Agenda item

This report will provide details of audits carried out in Brent Schools over the last two years. Members will also receive information on governing practices and support provided to governors, along with an outline of the procedures in place within Children and Families to ensure probity and the practice of correct auditing policies and procedures.

The Chair noted that this report had been requested as it was an issue of high public concern.

Simon Lane (Head of Audit and Investigations) and Mustafa Salih (Assistant Director, Strategic Finance) presented a report to the committee regarding financial management in Brent’s Schools. The report highlighted some of the associated issues currently being addressed and detailed the framework in place to provide support and challenge to Brent’s Schools. Financial management was a function delegated direct to governing bodies; however, the local authority retained a responsibility to ensure that public funds were spent lawfully and effectively and, as the Section 151 officer, the Director of Finance was required to ensure that sound financial systems and controls were in place across the council and Brent’s schools.

Mustafa Salih explained that the mechanisms employed by the Director of Finance in meeting this responsibility included a robust internal audit regime, the provision of support, guidance and training, and regular meetings with head teachers and bursars. Frequent updates were also provided to all schools via the school circular and this was deemed to be an effective tool of communication. Further examples of the provision of support and training were included at Appendix A, which evidenced the range of relevant information available on the schools intranet pages, and at Appendix B, which set out the Financial Management Training Brochure developed by the Schools Finance Team.

Turning to the issue of the audit process, Simon Lane advised that all maintained schools in Brent were audited on a regular basis and at present this amounted to approximately 80 establishments including PRU’s and Children’s centres. Audits typically took 10 days to complete and there had been 190 days dedicated to school audits in 2011/12 out of a total audit resource of 1,200 days. It was anticipated that 228 days would be dedicated to schools in 2012/13, which compared very favourably against other London authorities. Key issues arising from recent audits included compliance with the statutory requirements relating to Senior Leadership Pay and schools entering into unfavourable leases for the hire of photocopiers and other ICT equipment. A comprehensive action plan, included at Appendix C, had been developed to address this first issue and work was on-going. Multifaceted action had also been taken with regard to the issue of schools entering into leases and this had ranged from meeting directly with school officers and governors, to referring schools to solicitors and facilitating legal action. The council was of the view that these leases should be treated as void as the schools did not have the legal power to enter into these arrangements. Further details of specific issues currently being addressed were provided under the headings of governance, procurement, unofficial funds, budgeting and income and banking. As such issues were identified the council tailored the auditing programme accordingly and developed the comprehensive briefing document for those conducting the audits.

Councillor Mashari queried what arrangements were in place to prevent poor financial management within Academies and Free Schools. Simon Lane advised that the national audit office was currently studying the government’s arrangements for this, which encompassed a yearly external audit to be procured by the school.

The committee raised several further issues and queries in the subsequent discussion. Councillor Al-Ebadi queried what power the council had to enforce compliance to the required procurement processes. Councillor Al-Ebadi also sought further details of the support offered to schools to enable them to gain understanding and experience of procurement activities. Councillor Matthews sought further details regarding the level of financial risk associated with poor procurement within schools. Councillor Cheese queried whether the council was responsible for meeting the cost from the unfavourable leasing arrangements.

In response to these queries, Simon Lane advised that the council’s powers to enforce compliance with the required procurement processes were limited; however, it was expected that head teachers and governors should conduct the financial management of their schools appropriately. The council could remove the governing body but would require the approval of the Secretary of State to do so, or it could remove the delegated powers of financial management from the school. Both these powers were considered to be draconian and would only be used in particular cases. Mustafa Salih advised that the support offered to schools in relation to procurement included the provision of guidance and training. Simon Lane further advised that the council conducted much of the procurement relating to large scale building work for schools. Fiona Ledden (Director of Legal and Procurement) added that a dedicated schools procurement manager had been in post for the last eight months. The financial impact of poor procurement was not considered to be material to the council but may be significant to the school in question. However, the implications of the leasing arrangements that had been entered into by a small number of schools were significant for the council.

Turning to the issue of senior leadership pay, Councillor Pavey noted that included amongst the reasons detailed for the omission of specific audit tests regarding this issue prior to 2009, was the assumption that head teachers were able to provide appropriate advice regarding the statutory requirements and that a degree of oversight was anticipated within the schools payroll team. Councillor Pavey commented that head teachers providing advice relating to their own pay conditions appeared to be a conflict of interest. He further expressed concern regarding the number of assumptions that had been made in this matter and queried why officers were confident that irregularities at Copland school would have been identified had the school been visited by A&I.

In response, Simon Lane explained that head teachers were not expected to provide specific advice regarding their own remuneration but were expected to have a good understanding of the School Teachers Pay and Conditions Document (STPCD) and to be able to advise a governing body where their actions would breach the regulations. It was considered that an internal audit would have identified the issues at Copland school because this process followed a different brief to external audits, which in contrast were focussed primarily on whether the overall income and expenditure positions tallied with the supporting records. The brief for internal audits would have included anomalies in staff pay.

Councillor Mashari queried whether current audits were of greater scale and depth than those conducted previously. Simon Lane confirmed that the process was more in depth than in previous years. In 2008/9 and 2009/10 the council had been required to conduct Financial Management Standards in Schools (FMSiS) assessments for Brent’s primary schools. This process would have led to less robust checking that would usually occur within a usual internal audit. Councillor Mashari subsequently queried whether it was fair to conclude that it was within the period between 2008/9 and 2009/10 when there were no internal audits of schools conducted, that poor financial management practices became entrenched. She further queried whether the council was obliged to carry out internal audits of schools. Simon Lane clarified that the council was obliged to conduct internal audits but was not required to do so within any fixed period. Whilst the FMSiS assessment was not as robust as a full internal audit, it was not possible to say that it was this that led to any particular incidents. Councillor Mashari also questioned why, in view of the seriousness of some of the incidents which had occurred, more robust action had not been taken to address poor financial management in schools. Clive Heaphy added that he held ultimate responsibility for the financial management of the council and school and had to take measures to assure himself that the proper procedures and practices were being adhered to. Significant actions were being taken to strengthen these measures including increased depth of internal audits, the recruitment of a dedicated procurement officer for schools, changing of the council’s financial regulations and the attendance the Director of Finance at the head teachers’ conferences.

Councillor Pavey asked whether officers considered that there had been inadequacies in the council’s processes which had allowed incidents relating to the financial management of schools to occur. Clive Heaphy advised that it was difficult to say as the measures put in place by the council were developed and amended to respond to issues as they were identified. Head teachers were responsible for the good financial management of their schools and had been since the 1980’s. However, the council was now strengthening their mechanisms to ensure good financial management of Brent’s schools.

With the permission of the Chair, Harbi Farah of the Help Somali Foundation sought further details regarding the training of school governors. Councillor Mashari queried whether the financial management training was mandatory for every governor. Councillor Pavey commented that the introductory training for school governors was elemental and a financial component could easily be added to this. Clive Heaphy advised that additional financial training could be provided for all Chairs of school governing bodies.

Mrs Gouldbourne congratulated the council on the proactive role that it had taken towards financial management of schools and commented that in view of the significant impact that poor financial management could have on schools, more resources should be targeted towards the actions taken by the council. In response, Councillor Arnold advised that the council was dedicating more resources to its audit programme than other London borough’s over the next few years.

Councillor Mashari requested an update report be submitted to the committee setting out the outcome of the investigations currently underway.

RESOLVED: -

      i.        That the report be noted

    ii.        That an update report be submitted to the committee in six months’ time.