The RSA Academy at Tipton
The RSA Academy at Tipton Report to the trustees and summary of audit findings (Extract for filing purposes) Year ended 31 August 2013
Contents Section
Page
1.
Audit Summary
2
2.
Accounting and financial control systems
3
3.
Regularity observations and recommendations
6
Scope and Limitations This report is part of a continuing dialogue between the Academy and ourselves and is therefore not intended to cover every matter discussed during the course of the audit. For this reason, the report is intended for the sole use of the Academy. We do not accept any responsibility to any governor acting in an individual capacity, and do not accept responsibility for any reliance that third parties may place on the report. It should be noted that the primary objective of our audit is to express an opinion on the truth and fairness of the Academy accounts as a whole. An audit does not examine every operating activity and accounting procedure in the Academy, nor does it provide a substitute for management’s responsibility to maintain adequate controls over the Academy’s activities. Our work is not designed therefore to provide a comprehensive statement of all weaknesses or inefficiencies that may exist in the Academy’s systems and working practices, or of all improvements that could be made.
1
1. Audit Summary 1.1.
Purpose
Our responsibilities as auditors are set out in the International Standards on Auditing (UK and Ireland) (“ISAs”). We are responsible for forming and expressing an opinion on the financial statements that have been prepared by management with the oversight of those charged with governance. The audit of the financial statements does not relieve management or those charged with governance of their responsibilities. We have carried out our audit in accordance with the terms of our engagement letter in order to express an audit opinion for UK statutory purposes on the financial statements of The RSA Academy at Tipton for the period ended 31 August 2013.
1.3.
During our audit we examined the design and implementation of the internal controls relevant to the accounting systems and procedures. The review of internal controls was carried out with a view to expressing an opinion on the financial statements for the year and was not directed primarily towards discovering weaknesses or towards the detection of fraud. Therefore our comments on these systems include only those matters that have come to our attention as a result of our normal audit procedures, and consequently our comments should not be regarded as a comprehensive record of all weaknesses that may exist or of all improvements that might be made.
1.4. 1.2.
Accounting and financial control systems
Audit Opinion
Objectivity and independence
We conducted our audit in accordance with the Code of Ethics of the Institute of Chartered Accountants in England & Wales and the Ethical Standards published by the United Kingdom Auditing Practices Board.
Based upon the findings and conclusions of our work, we expect to issue an unqualified audit opinion on the statements.
We have considered our independence and objectivity in respect of the audit for the period ended 31 August 2013. We confirm that, in our professional judgement, the firm is independent within the meaning of regulatory and professional requirements and the objectivity of the audit engagement partner and audit staff is not impaired.
2
2. Accounting and financial control systems 2.1.
Update on prior year findings
We set out below the matters we became aware of during our prior year audit which relate to the effectiveness of the Academy’s accounting and financial control systems and give an update on procedures put in place since the prior year to address these points. In the prior year we used the following grading system to indicate the significance of the issues we raised and the priority that we believed should be given to our recommendations:
Grade
Description
High (H)
Should be urgently attended to by Trustees and management. These are significant issues that may result in a qualification in the audit report in future periods if not satisfactorily addressed.
Moderate (M)
Issues requiring the attention of Trustees and management. Issues ranked as moderate require close monitoring by the Board and senior management to ensure timely resolution.
Low (L)
Issues requiring management attention and correction. Issues ranked as low are generally routine in nature and should be resolved by general management. The Board and senior management should be aware of these issues to enable monitoring of progress with their resolution. These issues may be reported to management in less detail than more highly rated issues.
3
1
Academy budgets
Grade
L
Issue noted in prior year It was noted that the academy’s budgets do not include balance sheet or cash flow information.
Recommendation
Follow up comments in the current year
Consideration should be given to the inclusion of a budget cash flow and balance As per the prior year management comment, the cash position of the academy sheet within forecasts going forward. remains healthy, which reduces the immediate need for a detailed cash flow forecast. Management response The recommendation is carried forward as something that should be considered At the present time, cash flow is extremely healthy, however, we would produce in the future. this for future years given the uncertainties around future funding long-term.
4
2.2.
Current year findings
We set out below the matters we became aware of during our prior year audit which relate to the effectiveness of the Academy’s accounting and financial control systems and give an update on procedures put in place since the prior year to address these points.
1
Independent checking of financial controls, systems, transactions and risks
Grade
M
Issue At the end of the previous financial year the academy’s Responsible Officer retired and was not replaced as the role of Responsible Officer was no longer mandated under the Academies Financial Handbook 2012. Consequently, there was no formal programme for independent reviews to take place and there was no review until July 2013, when a peer review was commissioned. The Academies Financial Handbook requires the relevant committee (be it Audit Committee, Finance Committee or another delegated committee) to put in place a programme of independent checks to inform the Statement on Internal Control included in the academy’s financial statements. This is also a requirement of section 3.5 of the Academies Financial Handbook 2013. Options for fulfilling this requirement include: - the work of Internal Audit (in-house, brought in or provided by a sponsor) - performance of supplementary work by the External Auditor - the work of a Responsible Officer - undergoing a peer review
Recommendation
Management Response
The relevant committee should assess the key risks to financial control within the academy and agree a programme of regular independent checking (termly) in order to fulfil the requirements of the Academies Financial Handbook and mitigate any control risks identified.
