Lord Agnew spoke at the recent ASCL conference for school business leaders and used his speech to promote the importance of rigourous internal assurance in Academy Trusts in fostering good governance and financial management.
But what is internal assurance? Why do we need it? How can it add value? And how does it relate to the ISBL professional standards?
What is internal assurance?
The ACCA (Association of Chartered Certified Accountants) define internal audit / assurance as a challenging and important role that helps organisations to succeed. Broadly speaking, internal assurance is an independent review of risks and the controls that have been put in place to mitigate against them. Some examples might include:
Strategic risk – identify and address key issues
Governance risk – effectiveness and accountability
Reputational risk – impact of adverse publicity
Financial - risk of loss through fraud, theft, lack of judgement
IT – threat of cyber-attack / data integrity
Change – readiness for and reaction to significant change
Maintained schools must self-assess annually against the Schools Financial Value Standard (SFVS) and may also be visited by the local authority internal audit service. Academies have a range of options:
internal audit service
supplementary programme of work by the external auditor;
non-employed trustee with an appropriate level of qualifications and/or experience to check the trust’s internal controls, who neither charges nor is paid by the trust for their work;
a peer review, with the work being performed by the chief financial officer, or a suitably qualified or experienced member of the finance team, from another academy trust.
Trustees may mix and match these approaches as appropriate.
Irrespective of the approach taken, it’s worth considering:
Independence – Can the reviewer cut through organisational politics and report their findings to those who need to know?
Authority – does the reviewer have the right skills and experience to bring insight and share best practice?
Knowledge – does the reviewer have the sector knowledge and organisational understanding to make useful and practical recommendations?
Why do we need internal assurance?
All Academy Trusts must have a system of internal scrutiny in place (AFH 2018 p20) which checks financial systems, controls, transactions and risks. Maintained schools must self-assess annually under the Schools Financial Value Standard (SFVS).
I would argue that internal assurance is a requirement in any school that seeks to assess, reflect upon and improve its performance.
How can internal assurance add value?
In these days of constricted budgets, internal assurance can be perceived as simply another drain on dwindling resources. So, make it work for you. Best practice is to take a risk based approach. Fewer schools these days focus on checking that basic controls are in place – that’s easily analysed internally and has less impact. Look at what really drives your school’s performance and efficiency. Think wide – what are the key risks to your school and how do you mitigate these?
The risk register is a great place to start.
Some interesting reviews that I have seen undertaken lately include:
Review of budget processes – how effective is the budget setting and budget monitoring cycle?
Review of governance – how effective are the committees at holding the SLT to account? Are their terms of reference appropriate and are they referred to? Have the Trustees / Governors completed any kind of skills audit? What key skills will your school need in the future and do you have them on board?
Review of induction processes – for senior staff / Trustees / Governors / any staff exposed to any kind of operational risk: how do the induction processes identify what new joiners need to know and how effective are they at ensuring this knowledge is acquired?
Compliance with the Academies Financial Handbook
Cyber security and IT fraud
Payroll, banking and transactional fraud
How does internal assurance relate to the ISBL professional standards?
Leading Support Services is at the heart of everything we do – internal assurance is your ear to the ground on how to lead more effectively and efficiently.
Values and Ethics – internal assurance provides comfort that everyone in your organisation is up to speed with this and that there are no issues of regularity.
Challenging and change catalyst – internal assurance helps you to challenge the status quo and really get into the heart of how and why we are following certain processes – and then change them for the better.
Want to know more?
Have a look at ISBL’s website for some helpful factsheets here:
By Sarah Chambers - July 2018