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KEEPING YOUR BALANCE –WITH A LITTLE HELP. Hugh Thomas, Audit and Risk Manager 22 nd November 2012. PURPOSE OF THE TALK. BACKGROUND ROLES AND RESPONSIBILITIES AN OVERVIEW OF FINANCIAL MANAGEMENT ROLE OF AUDIT A TYPICAL SCHOOL AUDIT WHAT CAN GO WRONG QUESTIONS . THE MESSAGE .

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keeping your balance with a little help

KEEPING YOUR BALANCE –WITH A LITTLE HELP

Hugh Thomas,

Audit and Risk Manager

22nd November 2012

purpose of the talk
PURPOSE OF THE TALK
  • BACKGROUND
  • ROLES AND RESPONSIBILITIES
  • AN OVERVIEW OF FINANCIAL MANAGEMENT
  • ROLE OF AUDIT
  • A TYPICAL SCHOOL AUDIT
  • WHAT CAN GO WRONG
  • QUESTIONS
the message
THE MESSAGE
  • GOVERNORS DO NOT NEED TO BE EXPERTS
  • ROLES AND RESPONSIBILITIES – MAY SEEM DAUNTING
  • TERMINOLOGY – NEW
  • VALUES – LARGE
  • EXPERIENCE – MIXED
  • EXPECTATION – HIGH
  • COMMITMENT – UNDENIABLE
  • THE SIMPLEST QUESTIONS ARE OFTEN THE BEST QUESTIONS
  • EVERYBODY BRINGS SOMETHING TO THE TABLE
  • IF YOU DON’T KNOW – ASK
  • HELP IS AVAILABLE FROM VARIOUS SOURCES
statistics
Statistics!!
  • 111 Primary, 14 Secondary and 2 Special schools.
  • The total Fair Funding allocations 2012/13 were:-
  •  Primary £54,888,270
  • Secondary £54,992,608
  • Special £3,104,895
  •  Total £112,985,773

Staff Costs £93m 1500 Teachers Utilities £3.7m

  •  The balances carried over by schools as at 1st April 2012 were:-
  • Primary £3,752,752 (£3,971,080 surplus, and £218,328 deficit)
  • Secondary £1,944,192 (£2,526,606 surplus, and £582,414 deficit)
  • Special £294,924 (£294,924 surplus)
  •  Total £5,991,868

 Of the balances shown above, the schools propose to spend the following amounts:-

  •  Primary £1,798,458
  • Secondary £1,232,353
  • Special £221,905
  •  Total £3,252,716
  • PRIVATE SCHOOL FUNDS !!!
a trusted mum stole 6k from bristol parent teacher association
A trusted mum stole £6K from Bristol parent-teacher association
  • A TRUSTED mum and treasurer of a Bristol parent-teacher association stole thousands of pounds meant for the school children where her own children were pupils to pay off her own spiralling debts.
  • In just 18 months she helped herself to more than £6,000 from the school's Parents', Teachers' and Friends' Association (PTFA), money which could have been used for playground improvements or library books.
  • She forged her first cheque just two days into her role as the PTFA's treasurer.
  • She told police in interview the temptation had been too much to resist after she racked up debts of £20,000 and her husband walked out, leaving her with three children to support.
  • After school fundraising events, the vice-chairwoman would count the money and give it to the mum to bank. But time and again she failed to deposit the cash. She kept £565 from a school Santa's grotto and £121 from pupils writing letters to Father Christmas last December. In May she pocketed £615 from a school disco, another £513 from a World Cup event in June, and £146 from a school dress-down day, again in June.The court was also told Millard stole about £2,500 between January 2009 and July 2010 by forging signatures on cheques.
  • The PTFA's chairman had become suspicious of Millard in December and January after she failed to go to meetings or produce financial reports. In July he discovered the PTFA bank account only contained £240, much less than the £5,000 he expected, and £1,647 from a summer fete had not been banked.
  • The Chairperson was told that cash not deposited and that other monies had been stolen from her home. When they went to her house she gave them the £1,647 and told them she wanted to give them a cheque for £2,000.
a trusted mum cont d
A trusted mum cont’d
  • The Chairman said “after so much successful fundraising to discover these thefts at the end of the school year was a catastrophe. It took us months to recover.
  • "We always get requests from the school to pay for things that their budget can't quite stretch to, but we had to cancel some projects.
  • "What she did seriously damaged the morale of the PTFA team and our reputation with the parents, but both they and the school have been very supportive of us since then.
  • "The true amount of money will never actually be known.”
  • "She didn't take up the role of treasurer to take the money, but the temptation was too much to resist.“
  • Her defence said: "She intended to repay the amount as and when she could, but her situation didn't improve. She has now sold her house in order to pay the debts, and the offence she committed made life so unbearable that she has moved to make a new start.
  • "This was an unsophisticated offence of which she is thoroughly ashamed, and it was inevitable that she would be found out."
  • Chairman added the PTFA was also making a claim against HSBC, its bank, for allowing her to withdraw such large amounts of cash using the signature of only one signatory.
what can we do
WHAT CAN WE DO ??
  • BE RISK AWARE – WHAT IF???
  • ACTIONS HAVE CONSEQUENCES
  • INACTION HAS CONSEQUENCES
  • COMPLY WITH RULES
  • TIMELINESS
  • IF IT DOESN’T LOOK RIGHT IT PROBABLY ISN’T
  • ASK
financial management roles and responsibilities
FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES
  • GOVERNORING BODY
  • HEADTEACHER
  • OTHER SCHOOL STAFF
  • THE AUTHORITY
  • ESTYN
financial management roles and responsibilities1
FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES

