Learning Pathways Academy Trust For the year ended 31 August 2019 Presented to the Trustees on 12 December 2019 Prepared by Cara Miller, Partner T: 01245 353177 E: [email protected]MHA MacIntyre Hudson, Boundary House, 4 County Place, Chelmsford, Essex Audit Findings Report
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Being recognition of rates reclaim deferred income (BPS, WHA & LHS) 22,461 22,461
Subtotal of all adjustments 22,461 - - 22,461
Net impact of adjustments made 22,461
17
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Regularity Issues
5. Regularity issues
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Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Regularity Issues
5. Regularity issues
Regularity issues and potential
consequences
Significance and
recommendations Trustees’ response
Timescale and
responsibility for
implementation
Upon review of the Learning Pathways
Academy website we found the Trustees
were not up to date.
We recommend that this is updated for all new
trustees and resigning trustees.
Website issues at the time of the audit have now been
resolved. Updated website was not pulling through
correctly
Complete
On review of the title register at White Hall
Academy, the property and land are
currently registered to “Coppins Green
Primary School”.
We recommend that this is re-registered in the
correct name.
Action is being taken.
Immediate- GG
We have set out below the regularity issues that arose during the course of our work. The Trustees' responses to the issues raised, together with a
timescale for action, have been included where these have been received prior to the finalisation of this report. All observations have been graded as low,
medium or high risk, as noted below, reflecting our initial assessment of priorities, but it is for the trustees to decide what actions are necessary.
19
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Internal Control
6. Internal control deficiencies
20
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Internal Control
6. Other internal control deficiencies
6.1 Observations of weaknesses in Internal Control
Weakness and potential consequences Significance and
recommendations Trustees’ response
Timescale and
responsibility for
implementation
WHA: Bank reconciliations
The year end bank reconciliation didn’t agree to the year
end balance per the trial balance, yet had been signed off
by two levels of authority to identify it as having been
checked, indicating a weakness in internal controls.
Risk rating: Medium
We recommend that the bank reconciliation is
checked against the balance per the trial balance
and signed off to indicate this has been checked.
Any differences should be followed up in a timely
manner, and the bank reconciliation reperformed
if necessary.
Noted. PSF reports to be used to reconcile
the bank accounts.
Immediate - GG
WHA: Year end postings
The accruals balance per the trial balance did not agree to
the accruals schedule provided to us. Upon investigation
we found the accruals balance was posted to the incorrect
period, leading to overstated net income of £13k.
The year end accrued income balance had been posted
the wrong way round leading to the net income being
understated by £148k.
The year end prepayments balance had not been posted to
the system, leading to an understatement of net income of
£20,418. We also found that the prepayment schedule
had not be updated accurately leading to an error of
£5,673.
Risk rating: Medium
We recommend that an independent review of all
year end postings is undertaken, ensuring that
balance sheet amounts agree back to the
supporting schedule, to ensure all year end
adjustments are complete and accurately posted.
Noted. Further reconciliation checks have
now been introduced
Immediate - GG
Checked by TS
21
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Internal Control
6. Other internal control weaknesses
6.1 Observations of weaknesses in Internal Control
Weakness and potential
consequences Significance and recommendations Trustees’ response
Timescale and
responsibility for
implementation
WHA: Back dated postings
A purchase was posted to the bank account after
the accounts had been finalised for the year. This
caused a difference between the year end bank
reconciliation, trade creditors listing and the
balance per the trial balance.
Risk rating: Low
We recommend that entries are not posted to the previous
financial year once the accounts have been closed.
Noted. No entries to be posted once
the accounts have been closed for the
year.
Sep 20—GG
WHA: Fixed Asset register
There are a number of fixed assets on the register
without detailed descriptions and with a Nil NBV.
As part of our testing of fixed asset verification, we
were unable to trace a number of assets from the
register to the physical item and vice versa.
Risk rating: Low
It is advised that a review of the assets held in the register
is undertaken. Whereby assets are unidentifiable it is
advised that the cost and subsequent depreciation is
disposed of from the register and nominal codes in order to
ensure that it is up to date and reflective on the actual
assets held.
Review of fixed asset register to be
conducted.
Feb 20—GG. Checked by TS
WHA: Donations
Upon our review of donations nominal codes we
found income being posted to the donations
nominal not being reversed once the income had
been paid to the relevant charity.
Risk rating: Low
It is advised that all donations due to be given to charities
is reversed from the income nominal code once the income
is paid to the charity.
Noted. Income to be reversed.
