20 May 2019
Newly converting academy schools face a barrage of rules and regulations and this can be a daunting time for the finance teams.
The status as an academy school means visits by auditors and it is hard for the finance teams to know what to expect under the new regime. However, it is important to view the internal audit as a process which can support those teams and add value to the trust. To be successful, internal audit should be a true collaboration between the trust and the auditor, resulting in an open and transparent process.
A robust control framework is a requirement of the Academies Financial Handbook (AFH) and crucially that framework must include the independent checking of financial controls, systems, transactions and risks. The oversight of this process lies with a committee appointed by the board of trustees (either a separate audit committee or a committee with responsibility in this area), and the purpose of the committee is to ensure that risks are managed and that the financial systems and controls are appropriate and rigorously enforced.
Independent checks can be achieved in a number of ways, depending on the trust’s circumstances and available resources. One way is to appoint an internal audit service which carries out a programme of work.
The first step is for the internal auditor to conduct a comprehensive needs assessment in order to identify areas of focus for their work. The outcome of the assessment is a proposed bank of tests covering key controls which are then discussed and agreed with the audit committee. It is crucial that the audit committee plays a full role in identifying risk areas and deciding upon the areas of focus for the internal auditor, for example, there may be specific areas where the committee would like assurance, such as the authorising of expense claims or the process to identify related parties.
Internal audit checks may highlight new areas for review during future visits and it is usual for programmes to develop over time, with some areas being checked on a rotating basis. The key point is that the internal audit should provide added-value to the trust in the emergence of positive recommendations and, possibly, an early warning system where controls are weak or absent.
The internal auditor will formally report to the audit committee, which should then ensure that the recommendations are acted upon. These internal audit reports are made available each year to the external auditors who assess the process and the conclusions as part of the statutory audit.
In the 2018 AFH Lord Agnew writes that “making every pound count can maximise outcomes for our young people. Everyone involved has a role to play…in achieving the highest standards of financial management and governance.” The role of internal audit is a crucial one in helping to ensure that those highest standards are achieved.