tag:blogger.com,1999:blog-361473932024-02-21T01:41:55.792+00:00Deed Consulting - Changing public servicesA blog on changes in the public sector and not-for-profits - colleges, academies, housing associations, charities, social enterprise etc. News about finance, governance, regulation etc plus views on themes such as reform, efficiency and value-for-money.Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.comBlogger450125tag:blogger.com,1999:blog-36147393.post-86353865055914400342016-08-01T13:02:00.000+01:002016-08-01T13:02:20.278+01:00Civil and criminal liabilities for college governors - the small print of the proposed insolvency regimeAs summer term drew to a close, the government issued a <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/315432/bis-14-862-further-education-intervention-process.pdf" target="_blank">consultation on an insolvency regime for colleges</a>. Much of the paper is usefully about clarifying what happens when colleges become insolvent. But it also includes a far-reaching proposal to extend the fraudulent and wrongful trading provisions of the Insolvency Act 1986 to college governors. The introduction of these civil and criminal sanctions may have unhelpful implications.<br />
<br />
In setting out the context, the consultation paper notes that, as charity trustees, governors have a duty to act with reasonable care and skill. They must act responsibly, reasonably and honestly; they should put appropriate procedures and safeguards in place. The paper also notes that trustees can be held personally liable to their charity for any financial loss they cause or help to cause by their wrongful action although charity law protects trustees who have acted honestly and reasonably from personal liability.<br />
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The paper does not make a strong case for the extension of governor liability. Indeed, it concedes: “Indeed, in the event that [governors] were to breach wrongful and fraudulent trading provisions it is likely that they would, through the same conduct, also already be in breach of their duties as charitable trustees.”<br />
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The liabilities put in place by the Insolvency Act 1986 were intended to deter and punish “rogue directors” who enriched themselves through running failed or fraudulent companies. There does not appear to be evidence of rogue or “fly-by-night” governors in the college sector. The financial problems in the sector arise from an extended period of funding reductions and changes.<br />
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The unstated rationale of the proposed extension of governor liability is to provide a bigger stick in the Area Review process.<br />
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The law firm Eversheds note in a <a href="http://www.eversheds.com/global/en/what/articles/index.page?ArticleID=en/Education/EDU_a_consultation_developing_onsolvency" target="_blank">briefing</a>: “In our view, the introduction of the wrongful trading provisions in the context of colleges does heighten the risk for Governors as it makes it explicit that the duty to act in the interests of the creditors is a higher priority than the delivery of the charitable purpose.”<br />
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The extension of governor liability may have serious effects on college governance. Existing and potential governors may be discouraged from taking on the already heavy responsibilities of the voluntary position of governor. It’s a hard sell: “you can give up your time, you don’t get paid and you could lose your house!”<br />
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It would be a particularly perverse outcome of the proposals if accountants, lawyers and other professionals were increasingly wary of joining college governing bodies.<br />
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Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-7073519692964059172015-07-02T22:00:00.001+01:002015-07-02T22:00:51.706+01:00Phishing: should you be worried of cyber fraud?
<br />
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">1. What exactly is ‘phishing’?
<o:p></o:p></span></b></div>
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<span style="font-family: Calibri;">The text book definition is: “the illegal attempt to acquire
sensitive information such as usernames, passwords and account details often
for malicious reasons by masquerading as a trustworthy entity in electronic communication”.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">2. What are the worst cases of online fraud/phishing that you’ve heard of?
<o:p></o:p></span></b></div>
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<span style="font-family: Calibri;">Victims of phishing may be shy. But we do know that schools
can fall victim to online scams.<span style="mso-spacerun: yes;"> </span>St
Aldhelm's Academy in Poole was contacted by fraudsters pretending to be bank
employees and asking about the school's bank account. Staff provided the requested
details and the criminals withdrew over £1million. The academy subsequently
suffered the ignominy of national press coverage and a financial notice to
improve from its funder and regulator, the Education Funding Agency.<o:p></o:p></span></div>
<br />
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">3. What advice would you offer schools wanting to avoid falling victim to online
fraud? <o:p></o:p></span></b></div>
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<span style="font-family: Calibri;">Complacency is the greatest threat. Many of us will have had
a poorly spelt and badly worded email from a United Nations official or the
widow of a recently deposed dictator.<span style="mso-spacerun: yes;">
</span>These missives asking for help in transferring funds are often safely redirected
straight to our junk filters. However, we must not assume all phishing emails
are so blatant. Increasingly, scammers are raising their game and making their
emails more professional and hence believable. <o:p></o:p></span></div>
<br />
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">4. What are the most common online scams?
<o:p></o:p></span></b></div>
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<span style="font-family: Calibri;">Attempts – both online and offline - to redirect payments
from legitimate suppliers to fraudsters appear to be the most common scam in
the education sector. There have been increasing reports in recent years of
both successful and failed attempts to defraud schools and colleges as well as
other not-for-profits. <o:p></o:p></span></div>
<br />
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<span style="font-family: Calibri;">While technology allows fraudsters to go phishing on an
industrial scale, some of the most effective scams have been offline exploiting
our innate trust in paper. <span style="mso-spacerun: yes;"> </span>There have
been several recent cases where BACs electronic payments have been made
directly into fraudsters’ bank accounts after correspondence on convincing
letterheads asked for the bank details of suppliers to be changed. In 2010 Oldham
Sixth Form College transferred £730,000 after receiving such a letter.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">Sometimes the fraudsters supplement their paper letters with
fake websites as part of the scam.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">5. How can schools tighten up their online security?<o:p></o:p></span></b></div>
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<span style="font-family: Calibri;">While schools should have robust cybersecurity, common sense
and caution are essential too. Never give information to your bank which your
bank should already know. If in doubt, speak to your bank manager. Always
verify verbally any paper or electronic request to change supplier bank details
with known contacts. Above all, take care!<o:p></o:p></span></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-44905233429342531412014-11-09T22:22:00.001+00:002014-11-09T22:22:06.997+00:00Fraud in Schools - what can be done?
<br />
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<span style="font-family: Calibri;"><a href="http://www.dailymail.co.uk/news/article-2699331/Nigerian-accountants-4million-fraud-academies-Gove-hailed-Staff-member-said-spent-cash-extravagant-lifestyle.html" target="_blank">In July news emerged of an investigation into an alleged fraud at a London academy after £4million of school funds disappeared</a>. The case
was kept under wraps for two years while parents were asked not to speak to
reporters although hawk-eyed readers of the Department for Education’s annual
accounts for 2012/13 might have noticed oblique references to an “irregularity”
at the Haberdashers Aske’s academy trust. The case is believed to be largest
school fraud in British education history.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">While school managers might expect to notice and stop
millions of pounds being siphoned off, schools are at risk from fraud
perpetrated by those on the inside and the outside. Complacency - “it could
never happen here” – worsens that vulnerability.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">A perusal of Google news over a month or two will unearth
cases of schools falling victim to managers signing off fake timesheets,
finance assistants using cards to pay for holidays and heads appointing friends
and family without due process. There are many more con artists outside trying
to defraud schools – last year a solicitor was jailed for his part in tricking
a sixth form college into paying over £730,000 intended for a genuine
contractor into a bogus bank account.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">While fraud risks cannot be eliminated, schools can mitigate
them. A few simple steps can help:<o:p></o:p></span></div>
<br />
<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><b style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">1.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span></b><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Get the tone from the top right<o:p></o:p></span></b></div>
<br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt;">
<span style="font-family: Calibri;">School leaders need to lead by example and
emphasise probity. That means a fraud policy with zero tolerance of
irregularity. There should be a register of interests for governors, senior
managers and other staff with significant financial authority or influence.
