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Audit Committees & Internal Audit

Every academy must have in place a process for independent checking of financial controls, systems, transactions and risks

The new Academies Financial Handbook is effective from 1 September 2016

Every academy must have in place a process for independent checking of financial controls, systems, transactions and risks. The hand book states this should be driven by an audit committee, but The Education Funding Agency (EFA) recognise in this new handbook that this may not be a practical proposition for every academy, especially for those that are smaller or where there is a limited pool of potential trustees to provide the necessary direction.

The EFA has, therefore, introduced a system which allows some flexibility as to how trusts discharge these requirements. This means that all academies must establish either:

  • A dedicated audit committee; or
  • A committee whose remit includes the functions of an audit committee. This could be an addition to the terms of reference to an existing committee, such as a finance committee, and have an overlapping or fully integrated membership.
  • Multi academy trusts with an income of over £10 million or capitalised asset value of over £30 million must have an audit committee (previously, it was a requirement that all single academies over these limits also had to have a dedicated audit committee).

For all other academies under these limits:

  • Multi-academy trusts should consider having a dedicated audit committee; and
  • All other academy trusts may have a dedicated audit committee.
  • The relevant committee must review the risks to internal financial control at the academy and must agree a programme of work that will address these risks, to inform the governance statement that accompanies the trust’s annual accounts and, so far as is possible, provide assurance to the external auditors.

It is important that the academy considers the role of the accounting officer when setting their programme of work. This will assist the accounting officer when gathering evidence to enable them to sign their annual statement on regularity, propriety and compliance.

At Bishop Fleming we have extensive experience of advising our academy clients on all aspects relating to an audit committee, including advising on the terms of reference, how to run an effective function and advising on best practice.

Responsible Officer

Academy trusts may manage their programme of risk review and checking of financial controls in the way that they deem most appropriate to their circumstances. Options include:

  • The work of an internal audit service (either in-house, bought-in or provided by a sponsor);
  • The performance of a supplementary programme of work by the trust’s external auditor;
  • The work of a ‘responsible officer’ who will be a non-employed trustee with an appropriate level of qualifications and/or experience, and who neither charges nor is paid by the trust for their work. The appointment of a responsible officer is not mandatory but is one of the options that trusts can use to conduct their internal checks;
  • Completing the work by peer review (i.e. the work being performed by the PFO, or a suitably qualified or experienced member of the finance team, from another academy trust, as an independent reviewer).

The audit committee or responsible officer will be responsible for reviewing the risks to internal financial control and must agree a programme of work to address these risks. This may be addressed using the Responsible Officer role, internal audit, external audit or by peer review. We can assist by establishing an appropriate programme of checks and we can perform the work on your behalf if required.

As an additional service to help Governors meet their responsibility to “ensure that the academy’s internal systems and controls are operating effectively” (as stated in the Academies Financial Handbook), Bishop Fleming can work with Governors to design a tailored annual program of testing to help address this responsibility.

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