THE GOVERNING BODY

  • Responsibilities detailed in the School Standards Framework Act.
  • The Governing Body Is Accountable to the LEA.
  • Strategic Role - Setting Aims and Objectives , Setting Policies and Targets, School Development Plan, Reviewing progress, Appointing Staff, Providing Information for Parents.
  • Act as a Critical Friend for the Headteacher providing advice and support. Challenging and Questioning
  • Approves the School Budget
financial management roles and responsibilities2
FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES

THE GOVERNING BODY’S ROLE IN FINANCE MATTERS IS TO:

  • Decide how to spend its delegated budget subject to any conditions in the LEA scheme
  • Make sure accurate accounts are kept
  • The full governing body need not take every decision
  • They may delegate some of their functions and powers to the Headteacher, to an individual governor or to committees that the governing body set up
  • But the responsibility remains with the full Governing Body
governing body decision planner

GOVERNING BODY DECISION PLANNER

KEY

Level 1 = decisions made by GB

Level 2 = decisions made by GB with advice from head

Level 3 = decisions delegated to head

Level 4 = decisions made by head

Column blocked off: Function cannot legally be carried out at this level

Tick: Recommended level (s) or where law assigns specific responsibility

Blank: Action could be carried out at this level if governing body so decide, but

is not generally recommended

* Functions which the whole governing body must consider

** All schools must ensure that their financial arrangements comply with the current financial regulations, standing orders and schemes of delegation issued by their local authority

*** GB may, if they wish, be involved in the selection pane.

GOVERNING BODY DECISION PLANNER

KEY

Level 1 = decisions made by GB

Level 2 = decisions made by GB with advice from head

Level 3 = decisions delegated to head

Level 4 = decisions made by head

Column blocked off: Function cannot legally be carried out at this level

Tick: Recommended level (s) or where law assigns specific responsibility

Blank: Action could be carried out at this level if governing body so decide, but

is not generally recommended

* Functions which the whole governing body must consider

** All schools must ensure that their financial arrangements comply with the current financial regulations, standing

orders and schemes of delegation issued by their local authority

*** GB may, if they wish, be involved in the selection panel.

financial management roles and responsibilities3
FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES

THE HEADTEACHER

  • ADVISES ON AND IMPLEMENTS THE GOVERNING BODIES STRATEGIC FRAMEWORK AND POLICIES
  • REPORTS ON PROGRESS
  • RESPONSIBLE FOR INTERNAL ORGANISATION, MANAGEMENT AND CONTROL
  • DAY TO DAY MANAGEMENT
  • LOTS OF OTHER THINGS
financial management roles and responsibilities4
FINANCIAL MANAGEMENT - ROLES and RESPONSIBILITIES

OTHER STAFF

  • School Administration

THE AUTHORITY

  • Education staff - Strategic Direction, School Improvement
  • Finance Staff – Accountancy, Payments, Payroll, Audit
  • Other Depts – Legal, Property Services other Sla’s
  • ESTYN
estyn
ESTYN
  • Staffing and financial resources are managed and deployed effectively to support learning improvement.
  • The impact of resources on teaching and learning is kept under review and future needs are planned for.
  • The school’s spending decisions relate well to priorities for improvement and the benefit of the pupils
estyn1
ESTYN

There are clear management features that contribute to or detract from the efficient management of resources.