Immediate - GG
22
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Internal Control
6. Other internal control weaknesses
6.1 Observations of weaknesses in Internal Control
Weakness and potential
consequences Significance and recommendations Trustees’ response
Timescale and
responsibility for
implementation
WHA: Trade debtors
Although the balance was immaterial we found
that £2,000 of the £3,000 trade debtor balance
was more than 12 months old. This indicates trade
debtors are not being reviewed monthly, and
outstanding monies chased up.
It was also found that trade debtor and creditor
reconciliations are not produced on a regular
basis.
Risk Rating: Low
Trade debtors may be overstated in the financial
statements and should be provided for as bad debts or
written off. The risk of debts going ‘bad’ can lead to a
negative impact on cash flow for the academy trust.
Full recoverability review to be
undertaken.
Jan 20—GG
Checked by TS
All: Related party transactions
Reportable related party transactions to the ESFA
had been disclosed to us, however transactions
between related parties in connection to key
management personnel, who are not Trustees, as
well as ‘school to school’ transactions, in relation
to Tendring Primary School and the SIGMA Trust
had not been disclosed.
Risk Rating: Low
We recommend that income and expenditure codes are
reviewed for to ensure all related party transactions are
complete.
Clarification of understanding
received that non-reportable
transactions are included in
accounts disclosure
Immediate TS/GG
23
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Internal Control
6. Other internal control weaknesses
6.2 Advisory points
We have raised below matters which we consider as advisory points and to be considered for best practice.
Cashless System
We recommend that the trust moves towards a more cashless system for trips and catering income at White Hall, in order to reduce the risk of
misappropriation of funds.
Trustee information
We advise that the Trust’s website is reviewed to ensure that all Trustees are up to date and accurately recorded.
Internal Scrutiny Report
It is a new requirement this year that Academy Trusts make a submission to the ESFA regarding the internal scrutiny reviews that have been
performed on the financial control and regulatory processes in place. The submission is due by 31 December 2019. It is not known what reporting
will be required in future, but some form of formal report is expected. It is clear that the approach adopted by the Trust for its assurance framework
will be made more obvious to the ESFA, so the Board must ensure it is both appropriate and adequate. If you require any guidance or advice,
please do let us know.
Better Financial Reporting
The ESFA has made a start towards it’s ‘Better Financial Reporting’ project. This will in part be achieved by standardising the ledger code structure
that all Academy Trusts will use. Currently the list contains an estimated 1,000 ledger codes. The intention is that if these standardised codes are
used, it will streamline many of the reporting and accounting processes such as Budget forecast Returns, Annual Accounts Returns and the
preparation of the financial statements.
As this is potentially beneficial, but the transition to the new coding structure will be quite laborious, we recommend you liaise with your accounting
software provider to confirm when/if your accounting system will be compatible with the new ledger codes.
Integrated Curriculum Financial Planning
As part of the ever-increasing scrutiny of the education system obtaining value for money, there is more emphasis on ‘Integrated Curriculum
Financial Planning’. Whilst still not well defined, the focus should be on school improvement plan priorities, and use benchmarked metrics and
performance measures in conjunction with financial data to help identify where more value for money can be obtained. For example if the teacher
contact ratio for an Academy is lower than the expected average, it could indicate where more value for money could be obtained by increasing the
contact ratio.
Since ICFP is now considered to be a fundamental expectation for all academies, you should ensure you can demonstrate good practice. This is
an area that we are able to provide advice and support on, please get in touch if you have any questions.
These are based on our initial assessment of priorities, but it is for the trustees to decide what actions are necessary.
24
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Prior years
7. Audit findings in prior years
25
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Prior years
7. Audit findings in prior years
Issues and potential consequences
reported in 2018
Regularity or
Internal
Control
weakness
Status in current year Trustees’ response
Timescale and
responsibility for
implementation
White Hall Title Register - Low Risk
On review of the title register at White Hall Academy, the
property and land are currently registered to “Coppins
Green Primary School”.
Regularity
Unresolved, but action being taken.
Action being taken to resolve
Mar 20—GG
Related Party Transactions
As part of our audit testing it was found that transactions
with identified related parties per the Register of Interests
had not been recognised by the academy in the initial audit
deliverables provided to us.
From 1 April 2019 the ESFA are heightening their
requirements and regulations regarding Related Party
Transactions (RPTs). From this date, all RPTs must be
reported to the ESFA using their on-line form. Additionally,
any RPT which will total over £20,000 for the financial
year, must be pre-approved by the ESFA.
