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					Internal Audit and Risk Management Service
Annual Report on Schools 2008/09




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                                     North Somerset Council

                    Internal Audit and Risk Management Service

                                   Annual Report on School Audits

                                                        including

                     Financial Management Standard in Schools

                                             External Assessments




                                                    2008/2009
Internal Audit and Risk Management Service
Annual Report on Schools 2008/09




          Content:                                                   Page:



    1.     Background                                                 2

    2.     Responsibilities of Management and Internal Auditors       2

    3.     Schools Internal Audit Annual Assurance Plan               3

    4.     Financial Management in Schools (FMSiS)                    3

    4.1    Primary School – Summary of Findings                       4

    5.     Primary School – Internal Audit Assurance visits           6

    6.     Projects and Investigations                                8

    7.     Risk Management Arrangements                               8

    8.     Internal Audit and Risk Management Service proposed        8
           approach 2008/09

    8.1    FMSiS Assessments                                          9

    8.2    School selection criteria                                  10

    9.     School Newsletter                                          10



    Appendix 1                                                        11-12

    Schedule of Schools due to be audited and assessed against the
    FMSiS standard in 2009-10




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 Internal Audit and Risk Management Service
 Annual Report on Schools 2008/09




1.   Background
     This Annual Report has been produced at the request of the Strategic School’s
     Forum stakeholders to explain the role of the service, the major conclusions and
     findings for 2008-09 and to highlight any significant issues of concern.
     The primary aim of the Internal Audit and Risk Management Service in relation to
     Primary, Secondary and Special Schools is to:
      provide an independent audit opinion to the Headteacher and Governors on the
         soundness of the financial, governance and administrative systems and controls
         operated at the School;
        recommend any improvements in the systems and procedures, which are
         considered necessary.
     In March 2008 the Council’s Audit Committee and the Section 151 Officer approved
     a risk based annual Assurance Audit Plan for the Council which included coverage of
     the Children and Young People’s Services Directorates Primary and Secondary
     Schools and provides the basis for the review of internal control within Schools and
     the assessment of the Financial Management Standard in Schools (FMSiS)
     The Internal Audit Annual Assurance Plan for 2009-10, which includes coverage of
     the assessment for the Financial Management Standard in Schools, was approved
     by the Council’s Audit Committee in March 2009 and is covered in Section 8 of this
     report.

2.   Responsibilities of management and internal auditors
     It is management’s responsibility to develop and maintain sound systems of risk
     management, internal control and governance and for the prevention and detection
     of irregularities and fraud. Whist the Internal Audit and Risk Management Service
     provides an independent opinion on these controls it should not be seen as a
     substitute for management’s responsibilities for the design and operation of these
     systems.
     Every effort is made to ensure that Internal Audit work is planned to provide a
     reasonable expectation of detecting significant control weaknesses and, if detected,
     additional resource is directed towards the identification of consequent fraud or other
     irregularities.
     However, internal audit procedures alone, even when carried out with due
     professional care, cannot guarantee that fraud will be detected.
     In addition to its assurance work, the Internal Audit and Risk Management Service
     provide an external FMSiS assessment service to Schools. Whilst the cost of the
     Internal Audit assurance work is met from central funding this additional work is not.
     It has therefore been necessary to pass on the cost of the FMSiS external
     assessment to each individual School.



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 Internal Audit and Risk Management Service
 Annual Report on Schools 2008/09




3.   Schools’ Internal Audit Annual Assurance Plan:
     Completion of Plan
     The Children and Young People’s Services Annual Audit Assurance Plan prescribes
     approximately 32% of Internal Audit’s work.
     The planned coverage for 2008/09 included;

         Review                                                  Plan     Completed
         Secondary Schools – FMSiS Assessments                     4           1
         Secondary Schools – Assurance Reviews                     4           2
         Primary Schools – FMSiS Assessments                      23           13
         Primary Schools – Assurance Reviews                      25           23
         Special Schools – FMSiS Assessments                       2           1
         Special Schools – Assurance Reviews                       2           1
                                                       Totals     60           41

     In summary 41 of the planned 60 visits to Schools were completed, this represents
     68%.

