Allotts Business Services Limited. Management Report to Sir Thomas Wharton Community College Co-Operative Academy Trust

Transcription

1 Allotts Business Services Limited Management Report to Sir Thomas Wharton Community College Co-Operative Academy Trust Period ended 31 August 2013

2 Introduction The purpose of this report is to set out certain matters which came to our attention during the course of our audit of the financial statements for the period ended 31 August Our audit work is designed to consider whether: The financial statements of the academy give a true and fair view of the state of the academy s affairs at 31 August 2013 and of its incoming resources and application of resources, including its income and expenditure for the period then ended; The financial statements have been properly prepared in accordance with the Annual Accounts Direction 2013 issued by the Education Funding Agency, the Companies Act 2006 and UK Generally Accepted Accounting Practice; The information given in the Trustees Report is consistent with the financial statements; and Grants made by the Education Funding Agency have been applied for the purposes intended. A further supplemental objective is to use our knowledge of the academy gained during our routine audit work to make useful suggestions concerning your financial systems for you to consider when looking at potential improvements in this area. However, our audit work in relation to the annual accounts is principally designed to enable us to form the above audit opinions and should not be relied upon to disclose all errors or irregularities. We would be grateful if you could enter the academy s comments against each point under the section and return it to us in due course. Acknowledgements We would like to take this opportunity to thank all staff we met during our audit for their co-operation and assistance. 1

3 1 Fixed Asset Register s i) It was observed that a formal fixed asset register had not been maintained by the academy. In order to value the fixed assets for year-end accounts purposes, it was necessary to obtain lists of non-pfi computers and other assets from academy staff, together with details of purchase values and dates, and then use these details to value the assets at the date of conversion. ii) The academy currently has no formal capitalisation or depreciation policy. i) Preparing the asset register based on staff knowledge rather than detailed contemporaneous lists of asset purchases increases the risk of items being missed from the asset register. ii) The lack of a formal asset register increases the likelihood of asset theft going undetected. iii) Without a formal capitalisation policy, minor asset purchases may be capitalised, resulting in the fixed asset register becoming large and unmanageable quickly, or large asset purchases may not be capitalised, resulting in adjustments at the year-end which could significantly change the previously reported surplus figure. i) A formal fixed asset register should be maintained. ii) A minimum capitalisation policy, of say 1,000, should be agreed and implemented. This would ensure that a manageable fixed asset register can be maintained. iii) Depreciation policies should be agreed and reflected in the depreciation charges on the fixed asset register. The depreciation rates included in the draft accounts figures are: Buildings 50 years Fixtures, fittings and equipment 4 years Computer equipment 3 years i) A formal fixed asset register will be established prior to 31 March ii) A minimum capitalisation policy of 1000 has been agreed with the Chair of Governors and will be set out in a policy document presented to the Governors Business & Finance Committee meeting in January iii) The capitalisation policy will include depreciation rates as above. 2

4 2 Fund Accounting It was observed that although income from different sources was easily identifiable from the nominal ledger, little consideration had been given to matching expenditure against the relevant income sources. i) As part of the year-end work it was necessary to consider each source of income and identify relevant expenditure to be matched against it. ii) It is important that the academy properly accounts for funds so that income and expenditure is accurately matched, the balance of unspent income from each source can be identified, funds are not spent on ineligible activities and GAG or other restricted funding is not used to support unrestricted activities. Records of income and expenditure should be maintained for each source and type of funding. As there are relatively few sources of non-gag funding, this could be done on a simple spreadsheet, or alternatively, cost centres could be set up for each fund on the FMS accounting system. i) Non-GAG funding and expenditure will be maintained by setting up separate fund types in the FMS accounting system. With immediate effect. 3

5 3 Trustee s interests s It was noted that trustees are asked to complete and sign a business interests form at the first meeting of the academic year and are then asked to declare any new interests and any possible transactions or conflicts of interest regarding business being discussed at each subsequent meeting. i) Although the forms ask for business interests they do not make it clear that details of employments should also be included or that the same information should also be provided for connected persons including spouses and other direct relatives. ii) The majority of trustees had completed a nil return. This may be a consequence of the format of the form as noted in i) above. iii) During the audit it became apparent that trustees of the academy who had declared no other business interests, were also trustees of a local charity with whom the academy had had dealings. They had not always declared an interest at the meetings at which such dealings were discussed. i) The business interest forms require details of employments and the business interests of connected persons. There is a risk that the academy may unknowingly enter into transactions of which a trustee has an interest. ii) If trustees do not declare interests and withdraw from discussions and decisions on matters in which they are interested then it may be interpreted that they are not acting in the best interests of the academy. i) It is recommended that the business interests form is updated to include the employment details of trustees and the employment details and business interests of connected persons. ii) It is recommended that trustees are reminded that all business interests should be declared on the form and that they should remove themselves from any discussions or decisions regarding any matter on which they have an interest. i) A trustees declaration of business interests form will be completed by all trustees following the AGM on 2 nd December ii) Trustees will be reminded of their obligations to declare interests and remove themselves from any discussions or decisions regarding any matter on which they have an interest, with immediate effect. 4

6 4 Supplier Statements It was noted that supplier statements are not retained after they have been checked and agreed to outstanding invoices. As the year-end supplier statements had not been retained it was not possible to agree creditor balances to third party statements as part of the audit work. Additional audit work was required to confirm the completeness of creditors. Recommendation Supplier statements for July and August should be retained as they provide valuable audit evidence in support of year-end creditor balances. i) Supplier statements will now be retained for a 3 month period, with immediate effect. 5

