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KEEPING YOUR BALANCE –WITH A LITTLE HELP Hugh Thomas, Audit and Risk Manager 22 nd November 2012 1.

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Presentation on theme: "KEEPING YOUR BALANCE –WITH A LITTLE HELP Hugh Thomas, Audit and Risk Manager 22 nd November 2012 1."— Presentation transcript:

1 KEEPING YOUR BALANCE –WITH A LITTLE HELP Hugh Thomas, Audit and Risk Manager 22 nd November

2 PURPOSE OF THE TALK BACKGROUND ROLES AND RESPONSIBILITIES AN OVERVIEW OF FINANCIAL MANAGEMENT ROLE OF AUDIT A TYPICAL SCHOOL AUDIT WHAT CAN GO WRONG QUESTIONS 2

3 THE MESSAGE GOVERNORS DO NOT NEED TO BE EXPERTS ROLES AND RESPONSIBILITIES – MAY SEEM DAUNTING TERMINOLOGY – NEW VALUES – LARGE EXPERIENCE – MIXED EXPECTATION – HIGH COMMITMENT – UNDENIABLE THE SIMPLEST QUESTIONS ARE OFTEN THE BEST QUESTIONS EVERYBODY BRINGS SOMETHING TO THE TABLE IF YOU DON’T KNOW – ASK HELP IS AVAILABLE FROM VARIOUS SOURCES 3

4 Statistics!! 111 Primary, 14 Secondary and 2 Special schools. The total Fair Funding allocations 2012/13 were:- Primary£54,888,270 Secondary£54,992,608 Special £3,104,895 Total£112,985,773 Staff Costs £93m 1500 Teachers Utilities £3.7m The balances carried over by schools as at 1 st April 2012 were:- Primary£3,752,752 (£3,971,080 surplus, and £218,328 deficit) Secondary£1,944,192 (£2,526,606 surplus, and £582,414 deficit) Special £294,924 (£294,924 surplus) Total£5,991,868 Of the balances shown above, the schools propose to spend the following amounts:- Primary£1,798,458 Secondary£1,232,353 Special £221,905 Total£3,252,716 PRIVATE SCHOOL FUNDS !!! 4

5 A trusted mum stole £6K from Bristol parent-teacher association A TRUSTED mum and treasurer of a Bristol parent-teacher association stole thousands of pounds meant for the school children where her own children were pupils to pay off her own spiralling debts. In just 18 months she helped herself to more than £6,000 from the school's Parents', Teachers' and Friends' Association (PTFA), money which could have been used for playground improvements or library books. She forged her first cheque just two days into her role as the PTFA's treasurer. She told police in interview the temptation had been too much to resist after she racked up debts of £20,000 and her husband walked out, leaving her with three children to support. After school fundraising events, the vice-chairwoman would count the money and give it to the mum to bank. But time and again she failed to deposit the cash. She kept £565 from a school Santa's grotto and £121 from pupils writing letters to Father Christmas last December. In May she pocketed £615 from a school disco, another £513 from a World Cup event in June, and £146 from a school dress-down day, again in June.The court was also told Millard stole about £2,500 between January 2009 and July 2010 by forging signatures on cheques. The PTFA's chairman had become suspicious of Millard in December and January after she failed to go to meetings or produce financial reports. In July he discovered the PTFA bank account only contained £240, much less than the £5,000 he expected, and £1,647 from a summer fete had not been banked. The Chairperson was told that cash not deposited and that other monies had been stolen from her home. When they went to her house she gave them the £1,647 and told them she wanted to give them a cheque for £2,000. 5

6 A trusted mum cont’d The Chairman said “after so much successful fundraising to discover these thefts at the end of the school year was a catastrophe. It took us months to recover. "We always get requests from the school to pay for things that their budget can't quite stretch to, but we had to cancel some projects. "What she did seriously damaged the morale of the PTFA team and our reputation with the parents, but both they and the school have been very supportive of us since then. "The true amount of money will never actually be known.” "She didn't take up the role of treasurer to take the money, but the temptation was too much to resist.“ Her defence said: "She intended to repay the amount as and when she could, but her situation didn't improve. She has now sold her house in order to pay the debts, and the offence she committed made life so unbearable that she has moved to make a new start. "This was an unsophisticated offence of which she is thoroughly ashamed, and it was inevitable that she would be found out." Chairman added the PTFA was also making a claim against HSBC, its bank, for allowing her to withdraw such large amounts of cash using the signature of only one signatory. 6