Similarly there should be a policy on gift and hospitality. Everyone should
know about these policies – where to find them and what they require.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><b style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">2.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span></b><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Assess risks and mitigate them<o:p></o:p></span></b></div>
<br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt;">
<span style="font-family: Calibri;">The identification, assessment and management
of fraud risks should be covered by school risk registers – particularly in the
risky area of purchasing. <span style="mso-spacerun: yes;"> </span>There is plenty
of free guidance available online including fraud risk self-assessments. The
Chartered Institute of Public Finance and Accountancy recently published a <i style="mso-bidi-font-style: normal;">Schools Fraud Health Check</i>. Simple
checks and balances with segregation of duties and independent review of
transactions are effective in mitigating risks. This is more challenging for
smaller schools, particularly primaries. However, there is normally a second
pair of eyes, even if it is a governor, who can ensure that there is never too
much reliance upon one member of staff. <o:p></o:p></span></div>
<br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><b style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">3.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span></b><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Look out for risk indicators<o:p></o:p></span></b></div>
<br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt;">
<span style="font-family: Calibri;">Both the Education Funding Agency and the
Audit Commission have published advice on fraud risk indicators. The
Commission’s list of behavioural warning signs included: reluctance to take
holiday entitlement; poor work practices such as “bending rules”; a lifestyle
not equal to income. There may be innocent reasons for strange behaviour but
sometimes these can be indications of a staff member with something to
hide.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><b style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">4.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span></b><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Use data<o:p></o:p></span></b></div>
<br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt;">
<span style="font-family: Calibri;">While there are software packages to
highlight strange patterns in financial data, a spreadsheet is sometimes enough
to spot anomalies. A key check to perform is looking at the top dozen or so
suppliers over the last year compared with previous years – does it make sense?
There may be nothing untoward about using the same suppliers or contractors
again and again. But, on the other hand, it may be a sign of an overly cosy or
even inappropriate relationship with a supplier. (Aside from fraud risks, this
simple review of spend patterns may identify value-for-money opportunities.) <o:p></o:p></span></div>
<br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><b style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">5.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span></b><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Welcome whistleblowing<o:p></o:p></span></b></div>
<br />
<div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 8pt 36pt;">
<span style="font-family: Calibri;">Appropriate arrangements for confidential
reporting are not only a legal must-have, whistleblowing is vital defence
against fraud and other wrong-doing. Staff must know where to find the
whistleblowing policy. The policy itself should link into the governance
framework, including those elements perceived as most independent e.g. the
audit committee, the internal and external auditors.<o:p></o:p></span></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-71621738488373209342014-06-04T09:22:00.001+01:002014-06-04T09:22:11.199+01:00Are schools doomed to be scammed?<span style="font-family: Calibri;">Before the National Fraud Authority ended up on the
Coalition’s bonfire of quangos it did a lot of work on raising awareness of
fraud. One of its major projects was estimating the total value of fraud in the
economy – everything from “blue badge” parking abuse to multi-million VAT
fraud. Before the NFA disappeared, it published Annual Fraud Indicators which estimated
the loss to the economy of fraud to be £52billion (<a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206552/nfa-annual-fraud-indicator-2013.pdf" target="_blank">pdf</a> available).</span><br />
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<span style="font-family: Calibri;">What has that number got to do with schools? In one month the
press reported:<o:p></o:p></span></div>
<br />
<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: Calibri;"><a href="http://www.thenorthernecho.co.uk/news/11123708.Arrests_in_Darlington_and_Whitley_Bay_as_police_probe_Easington_Academy/http://www.thenorthernecho.co.uk/news/11123708.Arrests_in_Darlington_and_Whitley_Bay_as_police_probe_Easington_Academy/" target="_blank">Arrests following concerns over the use of£162,000 at an academy following an Education Funding Agency report.</a></span></div>
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<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: Calibri;"><a href="http://www.dailymail.co.uk/news/article-2599271/Academy-staff-school-posted-worst-GCSE-results-England-2012-lost-1m-simple-email-scam-replied-account-details.html" target="_blank">Finance staff giving away bank details in response to a phishing email with a subsequent loss of £1m</a></span></div>
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<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: Calibri;"><a href="http://www.dailyecho.co.uk/news/11177927.Council_considering_action_in_school_fraud_case/" target="_blank">A school bursar being convicted of signing-off fake overtime claims with a loss of £18,000</a></span></div>
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<div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 8pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: Calibri;"><a href="http://www.middevongazette.co.uk/head-teacher-cleared-misconduct/story-21045658-detail/story.html" target="_blank">A former head being found to have fallen below the standards expected of school leaders for his involvement in the recruitment of a family member which "breached the expected standards of transparency".</a></span></div>
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<div class="MsoNormal" style="margin: 0cm 0cm 8pt;">
<span style="font-family: Calibri;">Much detected (and obviously undetected) fraud does not get
into the papers. The 2012/13 Department for Education accounts mention a £2m
“irregularity” at one academy chain – a Google suggests that the case never got
into the press.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 8pt;">
<span style="font-family: Calibri;">The NFA cautioned against its estimates being used for
identifying trends. But is fraud getting worse? Quite possibly: while staff
will generally be honest and public-spirited, after years of pay freezes and 1%
rises, a minority may be demoralised and feel squeezed;<span style="mso-spacerun: yes;"> </span>many organisations are struggling to cope
with financial pressures so some managers may be tempted to bend rules; greater
autonomy for schools creates opportunities but not all are positive. <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 8pt;">
<span style="font-family: Calibri;">Are schools doomed to be scammed? In fact, schools can
protect themselves through simple steps. But the first step is to recognise
that fraud is an issue.</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 8pt;">
<span style="font-family: Calibri;"><em></em></span> </div>
<div class="MsoNormal" style="margin: 0cm 0cm 8pt;">
</div>
<div class="MsoNormal" style="margin: 0cm 0cm 8pt;">
<span style="font-family: Calibri;"><em>Later this month I am talking at </em><a href="http://site.edexeclive.co.uk/" target="_blank"><em>EdExec Live</em></a><em> about how schools can protect themselves. Tickets are still available.</em></span></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-3705634985560883392014-05-20T17:18:00.002+01:002014-05-20T17:18:08.194+01:00EFA asks academy principals and boards to think about fraudToday the chief executive of the Education Funding Agency sent a <a href="https://www.gov.uk/government/publications/letter-to-academy-trust-accounting-officers" target="_blank">letter</a> to accounting officers (i.e. principals) at all academies in England. It reminded them of the requirements in relation to fraud, connected parties and special payments.<br />
<br />
The letter included an annex setting out questions for principals and trustees to consider in order to minimise the risk of fraud or irregularity:<br />
<br />
<ul>
<li><em>Authority – Do you have a written scheme of delegation, approved by the trustees, so that individuals are clear about their levels of financial authority?</em></li>
<li><em>Purchasing – Are you confident you are procuring all goods and services in an open, competitive and transparent way?</em></li>
<li><em>Payroll – Do you have robust controls for payroll including checks that payments are for the right amounts and paid to bona fide employees?</em></li>
<li><em>Oversight – Do you ensure that financial reports are produced that fairly reflect the activity at the trust, that they are properly reconciled at least monthly and are shared regularly with the trustees for formal review?</em></li>
<li><em>Cash management – Are your bank accounts reconciled at least monthly?</em></li>
<li><em>Assets – Is all of the trust’s property under proper control and measures in place to prevent loss or misuse?</em></li>
<li><em>Segregation – Do you have appropriate separation of responsibility in your finance team? And are you providing proper management support to your finance staff to help them to operate in a role where they are well-placed to provide you with a “first line of defence” in terms of upholding propriety, regularity and value for money in the use of public funds?</em></li>
<li><em>Records – Do you have robust procedures for recording, documenting, evidencing and monitoring information and especially the reasons for entering into major spending commitments?</em></li>
<li><em>Scrutiny and audit – Do you have properly constituted arrangements for internal review (such as a responsible officer or internal auditor) to give you and trustees a further safeguard that the trust’s financial systems and controls are operating effectively and efficiently? Does the trust debate, and agree how to act upon, recommendations arising both from these internal reviews and from the work of its external auditors?</em></li>
<li><em>Risk – Do you have an effective process for identifying and responding to the major risks that the trust faces?</em></li>
</ul>
These are all basic and sensible measures.<br />
<br />
Next month I will be talking about fraud risk at the <a href="http://site.edexeclive.co.uk/speakers/" target="_blank">EdExec Live conference</a>. I will be explaining what more academies can do to protect themselves from fraudsters both inside and outside their organisations.<br />
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-58846665755974827422014-04-15T16:31:00.003+01:002014-04-15T16:31:46.079+01:00Job losses in colleges – things did not get much worse last year<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlTTYmpTiDftum9WYz8k7x49efr1EQoPFRHbHadbAN7T59wMV74nTng1vZ0-yHbQvGK5KMeTbj1_pDkLyqNYEf3smQx-bD2FSRVrVU9bv-UQpQlqM5xrzXDK0QAg8cnssm4JkNIg/s1600/English+colleges+staffing+2013.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlTTYmpTiDftum9WYz8k7x49efr1EQoPFRHbHadbAN7T59wMV74nTng1vZ0-yHbQvGK5KMeTbj1_pDkLyqNYEf3smQx-bD2FSRVrVU9bv-UQpQlqM5xrzXDK0QAg8cnssm4JkNIg/s1600/English+colleges+staffing+2013.jpg" height="278" width="400" /></a></div>
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The college sector has had a bad few weeks. As a consequence
of the funding squeeze, especially the painful reductions in adult skills
budgets for 2014/15, there have been redundancy programmes announced at FE
colleges across the country: <a href="http://www.theargus.co.uk/NEWS/11129599.City_College_Brighton_and_Hove_facing__financial_crisis_/" target="_blank">Brighton</a>, <a href="http://www.yourlocalguardian.co.uk/news/local/kingstonnews/11092299.Kingston_College_principal_warns_of_cuts_and_possible_job_losses/" target="_blank">Kingston</a>, <a href="http://www.sthelensreporter.co.uk/news/local/college-sheds-50-jobs-in-face-of-budget-cuts-1-6521085" target="_blank">St Helens</a>,
<a href="http://www.stratfordobserver.co.uk/2014/04/03/news-Jobs-axe-to-fall-at-Stratford-College-97759.html" target="_blank">Stratford-upon-Avon</a>.<o:p></o:p></div>
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There was some slightly brighter news tucked away in the
Skills Funding Agency release of 2012/13 financial accounts for the college
sector. Tucked away in the numbers, the number of teaching staff full-time
equivalents in colleges fell by only 1% last year compared with 5% in 2010/11
and 6% in 2011/12.<o:p></o:p></div>
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This is not a good news story. There are still over 100 FE
colleges in deficit and the number of sixth form colleges with losses doubled.
