Management Information Sheet

Traded full audits and traded financial health checks

MI Sheet TypeInformation
MI Number:47/19
Publication Date:22/03/2019 12:00:00
LA Contact:Teresa Sharman (01603 222782)
Audience:Headteachers

Traded full audits and traded financial health checks

As some of you may be aware, both Norfolk Audit Services (NAS) and the Educator Solutions Finance and Business Services (FaBS) Team have previously offered LA Maintained Schools a traded financial health check. When Norfolk Audit Services (NAS) last wrote to those schools in September 2018, who had not had either a traded financial heath check or traded full audit in the last eight, nine or ten years, some schools queried the accuracy of NAS's records. They informed NAS that they had had a health check, which NAS discovered had been completed by the Educator Solutions FaBS Team. Questions were also raised concerning whether the traded financial health check, completed by either NAS or the Educator Solutions FaBS Team, was sufficient assurance and negated the need for a traded full audit. Senior Managers for NAS and the Educator Solutions FaBS Team have met to determine a way forward and answer these questions and this MI Sheet informs LA Maintained schools of the agreed way forward.

Health checks

From 1 April 2019, only the Educator Solutions FaBS Team will be offering LA Maintained schools a traded financial health check. NAS will no longer be offering this service.

Traded Full Audits

From 1 April 2019, NAS will only be offering LA Maintained schools a traded full audit.

Does the traded financial health check negate the need for a traded full audit?

The health check DOES NOT negate the need for a periodic traded full audit. The traded financial health check is designed to advise on the adequacy of the system of internal financial controls at LA Maintained schools. Recommendations are made as necessary to improve the system of internal financial controls. The traded financial health check DOES NOT provide assurance on the effectiveness of the system of internal financial controls i.e. whether controls are working in practice. The traded full audit is designed to provide independent assurance on the effectiveness of the system if internal financial controls. Reports issued by the Educator Solutions FaBS Team specifically detail in the objectives and scope section, 'Ensure that where exceptions occur they are identified and reported to assist the school in achieving a satisfactory audit from Norfolk Audit Services but does not replace an internal audit.'

What is the purpose of traded full audits?

Traded full audits are part of our assurance to the Council's Audit Committee and the Council's Executive Director of Finance and Commercial Services (the statutory Section 151 Officer) that maintained schools have an adequate and effective system of internal controls. To provide that assurance to the Audit Committee, we include in our Audit Plan an estimated number of traded full audits that we will complete each year.

How often is it recommended that a School ought to have a traded full audit?

As part of good governance of the School, we rely on each School to recognise that they periodically need independent assurance on their system of internal financial controls. Therefore, we anticipate that schools will voluntarily request our services on a regular basis to obtain up to date independent assurance. A traded audit every five - eight years would seem an appropriate period if no other independent sources of assurance are received by the School on their system of internal financial controls.

What are your responsibilities?

As a Headteacher, your responsibility is to ensure that sound financial systems and internal controls are in place within your School. As School budgets are put under greater pressure and resilience is stretched, we are finding there are more cases where controls are failing, and schools are facing unexpected financial and reputational losses. The Chair of Governors also have a key role in the leadership and management of the School and should be aware that it their responsibility to oversee the financial performance of the School and confirm that sound internal controls are in place.

The purpose of governance is to provide confident, strategic leadership and to create robust systems of accountability, oversight and assurance for educational and financial performance. A sound system of internal financial controls is one way to demonstrates good governance and will help schools ensure that resource allocations and grants are used for the purposes intended and help to safeguard against fraud.

Why do we have to pay for a traded full audit?

There is a misconception that traded audits and health checks are free to schools. This is not the case. Charges were introduced to schools via the School Forum and have been in place since January 2014.

What does a traded audit cost?

The cost of a traded full audit from NAS has been maintained at the 2018/19 price for 2019/20 and is £860. This cost may seem high to schools but when you consider that this cost covers a five to eight-year period, the cost equates to £172 per annum for a five-year period and £107 for an eight-year period.

The cost is also considerably less than an external accountancy practice of auditors would charge to provide independent assurance on the system of internal financial controls. Based on a cost of £860, our daily rate calculates to be £215 for the four days it takes us to complete all the work from start to finish; external contractors would not operate at such a low daily rate.

In 2019/20 we would be happy to consider how the cost could be spread over a number of years for those schools who would like to receive a traded full audit but are worried about meeting the whole cost in one year.

What will happen now?

If you wish to have a traded full audit, please book this in this usual way through your log on to the SLA Online portal or to make an enquiry, please call NAS on 01603 222777.

If you wish to have a traded financial health check, please book this in this usual way through your log on to the SLA Online portal or to make an enquiry, please call the Educator Solutions FaBS Team on 01603 307758.

Reminder letters will also be sent to all LA Maintained schools who have not had a traded full audit since 2009/10 (10 years), 2010/11 (9 years), and 2011/12 (8 years), requesting the School to book a traded full audit in 2019/20.

To ensure good governance, where such schools are not willing to have a traded full audit, this will be reported to the Executive Director of Children's Services, the Executive Director of Finance and Commercial Services (the statutory Section 151 Officer) and the Chairman of the Audit Committee.

The reporting of a lack of independent assurance at a School may then result in either the Chair of Audit Committee or the Executive Director of Finance and Commercial Services requesting NAS to arrange a traded full audit under the Section 151 Officer's responsibilities.