7 WHAT CAN WE DO ?? BE RISK AWARE – WHAT IF??? ACTIONS HAVE CONSEQUENCES INACTION HAS CONSEQUENCES COMPLY WITH RULES TIMELINESS IF IT DOESN’T LOOK RIGHT IT PROBABLY ISN’T ASK 7

8 FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES GOVERNORING BODY HEADTEACHER OTHER SCHOOL STAFF THE AUTHORITY ESTYN 8

9 FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES THE GOVERNING BODY Responsibilities detailed in the School Standards Framework Act. The Governing Body Is Accountable to the LEA. Strategic Role - Setting Aims and Objectives, Setting Policies and Targets, School Development Plan, Reviewing progress, Appointing Staff, Providing Information for Parents. Act as a Critical Friend for the Headteacher providing advice and support. Challenging and Questioning Approves the School Budget 9

10 FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES THE GOVERNING BODY’S ROLE IN FINANCE MATTERS IS TO: Decide how to spend its delegated budget subject to any conditions in the LEA scheme Make sure accurate accounts are kept The full governing body need not take every decision They may delegate some of their functions and powers to the Headteacher, to an individual governor or to committees that the governing body set up But the responsibility remains with the full Governing Body 10

11 GOVERNING BODY DECISION PLANNER KEY Level 1 = decisions made by GB Level 2 = decisions made by GB with advice from head Level 3 = decisions delegated to head Level 4 = decisions made by head Column blocked off: Function cannot legally be carried out at this level Tick: Recommended level (s) or where law assigns specific responsibility Blank: Action could be carried out at this level if governing body so decide, but is not generally recommended * Functions which the whole governing body must consider ** All schools must ensure that their financial arrangements comply with the current financial regulations, standing orders and schemes of delegation issued by their local authority *** GB may, if they wish, be involved in the selection pane. Action SheetDecision Level Key Function NoTasksLevel 1Level 2Level 3Level 4 School1To approve the first formal budget plan each financial year  Budgets **2To monitor monthly expenditure 3Miscellaneous financial decisions (e.g. write-offs) 4To investigate financial irregularities (head suspected)  5To investigate irregularities (other suspected) GOVERNING BODY DECISION PLANNER KEY Level 1 = decisions made by GB Level 2 = decisions made by GB with advice from head Level 3 = decisions delegated to head Level 4 = decisions made by head Column blocked off: Function cannot legally be carried out at this level Tick: Recommended level (s) or where law assigns specific responsibility Blank: Action could be carried out at this level if governing body so decide, but is not generally recommended * Functions which the whole governing body must consider ** All schools must ensure that their financial arrangements comply with the current financial regulations, standing orders and schemes of delegation issued by their local authority *** GB may, if they wish, be involved in the selection panel. 11

12 Action SheetDecision Level Key Function NoTasksLevel 1Level 2Level 3Level 4 6To enter into contracts (above set financial limit) 7To enter into contracts (below set financial limit) 8To make payments 9To provide insurance – where funding has been delegated  10Head teacher appointments (selection panel) *  11Deputy appointments (selection panel) *  12Appoint other teachers ***  13Appoint non teaching staff ***  14Pay discretions (the head teacher should not advise on his/her own pay)  15Dismissal (Headteachers) NB GB must act through Dismissal Committee *  16Dismissal (other staff) NB GB must act through Dismissal Committee  17Establishing disciplinary/capability procedures  18Suspending head  GOVERNING BODY DECISION PLANNER 12

13 FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES THE HEADTEACHER ADVISES ON AND IMPLEMENTS THE GOVERNING BODIES STRATEGIC FRAMEWORK AND POLICIES REPORTS ON PROGRESS RESPONSIBLE FOR INTERNAL ORGANISATION, MANAGEMENT AND CONTROL DAY TO DAY MANAGEMENT LOTS OF OTHER THINGS 13