We are only half way through the Coalition’s austerity programme and things
won’t be much easier with a different government. The 2013/14 figures might
well see an acceleration in job cuts.<o:p></o:p></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-68865100705404271592014-03-05T11:42:00.000+00:002014-03-05T11:46:45.176+00:00EFA tweaks fraud reporting requirements for academies<div class="MsoNormal">
In the New Year academies may not have noticed a subtle
change in the Education Funding Agency’s requirements for fraud reporting.<o:p></o:p></div>
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The Academies Financial Handbook in para 3.9.2 still states:<o:p></o:p></div>
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<i>All instances of fraud or theft committed against the trust,
whether by employees or trustees or third parties, above £5,000 must be
reported by the trust to the EFA. Any unusual or systematic fraud, regardless
of value, must also be reported. </i><o:p></o:p></div>
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But in January the EFA decided to change the requirements
for fraud as they affecting the 16-19 bursary fund and noted on its<a href="http://www.education.gov.uk/aboutdfe/executiveagencies/efa/funding/b00230286/16-to-19-financial-support/16-to-19-bursary-fund/errorcriteriafraud1619" target="_blank"> website</a>:<o:p></o:p></div>
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<i>We have reviewed the advice given to institutions on the
threshold for reporting cases of significant fraud to the EFA. The threshold
has now been reduced from £5000 to £1200 to reflect the amounts of funds that
institutions typically pay to students. Institutions must now report any suspected
16 to 19 bursary frauds of £1200+ to the EFA.</i><o:p></o:p></div>
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All academies should have fraud policies (as well as whistleblowing
policies and fraud response plans). They (and other 16-19 provider) need to make sure their next update of
their fraud policies reflects this lower threshold.<br />
<o:p></o:p></div>
<br />Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-63117630163482080892014-03-05T10:31:00.000+00:002014-03-05T10:31:34.151+00:00The FE Commissioner reflects on college governance<div class="MsoNormal">
After his first six interventions, the Further Education
Commissioner has written to colleges with some reflections. The whole letter is
worth a read but below are some extracts with particular relevance to college
governance. Governors and clerks should dwell on his thoughts:<o:p></o:p></div>
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<ul>
<li><i>College governors must take greater ownership of their
college, driving the strategic direction forward and challenging the Principal
and senior leadership team on the quality of teaching and learning and the
institution’s financial position. </i></li>
<li><i>College governors must satisfy themselves that they have a
complete picture of how the college is operating by triangulating the
information they receive with other sources of information, for example the new
Data Dashboard being produced by Ofsted and which is due to be published in the
Spring. </i></li>
<li><i>It is essential to undertake effective succession planning
of the governing body; bringing in new and diverse skills and fresh thinking
regularly. I especially see the case for
more business people on boards.</i></li>
<li><i>Clerks are vital to the success of colleges. Clerks ensure that good governance practice
is followed and that the Principal/senior leadership team are not exceeding
their authority. Clerks should be
independent, supported and have the skills and experiences necessary to fulfil
their role. </i></li>
<li><i>If you’re not already doing so, it is very important that
you conduct an annual professional appraisal of your Principal, which examines
and reports on their performance to date and sets clear SMART targets for the
year to come. </i></li>
<li><i>College governors should have regular and purposeful
training and development. … They often
are working in something of a vacuum with little or no contact with Board
members from other colleges and hence are unable to benchmark their performance
against their peers. </i></li>
<li><i>There is some evidence that college governors can be
reluctant to take the difficult decisions when there is evidence of poor
performance.</i></li>
</ul>
<o:p></o:p><br />
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Now that I am resuming blogging, I will be writing on some
of these governance themes as well as some not mentioned.<o:p></o:p></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-6208720318572788982013-11-09T10:24:00.000+00:002013-11-09T10:26:21.475+00:00Lies, damned lies and incomplete statistics: teaching staff numbers in Further Education<div class="MsoNormal">
These are difficult times for all those working in post-16
education. Across the United Kingdom there have been funding cuts – and there
will be more before and after the 2015 election. This week the usually
excellent <i>Guardian Datablog</i> added to the anxiety. It ran an article warning <a href="http://www.theguardian.com/news/datablog/2013/nov/07/further-education-statistics-neets-staff" target="_blank">“The number of staff in further education dropped by 35% last year”</a>. <o:p></o:p></div>
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Is that really so? I doubt it. Where did the numbers come
from? It is not clear. What went wrong? My guess is that the article relied in
part on data from the Staff Individualised Record. The SIR is soon to cease.
The SIR 2011/12 suffered disinterest with a 22% non-response rate.<o:p></o:p></div>
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So what has happened to staffing? For English FE we have the
college finance records which include staffing numbers.<o:p></o:p></div>
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We have seen a contraction in teaching Full Time Equivalent
numbers since 2009/10. In English colleges teaching FTEs peaked at 80,674.
Numbers fell 6% to 75,999 in 2010/11 and then 4% to 72,755. Painful job losses
but not the one year apocalyptic drop shown by the <i>Guardian</i>.<o:p></o:p></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3W4XOmzMye1Q_iAwegdyMGvfQGAkb3ZrXvHrzvYCVUMEwLEBbwmGndQGjOoW98F1xtjgJVazC9CrFlPsnxDlhYj4K2oXpII00chGKxCd_6aLrMhvqDrPCf7I8Z61rAq_v98IzyA/s1600/English+FE+staffing.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3W4XOmzMye1Q_iAwegdyMGvfQGAkb3ZrXvHrzvYCVUMEwLEBbwmGndQGjOoW98F1xtjgJVazC9CrFlPsnxDlhYj4K2oXpII00chGKxCd_6aLrMhvqDrPCf7I8Z61rAq_v98IzyA/s400/English+FE+staffing.jpg" width="400" /></a></div>
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Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-24717553893029247302013-11-07T21:49:00.001+00:002013-11-07T21:49:38.689+00:00Paying the college governors - the debate in the Guardian and elsewhere<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">This week <a href="http://www.theguardian.com/education/2013/nov/05/college-governor-pay-further-education" target="_blank"><i>Guardian Further Education</i> carries a debate about whether college governors should be paid or not</a>. The three contributions clearly set out some of the issues at the
heart of the issue.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif;">The article reminds me of the debate in the social housing sector a
decade ago.</span><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif;">In 2003 the Housing Corporation allowed
housing associations to pay board members who had previously been volunteers –
like college governors are now. As a board member in the Midlands and opposed
to board remuneration. I am now less sceptical. <o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif;">Across the housing association sector, board
remuneration was tied to governance improvement plans which saw good practices
being introduced including board member appraisal and term limits on appointments.