Regularity
Partially resolved—all disclosable
related party tranactions had been
identified. Related party transactions in
relation to Key Management Personnel
who are not Trustees however had not
been disclosed to us.
Further reviews to be undertaken.
Immediate—TS/GG
Unidentified Trustee Expenses—Low Risk
At White Hall Academy, it was found during audit testing
that there were £99 of unidentified trustee expenses
relating to Gavin Bradley for mileage claims.
Regularity
No issues Not applicable
Debtor and Creditor Reconciliations - Low Risk
It was found during the audit that trade debtor and creditor
reconciliations were not produced, or maintained as
evidence of production, on a regular basis.
Reconciling trade debtors and creditors is a key financial
control which could create significant errors if not properly
managed.
Internal control
Unresolved at WH.
Issue cleared at LHS/BPS
Monthly procedures and checks to
be undertaken.
Immediate—GG
Checked by TS
26
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Prior years
7. Audit findings in prior years
Issues and potential consequences reported in
2018
Regularity or
Internal
Control
weakness
Status in current year Trustees’ response
Timescale and
responsibility for
implementation
Intercompany Transactions—High Risk
It was found during our testing that the Trust’s accounting system
allows for the recognition of ’cross-Trust’ transactions, e.g. a journal
can be posted to credit one entity within the Trust and debit another
entity, without the use of intercompany control accounts.
Although the actual transactions recognised have been appropriate,
this system issue and accounting practice has led to the
misstatement of debtors and creditors for individual entities within
the Trust.
Internal control
No issues
Not applicable
Regularity of VAT returns - Medium risk
VAT returns are not submitted regularly as would be expected and
recommended to support budgeting and cash flow and to avoid
HMRC raising an enquiry into your affairs.
Internal control
No issues
Not applicable
Inconsistent review and authorisation of bank reconciliations -
Medium Risk
It was found during our testing at Braiswick Academy, that bank
reconciliations were not regularly performed and / or reviewed during
the financial year.
By not performing regular bank reconciliations, differences between
the bank statements and the nominal ledger can go undetected for a
period of time.
Internal control
No issues
Not applicable
Provided services income - Medium Risk
Income is generated by providing teaching and leadership staff to
schools outside of the academy in need of assistance (e.g. SIGMA).
There are no formal agreements in place that detail the scope of
these services.
Internal control
Partially resolved - a
memorandum of
understanding is in place ,
however no formal agreement
between the parties is in
place.
Formal agreements in the process
of being implemented
Jan 20—AS/GB
27
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
Prior years
7. Audit findings in prior years
Issues and potential consequences reported in
2018
Regularity or
Internal
Control
weakness
Status in current year Trustees’ response
Timescale and
responsibility for
implementation
Donation income - Low Risk
Amounts totalling £484 were identified at White Hall Academy as
income raised for charity events. This should not be recognised
within donations, but rather recognised initially in a control account,
which is then reduced when paid over to the relevant charity.
Internal control
Issue still remains.
Income relating to charities to be
entered into a different nominal
code.
Immediate—GG
Checked by TS
Updating Payroll Files - Low Risk
It was found during payroll testing that for incremented pay rises,
the updated pay level is not consistently evidenced on employee
files.
Internal control
No issues
Not applicable
Lettings booking forms - Low risk
It was noted as part of our income testing at Whitehall Academy
that for one of the lettings bookings, a booking form could not be
found.
Internal control
No issues
Not applicable
Unmatched invoices and payments within trade creditors - Low
risk
It was noted during the audit at White Hall, Academy, that for a
number of entries in the aged creditors report, the payments have
not been allocated against the invoice raised. This results in historic
balances remaining on the trade creditors reports.
Internal control
No issues
Not applicable
28
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
8. Sector Developments
Sector developments
29
Audit Findings | Year ended 31 August 2019
Contents
Introduction
Audit Process
Key audit areas
Financial Statements
Regularity Issues
Internal Controls
Prior years
Sector developments
Conclusion
8. Sector developments
Sector developments
8.1 Academy Advisor – Summer 2019 edition
The summer edition of our Academies and Free Schools newsletter is
available.
This edition of the newsletter covers topics including:
2019 Academies Financial Handbook
Academy Accounts Direction 2018/19
Teachers’ Pension Scheme Grant (2019/20) - From September 2019
the government will be providing a grant to Academies and Free
Schools to assist with the increase in Teachers’ Pension Scheme
(TPS) employer contributions. The grant will be calculated on a ‘per-
pupil’ basis; however, there will be an option for school to apply for
additional funding should there be a deficit against the actual cost,
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