14 FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES OTHER STAFF School Administration THE AUTHORITY Education staff - Strategic Direction, School Improvement Finance Staff – Accountancy, Payments, Payroll, Audit Other Depts – Legal, Property Services other Sla’s ESTYN 14

15 ESTYN Staffing and financial resources are managed and deployed effectively to support learning improvement. The impact of resources on teaching and learning is kept under review and future needs are planned for. The school’s spending decisions relate well to priorities for improvement and the benefit of the pupils 15

16 ESTYN There are clear management features that contribute to or detract from the efficient management of resources. They should consider how well leaders and managers: ensure that the school is appropriately staffed to teach the curriculum effectively; deploy staff to make best use of their time, expertise and experience; identify and meet the development needs of all staff through appraisal and performance management systems; make effective use of teachers’ planning, preparation and assessment time; employ appropriate strategies and processes to meet the statutory requirements of the National Agreement on ‘Raising Standards and Tackling Workload’ (January 2003); manage and deploy teaching assistants and non-teaching staff; provide the best standards of accommodation possible within the school’s budget; and ensure that pupils have enough appropriate learning resources. 16

17 ESTYN Inspectors should concentrate less on the detail of the financial budgets than on the extent to which the school’s spending decisions and broad financial planning are based on priorities for expenditure on improvement over time. They should consider the extent to which leaders and managers: know the costs of existing programmes and activities, keep them under review and question whether they are cost-effective, for instance in relation to non-viable class sizes; identify priorities and areas for development and allocate resources appropriately and according to clear criteria to reflect the school’s agreed objectives; have systematic and accurate budgeting arrangements, including appropriate arrangements for contingencies; and have established a sensible balance between the responsibilities undertaken by governors and those delegated to the headteacher and staff. 17

18 ESTYN When inspecting value for money, inspectors should take into account the effectiveness of the school in achieving good or excellent outcomes for pupils. However, if resources are poorly managed, even if outcomes are good, the overall judgement should reflect the areas for improvement identified. Inspectors should evaluate: the effectiveness of the provision in securing appropriate outcomes for pupils overall; the extent to which the school successfully balances the effectiveness of its provision against costs, including staffing costs; and the extent to which it makes good use of the funding it receives. They should state in the report that the school offers excellent, good, adequate or unsatisfactory value for money in terms of the use made of the budget allocated to the school. 18

19 FINANCIAL MANAGEMENT Is the Overall Management of an Organisation’s Financial Resources to ensure the best Value for Money in delivering set Objectives within an Approved Budget within Timescales 19

20 FINANCIAL MANAGEMENT Good Financial Management is about proper stewardship of public funds and about using resources effectively. This means ensuring that budgets are not overspent through inefficiency and waste, but equally that they are not deliberately or needlessly underspent. (Audit Commission) 20

21 WHY HAVE FINANCIAL MANAGEMENT Allows better planning Links with School Development Plan Allows costs to be considered and controlled Allows and demonstrates that limited resources are used effectively and efficiently Evidence of Compliance with Rules It is Public Money Prevents Fraud Estyn 21

22 FINANCIAL MANAGEMENT– THE RULES THE SCHOOL STANDARDS AND FRAMEWORK ACT 1998 FAIR FUNDING SCHEME FINANCIAL PROCEDURE RULES FOR SCHOOLS SCHOOL GOVERNORS GUIDE TO THE LAW

23 FAIR FUNDING SCHEME SETS OUT THE FINANCIAL RELATIONSHIP BETWEEN AUTHORITY AND THE SCHOOL, INCLUDING FINANCIAL MANGEMENT THE AUTHORITY - STRATEGIC ROLE; DELIVERING BETTER EDUCATION. GOVERNORS - FINANCIAL AND MANAGERIAL RESPONSIBILITIES WITHIN THE STATUTORY AND LOCAL AUTHORITY REQUIREMENTS. IT IS A MATTER FOR EACH GOVERNING BODY TO DECIDE THE EXTENT TO WHICH IT WISHES TO FURTHER DELEGATE IT’S POWERS TO THE HEADTEACHER WITH ANY SUCH DECISION (AND ANY REVISIONS) TO BE FORMALLY RECORDED IN THE MINUTES OF THE GOVERNING BODY.

