Financial Management Standard in Schools (FMSiS) and Internal Audit

Introduction

This document sets out the background to the FMSiS standards and internal audit arrangements for Norfolk schools. It provides a protocol for the treatment of schools having met the FMSiS standard that are later assessed as having 'Key issues that need to be addressed' by the internal auditors. It also gives a brief explanation of the links between the FMSiS Assessment and the Audit Commission 'Keeping Your Balance' questionnaire.


Background

The Department for Children, Schools and Families ( DCSF) has set up the FMSiS as a clear and consistent standard for financial management that schools can aim to achieve nationally.

In January 2007, achievement of the FMSiS became a statutory requirement and was added to Norfolk's Scheme for Financing Schools. The Standard is being phased in over 3 years with all schools expected to have achieved it by March 2010.

Schools are asked to submit a portfolio of evidence for assessment against the Standard and Children's Services' finance staff have received DCSF training as assessors. The external assessment process is a core function, providing consistent, fair and objective decisions.

All Chief Finance Officers (CFOs) are required to fill out and sign a FMSiS assurance statement showing how many schools have met the standard.

The link with the internal audit process is highlighted in several sections of the Standard emphasising the importance of addressing recommendations from any audit report and in the absence of a recent inspection, the school's own self-evaluation, such as the Keeping Your Balance questionnaire.

As part of the FMSiS, schools are asked to prepare a Statement of Internal Control (SIC), which is signed by the headteacher, chair of governors and chair of finance, to the effect that financial control systems at the school are robust. The SIC also advises of the need to inform the LA's S151 officer where significant issues are identified.


Maintenance of Accreditation

The two systems, FMSiS assessment and internal audit, are very different in content and method, but they complement each other and have common goals. Sharing good working practices would assist in preserving the integrity of both.

Internal Audit have recently undertaken to audit all Norfolk schools within a four year period. This has followed a period when only higher risk schools received an audit visit and as a result some schools have had no audit for several years. Once the initial four-year period is complete and a level of assurance for all schools is achieved it is proposed to move to a three-year cycle of schools audits in line with FMSiS.

Internal Audit is informed when schools have met the FMSiS standard and from 2008-9 they will receive details of any recommendations made as part of the assessment process. This information is used in the audit planning process. Where a school has met the standard the audit programme of work is reduced for those areas already covered by the FMSiS assessment to avoid duplication.

There are situations where a school will meet the FMSiS standard but will be subsequently assessed by Internal Audit as having 'Key issues that need to be addressed'. This is due in part to the differing nature of the FMSiS assessment and the internal audit work. The FMSiS process focuses on financial management while Internal Audit work covers all internal controls and includes testing that the policies and procedures are being followed and are working effectively. They also assess compliance with financial instructions, regulations and legislation.


Agreed Protocol

Where a school that has been assessed as meeting the FMSiS standard is subsequently considered to have 'Key Issues that need to be addressed' by Internal Audit:

	An action plan, with proposed actions, by whom and when, will be agreed and reported in the usual way.
	The Governors and Headteacher will be advised in a letter from the auditors to reconsider the validity of the Statement of Internal Control (SIC) in light of the audit findings and action plan. When they are confident that the action plan has been completed and on a risk assessed basis that adequate and effective internal controls are in place and working, a new SIC should be produced and signed by the Governors. An example of the letter Governors will receive is included at page 4 of this document.
	Children's Services finance staff will follow-up the actions taken and give an opinion on their adequacy. They will also check that the new SIC has been considered and signed.
	A synopsis is reported to Chief Officers Group after the follow up visit. If all actions are complete or have satisfactory plans no further follow up visits will be required.
	Only in extreme circumstances, eg where delegation is removed or there are serious ongoing control issues, may accreditation be removed with the agreement of the Director/Deputy Director of Children's Services.

'Keeping your Balance' and FMSiS

'Keeping Your Balance' is an in-depth self-assessment questionnaire produced by the Audit Commission that schools (governors, leadership and finance staff) should complete every two years. It helps ensure that schools are following best practise and understand their individual roles and responsibilities with regard to finances in the school. It is not externally assessed, but is checked as to its' completion when a school has an internal audit.

The FMSiS standard is a benchmark that ensures schools reach a minimum standard in financial management. It gathers a series of data including governors minutes, budget plans, induction packs and the 'Keeping Your Balance' questionnaire into a portfolio that shows the competence levels of governors, leadership and finance staff. This portfolio is externally assessed every three years for the school to be FMSIS accredited, and thereby allowed to show the FMSiS logo on the school letterhead.

Please click here to see example letter