4.   Financial Management Standard in Schools
     The Financial Management Standard in Schools is broken down into five main
     control areas, in which there are a number of individual processes to comply. The
     standard is the same for Primary, Special and Secondary Schools. Table 1 details
     the five main control areas.

     Table 1
                 Control Objective                              Control Objective
     Leadership and Governance                     Partnership and Resources
     People Management                             Processes
     Policy and Strategy

     The standard was introduced in 2006 and since January 2007 the Internal Audit and
     Risk Management Service has visited nine of the ten secondary schools. Of these
     nine schools, seven have passed the external assessment including one conditional
     pass.
     Twenty-seven Primary Schools have also been externally assessed of which twenty-
     five have, or are soon to be, awarded passes.
     One Special School has been assessed and successfully passed.
     Table 2 overleaf provides a summary of the FMSiS external assessments since its
     introduction in 2006.

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 Internal Audit and Risk Management Service
 Annual Report on Schools 2008/09




      Table 2

        Review                                                Conditional   Standard not
                                           Completed   Pass
                                                                Pass          achieved
        Secondary Schools - FMSiS              9        6         1              2
        Primary Schools - FMSiS               27        20        5              2
        Special Schools - FMSiS                1        1         0              0
                                  Totals      37        27        6              4



      On the four occasions where both Primary and Secondary School were assessed as
      not having achieved the standard it was generally attributed to, and reflected an
      overall lack of ownership to the requirements of the standard by the School
      Management and Governors.

4.1   Primary School – FMSiS – Summary of Findings
      This was the second year that Primary Schools were externally assessed against the
      DCSF’s Financial Management Standard in Schools within North Somerset.
      From the assessments carried out it was generally considered that the Primary and
      Special Schools have been better prepared for the assessment visit than had
      previously been experienced with the Secondary Schools.
      A number of the evidence packs compiled by the Primary and Special Schools were
      considered to be exemplary.
      It is recognised that, on occasions, preparation for the standard has placed
      additional work pressure on key individuals.
      The preparation process for the standard and the compilation of the evidence pack
      must be seen as a whole school management and governing body exercise and this
      point is stressed throughout the FMSiS training sessions.
      Table 3 overleaf provides a summary of the main FMSiS findings identified within
      Primary Schools.




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Internal Audit and Risk Management Service
Annual Report on Schools 2008/09




    TABLE 3
    Most Common weaknesses in Primary School FMSiS Reviews
    Leadership and Governance
    (a) Registers of Business and Pecuniary           ·   Not all governors are signing;
        Interests for governors and senior            ·   Registers not consistently being retained.
        members of staff



    (b) Purchasing / Finance Policies                 ·   Polices are not subject to regular review.
                                                      ·   Discrepancies between polices and scheme of
                                                          delegation;
                                                      ·   Authorisation levels for virements not
                                                          prescribed.
    (c) Whistle-blowing Policy to express             ·   Absence of, or no formal approval by
        concerns                                          Governing Body of, a Whistle-blowing Policy;
                                                      ·   Policies not supported by documented
                                                          procedures;
                                                      ·   Governors or staff are not made aware of
                                                          existence of policy.


    (d) Budget Monitoring                             ·   Lack of evidence in committee minutes of
                                                          effective budget monitoring by Governors;
                                                      ·   Absence of Budget monitoring reports with
                                                          Committee minutes.

    (e) Committees                                    ·   Terms of reference (TOR) are either not
                                                          present or have not been regularly reviewed on
                                                          a periodic basis;
                                                      ·   Minutes do not record the full discussion of
                                                          agenda items, or there is a lack of evidence of
                                                          questioning and evaluation of agenda items;
                                                      ·   Finance committee TOR’s do not make
                                                          reference to desirable competencies of
                                                          members.

     People Management
     Demonstration of Financial Skills            ·       Lack of evidence of setting performance
                                                          targets for key finance staff;
                                                  ·       Poorly     completed      governor    or staff
                                                          competencies matrices;
                                                  ·       Lack of evidence of finance governors
                                                          receiving regular financial training.
                                                  ·       Staff Structure not being regularly reviewed.




