19 Governors had received no reports on the account which had a significant balance. These monies should have been spent on the children in the school at the time it was raised. this has gone undetected. This could have a negative impact on the educational experience of pupils. The audited annual accounts must be presented to the Governors. A report should be produced for Governors to enable discussion and approval to spend some of the money held for specific purposes to benefit the children at the school. Going forward, expenditure should be timely to avoid the build-up of large fund balances. 31 School Fund Account Balance In one school the year-end balance exceeded 75,000. This had not been reported to the Education and Early Years Section in HCC in line with HCC requirements. n-compliance with HCC regulations and reputational risk for the school. Where the School Fund Account Balance is in excess of 75,000, details should be reported to the Education and Early Years Section at HCC. 32 Business Continuity In fifteen schools there was either no Business Continuity Plan (known as an Emergency Response Plan) or it was out-ofdate/ incomplete. Without an up-to-date Business Continuity Plan the school cannot evidence that it would be able to continue to function in the event of a disaster. This would have a potentially significant shortterm impact on the education of pupils. The school should fully complete / update the Emergency Response Plan with at least two copies held off site. 33 Asset Register In seven schools the inventory of school assets was either out of date or incomplete as it did not The school potentially could encounter difficulties in the event of making an insurance claim for lost, stolen of The inventory should be reviewed to include details of the purchase date, the cost of the asset and columns for disposal details. 19 of 21

20 contain details of the purchase date, the cost of the asset and /or include columns for disposal details. damaged items. Where costs are not recorded the school may not be able to claim the full amount and should unrecorded items be destroyed they may not be replaced with items of an equal value. Assets inappropriately removed from the school may be thought to have been disposed. Signing School Financial Value Standard Return 34 Signing the School Financial Value Standard (SFVS) At the time of the audit one school did not have a signed copy of its SFVS. It is a requirement of the SFVS that the Chair of Governors signs a copy of the SFVS return. HCC requires that a signed copy is held in school for inspection by SIAS. n-compliance with the requirements of the Department for Education which could cause reputational risk to the school. The Chair of Governors should sign the SFVS return at the earliest opportunity and a copy of this be held in the school. 20 of 21

21 Appendix B Definitions of Assurance and Recommendation Priorities Themed Audit - SFVS Levels of assurance Full Assurance Substantial Assurance Moderate Assurance Limited Assurance Assurance There is a sound system of control designed to achieve the system objectives and manage the risks to achieving those objectives. weaknesses have been identified. Whilst there is a largely sound system of control, there are some minor weaknesses, which may put a limited number of the system objectives at risk. Whilst there is basically a sound system of control, there are some areas of weakness, which may put some of the system objectives at risk. There are significant weaknesses in key control areas, which put the system objectives at risk. Control is weak, leaving the system open to material error or abuse. Priority of recommendations High There is a fundamental weakness, which presents material risk to the objectives and requires urgent attention by management. There is a significant weakness, whose impact or frequency presents a risk which needs to be addressed by management. There is no significant weakness, but the finding merits attention by management. 21 of 21