(Essential good practices not seen on too many college governing bodies.) Moreover,
remuneration often ended board recruitment problems and promoted a
professionalisation of governance.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif;">So should college governors be paid? Maybe –
it depends on the balance of costs and benefits being thoroughly and
objectively analysed. Scarce resources spent on governors won’t be available
for teaching and learning. On the other hand, if paying governors is used to
improve governance we should end up with a better governed and stronger FE
sector. The arguments for paying governors are likely to be particularly strong
for the larger colleges.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">In the
<i>Guardian FE</i> piece, all three contributions came from the sixth form college
sector rather than the general FE sector. The largest of the three sixth form
colleges has an income of £14 million. Could board remuneration be justified
for colleges of that size? I doubt it.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">In 2011/12
(the latest year for which we have published figures) 17 colleges had income
over £50 million. For such large and complex organisations, board remuneration
may be appropriate and, perhaps, essential. A debate over board remuneration has
a particular relevance for this sub-sector of further education – rather than
for sixth form colleges.<o:p></o:p></span></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-48033704847181043662013-10-29T13:15:00.001+00:002013-10-29T13:15:09.842+00:00More than invoices: the investigation report at the King’s Science Academy should raise more questions<div class="MsoNormal">
The free schools programme was again in the news on Friday
with the <i>Newsnight </i>report into the Kings Science Academy in Bradford. Likewise
Saturday’s newspapers asked whether there had been a “cover-up” of the findings
of an Education Funding Agency audit report (pdf of the report available <a href="http://www.education.gov.uk/schools/adminandfinance/financialmanagement/efafundingfinance/b00212647/external-assurance/academiesfraud-/investigation-reports" target="_blank">here</a>).<o:p></o:p></div>
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While most of the media coverage was about allegedly
misclaimed funding (so-called “false invoices”) and the repayment of about
£70,000 by the project to the Department for Education, the Education Funding
Agency audit report was far more wide-ranging in its scrutiny of governance and
financial management at the free school.</div>
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The report identified that business interests did not appear
to be declared when they should have been:</div>
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<ul>
<li><i><span style="font-family: Symbol; text-indent: -18pt;"><span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span><span style="text-indent: -18pt;">[redacted] (a Director) is the brother of the
Principal, [redacted] ;</span></i></li>
<li><i><span style="font-family: Symbol; text-indent: -18pt;"><span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></span><span style="text-indent: -18pt;">[redacted] and [redacted], the former FD, have
links with the company [redacted] , used by the Academy to engage [redacted];</span></i></li>
<li><span style="text-indent: -18pt;"><i>[redacted] has a number of family members
working for the Academy and a brother who is a member of the GB;</i></span></li>
<li><i><span style="text-indent: -18pt;">The links with the [redacted] – who leased the
land and [redacted]</span><span style="text-indent: -18pt;"> </span><span style="text-indent: -18pt;">role as [redacted].</span></i></li>
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Maybe these connections were not evidence of cronyism. But
transparency becomes especially vital when situations are complicated.<o:p></o:p></div>
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There were also significant blurring of roles. A former Chair
was acting as a “benefactor/advisor” which had no legal standing and
effectively duplicated the Chair’s role of overseeing governance. The Companies
House entries for the company were out-of-date with year old changes in
directorships not being shown.</div>
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In the fields of personnel and procurement, there appeared
to be weaknesses.<o:p></o:p></div>
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The report goes beyond matters of compliance and procedure.
More generally, it found that the directors were failing to perform key
elements of their governance role:</div>
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<i>The lack of understanding of responsibilities and the
experience of running a school resulted in an acceptance of the way the GB was
being run (e.g. no notice of meetings, lack of adequate minutes etc. already
raised by the [redacted] review and the FMGE validation). In relation to the
finance area in particular there was no challenge where the lack of expected
reports such as management accounts and balance sheets was not being presented
to the GB, which are important for understanding the Academy’s finances and for
monitoring financial health.</i></div>
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These are serious failings. Let us hope that this was a
unique failure of governance at an academy. Perhaps it isn’t.</div>
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Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-31693880005458001712013-10-05T11:32:00.000+01:002013-10-05T11:32:10.948+01:00Fraud in schools - some thoughts on the DfE's risk indicator checklist for academies<div class="MsoNormal">
Allegations, fraud, corruption and bad behaviour have been
in the news. A knighted Headteacher was convicted of false accounting and
narrowly missed a custodial sentence for false accounting. <a href="http://news.sky.com/story/1149161/muslim-school-shuts-during-ofsted-inspection" target="_blank">A free school was being investigated after allegations of irregularities</a>. <a href="http://www.thisisderbyshire.co.uk/fixed-graduate-job-figures-says-uni/story-19880658-detail/story.html#axzz2gh2MLuOg" target="_blank">Derby University was forced to strongly deny claims that it falsified official statistics on graduate employment</a>.<o:p></o:p></div>
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Also this week <a href="http://www.timeshighereducation.co.uk/news/rising-university-corruption-linked-to-falling-public-investment/2007868.article" target="_blank">Times Higher Education carried an article about a Transparency International report which warned financial pressures could impact on ethical standards</a>. <i>Global Corruption Report: Education</i> noted:<o:p></o:p></div>
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<i>The very structure and culture of colleges and universities,
as well as the current constraints under which many…operate, can create conditions
that facilitate fraud.</i><o:p></o:p></div>
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This makes it timely to look at <a href="http://www.education.gov.uk/aboutdfe/executiveagencies/efa/efafundingfinance/b00212647/external-assurance/academiesfraud" target="_blank">the recently published guidance from the Department for Education (DfE ) on fraud</a>. Last month the
Education Funding Agency at the DfE issued <i>Fraud
Indicators: A checklist for academies </i>(download <a href="http://media.education.gov.uk/assets/files/docx/f/fraud%20indicators.docx" target="_blank">here</a>).<o:p></o:p></div>
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The <i>Fraud Indicators </i>checklist
details “generic” indicators including “personal and organisational motives for
fraud, possible weakness of internal controls, transactional indicators and
possible methods of committing and concealing fraud”. The DfE suggest that the
checklist “may be helpful for use as a checklist where concerns exists that
fraudulent activity may be taking place”.<o:p></o:p></div>
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It would be easy to mock the section headed Personal Motives
– many organisations would show a red flag on fraud indicators such as “personnel
believe they receive inadequate compensation and/or rewards”, “disgruntled
employee”, “recent failure associated with specific individual” and “personal
animosity or professional jealousy”. Nevertheless these soap opera indicators
do highlight that in the fraud triangle motivation and rationalisation sit with
opportunity.<o:p></o:p></div>
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Under the heading of Organisational Motives, how many of us
have known organisations “experiencing financial difficulty”, burdened by
“under unusually tight time deadlines to achieve level of outputs” or having
“suffered disappointment/reverses/consequences of bad decisions”. Still the checklist is right to point to the
problems which arise from an all-powerful head and governance which lacks
clarity and direction. How many schools are dominated by Heads with Maxwell-sized
egos.<o:p></o:p></div>
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Flippancy aside, this is all useful stuff. However, as with
all self-assessments, they are treated most seriously by those who are least in
need of reflection and criticism.<o:p></o:p></div>
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The checklist sets out what poor policies, procedures and
practices look like. The document is fairly comprehensive. One area where the
checklist says little is audit. It notes that critical audit reports and
obfuscating auditees are fraud indicators. But what about where managers do not
put in place robust internal audit arrangements and/or where governors let weak
internal audit arrangements persist. The Principal’s PA or a governor without
the time and skills to be an internal auditor is never enough.<o:p></o:p></div>
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Also it is worth noting that the checklist focuses on fraud
risks internal to academies. There are plenty of external risks – and
organisations tend to pay more attention to them (even if, not enough).<o:p></o:p></div>
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So what is my conclusion? If you are a manager, governor,
internal or external auditor, spend some time working through the <i>Fraud Indicators: A checklist for academies</i>.
