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Lessons to learn from latest Financial Notice to Improve

Posted by Ben Thorne on March 27, 2018

Lessons to learn from latest Financial Notice to Improve

The ESFA have issued a Financial Notice to Improve (FNtI) to Bolton University Technical College, dated 23 February 2018. The FNtI was issued due to a number of non-compliance points with the Academies Financial Handbook. The FNtI was issued in follow up to a Financial Management and Governance Review issued in September 2017.

The key themes from the review were:

  • No evidence of performance management of the CEO or a contract confirming the role and responsibilities
  • CEO being approved by the sponsor and a trust member without a competitive recruitment process
  • Staff payments (relocation, redundancy and compensation payments) made without undertaking due process
  • No audit committee or any committee that fulfils the function
  • No formal internal checks undertaken on internal financial controls.
  • Inadequate whistleblowing policy
  • Lack of an appropriate procurement policy, including a number of significant transactions with related/connected party transactions without supporting information surrounding value for money, competitive tendering and a failure to demonstrate compliance with the “at cost” principle.

What lessons can we learn from the latest review?

  • When setting any pay awards the decision process must be documented. This should also include ensuring that there is an up to date contract of employment and that the job description is clear and has a defined job role. This will assist with job evaluation and monitoring and is key for all roles.
  • Any unusual staff payments must be supported by a robust decision making process, including the documentation of this process. Under the scheme of delegation it is likely that these will be discussed at board meetings and the discussion and challenge by the board/committee should be clearly documented. Even if the amounts are below the delegated authorities, it should be clearly documented as to why it achieves value for money and what the business case for such a payment is. The documentation should also evidence consideration of novel, contentious and repercussive transactions.
  • There must be an audit committee. If the function is fulfilled by another committee it should be clearly documented in minutes when the audit committee function is undertaken to ensure that it can clearly be demonstrated that you are compliant.
  • Internal checks must be undertaken and reported to the audit committee. This can be completed by a variety of means, and it depends on size of the trust but options include the appointment of an internal audit service, appointment of a non-employed trustee with appropriate qualifications to undertake checks (must be an unpaid role), a peer review by a CFO or other suitably qualified individual from another trust or an additional programme of work undertaken by the external auditor.
  • On all significant procurement contracts, they should be reviewed for delegated limits and appropriate tenders undertaken. The register of interests must also be maintained and any related or connected party transactions must be identified before contracts are entered into. If contracts are entered into the decisions behind it should be documented and approved at board level, along with considering the “at cost” requirements.

The final piece of advice we would give to all our clients is that all decision making processes are clearly documented and approved to ensure that if there is any challenge you can clearly demonstrate how conclusions were made. Even if the ESFA disagree with your final conclusion, you will at least be able to demonstrate that you have followed due process and a decision making process.

If you have any queries in the meantime please do not hesitate to contact your usual Bishop Fleming representative.