They should consider how well leaders and managers:

  • ensure that the school is appropriately staffed to teach the curriculum effectively;
  • deploy staff to make best use of their time, expertise and experience;
  • identify and meet the development needs of all staff through appraisal and

performance management systems;

  • make effective use of teachers’ planning, preparation and assessment time;
  • employ appropriate strategies and processes to meet the statutory requirements

of the National Agreement on ‘Raising Standards and Tackling Workload’

(January 2003);

  • manage and deploy teaching assistants and non-teaching staff;
  • provide the best standards of accommodation possible within the school’s

budget; andensure that pupils have enough appropriate learning resources.

estyn2
ESTYN

Inspectors should concentrate less on the detail of the financial budgets than on the extent to which the school’s spending decisions and broad financial planning are based on priorities for expenditure on improvement over time.

They should consider the extent to which leaders and managers:

  • know the costs of existing programmes and activities, keep them under review

and question whether they are cost-effective, for instance in relation to non-viable class sizes;

  • identify priorities and areas for development and allocate resources appropriately and according to clear criteria to reflect the school’s agreed objectives;
  • have systematic and accurate budgeting arrangements, including appropriate arrangements for contingencies; andhave established a sensible balance between the responsibilities undertaken by governors and those delegated to the headteacher and staff.
estyn3
ESTYN

When inspecting value for money, inspectors should take into account the effectiveness of the school in achieving good or excellent outcomes for pupils. However, if resources are poorly managed, even if outcomes are good, the overall judgement should reflect the areas for improvement identified.

  • Inspectors should evaluate:
  • the effectiveness of the provision in securing appropriate outcomes for pupils

overall;

  • the extent to which the school successfully balances the effectiveness of its

provision against costs, including staffing costs; and the extent to which it makes good use of the funding it receives.

  • They should state in the report that the school offers excellent, good, adequate or

unsatisfactory value for money in terms of the use made of the budget allocated to

the school.

financial management
FINANCIAL MANAGEMENT

Is the Overall Management

of an Organisation’s Financial Resources

to ensure the best Value for Money

in delivering set Objectives

within an Approved Budget

within Timescales

financial management1
FINANCIAL MANAGEMENT
  • Good Financial Management is about proper stewardship of public funds and about using resources effectively. This means ensuring that budgets are not overspent through inefficiency and waste, but equally that they are not deliberately or needlessly underspent. (Audit Commission)
why have financial management
WHY HAVE FINANCIAL MANAGEMENT
  • Allows better planning
  • Links with School Development Plan
  • Allows costs to be considered and controlled
  • Allows and demonstrates that limited resources are used effectively and efficiently
  • Evidence of Compliance with Rules
  • It is Public Money
  • Prevents Fraud
  • Estyn
financial management the rules
FINANCIAL MANAGEMENT– THE RULES
  • THE SCHOOL STANDARDS AND FRAMEWORK ACT 1998
  • FAIR FUNDING SCHEME
  • FINANCIAL PROCEDURE RULES FOR SCHOOLS
  • SCHOOL GOVERNORS GUIDE TO THE LAW
fair funding scheme
FAIR FUNDING SCHEME
  • SETS OUT THE FINANCIAL RELATIONSHIP BETWEEN AUTHORITY AND THE SCHOOL, INCLUDING FINANCIAL MANGEMENT
  • THE AUTHORITY - STRATEGIC ROLE; DELIVERING BETTER EDUCATION.
  • GOVERNORS - FINANCIAL AND MANAGERIAL RESPONSIBILITIES WITHIN THE STATUTORY AND LOCAL AUTHORITY REQUIREMENTS.
  • IT IS A MATTER FOR EACH GOVERNING BODY TO DECIDE THE EXTENT TO WHICH IT WISHES TO FURTHER DELEGATE IT’S POWERS TO THE HEADTEACHER WITH ANY SUCH DECISION (AND ANY REVISIONS) TO BE FORMALLY RECORDED IN THE MINUTES OF THE GOVERNING BODY.
fair funding scheme1
FAIR FUNDING SCHEME
  • ALL SCHOOLS, IN THE MANAGEMENT OF THEIR DELEGATED BUDGETS WILL NEED TO ABIDE BY THE AUTHORITY’S REQUIREMENTS ON FINANCIAL CONTROLS AND MONITORING.
  • ALL SCHOOLS MUST ENSURE THAT THEIR FINANCIAL ARRANGEMENTS COMPLY WITH THE CURRENT FINANCIAL REGULATIONS, STANDING ORDERS AND SCHEMES OF DELEGATION ISSUED BY THEIR LOCAL AUTHORITY.
financial procedure rules for schools
FINANCIAL PROCEDURE RULES FOR SCHOOLS
  • Financial Procedure Rules explain the procedures, which we must all follow to ensure high standards of financial management. They tell us things we cannot do, but also tell us things we can whilst keeping within the rules.
  • School Governors are accountable for the deployment of resources for which they have been given responsibility and they will delegate functions of a financial nature to individual officers.
  • All Governors and employees who undertake an activity which affects the School’s finances must ensure that they understand the relevant requirements within Financial Procedure Rules.
a typical school systems and processes
A TYPICAL SCHOOL SYSTEMS and PROCESSES !!
  • A typical School
  • Governance – decision making, transparency
  • Budgets – School Development Plan, Pupil numbers
  • Payroll – teachers, admin, other support
  • Procurement – how, from who, value for money
  • Payments – appropriate, accurate, timely, how
  • Income – maximised, accountable,
  • Assets – building, equipment, people
  • Communication - management information,
  • Monitoring and Supervision
  • Then there’s the pupils themselves and their education
financial management2
FINANCIAL MANAGEMENT