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 Internal Audit and Risk Management Service
 Annual Report on Schools 2008/09




     TABLE 3
     Most Common weaknesses in Primary School FMSiS Reviews
      Policy and Strategy
     Benchmarking                                ·   Absence of or limited amount of benchmarking;
                                                 ·   Lack of evidence in committee minutes of the
                                                     results of benchmarking exercises.
     School Improvement Plan                     ·   School Improvement Plan not showing links to
                                                     available budgets


     Partnership and Resources

      (a) Tendering / quotation procedures       ·   Lack of evidence that tenders/quotations have
                                                     been sought;
                                                 ·   Tender/quotation returns not being kept at
                                                     school;
                                                 ·   Absence of evidence in minutes that Governors
                                                     have approved contracts.

      (b) Scheme of finance for Schools          ·   Schools not consistently adopting the Scheme
                                                     on an annual basis.
      Processes

     (a) Controlled self assessment              ·   Assessment     not   completed or where
                                                     completed an action plan had not been
                                                     prepared or approved.

     (b) Financial Procedures                    ·   Financial procedures not documented          or
                                                     approved by the Governing Body.

     (c) Financial Regulations                   ·   Financial Regulations are not based on and
                                                     consistent with Scheme for Financing Schools

     (d) Record Security                         ·   Lack of adequate physical security measures
                                                     for the safe storage of Personal or confidential
                                                     information.


5.   Primary School Assurance Audits – Summary of Findings
     A total number of twenty-three Primary School Assurance Audit reviews were carried
     out during the financial year 2008-09.
     A summary of the main findings identified as part of the Internal Audit reviews of
     Primary Schools completed during 2008/09 is shown in Table 4.
     Primary School Assurance audits are structured around a School Audit Programme
     based on the recommendations considered to be those used by the Office for
     Standards in Education (Ofsted) when forming an opinion on the financial control of
     the School and which are also considered to demonstrate best practice.



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Internal Audit and Risk Management Service
Annual Report on Schools 2008/09




    On the basis of the work carried out, the Auditor will form an opinion on the standard
    to which the financial procedures have been administered to ensure that the
    transactions of the School are properly controlled.
    A number of improvements are generally recommended, which when implemented
    will further strengthen the accounting practices and principles already adopted and
    ensure that the School complies with the guidelines recommended by the Ofsted, the
    Audit Commission and the Council’s Section 151 local requirements.
    All matters arising are discussed with the Headteacher and representative of the
    Governing Body and form the basis of the recommendations contained in the Final
    Internal Audit Report.
    The Internal Audit and Risk Manager, in liaison with the Children and Young
    People’s Service Directorate’s Fair Funding Manager also seek to address these
    issues.
    Table 4


                     Areas for improvement in Primary School Visits 2008-09

      Area of Audit Coverage                              Main Findings

                               · Register of Business Interests forms not completed
                               · Terms of Reference not including requirements for governors to
                                 have financial training
                               · Finance reports used in governors meetings not attached to
                                 minutes or signed
              Governance       · Scheme for Financing Schools is not being formally adopted on an
                                 annual basis annual basis
                               · Purchasing policy not including levels of authorisation for journals
                                 and virements
                               · Purchasing policy not being reviewed annually
                               · Minutes of meetings are not being signed by the Chair
      Purchasing Procedures    · High Usage of non order invoices;

     Contracts / Leases        · Not obtaining evidence that Contractors have adequate insurance
                                 cover
                                No retention of quotes High Usage of non
     Income                    · No formal Debt Recovery Policy in place
     Lettings                  · No Policy in place
                               · Policy not annually reviewed
                               · No up to date Public Liability Insurance Certificate held
                               · Application Forms not completed
                               · Waiving of fees not authorised by Governors


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 Internal Audit and Risk Management Service
 Annual Report on Schools 2008/09




                    Areas for improvement in Primary School Visits 2008-09
         Computer Security      · Acceptable Usage Policy not signed by staff/ parents/ pupils
                                · Bank Reconciliations not complete regularly and bank statements
                                  not date stamped
       Unofficial School Fund
                                · Audited accounts not made available for staff, parents and
                                  governors to view



6.   Projects and Investigations
     There were no specific projects or investigations carried out in respect of Schools
     during 2008/09.

