The role of Internal Scrutiny is to provide independent scrutiny and assurance that an organisation's risk management, governance and internal control processes are operating effectively.

Prior to the publication of the latest Financial Handbook, internal scrutiny was only required in certain areas, in particular key financial controls. The latest Financial Handbook has extended the requirement for internal scrutiny to cover the whole control framework. It is therefore likely that trusts will now need assurance in areas that have never previously been reviewed.

Below we provide a breakdown of the typical work we conduct on a review of key financial controls.

It is necessary to plan our work carefully so we will undertake an initial visit at the trust’s centre to ensure the management structure and processes are documented. It is vital that the structure of the trust’s management is fully understood through robust audit planning, as different MATs have differing levels of decentralisation, and it is important to tailor tests accordingly to ensure an efficient and effective audit.

There are two key elements to the internal scrutiny work programme: tests to be conducted at the trust’s centre and those undertaken at academy level.

Trust level review will be tailored to suit the management structure of the trust, but indicative themes are provided below:

• Review policies in place at the trust and how they are implemented operationally
• Review the controls in place centrally in order to ensure effective management of academies
• Review the risk register and key central controls that mitigate those risks
• Review the financial systems and controls in place at the trust's centre are effective

The following tests are often carried out at academy level, but will be tailored to suit the needs of the trust. They’re included below to provide an indication as to the usual scope of work:

• Review a sample of purchase orders for each academy, reviewing adherence to trust policies.
• Review any leases/contracts held to ensure documentation is available.
• A sample of capital grant expenditure items are reviewed to ensure spend is in line with trust policies and grant terms.
• A sample of income transactions are reviewed to ensure prompt recording and banking takes place, in accordance with policies.
• A sample of payroll transactions are reviewed to ensure pay is in accordance with HR records and policies.
• A sample of new starters are reviewed to ensure they have been properly authorised in accordance with trust policies.
• A sample of expense claims are reviewed to ensure spend is appropriate and authorised in accordance with trust policies.
• All ex-gratia payments are reviewed to ensure they’re in line with trust policy.
• A sample of business card transactions are reviewed to establish whether they've been properly authorised and incurred in accordance with trust policy.
• A sample of journals are reviewed to ensure they’re appropriate, and have been authorised in line with trust policy.
• We review petty cash transactions to establish whether transactions over the authorised limit have been made.
• We review whether month-end petty cash has been properly reconciled.
• We review whether month-end bank balances have been properly reconciled.
• We establish whether the academy budget has been approved by the trust in accordance with stated policies.
• We review petty cash controls and balances (to establish whether the authorised limit has been exceeded).
• We review and test the procedures and controls around non-grant income, covering areas such as: trips; facilities hire; catering; and donation income.
• We review monthly management accounts to identify any financial issues, and to gauge the effectiveness of budgetary control.
• We enquire as to the level of communication with the academy principal.
• We review any disposal of assets to ensure they’re in accordance with the ESFA Financial Handbook and trust policy.
• We review the procedures in place at the academy to capture any potential conflicts of interest.
• We review any related party transactions and report any that may be of significant issue.
• All previous recommendations of internal audit are followed up and considered as part of our reporting.
• We consider the findings of and liaise with External Audit.
• We review for any instances of whistleblowing and / or fraud.

Aside from the scrutiny of key financial controls, it is likely that that the internal scrutiny plan will need assurance on other areas of risk that the trust faces. These might include:

• Governance (including trust-level compliance to handbook and governance structures at local levels)
• Fixed assets
• Procurement and contract management
• ICT strategies
• Estates strategies
• HR policies, systems and controls
• Review of policy framework
• Business and strategic planning processes
• Budget preparation processes and procedures
• Management reporting
• Management of trips

Following the publication of the revised Financial Handbook we have enhanced how we communicate to clients in order to improve the timeliness, accuracy and transparency of our findings.

At the end of each visit we will provide each academy/trust with a spreadsheet-based summary of our findings and recommendations. Academies will then have time to review our findings, ensure they are satisfied with the factual accuracy, and provide their responses to those findings. Once this is complete, we will draft the findings and responses into our formal report for presentation to the Audit Committee. This new approach means that academies receive feedback immediately, plus it allows us to consider academies’ plans for implementing our recommendations when we draft our report.

A new requirement of the Financial Handbook is a termly report to the Audit Committee summarising the internal scrutiny work undertaken in that term. It is up to each trust to decide how it divides its internal scrutiny plan between the terms. In our termly report we will consider the outcome of that term’s work and its impact on the agreed internal scrutiny plan and suggest amendments where we feel the risks in particular areas have changed.

We will also provide an Annual Report summarising our work for the year, highlighting any risk areas that we have identified, and any follow up reviews undertaken.