GOVERNANCE

  • Roles and Responsibilities
  • Decision making process
  • Objectives are established, understood and monitored
  • Challenge
  • Effective Management information/reporting
  • Risk Aware
financial management3
FINANCIAL MANAGEMENT
  • FINANCIAL RESOURCES
  • Budget Setting - Pupil numbers - Formula Funding
  • Delegation
  • Separation of Duties - Authorisation
  • Standard procedures – payroll, procurement payments, income
  • Monitoring – On track, Fraud prevention
financial management4
FINANCIAL MANAGEMENT
  • VALUE FOR MONEY
  • Best use of Resources
  • Good Housekeeping
  • Effective Purchasing (Quality : Price)
  • Maximising Income
non financial management controls
NON FINANCIAL MANAGEMENT/CONTROLS
  • Asset Management
  • Security
  • Health and Safety
  • IT Security
  • Data Security
financial management5
FINANCIAL MANAGEMENT
  • HELP IS AVAILABLE
  • FOLLOW THE RULES
  • NEED NOT BE AN EXPERT
  • COMMON SENSE APPROACH
  • KEEP IT SIMPLE
  • NEED NOT BE A PROBLEM
  • ASK
internal audit
INTERNAL AUDIT
  • PROVIDE INDEPENDENT AND OBJECTIVE ASSURANCE TO MANAGEMENT OF THE CONTROL ENVIRONMENT (COMPRISING RISK MANAGEMENT, CONTROL AND GOVERNANCE) EVALUATING ITS EFFECTIVENESS IN ACHIEVING THE ORGANISATION’S OBJECTIVES.
  • IT OBJECTIVELY EXAMINES, EVALUATES AND REPORTS ON THE ADEQUACY OF THE CONTROL ENVIRONMENT AS A CONTRIBUTION TO THE PROPER, ECONOMIC, EFFICIENT AND EFFECTIVE USE OF RESOURCES.
role of internal audit
ROLE OF INTERNAL AUDIT
  • STATUTORY RESPONSIBILITY
  • INDEPENDENT REVIEWS OF ALL FUNCTIONS OF THE AUTHORITY TO ENSURE COMPLIANCE WITH APPROVED PROCEDURES AND TO MINIMISE THE RISKS TO WHICH THE AUTHORITY IS EXPOSED
  • COMPLIANCE WITH PROCEDURES, POLICIES, REGULATIONS AND LEGISLATION
  • THE AUTHORITY MEETS ITS EXTERNAL OBLIGATIONS E.G. LEGAL REQUIREMENTS
role of internal audit1
ROLE OF INTERNAL AUDIT
  • PROVIDE ASSURANCE TO MANAGEMENT THAT THEIR AGREED POLICIES ARE BEING CARRIED OUT EFFECTIVELY
  • HELP MANAGERS TO IDENTIFY IMPROVEMENTS IN CONTROL, PERFORMANCE AND PRODUCTIVITY
  • A SERVICE TO MANAGEMENT, PROVIDE ADVICE
  • FRAUD INVESTIGATION
typical audit process
TYPICAL AUDIT PROCESS