As the RSA Academy operates over 5 terms this could be seen as over regularity. This will be raised as an issue for discussion during the AR&G meeting (10 Dec 2013). The Risk Register is currently under further review with the F&CM and Director of Business and Operations and has been discussed in length at the last two AR&G meetings (refer to minutes).
5
3. Regularity observations and recommendations 3.1. Introduction We set out below the significant matters we became aware of during our audit, which relate to the effectiveness of the Academy’s regularity framework. We have used the following grading system to indicate the significance of the issues we have raised and the priority that we believe should be given to our recommendations:
Grade
Description
High (H)
Should be urgently attended to by Trustees and management. These are significant issues that may result in a qualification in the audit report in future periods if not satisfactorily addressed.
Moderate (M)
Issues requiring the attention of Trustees and management. Issues ranked as moderate require close monitoring by the Board and senior management to ensure timely resolution.
Low (L)
Issues requiring management attention and correction. Issues ranked as low are generally routine in nature and should be resolved by general management. The Board and senior management should be aware of these issues to enable monitoring of progress with their resolution. These issues may be reported to management in less detail than more highly rated issues.
6
1
Investment policy
Grade
L
Issue As per section five of the academy’s investment policy the academy should not deposit any more than 50% of available funds or £500k (whichever is lower) with any single approved institution. It also states that funds should be spread across a minimum of three approved institutions. However, as at 31 August 2013 the academy had £1.3m on deposit with one institution and £1m held with another institution. The academy was therefore technically in breach of its investment policy. Recommendation
Management response
The position with regards to the investment of surplus funds should be reviewed and either:
2
-
The investment policy and reserves policy are currently under review with the The policy should be amended to reflect the significant cash balance held Director of Business and Operations and will be presented to the next F&GP for by the academy; or approval.
-
Funds should be managed in accordance with the policies set
Procedure for recording declarations of interest
Grade
L
Issue It was noted that the academy does not currently have a formal register of interests in place to collate and record the responses to declarations of interest made by governors. Recommendation A register should also be created to formally document the responses from declarations of interest. This should be updated to reflect any declarations of interest at governor’s meetings as they arise. The register should then be reviewed regularly to ensure no conflicts of interest arise and go undetected.
Management response
A register of business interests has been collated by the finance team for all staff. However, the governors declarations were circulated but the register/summary of interests had not been compiled. This will be actioned by the Clerk to Governors for future audit purposes.
7
Contents Section
Page
1.
Audit Summary
2
2.
Accounting and financial control systems
3
3.
Regularity observations and recommendations
6
Scope and Limitations This report is part of a continuing dialogue between the Academy and ourselves and is therefore not intended to cover every matter discussed during the course of the audit. For this reason, the report is intended for the sole use of the Academy. We do not accept any responsibility to any governor acting in an individual capacity, and do not accept responsibility for any reliance that third parties may place on the report. It should be noted that the primary objective of our audit is to express an opinion on the truth and fairness of the Academy accounts as a whole. An audit does not examine every operating activity and accounting procedure in the Academy, nor does it provide a substitute for management’s responsibility to maintain adequate controls over the Academy’s activities. Our work is not designed therefore to provide a comprehensive statement of all weaknesses or inefficiencies that may exist in the Academy’s systems and working practices, or of all improvements that could be made.
1
1. Audit Summary 1.1.
Purpose
Our responsibilities as auditors are set out in the International Standards on Auditing (UK and Ireland) (“ISAs”). We are responsible for forming and expressing an opinion on the financial statements that have been prepared by management with the oversight of those charged with governance. The audit of the financial statements does not relieve management or those charged with governance of their responsibilities. We have carried out our audit in accordance with the terms of our engagement letter in order to express an audit opinion for UK statutory purposes on the financial statements of The RSA Academy at Tipton for the period ended 31 August 2013.
1.3.
During our audit we examined the design and implementation of the internal controls relevant to the accounting systems and procedures. The review of internal controls was carried out with a view to expressing an opinion on the financial statements for the year and was not directed primarily towards discovering weaknesses or towards the detection of fraud. Therefore our comments on these systems include only those matters that have come to our attention as a result of our normal audit procedures, and consequently our comments should not be regarded as a comprehensive record of all weaknesses that may exist or of all improvements that might be made.
1.4. 1.2.
Accounting and financial control systems
Audit Opinion
Objectivity and independence
We conducted our audit in accordance with the Code of Ethics of the Institute of Chartered Accountants in England & Wales and the Ethical Standards published by the United Kingdom Auditing Practices Board.
Based upon the findings and conclusions of our work, we expect to issue an unqualified audit opinion on the statements.
We have considered our independence and objectivity in respect of the audit for the period ended 31 August 2013. We confirm that, in our professional judgement, the firm is independent within the meaning of regulatory and professional requirements and the objectivity of the audit engagement partner and audit staff is not impaired.
