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Paper C Committee SCHOOLS FORUM Date 19 MARCH 2020 Title INTERNAL AUDIT APPROACH FOR L.A. SCHOOLS Report of CHIEF INTERNAL AUDITOR EXECUTIVE SUMMARY 1. The purpose of this report is to clarify the new Internal Audit approach for the Isle of Wight Local Authority Maintained Schools and to outline; • The Financial framework and rules that inform the Internal Audit Programme • The Internal Audit process • The Internal Audit Plan moving forward BACKGROUND 2. THE FINANCIAL FRAMEWORK AND RULES THAT INFORM THE INTERNAL AUDIT PROGRAMME Local Authority Schools are funded via the Dedicated School Grant (DSG) which is a ring-fenced specific grant and must be used in support of the schools budget as defined in the School and Early Years Finance (England) Regulations 2017. The Local Authority is the Accountable Body for Local Authority Maintained Schools and is responsible for setting the local framework for their schools. They are required to maintain a Scheme for Financing Schools (School Standards and Framework Act 1998). The Governing Body is responsible for overseeing the financial performance of the school and making sure its money is well spent. Each maintained school has autonomy over the use of their budgets but must work within the locally agreed 'Scheme for Financing Schools' framework. The Governing Body is responsible and accountable in law and in practice for all of the school’s major financial decisions and must submit an annual Schools Financial Value Standards (SFVS) statement to the Local Authority, confirming there are effective financial management standards at the school. Local Authorities are required to complete annual assurance returns which include - the Schools Financial Value Standards (SFVS) / the Dedicated Schools Grant CFO Assurance Statement (DSG) / the Consistent Financial Reporting return (CFR) detailing Schools income, expenditure and balances. The purpose of an Internal Audit is to give the School Governing Body and Chief Finance Officer independent assurance that there are effective Financial Management Standards in place and operating at the school. The internal audit function at the Isle of Wight was previously provided by Price Waterhouse Cooper under a co-sourced arrangement, with the Council retaining the Chief Internal Auditor role. However, with effect from April 2019 the Authority have an in- house audit team supported by Portsmouth City Council. 3. THE INTERNAL AUDIT PROCESS Planning begins in March 2020 for the assessment of schools to be audited in the coming financial year. The internal audit team are responsible for three unitary authorities and the approach will be determined as follows; Portsmouth City Council - School audits have been undertaken on a three-year cycle for the last 20 years. This cycle will continue. Southampton City Council / Isle of Wight - Historically the internal audit teams for these authorities have conducted 'themed' audits. Therefore a risk assessment will be carried out based on budget position / most recent Ofsted results / school website / SFVS return and any internal intelligence from the Education Finance teams. Following the risk assessment, initial contact will be made by telephone with the Finance Managers of the schools which have been scheduled for an audit to discuss the audit process and arrange a mutually convenient date for the audit to take place. The telephone call will be followed up promptly via email to reinforce the discussion and to provide the recipient an email contact for any queries or questions. A standard Audit Planning Memorandum will be issued six weeks before the on-site visit to give the recipient the opportunity to prepare the relevant paperwork for audit. (An example of an Audit Planning Memorandum can be found under Appendix A). The on-site visit will take between one and two days. This will vary between the different types of school and how many test areas there are. The tests are summarised under the following headings; • Organisation of Responsibility and Accountability • Budget • Income • Petty Cash Account • Ordering, receipt of goods and payments (including purchase cards) • Business Continuity / Resilience Plan • Inventory • Computer Security • Unofficial Fund • Minibus The latest SFVS submission will also be reviewed as part of testing and to ensure there is clear evidence that the Governing Body have formally discussed each question in the statement to assure themselves that appropriate financial controls are in place. (An example of a suggested Governors meeting planner can be found under Appendix B). An Exit meeting will take place with the Head teacher / Finance Manager / Chair of Governors at the conclusion of testing and an audit assurance opinion will be given as to the effectiveness and accountability of financial management controls at the School. An Audit Report will be issued within 15 working days of the exit meeting to the Head teacher / Finance Manager / Chair of Governors and all other L.A. stakeholders. 4. THE INTERNAL AUDIT PLAN MOVING FORWARD The plan for the next three years is to bring the Isle of Wight and Southampton City Council in line with Portsmouth City Council and undertake School audits on a 3-year cycle. This strategy is in line with the GOVERNMENT CONSULTATION PAPER - Financial transparency of Local Authority Maintained Schools and Academy Trusts - July 2019 Proposal 5 which proposes a directed revision to the Scheme for Financing School Guidance to require that every maintained school is subject to an internal audit at least every 3 years. (Feedback is currently being analysed - but likely to be implemented with effect from 2021/2022) RECOMMENDATIONS 5. This paper is for information and noting. APPENDICES ATTACHED 6. Appendix A - Audit Planning Memorandum 7. Appendix B - Governors' meeting planner BACKGROUND PAPERS 8. https://www.gov.uk/government/publications/schools-financial-value-standard-sfvs Contact Point: Karen Gibbs Audit Manager Portsmouth City Council Civic Offices Guildhall Square Portsmouth PO1 2AR Tel: 023 9284 1266 email: [email protected] www.portsmouth.gov.uk .

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