If enough academies do treat fraud risks more seriously, academy assets and
public funds will be better safeguarded as will the reputation of the sector.<o:p></o:p></div>
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Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-71127390964023928982013-09-18T20:16:00.002+01:002013-09-18T20:21:21.836+01:00The National Audit Office on risks in academies<div class="MsoNormal">
<a href="http://www.nao.org.uk/report/communication-with-academy-auditors-2013/" target="_blank">Over the summer the National Audit Office published guidance to the external auditors of academies. </a>The guidance, <i>NAO Communication with academy
auditors 2013</i>, has been issued as the academies are consolidated into the “group
accounts” of the Department for Education – so academy auditors are auditing
parts of the DfE.<o:p></o:p></div>
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The guidance will be fascinating for audit anoraks. It will
also be of interest to anyone many others including principals, senior managers,
governors and ROs/internal auditors. The short guide highlights what the auditors
at the NAO worry about.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We … consider, because of the number and variety of providers,
there is an inherent risk that across the academies sector there could be
material or systemic irregularity, which may be heightened in newly converted
academies. Particular areas of concern include:</div>
<div class="MsoNormal">
</div>
<ul>
<li>Approval from the Secretary of State not being sought for
certain transactions above delegated authorities, outlined in the academies
financial handbook;</li>
<li>Fraud or misappropriation of funds, especially at the Trust
level in a multi academy trust; and</li>
<li>The increasing risk that academies with long standing
deficits may become insolvent.</li>
</ul>
<o:p></o:p><br />
<div class="MsoNormal">
Fraud and insolvency are of wider public interest too.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In terms of regularity (i.e. income and expenditure being
applied, in all material respects, for the purposes intended by Parliament),
the NAO advise:</div>
<div class="MsoNormal">
</div>
<ul>
<li>There are a number of themes which the auditor should consider
when identifying the risk of irregularity. These themes include:</li>
<li>Misuse of funds by head teachers (i.e. using academy funds
for personal gain);</li>
<li>Governance at multi academy trusts (i.e. oversight of
activities of individual academies, or weak controls at the trust level)</li>
<li>Weaknesses in procurement (i.e. non-compliance with EU
procurement rules, or employment/contracting with related parties)</li>
</ul>
Clearly audit and assurance are vital to keeping academies
on the right track – and spotting problems if they do start to go off the
rails.<o:p></o:p><br />
<div class="MsoNormal">
<o:p></o:p></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-13841809481023528792013-09-13T07:37:00.000+01:002013-09-13T07:37:10.895+01:00Social housing regulation: the risks of the HCA putting a hex on the finances of housing associations<div class="MsoNormal">
This week social housing has been in the news. <a href="http://www.theguardian.com/society/2013/sep/11/bedroom-tax-housing-benefit" target="_blank">The government – or at least Conservative component – charged into battle against the UN rapporteur who dared to come from Brazil (where some people live in favelas) to the UK to question the “bedroom tax” – which the Conservatives describe as an end to a “spare room subsidy</a>”. (As entertaining backstory the
Daily Mail reported that <a href="http://www.dailymail.co.uk/news/article-2418204/Raquel-Rolnik-A-dabbler-witchcraft-offered-animal-sacrifice-Marx.html" target="_blank">the Brazilian academic dabbled in witchcraft</a> – even going
so far as to making an animal sacrifice to get Karl Marx to leave her alone.)
Against this <a href="http://www.publications.parliament.uk/pa/cm201314/cmselect/cmcomloc/310/31002.htm" target="_blank">the House of Commons’ Communities and Local Government select committee had little hope of getting much press coverage for its own report on social housing regu</a>lation. (Only the BBC and Guardian seem to have given it any
profile outside the housing and public finance media.)<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The CLG select committee report <a href="http://www.publications.parliament.uk/pa/cm201314/cmselect/cmcomloc/310/310.pdf" target="_blank">(pdf</a> available) may not have
much witchcraft or sorcery but it is an interesting survey of economic and
consumer regulation of social housing by the Housing and Communities Agency.<i><o:p></o:p></i></div>
<div class="MsoNormal">
<i><br /></i></div>
<div class="MsoNormal">
The committee report was highly critical of how the HCA rates
the financial viability of housing associations.<i><o:p></o:p></i></div>
<div class="MsoNormal">
<i><br /></i></div>
<div class="MsoNormal">
<i>It has now emerged that the Regulator is unable to use his
statutory powers or provide a frank assessment of concerns about a provider’s
financial viability fearing that it might trigger a re-pricing of the
provider's debt and therefore undermine its viability. Instead, rather than use
his financial viability ratings to convey his assessment of financial
viability, the Regulator uses the governance ratings to signal concerns about
financial viability. This approach lacks openness and is confusing.</i><o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The committee noted that the social housing regulator had admitted
that a “handful” of providers that are of concern to the regulator and a “small
but steady flow of problem cases”, no provider has yet been graded as having “financial
viability [which] is of concern”. Less than 1% of ratings were V3 or V4 – the two
lowest. The only V4 rating was awarded after Cosmopolitan Housing Association
was on its last legs.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The committee’s solution was simple and straightforward:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i>Ratings published by the Regulator should be reliable and
capable of being understood at face value. The practice of using governance
ratings to signal concerns about financial viability lacks openness and is confusing.
It is misleading to the taxpayer and tenants, and potentially also to lenders
who, it appears, are expected to understand the coded message from the
Regulator. We conclude that the practice should cease. We recommend that the
Regulator publish accurate financial viability ratings.<o:p></o:p></i></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
How practical are warts-and-all viability ratings? Might
they actually be self-fulfilling in terms of financial weakness?<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Transparency is important. But might narrative opinions be
better than the pass/fail simplicity of ratings?<o:p></o:p></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-20119658957690880142013-08-27T19:46:00.001+01:002013-08-27T19:46:25.007+01:00Hope for sixth form colleges on VAT? Or just a little more honesty?
Today’s <em>Guardian</em> online and tomorrow’s paper carries an
article about <a href="http://www.theguardian.com/education/2013/aug/26/sixth-form-colleges-funding" target="_blank">sixth form colleges: overachieving but underfunded</a> by <a href="https://twitter.com/harrytwhite" target="_blank">Harry White</a>. The piece
highlighted the funding inequities suffered by SFCs.<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
The article included a quote from a Department for Education
spokesperson:</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<em>Colleges are treated differently to schools when it comes to
VAT because of their legal status. We are looking into whether funding
arrangements should be reviewed to take this into account.</em></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Basically that recognises that SFC bear VAT on their
purchases whereas schools do not.</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
This contrasts with <a href="http://www.publications.parliament.uk/pa/cm201314/cmhansrd/cm130513/text/130513w0001.htm#1305143000715" target="_blank">the Treasury minister David Gauke in Parliament in May this year</a>:</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<em>There are no plans to allow sixth form colleges to waive VAT
on purchases. They ar required to pay VAT on their purchases, in common with
everyone else. The basic funding principle for sixth form colleges is that
these VAT costs are taken into account as part of the up-front funding
allocation.</em></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
I am not expecting any U-turn but there is now a
more honest appraisal of the situation coming out of the Department for
Education.</div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-79996427418777946632013-08-06T21:11:00.001+01:002013-08-06T21:14:35.691+01:00Governance of social landlords – themes in a tagcloudSince the Homes and Communities Agency (HCA) has taken over social
housing regulation, there have been some eye-catching <a href="http://www.homesandcommunities.co.uk/ourwork/regulatory-judgements" target="_blank">Regulatory Judgements</a>
(RJs). In seven cases social landlords have been graded as weak with a G3 or G4
(see Footnote).<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Hopefully in there will be detailed work on these and other
social landlords in with governance difficulties. In the past there was the
<em>Problem Cases</em> trilogy – research by the Housing Corporation and consultancy <a href="http://www.campbelltickell.com/" target="_blank">CampbellTickell</a> on housing associations who had been placed in regulatory supervision.