7 5 Purchase Order Referencing Whilst agreeing a sample of items from the nominal ledger to invoices and purchase orders, it was noted that the purchase order reference was not always noted on the purchase invoice (8 invoices out of our sample of 12 invoices did not have a purchase order reference). This meant we were unable to trace the purchase order and confirm that it had been authorised, as in these instances a purchase order had not been raised. The control requiring expenditure to be authorised prior to an order being placed is not always followed. It is more difficult to monitor departmental spending, ensure departmental budgets are being adhered to and ensure accounts information in relation to purchase commitments is up to date without authorised purchase orders. Purchase orders should be completed and authorised by the relevant budget holder prior to an order being placed. When purchase invoices are checked and matched to purchase orders, the purchase order reference should be clearly marked on the invoice so that it can easily be accessed in the future in case of a query. i) Procedures will be put in place to ensure all staff understand the requirement to raise a completed and authorised internal purchase order prior to committing the school to any type of expenditure. To be actioned by 31 December

8 6 Personnel Files s i) It was noted that although the academy holds personnel files containing duplicate copies of original documents such as CRB checks, identification documents etc held by Doncaster MBC, many of the files do not contain copies of signed contracts. Without confirmation that the academy or Doncaster MBC holds a signed contract for each employee, it is difficult to confirm that the information held meets legal requirements. Whilst it is acceptable for Doncaster MBC, as payroll and HR services provider to the academy, to hold staff personnel records, it is important that the academy is aware of the information held on file for each employee. It is recommended that the academy undertakes a review of the information held on its own personnel files, identifies any areas where the information held is insufficient and ensures that this is held by Doncaster MBC. A note to this effect should be made on the personnel file so that the academy is not entirely reliant on a third party to meet its regulatory duties. i) Arrangements will be made to ensure that contracts for all employees are held in school. All historic employee contracts held by DMBC will be requested and retained within the school s employee files. By 31 March

9 7 Postings to the FMS Accounts System It was noted that postings are only made to the FMS accounting system on a cash basis i.e. when payments are due to be made or when income is received. i) The accounting system includes only cash transactions and not debtor or creditor balances and so the accounting records do not reflect the true financial position of the academy at a point in time, but merely show income received and expenditure paid. ii) Although the academy has a system for monitoring unpaid lettings invoices via a rent book, and unpaid purchase invoices via an unpaid invoices folder, if sales and purchase invoices are not posted to the accounting system on a timely basis there is an increased risk of invoices being mislaid and important payments not being made on time, or unpaid sales invoices not being chased for payment. iii) Although at the year-end debtors and creditors could be determined from the rent book and a review of unpaid invoices and post year-end payments, this resulted in additional audit work. i) As the FMS system allows purchase invoices to be posted as unauthorised items and then be authorised and paid at a later date, purchase invoices should be entered onto the FMS accounting system as soon as an invoice is received. The FMS creditor reports can then be used to monitor unauthorised invoices, outstanding creditor balances and payments due. ii) Sales invoices should be posted to the FMS accounting system as soon as an invoice is raised. The FMS debtor reports could then be used for easier monitoring of outstanding balances. i) Purchase invoices are now posted as unauthorised items immediately on receipt until authorised by the appropriate budget holder, with immediate effect. ii) Sales invoices are now raised on FMS in the Accounts Receivable module, with immediate effect. 8

10 8 Responsible Officer Visits It was observed that although a Responsible Officer (RO) had originally been appointed, no reviews had been undertaken and the RO has now resigned. Whilst there is no longer a requirement to appoint a Responsible Officer, every academy trust must have in place a process for the independent checking of financial controls, systems, transactions and risks. Where the trustees are relying upon the work of the Responsible Officer for this role, it is up to them to consider whether the frequency of the RO reviews and the areas tested by the RO allow sufficient assurance for the Accounting Officer to be able to sign the Governance Statement in the annual accounts. Although the Governance Statement should be tailored for each academy, the example statement issued by the EFA refers to RO work being carried out on a quarterly basis. The trustees should consider how they are to meet their duties to have in place a process for the independent checking of financial controls, systems, transactions and risks. If the trustees are to rely on the work of a Responsible Officer, then an RO should be appointed as soon as possible, and the frequency of the Responsible Officer visits and work to be carried out agreed. If the trustees are to meet their duties by others means (i.e. internal audit service, additional checks carried out by the external auditors or peer review), then these procedures should be put in place as soon as possible. i) In line with section 3.5 of the Academy Financial Handbook, the audit function of the trustees will be incorporated within the terms of reference of the Business & Finance Committee. By 31 January ii) A Responsible Officer will be appointed from the Board of Trustees by 31 January

11 9 Finance Handbook It was observed that an academy finance handbook of systems and procedures has not yet been produced. Instead, a combination of the Accounts Direction and an old version of the school finance handbook are being used. i) The school finance handbook does not fully reflect the changes in procedures following conversion to an academy and does not include policies on some areas (e.g. depreciation, capitalisation etc). ii) Without written policies and procedures it is difficult to demonstrate that the academy s systems and controls are adhered to. A finance handbook should be produced reflecting the academy s financial policies and the updated system of procedures and controls. i) A finance handbook will be produced to reflect the Academy s financial policies and updated system of procedures and controls prior to 31 March