7.   Risk Management in Schools workshops
     During 2007/08 the Internal Audit and Risk Management Service introduced a
     generic risk template to all Secondary and Special Schools.
     In addition, the template was presented at a workshop to 21 representatives from
     Primary Schools.
     The key aim is to raise awareness of strategic and operational risks within schools
     and to provide practical guidance on how best to manage the risks identified in an
     effective and formal manner.
     However, following the departure of the Lead Officer for this project the proposed
     timescale for delivery has slipped and it is included in the planned programme of
     work 2008/09.
     A copy of the risk register template and expressions of interest to attend further
     workshops to be run in 2008/09 was extended to all Primary Schools and was
     included in a Newsletter to all schools in June 2008.
     To date, a limited number of Schools have demonstrated that they have complied
     and produced a risk register to a satisfactory standard. However, it is envisaged that
     the level of detail, quality and robustness of these risk registers will evolve and
     improve over time.
     The majority of Schools have indicated that they fully intend to produce a risk
     register this academic year and are keeping the Internal Audit and Risk Management
     Service up to date with progress.

8.   Internal Audit and Risk Management Service planned approach for 2009-10
     The School Audit Programme has recently been revised to ensure ongoing
     assurance to the Council’s Section 151 Officer that procedures in Schools are
     operated to a satisfactory standard and reflect best practice



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 Internal Audit and Risk Management Service
 Annual Report on Schools 2008/09




      During the financial year 2008/09, the Internal Audit and Risk Management Service
      separated the Internal Audit assurance work from the FMSiS external assessment,
      and whilst there was success with this approach by the auditors, it is considered that
      further improvements can be made.
      The audit covered approximately 30% of the FMSiS assessment and the key
      assurance areas for the s151 Officer, such as Governance, Budgetary Control and
      Financial Reporting are included in the FMSiS and therefore provide adequate
      assurance.
      A revised approach is proposed in 2009-10 whereby it is envisaged that, wherever
      possible, an informal day will be arranged at each School in advance of their FMSiS
      assessment in order to ensure that the School has completed the key items required
      to achieve the FMSiS.
      It is hoped that this process will allow Schools the opportunity to address any areas
      that have not been satisfactorily evidenced, before they formally submit their pack for
      assessment against the FMSiS Standard.

8.1   FMSiS External Assessments
      Schools which are not subject to a separate internal audit review in 2009/10 will be
      requested to provide the Internal Audit and Risk Management Service with their
      completed FMSiS evidence pack at an informal pre-assessment day, which will be
      held in advance of their FMSiS external assessment.
      The purpose of the pre-assessment day is so that the Auditor can perform a light
      review of the school’s completed FMSiS evidence pack and identify any areas that
      do not sufficiently meet the DCSF’s requirements at that time. The school will then
      be given time to address these areas before they are required to submit their final
      evidence pack to the Internal Audit and Risk Management Service.
      It is hoped that this approach will offer the best possible service to Schools and
      reduce the likelihood of failure.
      The pre-assessment day will take place at the school, the date of which will be
      confirmed well in advance of the visit. It is anticipated that these pre-assessment
      days will be held over the period of 8th September to 8th October 2009. Schools must
      therefore ensure that they have completed their FMSiS evidence pack’s ready for
      these dates.
      At a later date, once the pre-assessment has taken place and further evidence has
      been compiled (if required), the final assessment pack should be submitted to the
      Auditor so that the External assessment can be completed at the Town Hall.
      This ‘desktop’ exercise will be followed by the issue of a draft report and meeting
      with the held to notify them of the Assessment outcome.
      For schools which are due to receive a separate internal audit in 2009-10, their pre-
      assessment will be completed during the internal audit review.