Perhaps in the age of austerity there will be no funding for looking at case
studies of failure.</div>
<br />
While we wait for more detailed research we might be able to
visualisation techniques to pull out some of the themes from the first seven
social landlords to get G3 or G4 in their RJs. With a population of seven, the
statistical significance will be limited. Nevertheless, the <a href="http://tagcrowd.com/" target="_blank">TagCloud</a> does
highlight issues like development. Also, the TagCloud shows the importance of
frameworks for risk management and assurance for governance. As the HCA churns
out more RJs, TagClouds may prove more instructive.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-J3wj-uti85d23gXBbDv8Y6jI72_LhuKlFzCUL8ef7WAxzV7TM1UGsgLiYGfOQvNXafL0F4NJxWmrqjkGxUN6YZlm03JH9GiZ-9DKGTXngiHO1xZcS8rNBZdOXW_hdA7BtHbJug/s1600/Tagcloud+RJs.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="194" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-J3wj-uti85d23gXBbDv8Y6jI72_LhuKlFzCUL8ef7WAxzV7TM1UGsgLiYGfOQvNXafL0F4NJxWmrqjkGxUN6YZlm03JH9GiZ-9DKGTXngiHO1xZcS8rNBZdOXW_hdA7BtHbJug/s320/Tagcloud+RJs.jpg" width="320" /></a></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-size: x-small;"><strong>Footnote:</strong></span></div>
<span style="font-size: x-small;">
</span><br />
<span lang="EN" style="mso-ansi-language: EN;"><span style="font-size: x-small;">G3 = <em>The provider does not meet
all of the requirements on governance set out in the Governance and Financial
Viability standard. There are issues of regulatory concern and in agreement
with the regulator the provider is working to improve its position.<o:p></o:p></em></span></span><br />
<span style="font-size: x-small;">
</span><br />
<span lang="EN" style="mso-ansi-language: EN;"><span style="font-size: x-small;">G4 = <em>The provider does not meet
the requirements on governance set out in the Governance and Financial
Viability standard. There are issues of serious regulatory concern and the provider
is subject to regulatory intervention or enforcement action.<o:p></o:p></em></span></span><br />
<br />
<span style="font-size: x-small;"></span><br />Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-60016000437955105122013-08-01T19:45:00.001+01:002013-08-01T19:45:33.661+01:00Colleges face yo-yoing bottom lines with proposed accounting rules
There might be a few green shoots of recovery for UK plc but
public services are set for austerity up to at least 2018. The college sector
has felt the pressure of being outside the funding ring-fence protecting pre-16
education. In the middle of this decade, many colleges will take another set of
blows with National Insurance increasing and Formula Protection funding ending
in 2016. Like buses coming in threes, the college sector has another
prospective blow – a new accounting Statement of Recommended Practice (SORP)
for Further and Higher Education which radically (and adversely) changes the way
that capital grants are treated.<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
The draft SORP has not yet been issued but we know what it
will propose for college accounts from 2015/16 onwards. The <a href="http://www.fehesorp.ac.uk/a-new-sorp/whats-changed/" target="_blank">SORP consultation website</a> already outlines the changes on capital grants:</div>
<span style="mso-spacerun: yes;"> </span><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<em>The revenue recognition rules will result in most capital
grants being credited to the Income Statement, rather than to deferred capital
grants on the balance sheet. Deferred capital grants recorded on balance
sheets, and their subsequent release to the I&E Account, will no longer
occur.<o:p></o:p></em></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<em>This change will result in more volatile surpluses and
deficits.<o:p></o:p></em></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<em>Future Income Statements will no longer benefit from the
credit arising from the release of deferred capital grants (currently c£xm per
year), which will reduce on-going reported surpluses.<o:p></o:p></em></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Whereas now capital grants are released as income gradually
over the life of the buildings or other assets which they funded to offset the
depreciation cost of the assets, under the SORP the capital grant is recognised
as income in one go with the depreciation hitting the bottom line year after
year until the asset is fully depreciated. The resulting volatility will be
seen in ridiculously large surpluses coming along when a college gets a capital
grant but then many years of surpluses being much lower (or deficits much
higher) than otherwise. </div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Sometimes the size and/or frequency of those deficits will mean
that colleges breach the financial performance requirements of the covenants on
their loan agreements. Since the credit crunch it can be very costly to upset
bankers – a covenant breach means that a loan is (theoretically) repayable
immediately and, in practical terms, the interest rate can be cranked up. </div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
What will this mean in practical terms? How volatile will
the proposed SORP requirements make bottom lines? It’s hard to say exactly without
a crystal ball. However, we can look at the most recently available college
accounts for some idea of what this means.</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
In 2011/12 the operating surplus for the whole of the
college sector was £141 million – the value of the capital grant releases was
£143 million. So these capital grant releases are significant for the further
education and sixth form colleges taken as a whole. But what about individual
colleges?</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
In total there were 74 colleges with operating surpluses had
capital grant releases larger than these surpluses. In most of these cases the
SORP treatment would have led to an operating surplus. A similar number of
colleges already in deficit would have had a much operating deficits.</div>
<br />
One London college had an operating deficit of £193k in 2011/12
but the value of its capital grant releases was £2.6 million. Another college
in the south east had a surplus of £53k in 2011/12 after benefiting from capital
grant releases of £2.3 million.<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Colleges will have different loan covenants to comply with.
But the SORP changes are a nasty shock to even colleges with relatively permissive
covenants dating from before the credit crunch.</div>
<br />
This amounts to a ticking bomb under the college sector
unless the drafters of the SORP can be persuaded to change their minds by the
consultation period ending in October.<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<o:p> </o:p></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-11091698254214880622013-06-29T16:56:00.002+01:002013-06-29T16:56:31.307+01:00A revised Academies Financial Handbook from September 2013<br />The Education Funding Agency at the Department for Education have published a revised version of the <em>Academies Financial Handbook</em> (pdf <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/209830/Academies_Financial_Handbook_-_June_2013.pdf" target="_blank">here</a>). These <em>Handbooks</em> are like buses: you wait patiently for six year then two come along in less than 12 months.<br />
<br />
The <em>Handbook</em> applies from September. As with the previous version, it applies to free schools and UTCs - which are both types of school constituted as academies.The DfE have usefully issued a companion <em>At A Glance</em> guide (the pdf is tricky to find but it is <a href="http://media.education.gov.uk/assets/files/pdf/a/academies%20financial%20handbook%20at%20a%20glance%20overview_001.pdf" target="_blank">here</a>). The Handbook is largely unchanged from the 2012. The <em>At A Glance</em> guide highlights the following changes:<br />
<br />
<ul>
<li><em>improved information relating to the interlocking roles of trustees, directors and governors;</em></li>
<li><em>additional information on the role of the accounting officer;</em></li>
<li><em>clarification of the delegated limit for academy trusts to make staff severance payments;</em></li>
<li><em>clarification and relaxation of the delegated limits for trusts to dispose of fixed assets;</em></li>
<li><em>clarification and relaxation of the delegated limits for trusts to take up and grant leases;</em></li>
<li><em>additional information about Financial Notices to Improve;</em></li>
<li><em>emphasis of academy trusts’ duties in relation to payments to trustees;</em></li>
<li><em>decoupling of the annual value for money statement (announced in the 2012 Handbook) from academy trusts’ annual accounts, and replacement with a separate return;</em></li>
<li><em>introduction of the option for a multi-academy trust to pool its GAG to meet costs at any of its academies;</em></li>
<li><em>emphasis of academy trusts’ duties in relation to services provided by sponsors;</em></li>
<li><em>a change to the criteria for establishing an audit committee so that it focuses on the size, rather than the type, of academy trust;</em></li>
<li><em>confirmation that the appointment of a responsible officer is not mandatory;</em></li>
<li><em>the introduction of an annex summarising the requirements in the Handbook;</em></li>
<li><em>changes to formatting and cross-referencing, and the use of a navigation pane so that it is easier to move between key topics.</em></li>
</ul>
<br />
Interesting the U-turn on finance committees not acting as audit committees is formally incorporated into the Handbook. This is not highlighted in the <em>At A Glance</em> guide.Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-47984335815221181142013-05-02T22:04:00.000+01:002013-05-02T22:04:27.908+01:00Financial health of sixth form colleges holds up with belt-tighteningAn initial review of <a href="http://skillsfundingagency.bis.gov.uk/providers/finance/financialmanagement/financialmanagement/collegeaccounts/" target="_blank">the newly published spreadsheet of sixth form college accounts for 2011/12 </a>suggests a sector bracing itself for the storm ahead. Its financial health is bearing up in spite of a funding squeeze. The sector is managing this by reducing its pay bill relative to income.<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
The median average operating surplus for sixth form colleges has risen to 2.9% of income from 2.8% in the previous two years. Masked by this average there appears to some polarisation – the weak colleges getting weaker and the stronger more than holding their own. <span style="mso-spacerun: yes;"> </span>The median operating deficit for the poorest quartile worsened from 0.2% to 0.6%. Meanwhile the median operating surplus for the financially strongest quartile improved from 7.2% to 7.7%.</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
In 2009/10 staff costs as percentage of income (including contract tuition services) stood at 70.4% for the sixth form college sector. Then in 2010/11 it reduced to 68.8%. By 2011/12 it had fallen to 67.3%. This is well below the regularly quoted benchmark of a pay:income ratio of 70%. </div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
The reduction in the pay:income ratio is partly from pay restraint: pay freezes restrain pay costs even though many staff derive some benefit from increments. In 2011/12 the average pay costs per staff full-time equivalents (FTE) rose by only 1%.</div>
<br />