2
2. Accounting and financial control systems 2.1.
Update on prior year findings
We set out below the matters we became aware of during our prior year audit which relate to the effectiveness of the Academy’s accounting and financial control systems and give an update on procedures put in place since the prior year to address these points. In the prior year we used the following grading system to indicate the significance of the issues we raised and the priority that we believed should be given to our recommendations:
Grade
Description
High (H)
Should be urgently attended to by Trustees and management. These are significant issues that may result in a qualification in the audit report in future periods if not satisfactorily addressed.
Moderate (M)
Issues requiring the attention of Trustees and management. Issues ranked as moderate require close monitoring by the Board and senior management to ensure timely resolution.
Low (L)
Issues requiring management attention and correction. Issues ranked as low are generally routine in nature and should be resolved by general management. The Board and senior management should be aware of these issues to enable monitoring of progress with their resolution. These issues may be reported to management in less detail than more highly rated issues.
3
1
Academy budgets
Grade
L
Issue noted in prior year It was noted that the academy’s budgets do not include balance sheet or cash flow information.
Recommendation
Follow up comments in the current year
Consideration should be given to the inclusion of a budget cash flow and balance As per the prior year management comment, the cash position of the academy sheet within forecasts going forward. remains healthy, which reduces the immediate need for a detailed cash flow forecast. Management response The recommendation is carried forward as something that should be considered At the present time, cash flow is extremely healthy, however, we would produce in the future. this for future years given the uncertainties around future funding long-term.
4
2.2.
Current year findings
We set out below the matters we became aware of during our prior year audit which relate to the effectiveness of the Academy’s accounting and financial control systems and give an update on procedures put in place since the prior year to address these points.
1
Independent checking of financial controls, systems, transactions and risks
Grade
M
Issue At the end of the previous financial year the academy’s Responsible Officer retired and was not replaced as the role of Responsible Officer was no longer mandated under the Academies Financial Handbook 2012. Consequently, there was no formal programme for independent reviews to take place and there was no review until July 2013, when a peer review was commissioned. The Academies Financial Handbook requires the relevant committee (be it Audit Committee, Finance Committee or another delegated committee) to put in place a programme of independent checks to inform the Statement on Internal Control included in the academy’s financial statements. This is also a requirement of section 3.5 of the Academies Financial Handbook 2013. Options for fulfilling this requirement include: - the work of Internal Audit (in-house, brought in or provided by a sponsor) - performance of supplementary work by the External Auditor - the work of a Responsible Officer - undergoing a peer review
Recommendation
Management Response
The relevant committee should assess the key risks to financial control within the academy and agree a programme of regular independent checking (termly) in order to fulfil the requirements of the Academies Financial Handbook and mitigate any control risks identified.
As the RSA Academy operates over 5 terms this could be seen as over regularity. This will be raised as an issue for discussion during the AR&G meeting (10 Dec 2013). The Risk Register is currently under further review with the F&CM and Director of Business and Operations and has been discussed in length at the last two AR&G meetings (refer to minutes).
5
3. Regularity observations and recommendations 3.1. Introduction We set out below the significant matters we became aware of during our audit, which relate to the effectiveness of the Academy’s regularity framework. We have used the following grading system to indicate the significance of the issues we have raised and the priority that we believe should be given to our recommendations:
Grade
Description
High (H)
Should be urgently attended to by Trustees and management. These are significant issues that may result in a qualification in the audit report in future periods if not satisfactorily addressed.
Moderate (M)
Issues requiring the attention of Trustees and management. Issues ranked as moderate require close monitoring by the Board and senior management to ensure timely resolution.
Low (L)
Issues requiring management attention and correction. Issues ranked as low are generally routine in nature and should be resolved by general management. The Board and senior management should be aware of these issues to enable monitoring of progress with their resolution. These issues may be reported to management in less detail than more highly rated issues.
6
1
Investment policy
Grade
L
Issue As per section five of the academy’s investment policy the academy should not deposit any more than 50% of available funds or £500k (whichever is lower) with any single approved institution. It also states that funds should be spread across a minimum of three approved institutions. However, as at 31 August 2013 the academy had £1.3m on deposit with one institution and £1m held with another institution. The academy was therefore technically in breach of its investment policy. Recommendation
Management response
The position with regards to the investment of surplus funds should be reviewed and either:
2
-
The investment policy and reserves policy are currently under review with the The policy should be amended to reflect the significant cash balance held Director of Business and Operations and will be presented to the next F&GP for by the academy; or approval.
-
Funds should be managed in accordance with the policies set
Procedure for recording declarations of interest
Grade
L
Issue It was noted that the academy does not currently have a formal register of interests in place to collate and record the responses to declarations of interest made by governors. Recommendation A register should also be created to formally document the responses from declarations of interest. This should be updated to reflect any declarations of interest at governor’s meetings as they arise. The register should then be reviewed regularly to ensure no conflicts of interest arise and go undetected.
Management response
A register of business interests has been collated by the finance team for all staff. However, the governors declarations were circulated but the register/summary of interests had not been compiled. This will be actioned by the Clerk to Governors for future audit purposes.
7
