The auditing process can be a time consuming and daunting task; you may not look forward to an external company rifling through your paperwork and potentially highlighting issues with your processes. However, audits are an essential financial management tool to ensure your school, academy or MAT is running as effectively as possible and should be encouraged and embraced.
We’ve published this blog to make you aware of some of the most common issues highlighted by internal and external financial audits, to support you in taking the relevant steps to avoid them.
Common High-Risk Issues:
In order to successfully carry out an audit, ensure that these high-risk issues are avoided at all costs:
- Monthly payroll not checked adequately before BACS or authorised by appropriate person
- Additional payments for staff not authorised properly
- Large value item on finance system with no purchase order and/or no appropriate approval
- Purchases not appropriate to the school/academy e.g. alcohol
- Quotes and tenders are not robust
- Finance policy reviewed but not minuted as ratified by the governing body.
- Incomplete bank reconciliations
- Not completing monthly control account reconciliations and investigating discrepancies
- VAT returns not being prepared and submitted to HMRC in a timely manner
- Bank cheques being pre-signed
- Related party transactions/pecuniary interests not up to date
- Management accounts for academies not presented to trustees monthly in line with Academy Financial handbook
Common Medium Risk Issues:
There are also various medium risk issues that commonly occur during the auditing process, it is important to avoid these potential issues in advance:
- Purchase orders posted after invoice has been received
- Lower value items not having a purchase order and appropriate approval
- Breakfast club/after school income not reconciled to register and receipt
- Authorisation of payroll/ control account reconciliations not recorded
- Inventory/assets not recorded and no evidence of annual review
- Goods received notes are not signed or matched to invoice
- Trips income and expenditure not clearly recorded and identified
- Cash income not recorded appropriately and banked in a timely manner
- Petty cash not balancing
Common Low Risk Issues:
To ensure a smooth auditing procedure it is still important to eliminate these low risks too:
- Unorganised filing system
- SFVS for maintained schools isn’t submitted on time to the LA or School Resource Management Tool Checklist for academy trusts
- Support staff not subject to appraisal or set objectives
- No VAT receipts submitted with mileage claims; therefore school/academy cannot claim the VAT on fuel
- Reconciling/checking of aged debtors/creditors on finance system
- Minutes not reflecting attendance and apologies at governing body meetings.
Now that you have been made aware of the most common issues that occur during the auditing process, you can take relevant measures to prevent these from affecting your future audits.
Our finance consultants can provide guidance on financial best practice which will support you to effectively prepare for either your internal or external audit.
We also provide internal audit services and financial health checks giving you peace of mind that your school, academy or MAT is running as efficiently as possible.
Score Top Marks in your Next Audit