Moreover, the total staff count for the sixth form college sector (as measured by FTEs) reduced by 3%. In 2011/12 the staff count was15,301 – down from 15,766 in the previous year. Part of this reduction was at a cost of £5.4m in staff restructuring costs.<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Last week <a href="http://www.ucu.org.uk/6584" target="_blank">the unions in the higher education sector rejected a 0.5% offer from the employers' side</a>. Maintaining industrial peace in the sixth form sector may be increasingly difficult. This will doubtless complicate the challenge of the funding squeeze.</div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-62788818257126451742013-04-30T21:50:00.000+01:002013-04-30T21:55:50.363+01:00Academies in the news – or notIt isn’t exactly news that academies have been in the news
recently. But it is worth reviewing some of the stories and their significance.<br />
<br />
The opponents of the academisation of education will have
seized on <a href="http://www.tes.co.uk/article.aspx?storycode=6329974" target="_blank">the financial Notice to Improve issued by the Education Funding Agency to the academy chain E-Act</a>. In the past <a href="http://www.tes.co.uk/article.aspx?storycode=6073399" target="_blank">E-Act had plans to become a "super-chain" running 250academies by 2016</a>. It is no blocked by the EFA from taking on any more – for now. Days
after the financial Notice to Improve, <a href="http://www.educationinvestor.co.uk/(A(276a5Bp6zgEkAAAAYzRjM2VkYzUtNTJjYS00ZjIwLWIwNWQtM2FmZDQxZGNhMDZjZhRQMyRTc__Xd2IWZ4jSftrFJbM1)S(krhtzfy3qtczibjrizsauuvm))/ShowArticleNews.aspx?ID=3304" target="_blank">E-Act announced that its chief executive Sir Bruce Liddington would be leaving. Liddington was a former leading civil servant at the Department for Children, Schools and Families</a>. <br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
The financial Notice to Improve should be a wake-up call for
academies whether standalone or chains. They must take governance and financial
management seriously.</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Meanwhile the spring has seen interviews for free school
projects. <span style="font-family: "Times New Roman","serif"; font-size: 12pt; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">A few sixth form academies will probably have
been among them. There have been applications from <a href="http://www.lancashiretelegraph.co.uk/news/education/10353972.Plans_for_sixth_form_at_Burnley_free_school/" target="_blank">Burnley</a> to <a href="http://www.bbc.co.uk/news/uk-england-wiltshire-21379740" target="_blank">Salisbury</a>.</span><br />
<br />
Further down the
line is the new <a href="http://www.connellsixthformcollege.com/" target="_blank">Connell Sixth Form College</a> – <a href="http://www.manchestereveningnews.co.uk/news/greater-manchester-news/two-passes-clear-way-10m-2948036" target="_blank">an academy sponsored by Manchester City as part of an ambitious regeneration project</a>. The Connell academy is
intended to meet a demand for new sixth form places but it is located close to
well-established and successful sixth form colleges. In the output of the Connell
academy’s consultation (<a href="http://www.connellsixthformcollege.com/.../Consultation-Report-Feb-2013.pdf" target="_blank">pdf</a> available) the complaints of other post-16 providers (who do not
benefit from the VAT funding of academies) can be discerned.</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
What has not been in the news has been the debate among
sixth form colleges about seeking academy conversion. Since discussion at the
Sixth Form College Forum in the autumn there has not been much talk of this.
While conversion appeared to promise the VAT funding enjoyed by academies, it
also posed questions about the implications of academy status in terms of loan
agreements penalties and formula protection funding. Having said that, some
sixth form colleges will have fewer financial problems with academy status and
may well succumb to the call of the sirens. </div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-44744126940057754752013-03-05T22:25:00.000+00:002013-03-05T22:25:00.750+00:00Sixth form colleges at 20
Everyone loves anniversaries. This month it is the golden
anniversary of the Beaching Report which shrunk the rail network. Next month it
is twenty years since colleges were given their independence. <o:p></o:p><br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
For colleges these are challenging times. Things are perhaps
even more confusing for sixth form college sector. <o:p></o:p></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Even though <a href="http://www.southampton.ac.uk/mediacentre/news/2012/aug/12_143.shtml" target="_blank">sixth form colleges have proven themselves to deliver qualityoutcomes and excellent value-for-money</a>, the sector feels unloved. <a href="http://www.tes.co.uk/article.aspx?storycode=6303491" target="_blank">Last autumn the Sixth Form Colleges Forum debated the possibility of a mass conversion toacademy status</a>. (This will never happen – there are too many financial
obstacles.) The sector feels that academies get all the limelight while many
schools now want to trespass on 16-18 landscape. In the case of sixth form free
schools, the two developments combine.<o:p></o:p></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Over the years there has been a steady shrinkage of the
sixth form college sector. In 2001 there were over 100. In 2011 there were 95.
The numbers carry on going down. <a href="http://www.bbc.co.uk/news/uk-england-shropshire-19842152" target="_blank">On 1 August this year one of the oldestcolleges in the country, Ludlow College, merges into a local General FurtherEducation college.</a></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Financial headwinds will affect sixth form colleges – both
the funding squeeze and the competitive environment. While the sector as a
whole starts of in fairly robust health some colleges start with greater
challenges.<o:p></o:p></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
In 2010/11 five sixth form colleges had negative
“performance ratios”. This is a measure of financial health which takes
operating surplus and adds back the non-cash cost of depreciation. You would
expect this always to be comfortably positive although there can be exceptional
circumstances. (In one case the college appears to fit in that category.)<o:p></o:p></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
Surplus-based measures of financial health do fluctuate.
One-off costs and lucky windfalls can distort the picture. A key measure of
financial viability is a sustainable relationship between income and pay. <o:p></o:p></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
In 2010/11 there were nine sixth form colleges with a
pay:income ratio of 75% compared with an average of about 69%. In 2000/1 there
were fourteen colleges with such a high ratio – but three of those colleges are
no longer around.<o:p></o:p></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
All these measures will suffer some turbulence over the next
few years – not least with the effects of the 2013/14 funding changes and then
the end of the Formula Protection (probably) three years later.<o:p></o:p></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
It should be remembered that operating losses and high pay
costs can be shouldered for some time where sixth form colleges have been
salting away cash-backed reserves. <o:p></o:p></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
When, hopefully, the 2011/12 college accounts are published
in the next few months, we will see the readiness of sixth form colleges for
the next decade.</div>
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
</div>
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<o:p></o:p> </div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-32310828467573569382012-09-25T09:22:00.000+01:002012-09-25T09:22:07.811+01:00Academies and audit committees: where to start with terms of reference
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 11pt;"><a href="http://www.education.gov.uk/schools/adminandfinance/financialmanagement/efafundingfinance/b00212647/external-assurance" target="_blank">The Academies Financial Handbook issued last week by the Department for Education</a> nudges
Academy Trusts (ATs) towards audit committees but allows other committees to incorporate
the role of an audit committee into their remits.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 11pt;">The Handbook states:<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 11pt;"><em>All ATs must establish either an audit
committee or a committee which fulfils the functions of an audit committee (ie
it could be an addition to the terms of reference to an existing committee,
other than the finance committee, and have an overlapping or fully integrated
membership).<o:p></o:p></em></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 11pt;">The apparent block on combined finance and audit
committees may pose a challenge to some ATs. It will not be a surprise who are
familiar with audit codes of practice in the college sector.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 11pt;">The audit code of practice introduced for
colleges in 2004 (<a href="http://readingroom.lsc.gov.uk/pre2005/funding/providers/circular0407-audit-code-of-practice-supplement-b.pdf" target="_blank">pdf</a>) offers a useful template for setting out the role of an audit
committee. Below I have modified its terms of reference to suit an AT:<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>The
Audit Committee will consider matters relating to internal control and
auditors. In particular the Committee is to:<o:p></o:p></em></span></span></div>
<span style="font-size: x-small;"><em>
</em></span><br />
<ul>
<li><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>advise the governing body on the adequacy and effectiveness of the Academy Trust’s systems of internal control and its arrangements for risk management, control and governance processes, and securing economy, efficiency and effectiveness (value for money)<o:p></o:p></em></span></span><span style="font-size: x-small;"><em> ;</em></span></li>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>review the statement on internal control and make appropriate recommendations to the governing body;<o:p></o:p></em></span></span></li>
<span style="font-size: x-small;"><em></em></span>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>advise the governing body on the appointment, reappointment, dismissal and remuneration of auditors (both external auditors and internal audit);<o:p></o:p></em></span></span><span style="font-size: x-small;"><em> </em></span></li>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>monitor the effectiveness of auditors, including the use of auditor performance indicators;<o:p></o:p></em></span></span><span style="font-size: x-small;"><em> </em></span></li>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>ensure effective coordination between auditors;<o:p></o:p></em></span></span><span style="font-size: x-small;"><em> </em></span></li>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>ensure that additional services undertaken by the auditors is compatible with the audit independence and objectivity; </em></span></span></li>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>agree the work programme of internal audit including the checking of financial controls, systems, transactions and risks;<o:p></o:p></em></span></span><span style="font-size: x-small;"><em> </em></span></li>
<li><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>consider the reports of the auditors and, when appropriate, advise the governing body of material controls issues;<o:p></o:p></em></span></span></li>
