Auditing the fund account
Independent auditing of the fund account
Question 30 of the SFVS is “Does the school have adequate arrangements for audit of voluntary funds?”
The term voluntary fund applies to any account that is managed by the school other than the budget share account. This includes the school fund and governors accounts. Funds that are intended for the school budget share account must not be diverted into a private or other account.
As part of the SVFS submission the governing body must outline the details of each private, voluntary or trading organisation account and notify them of any additions or changes to these.
At the end of each financial year the final accounts of the private and voluntary funds must be prepared for an independent examination (audit). An independent examiner could be any person with a financial knowledge who is not involved with the running of the school. Therefore, the independent examination cannot be a governor, but could be a parent, a person in the local community or request for FSS to audit the accounts. Some schools have taken the decision to swap accounts with a local school and audit each other’s.
An auditor will need to review an audit certificate when visiting the school. This should be completed by the examiner to state they are an accurate set of accounts. Whilst the SFVS standard asks for an audit, Hertfordshire County Council (hereby referred to as the Council) will accept an independent examination in line with the Charity Commission guidelines. This states that the governors can opt for an independent examination as opposed to a statutory audit for fund accounts with gross income under £500,000. This requirement is outlined in the schools' financial handbook.
Any fraud or irregularities that have been identified, should be brought to the notice of the Head of Shared Internal Audit.
Who can complete a fund account audit?
The Schools Financial Handbook (Part 7) and DfE SFVS Guidance outline who is able to complete fund account audits.
DfE: Schools financial value standards checklist guidance
What certificate has to be completed?
The Schools Financial Handbook provides an example certificate in Annex I (page 77).
Public and private funds
It is important to distinguish between public funds provided by the local authority and those generated or raised by the governors or school. Funds provided by the local authority are governed by the authority’s scheme for financing schools and the provisions of the schools' financial handbook. Funds raised by governors or the school are controlled by the governing body and will be held in a separate (private) account.
Funds that belong to bodies that are closely associated to the school, but are not part of it, should be wholly separate e.g. parent teacher associations. See section 7.5 of the schools' financial handbook for further clarification on the administration of these accounts.
Definitions of ‘audit’ and ‘independent examination’ based on those published by the Charity Commission
Professional audit: An audit undertaken by a person who is eligible under the 1993 Charities Act, normally a registered auditor. The auditor has to express a professional opinion as to whether the accounts are ‘true and fair’ and they conduct the audit in accordance with Public Sector Internal Audit Standards (PSIAS).
An independent examination is an external review of an organisation’s accounts and is carried out by an independent person with the requisite ability and practical experience to carry out a competent examination.
An independent examination provides an external check on the accounts and can be carried out by any person with the relevant ability and experience. An examination is a less onerous form of scrutiny than an audit and provides less assurance in terms of the depth of work which is to be carried out.
An examiner, in their report, is only required to confirm that no evidence has been found that suggests certain things have not been done by the organisation. This form of ‘negative assurance’ is a more limited form of scrutiny. The examiner is not acting as an auditor and so is not required to plan their work, to identify fraud or to test the internal financial controls operating in the organisation.
An examination involves a review of the accounting records kept by the organisation and a comparison of the accounts presented with those records. It also involves a review of the accounts and the consideration of any unusual items or disclosures identified. It is important to note that verification and vouching procedures, where an item in the accounts is checked against an original document such as an invoice or a receipt, only becomes necessary where significant concerns are identified from the work of the examiner, or where satisfactory explanations cannot be obtained from those responsible for the administration of the accounts.
In the examiner’s report, the examiner is only required to provide a statement on specific matters that have come to their attention as a result of the examination procedures followed. An auditor is required to build up a body of evidence to support a positive statement of opinion on the accounts. In particular, an auditor is required to form an opinion as to whether the accounts show a ‘true and fair view’.