Academies, Responsible Officers and risks: getting the basics right

Tomorrow is the last working day of August. So the long-promised revised Academies Financial Handbook must be quite imminent as it is due this month for the new financial year. When it does arrive on the DfE website, academies and free schools will need to do some thinking about their assurance arrangements.

In the past academies were given somewhat ambiguous and vague advice on who could be appointed as the Responsible Officer (RO) to give assurance to Governing Bodies on internal financial control. That led to a range of approaches – good practice and not-so-good. Given the rhetoric around freedom as well as common sense, the new Handbook will doubtless formalise that flexibility.

In terms of what ROs did, there was more direction if not prescription. The RO was given a list of Suggested System Control Checks to be done on a quarterly basis (in practice for many academies, termly basis). These will, I suspect, go out the window. What will be in their place?

If the RO is to evolve into something resembling internal audit, the RO’s work will be driven by the risk register. That makes sense - the assurance function for control and risk should be informed by the risk register.

But maybe there is a hitch? Many academies – not only new ones – have in place risk registers that look remarkably like the one in the 2006 Academies Financial Handbook. Using a template is a useful aid but organisations have to think about their own specific risks – not simply the generic ones. They need to rigorously review and objectively assess risks. How many do that?

ROs need to start their work with some attention to risk registers. If ROs have knowledge, understanding and experience when it comes to risk management – as well as common sense – they will add real value as well as ensure that their own testing driven by the risk register addresses real risks.

If academies and their ROs can get their risk registers in shape, they can then progress onto assurance mapping. But that will have to be another blog post.

 

Audits and risks: the new Funding Agreement for sixth form colleges

The Education Funding Agency’s new Funding Agreement for sixth form colleges is a strange beast. It is clearly a slimmed down version of the 2006 Learning and Skills Council’s variant. But in slopping parts off, there seem to be some strange and perhaps unintended consequences.
In the 2006 Financial Memorandum colleges were instructed:

The College must ensure that it has an effective policy of risk management (including appropriate insurance arrangements). The College’s risk management arrangements should consider the key principles given in LSC guidance.

In a far more uncertain and hazardous environment, the 2012 Agreement does not utter a word to sixth form colleges on risk management. As established and largely mature organisations, I would hope they will carry on managing risks and enhance their arrangements.

While the words on risk management are omitted from the 2012 Agreement, oddly the wording on internal remains unchanged. So where the 2006 Memorandum states:

The governing body shall appoint an audit committee and arrange to provide for internal and financial statements audit, including regularity audit, in accordance with the LSC’s Audit Code of Practice and any other directions drawn up and published by the LSC in consultation with colleges. Any mandatory requirements under the LSC Audit Code of Practice shall be a condition of funding under this financial memorandum.

The 2012 Agreement states:

The Governing Body shall appoint an audit committee and arrange to provide for internal and financial statements audit, including regularity audit, in accordance with the Joint Audit Code of Practice and any other directions drawn up and published by the EFA in consultation with SFC. Any mandatory requirements under the Joint Audit Code of Practice shall be a condition of funding under this Funding Agreement.

Some mistake surely?

Only today, the Education Funding Agency reminded sixth form colleges that they did not have to make provisions for internal audit from August 2012. (Of course, any sensible college will await the Agency’s guidance before making use of this new flexibility.)