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 Internal Audit and Risk Management Service
 Annual Report on Schools 2008/09




8.2   School selection criteria for School visits
      All North Somerset Schools are subject to an Internal Audit assurance review.
      The phasing in of FMSiS to all Primary and Special Schools by the end of March
      2010 has increased coverage in this area.
      The selection criteria used has been based on a risk assessment methodology
      whereby each individual school is scored against pre-determined criteria to establish
      the frequency of visit.
      The selection of Schools in any particular year is through a risk matrix which takes
      into consideration factors such as budget, any significant changes and date and
      findings of their last audit.
      Schools to be audited and externally assessed against the FMSiS during 2009/10
      are scheduled in Appendix 1.
      This includes school’s that were not audited as originally planned in 2008/09 and
      also school’s where an existing agreement to undertake a review in 2009/10 had
      already been promised.

9.    School Newsletter
      A Newsletter will be issued to all Schools to provide an update of common findings
      against the FMSiS standard based on the information contained in this report and to
      also provide advice on current topical issues.

      The Newsletter will be issued by the end of May.




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 Internal Audit and Risk Management Service
 Annual Report on Schools 2008/09




Appendix 1 - Schedule of Schools due to be audited and assessed against the FMSiS


Secondary School Reviews 2009-10
Planned                                       Planned

Assurance Audits                              FMSiS
Gordano                                       FMSiS Gordano
Nailsea                                       FMSiS Nailsea
Wyvern                                        FMSiS St Katherines
                                              FMSiS Churchill
                                              FMSiS Clevedon


Primary School Reviews 2009-10
Planned                                       Planned

FMSiS                                         FMSiS
FMSiS Ashcombe                                FMSiS Herons' Moor P
FMSiS Banwell Co P                            FMSiS Northleaze CE VC P
FMSiS Birdwell Co P                           FMSiS St.Barnabas - closing
FMSiS Bournville Primary School               FMSiS St Georges - Locking
FMSiS Churchill CE VC P                       FMSiS St.Joseph's RC Portishead
FMSiS Corpus Christi RC VA P                  FMSiS St Marys CE VA P
FMSiS Crockerne Pill CE VC I                  FMSiS St Nicholas Chantry Co P
FMSiS Dundry CE VC P                          FMSiS Sandford Co P
FMSiS All Saints East Clevedon CE VC P        FMSiS Tickenham CE VA P
FMSiS St Katharines ( Felton CE VC P )        FMSiS Trinity - Portishead
FMSiS Flax Bourton CE VC P                    FMSiS Uphill Co P
FMSiS Grove Co J                              FMSiS Walliscote Co P
FMSiS Highdown Co J                           FMSiS Windwhistle Co P
FMSiS Hillside Co I                           FMSiS Winford CE VC P
FMSiS Hutton CE VC P                          FMSiS Worlebury CE VA I
FMSiS Kewstoke Co P                           FMSiS Wraxall CE VA P
FMSiS Kingshill Co P                          FMSiS Wrington CE VC P
FMSiS Mary Elton P                            FMSiS Yatton CE VC Infants
FMSiS Mendip Green                            FMSiS Yatton CE VC Junior
FMSiS Mead Vale Co P                          Glebe School Closure
FMSiS Milton Park Primary                     St Andrews Cof E Jun (incorporate Glebe)

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Internal Audit and Risk Management Service
Annual Report on Schools 2008/09




Primary School Reviews 2009-10 contd.
Assurance Audits                         Assurance Audits
Banwell Primary School                   Trinity - Portishead
KingsHill Co P                           St Nicholas Chantry Co P
Bournville Primary School                Grove Junior School
Mead Vale Co P                           Wraxall Primary CE VA P
Sandford Co P



Special School Reviews 2009-10
Planned                                  Planned

Financial Management Standards in        Financial Management Standards in
Schools                                  Schools
FMSiS Baytree (Campus)                   FMSiS Westhaven

Assurance Audits                         Assurance Audits
Baytree (Campus)                         Westhaven




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