School Audit – Bilingual Approach

  • Primary Schools visited 1 in 3 Years
  • Secondary / Special Schools visited 1 in 2 years
  • Contact Headteachers
  • Pre meeting Chair of Governors attends
  • Questionnaire Format
  • Testing on a Sample Basis
  • Draft Report
  • Final Report (Including Action Plan)
  • Report for Chair of Governors/Head Teacher
  • Follow up Implementation of the Agreed Actions
areas reviewed during the audit
AREAS REVIEWED DURING THE AUDIT

A. Governance

  • Decision Making/Management Structure
  • School Development Plan
  • Policies

B. Financial Management

  • Compliance with the Rules ( Financial Procedure Rules for Schools)
  • Budgets, Payroll, Procurement, Payment, Income
  • School Funds
  • School Meals

C. Asset Management

  • Asset Control, Inventory, Stocks
  • Computers, IT controls
  • Insurance
  • Health and Safety
a recipe for something to go wrong
A RECIPE FOR SOMETHING TO GO WRONG
  • LOTS OF MONEY
  • LOTS OF SYSTEMS
  • LOTS OF SCHOOLS
  • LOTS OF PEOPLE
  • DIFFERENT SITES
  • DIFFERENT PRESSURES
  • EVERYONE IS HONEST
what can go wrong
WHAT CAN GO WRONG !!!!!
  • BUDGET OVERSPEND/UNDERSPEND
  • INEFFECTIVE USE OF RESOURCES
  • POOR VALUE FOR MONEY
  • A CRITICAL INTERNAL AUDIT
  • ESTYN INSPECTION - PERFORMANCE STANDARDS
  • PLUS
head handed a prohibition order for 10 years by education secretary ending her career
Head handed a prohibition order for 10 years by Education Secretary- ending her career
  • Headteacher had transferred money to the School Fund from the School Budget Account and had used the funds for trips to China, social events Cliff Richard concert and staff loans is struck off for 10 years.
  • She employed her son and paid him a higher than normal salary
  • Used money intended for special needs pupils to pay for staff social trips
  • She lent one employee £20k to buy a car
  • London Borough of Hillingdon identified a string of financial irregularities during a routine audit
  • The Teaching Disciplinary review found her guilty of unacceptable professional conduct and she was banned for teaching for 10 years
  • There was a need to be an open and transparent in decision making.
  • The review found that the Head had failed to properly declare conflicts of interest when employing her daughter, son and brother
slide40

Flintshire Head jailed for 16 months

A Headteacher stole £53k from School Funds which were not subject to regular audit to fund a gambling addiction

Birmingham Head forged Chairman’s signature escapes being struck off the Teaching Council

A Head forged a signature to increase his salary

Head is sacked

Governors reinstate him

Parents protest and he resigns and is appointed as School advisor

2 Rotherham Heads Jailed for £22k School cash scam

They conspired with a builder who provided inflated quotes and the Heads benefitted from School Funds

slide41

Thieving secretary has been jailed after stealing up to £89,000 from the primary school where she worked to fund her bid to be a property tycoon.

  • The trusted 51-year-old swindled the cash over six years after rising from dinner lady to running the school's accounts.
  • The money was set aside to fund school trips, school meals, charity events and even a Christmas party.
  • The secretary was arrested and forced to resign after an investigation found she had used the cash to put deposits on a house in the U.S., a holiday home in Bulgaria, and several properties in the UK. She gave some of the money to members of her family.
  • Headteacher said "The school has been absolutely shattered by this betrayal of trust. She not only abused her position of trust, but also ruthlessly deprived pupils of the money raised by hard-working parents."
  • The secretary repeatedly wrote out cheques to herself and members of her family, before swapping money around the accounts in an attempt to cover her tracks.
  • Audits have been unable to determine the exact figure.
  • The prosecutor said: ""She said she had bills to pay at home and it had just snowballed."
  • The defence barrister said she had 'lost everything'.
  • He added: "Her children don't want to know her. She's lost her husband. They are separated and planning to divorce. She is left at 51 with no-one and has only herself to blame."
  • Jailing Bailey, Judge Granville Styler told her: "The consequences of your dishonesty have been devastating for you."You've lost your job and family, and suffered humiliation in the community.
  • "But that humiliation is richly deserved."
contacts
CONTACTS
  • Hugh Thomas - Audit and Risk Manager 01267 246223, MHuThomas@carmarthenshire.gov.uk
  • Meirwyn Thomas Senior Auditor Schools 01267246228 RMThomas@carmarthenshire.gov.uk
  • Peter Williams
  • Susannah Nolan – LMS Manager 01267246717 SNolan@carmarthenshire.gov.uk