Academy external audit findings – strengths and weaknesses
- 26th January 2022
Another academy (external) audit season feels like a distant memory after the Christmas break!
We thought it may be useful to share some feedback we experienced from the 2021 external audits and have detailed some of the ESFA’s findings from the year ended 31 August 2020 financial statements.
- Clients were very organised and had a lot of information ready for us at the start of the final audit visit or even prior to the visit. This helps to make things run a lot smoother during the audit process and means we don’t have to pester clients as much for information. There is a short deadline for the audit work to be completed and the accounts being prepared. This is due to the accounts needing to be submitted to the ESFA by the 31st December each year, which is only 4 months after the year end.
- Feedback over the years has been taken on by our clients regarding some of the management letter points we have raised. Academy trusts have improved in tightening up their internal controls in some areas such as; purchase orders and invoicing, month end procedures, payroll approval, school websites and Get Information About Schools being up to date with local/Trust Governors details and attendance.
- Trusts seemed to have strong financial oversight including following the various requirements with regards to management accounts as outlined in section 2 of the Academy Trust Handbook 2021, which can be found on the ESFA’s website here.
- Fixed asset registers had been maintained by the Trusts and updated for any capital items during the year, which is also a requirement included in section 2 of the ESFA’s Academy Trust Handbook 2021.
- School’s websites or Get Information About Schools (GIAS) did not always contain the correct/most up to date information about local Governors. We recommend checking your websites and GIAS on a regular basis, say monthly, to make sure the Governors details are up to date.
- Some fixed asset additions had been capitalised even though they were below the capitalisation limit set out in the Trust’s accounting policies. We recommend looking at the accounting policies in your Financial Statements to check what the capitalisation limits are.
- Bank reconciliations and month end checklists are not always being authorised by the appropriate personnel or are not authorised at all.
- Starters and leavers forms are not always being authorised by the Head or other appropriate personnel.
- Employees have on occasion authorised their own charge card or petty cash expenditure. It may sounds obvious but please make sure another appropriate employee is authorising this expenditure to help ensure segregation of duties.
- Purchase orders are sometimes being raised with a date after the date of the purchase invoice. Purchase orders should always be raised before a purchase invoice is received as the purchase order should be the first stage of authorising the expenditure by the appropriate person. This helps to ensure schools are achieving the best value for money and are spending within their budgets.
The ESFA also published their common themes arising from ESFA assurance work, including Academy Trust Financial Statements for the year ended 31 August 2020, which can be found here.
The ESFA’s findings for the year ended 31 August 2020 financial statements include the following;
- The percentage of accounts received by 31 January for the 2019 to 2020 trust financial year was 97%. This shows that academy clients and external auditors worked hard together during the Covid-19 pandemic to ensure accounts were submitted on time.
- Only 0.5% of financial statements were qualified, the main reasons being due to accounting treatment for land and buildings and inadequate accounting records.
- The percentage of modified regularity opinions in the 2019 to 2020 year was 8.5%.
The main reason for the modified regularity opinion was in relation to internal financial reporting including;
- Management accounts (issues include not sharing with the Board, not produced at all and adequacy of the information being presented).
- Financial management (issues include either no or inaccurate bank reconciliations, value for money concerns, lack of payroll authorisation and payments made without appropriate approval).
- Governance (issues include Get Information About Schools (GIAS) not being updated and financial statements not being published on the trusts website).
The second highest reason for the modified regularity opinion was in relation to relation party transactions and the correct procedures not being followed such as;
- prior approval not being sought from the ESFA for transactions over £20,000.
- at cost policy not being followed.
- Conflicts of interest not being identified amongst Trustees and Key Management Personnel.
We hope this has given you some points to think about and if you have any queries on any of the above please do not hesitate to contact us.
Any news or resources within this section should not be relied upon with regards to figures or data referred to as legislative and policy changes may have occurred.