24 FAIR FUNDING SCHEME ALL SCHOOLS, IN THE MANAGEMENT OF THEIR DELEGATED BUDGETS WILL NEED TO ABIDE BY THE AUTHORITY’S REQUIREMENTS ON FINANCIAL CONTROLS AND MONITORING. ALL SCHOOLS MUST ENSURE THAT THEIR FINANCIAL ARRANGEMENTS COMPLY WITH THE CURRENT FINANCIAL REGULATIONS, STANDING ORDERS AND SCHEMES OF DELEGATION ISSUED BY THEIR LOCAL AUTHORITY.

25 FINANCIAL PROCEDURE RULES FOR SCHOOLS Financial Procedure Rules explain the procedures, which we must all follow to ensure high standards of financial management. They tell us things we cannot do, but also tell us things we can whilst keeping within the rules. School Governors are accountable for the deployment of resources for which they have been given responsibility and they will delegate functions of a financial nature to individual officers. All Governors and employees who undertake an activity which affects the School’s finances must ensure that they understand the relevant requirements within Financial Procedure Rules.

26 A TYPICAL SCHOOL SYSTEMS and PROCESSES !! A typical School Governance – decision making, transparency Budgets – School Development Plan, Pupil numbers Payroll – teachers, admin, other support Procurement – how, from who, value for money Payments – appropriate, accurate, timely, how Income – maximised, accountable, Assets – building, equipment, people Communication - management information, Monitoring and Supervision Then there’s the pupils themselves and their education 26

27 FINANCIAL MANAGEMENT GOVERNANCE Roles and Responsibilities Decision making process Objectives are established, understood and monitored Challenge Effective Management information/reporting Risk Aware 27

28 FINANCIAL MANAGEMENT FINANCIAL RESOURCES Budget Setting - Pupil numbers - Formula Funding Delegation Separation of Duties - Authorisation Standard procedures – payroll, procurement payments, income Monitoring – On track, Fraud prevention 28

29 FINANCIAL MANAGEMENT VALUE FOR MONEY Best use of Resources Good Housekeeping Effective Purchasing (Quality : Price) Maximising Income 29

30 NON FINANCIAL MANAGEMENT/CONTROLS Asset Management Security Health and Safety IT Security Data Security 30

31 FINANCIAL MANAGEMENT HELP IS AVAILABLE FOLLOW THE RULES NEED NOT BE AN EXPERT COMMON SENSE APPROACH KEEP IT SIMPLE NEED NOT BE A PROBLEM ASK 31

32 INTERNAL AUDIT PROVIDE INDEPENDENT AND OBJECTIVE ASSURANCE TO MANAGEMENT OF THE CONTROL ENVIRONMENT (COMPRISING RISK MANAGEMENT, CONTROL AND GOVERNANCE) EVALUATING ITS EFFECTIVENESS IN ACHIEVING THE ORGANISATION’S OBJECTIVES. IT OBJECTIVELY EXAMINES, EVALUATES AND REPORTS ON THE ADEQUACY OF THE CONTROL ENVIRONMENT AS A CONTRIBUTION TO THE PROPER, ECONOMIC, EFFICIENT AND EFFECTIVE USE OF RESOURCES. 32

33 ROLE OF INTERNAL AUDIT STATUTORY RESPONSIBILITY INDEPENDENT REVIEWS OF ALL FUNCTIONS OF THE AUTHORITY TO ENSURE COMPLIANCE WITH APPROVED PROCEDURES AND TO MINIMISE THE RISKS TO WHICH THE AUTHORITY IS EXPOSED COMPLIANCE WITH PROCEDURES, POLICIES, REGULATIONS AND LEGISLATION THE AUTHORITY MEETS ITS EXTERNAL OBLIGATIONS E.G. LEGAL REQUIREMENTS 33

34 ROLE OF INTERNAL AUDIT PROVIDE ASSURANCE TO MANAGEMENT THAT THEIR AGREED POLICIES ARE BEING CARRIED OUT EFFECTIVELY HELP MANAGERS TO IDENTIFY IMPROVEMENTS IN CONTROL, PERFORMANCE AND PRODUCTIVITY A SERVICE TO MANAGEMENT, PROVIDE ADVICE FRAUD INVESTIGATION 34