<span style="font-size: x-small;"><em></em></span>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>monitor the implementation of agreed audit recommendations;<o:p></o:p></em></span></span><span style="font-size: x-small;"><em> </em></span></li>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>ensure that all allegations of fraud and irregularity are appropriately investigated and controls weaknesses addressed; <o:p></o:p></em></span></span><span style="font-size: x-small;"><em></em></span></li>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: x-small;"><em>recommend the annual financial statements to the governing body for approval</em></span></span></li>
<li><span style="font-size: x-small;"><em></em></span><span style="font-family: "Arial","sans-serif"; font-size: 11pt;"><span style="font-size: x-small;"><em>review the committee’s membership and effectiveness on a annual basis to ensure that it has appropriate skills and relevant experience.<o:p></o:p></em></span></span> </li>
</ul>
<span style="font-family: "Arial","sans-serif"; font-size: 11pt;">This wording assumes that the Academy Trust refers to its assurance function as internal audit rather than a Responsible Officer. The wording can be tweaked on this and other Academy Trust specifics. Otherwise it can be adopted for a standalone committee or inserted into the terms of reference for another committee.</span><br />
<span style="font-family: "Arial","sans-serif"; font-size: 11pt;"></span><br />
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-81954595127911840312012-09-22T14:51:00.001+01:002012-09-22T14:51:57.113+01:00Internal control and audit committees - the new Academies Financial Handbook
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">In the past
there was a degree of ambiguity about whether academies had to have an audit
committee. The 2006 Academies Financial Handbook itself did not require one but
it included, as an appendix, a document which did. The 2012 Academies Financial
Handbook (AFH) clarifies the situation.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">The AFH
states the role of the audit committee:<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>The
committee must review the risks to internal financial control at the [academy
trust] and must agree a programme of work that will address these risks, inform
the statement of internal control and, so far as is possible, provide assurance
to the external auditors.<o:p></o:p></em></span></div>
<span style="font-family: "Verdana","sans-serif";"><o:p> </o:p></span><br />
<span style="font-family: "Verdana","sans-serif";">The AFH
clearly requires that academy trusts (which, of course, includes free schools) must establish “either an audit committee
or a committee which fulfils the functions of an audit committee”. Some trusts
by virtue of size or nature are expected to have a separately constituted audit
committee (i.e. one which does not also function as a finance committee).<o:p></o:p></span><br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>Every
[academy trust] must have in place a process for independent checking of
financial controls, systems, transactions and risks. <o:p></o:p></em></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">Ideally
this process should be driven by an audit committee appointed by Governors, but
EFA recognises that this may not be a practical position for every [academy
trust], especially the smaller ones or ones where there is a limited pool of
potential governors to provide the necessary direction. So, EFA has provided
for a system which allows some flexibility as to how any particular [academy
trust] discharges these requirements.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><o:p><em> </em></o:p></span><span style="font-family: "Verdana","sans-serif";"><em>All
[academy trusts] must establish either an audit committee or a committee which
fulfils the functions of an audit committee (i.e. it could be an addition to
the terms of reference to an existing committee and have an overlapping or
fully integrated membership). The decision will be for Governors and should
reflect the size and complexity of the organisation.</em> <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">EFA's
expectations are that that:<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>All [academy trusts]
that are a multi-academy federation must have a dedicated audit committee;<o:p></o:p></em></span></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>All [academy trusts]
with an income of over £10m or capitalised asset value of over £30m should consider having a dedicated audit committee;<o:p></o:p></em></span></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>All other
[academy trusts] may have a dedicated audit committee.<o:p></o:p></em></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">The new
Academies Financial Handbook (AFH) moves beyond internal financial controls and
risks to internal control more broadly. This makes sense: while financial
viability is vital so are other objectives – <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">The AFH
states:<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>The [academy
trust] should have in place sound internal control and risk management
processes.<o:p></o:p></em></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">While the
AFH talks of internal control and risk, strangely the AFH section on internal control
is narrowly focused on matters such as producing annual accounts,
preparing contingency plans, obtaining insurance etc. <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">These things all matter. But tinternal financial control falls short of the concept of
internal control developed by the Turnbull Committee for listed companies and
adopted by the Treasury for the public sector over a decade ago. "Turnbull" required:</span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>An internal
control system encompasses the policies, processes, tasks, behaviours and other
aspects of a company that, taken together:<o:p></o:p></em></span></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>facilitate
its effective and efficient operation by enabling it to respond appropriately
to significant business, operational, financial, compliance and other risks to
achieving the company's objectives. This includes the safeguarding of assets
from inappropriate use or from loss and fraud, and ensuring that liabilities
are identified and managed;<o:p></o:p></em></span></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>help ensure
the quality of internal and external reporting. This requires the maintenance
of proper records and processes that generate a flow of timely, relevant and
reliable information from within and outside the organisation;<o:p></o:p></em></span></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><em>help ensure
compliance with applicable laws and regulations, and also with internal
policies with respect to the conduct of business.<o:p></o:p></em></span></div>
<em>
</em><br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">If you plug
in academy in place of company, that is highly relevant to good governance and
management. It is also far more wide-ranging than contingency plans and
insurance policies. It is about staff and pupil safety, academic performance,
inspection grades, legal compliance, equality and diversity, and many other
objectives.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">So what
should academies be doing if they should be thinking about controls and risks
beyond the financial?<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">Academies
need to ensure that audit committee review not only the risks to internal
financial control but also the risks to delivery of all critical objectives. In
performing that review, they should be directing the Responsible Officer or the
internal auditor (or whatever the assurance function is called) to evaluate
controls and test controls in those critical areas. At new academies with
immature financial processes, much of the work will be around payroll and
purchasing. As academies get better established, non-financial systems will get
more attention and financial ones less.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">The path
from local authority control to independence has been trod before. In the 1990s
over 400 further education colleges went that way. Many survived. Some lived on
within merged institutions. A few merged or closed after failure – sometimes in
scandal. For those of us working with colleges then and now, there were lots of
interesting case studies and good practice and not-so-good practice.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">Audit
committees and internal audit contributing (or not) to internal control were
part of the reason why colleges succeeded (or not).<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";">"Turnbull" was
an issue for colleges then. Now it should be a challenge for academies. Taking
the AFH and going further – rigorous review of both financial and non-financial
risks with audit committees pushing that agenda.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Verdana","sans-serif";"><o:p></o:p></span><br /></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-59879639399053631992012-08-30T08:20:00.002+01:002012-08-30T08:20:57.797+01:00Academies, Responsible Officers and risks: getting the basics right
Tomorrow is the last working day of August. So the
long-promised revised <em>Academies Financial Handbook</em> 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.<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
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.</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
In terms of what ROs did, there was more direction if not
prescription. The RO was given a list of <em>Suggested System Control Checks</em> 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?</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
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 <em>should</em> be informed by the risk
register.</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
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 <em>Academies Financial Handbook</em>. 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?</div>
<br />
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.<br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
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.</div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 0pt;">
<o:p> </o:p></div>
Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0tag:blogger.com,1999:blog-36147393.post-91534809913831160552012-08-02T21:03:00.001+01:002012-08-02T21:03:43.123+01:00Audits and risks: the new Funding Agreement for sixth form collegesThe 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.
<br />
In the 2006 Financial Memorandum colleges were instructed:<br />
<br />
<em>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.</em><br />
<br />
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.<br />
<br />
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:<br />
<br />
<em>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.</em><br />
<br />
The 2012 Agreement states:<br />
<br />
<em>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.</em><br />
<br />
Some mistake surely?<br />
<br />
<a href="http://media.education.gov.uk/assets/files/pdf/e/ebulletin_issue_9.pdf" target="_blank">Only today, the Education Funding Agency reminded sixth form colleges that they did not have to make provisions for internal audit from August 2012</a>. (Of
course, any sensible college will await the Agency’s guidance before making use
of this new flexibility.)<br />
<br />Bob Deedhttp://www.blogger.com/profile/04760543093142035346noreply@blogger.com0