Governance and Financial Healthchecks

Posted  4th November 2016

Academy Accounting Officers will have received a letter from the CEO of the Education Funding Agency, Peter Lauener, reminding them of the principles that those holding public office should adhere to.

This is perhaps a timely reminder for all senior leaders and governors – both academies or local authority maintained schools. Lord Nolan set out seven principles for those in public office – whether this is national or local; employed, elected or voluntary. These principles, therefore, apply to governors and senior leaders in schools and academies.

In summary these principles are:

  1. Selflessness - Holders of public office should act solely in terms of the public interest.
  2. Integrity - Holders of public office must avoid placing themselves under any obligation to people or organisations that might try inappropriately to influence them in their work. They should not act or take decisions in order to gain financial or other material benefits for themselves, their family, or their friends. They must declare and resolve any interests and relationships.
  3. Objectivity - Holders of public office must act and take decisions impartially, fairly and on merit, using the best evidence and without discrimination or bias.
  4. Accountability - Holders of public office are accountable to the public for their decisions and actions and must submit themselves to the scrutiny necessary to ensure this.
  5. Openness - Holders of public office should act and take decisions in an open and transparent manner. Information should not be withheld from the public unless there are clear and lawful reasons for so doing.
  6. Honesty - Holders of public office should be truthful.
  7. Leadership - Holders of public office should exhibit these principles in their own behaviour. They should actively promote and robustly support the principles and be willing to challenge poor behaviour wherever it occurs.
In carrying out work with Academies, the EFA has identified that when problems arise it is often because individuals have fallen short of these principles, leading to a breakdown in strong financial management and governance. As part of your school or academy’s self-assessment of financial and governance arrangements, Peter Lauener has suggested you consider the following questions:
  1. Are you satisfied that lines of internal accountability are appropriate? Can key post holders influence the effectiveness of governance in an appropriate manner, or is there a concentration of power in one or two individuals who hold a number of posts? Has the appointment of family members given rise to actual or perceived conflicts of interest? Is there adequate scrutiny of the school’s leadership team by governors?
  2. Are you comfortable to defend in public the policies you have established and the decisions you have made? Decisions relating to recruitment, the pay of senior leaders, or expenses may all need to be justified. It is therefore important that policies relating to these and other areas are regularly reviewed.
  3. Can you evidence compliance with your financial policies and procedures? The most common finding of academy auditors was a weakness in internal controls such as procurement and financial reporting. Schools and academies must have their own rolling programme of internal checks;  this will ensure they are compliant with the Governors Handbook and other guidance such as thw Academies Financial Handbook.
  4. Do you have the right mix of skills on the board to provide adequate oversight and challenge of the short term financial performance and long term strategy of the school or academy? Consideration should be given both to the rationale for decisions and the standards of behaviour in reaching those decisions. It is good practice for all boards to review their skills and effectiveness each year.
  5. Are there any transactions with parties that governors or trustees have declared an interest in? Where this is the case, procurement must show that the market was tested and the supplier was selected impartially. Academies need to be aware of the ‘at cost’ requirement for transactions between related parties. Total transparency in this area is governor’s best ally.

Finally, to quote Peter Lauener:

‘Strong governance and oversight goes hand in hand with the good financial health essential to delivering an education system that maximises the potential of our young people. As budgets face pressure it is more important than ever to spend every pound properly.’ School Business Services can support you by undertaking an independent financial health check. This could be a one-off review, to allow you to understand the current position or a regular review that complies with the Academies Financial Handbook regulations regarding ‘internal audit’.

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