35 TYPICAL AUDIT PROCESS School Audit – Bilingual Approach Primary Schools visited 1 in 3 Years Secondary / Special Schools visited 1 in 2 years Contact Headteachers Pre meeting Chair of Governors attends Questionnaire Format Testing on a Sample Basis Draft Report Final Report (Including Action Plan) Report for Chair of Governors/Head Teacher Follow up Implementation of the Agreed Actions 35

36 AREAS REVIEWED DURING THE AUDIT A. Governance Decision Making/Management Structure School Development Plan Policies B. Financial Management Compliance with the Rules ( Financial Procedure Rules for Schools) Budgets, Payroll, Procurement, Payment, Income School Funds School Meals C. Asset Management Asset Control, Inventory, Stocks Computers, IT controls Insurance Health and Safety

37 A RECIPE FOR SOMETHING TO GO WRONG LOTS OF MONEY LOTS OF SYSTEMS LOTS OF SCHOOLS LOTS OF PEOPLE DIFFERENT SITES DIFFERENT PRESSURES EVERYONE IS HONEST 37

38 WHAT CAN GO WRONG !!!!! BUDGET OVERSPEND/UNDERSPEND INEFFECTIVE USE OF RESOURCES POOR VALUE FOR MONEY A CRITICAL INTERNAL AUDIT ESTYN INSPECTION - PERFORMANCE STANDARDS PLUS 38

39 Head handed a prohibition order for 10 years by Education Secretary- ending her career Headteacher had transferred money to the School Fund from the School Budget Account and had used the funds for trips to China, social events Cliff Richard concert and staff loans is struck off for 10 years. She employed her son and paid him a higher than normal salary Used money intended for special needs pupils to pay for staff social trips She lent one employee £20k to buy a car London Borough of Hillingdon identified a string of financial irregularities during a routine audit The Teaching Disciplinary review found her guilty of unacceptable professional conduct and she was banned for teaching for 10 years There was a need to be an open and transparent in decision making. The review found that the Head had failed to properly declare conflicts of interest when employing her daughter, son and brother 39

40 Flintshire Head jailed for 16 months A Headteacher stole £53k from School Funds which were not subject to regular audit to fund a gambling addiction Birmingham Head forged Chairman’s signature escapes being struck off the Teaching Council A Head forged a signature to increase his salary Head is sacked Governors reinstate him Parents protest and he resigns and is appointed as School advisor 2 Rotherham Heads Jailed for £22k School cash scam They conspired with a builder who provided inflated quotes and the Heads benefitted from School Funds 40

41 Thieving secretary has been jailed after stealing up to £89,000 from the primary school where she worked to fund her bid to be a property tycoon. The trusted 51-year-old swindled the cash over six years after rising from dinner lady to running the school's accounts. The money was set aside to fund school trips, school meals, charity events and even a Christmas party. The secretary was arrested and forced to resign after an investigation found she had used the cash to put deposits on a house in the U.S., a holiday home in Bulgaria, and several properties in the UK. She gave some of the money to members of her family. Headteacher said "The school has been absolutely shattered by this betrayal of trust. She not only abused her position of trust, but also ruthlessly deprived pupils of the money raised by hard-working parents." The secretary repeatedly wrote out cheques to herself and members of her family, before swapping money around the accounts in an attempt to cover her tracks. Audits have been unable to determine the exact figure. The prosecutor said: ""She said she had bills to pay at home and it had just snowballed." The defence barrister said she had 'lost everything'. He added: "Her children don't want to know her. She's lost her husband. They are separated and planning to divorce. She is left at 51 with no-one and has only herself to blame." Jailing Bailey, Judge Granville Styler told her: "The consequences of your dishonesty have been devastating for you."You've lost your job and family, and suffered humiliation in the community. "But that humiliation is richly deserved." 41

42 CONTACTS Hugh Thomas - Audit and Risk Manager , Meirwyn Thomas Senior Auditor Schools Peter Williams Susannah Nolan – LMS Manager


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