Rate This Page
Print
31-08-2004
Response to Learning and Skills Council's proposed changes to audit requirements for 2004/05
1 GENERAL COMMENTS
1.1 CIPFA is pleased to offer the following comments on the LSC's proposed changes to audit requirements for 2004/05. CIPFA has responded to the questions in which it has a particular interest owing to its role as a professional accountancy body
1.2 CIPFA welcomes the LSC's continuing commitment to reduce bureaucracy. However, the LSC needs to ensure that the new arrangements avoid duplication of internal and external audit roles.
1.3 In relation to paragraph 9 ( Charitable Status ), it is important that the LSC takes account of all future requirements of the Charities Bill in drawing up the audit code.
1.4 The audit approach applied to commercial and voluntary organisations funded by the LSC must be rigorous and robust. It is essential that the same high standards for stewardship of funds also operate in these organisations. These organisations may pose a higher risk and the audit regime should therefore be framed accordingly.
RESPONSE TO QUESTIONS
1 The LSC intends to cover the risks of learner non-existence and ineligibility through a risk based programme of work. Please comment on the implementation of this approach.
CIPFA welcomes the risk based approach. However, it is essential that the work required is simple, as proposed in the consultation document, and that the LSC provides clear and transparent guidance for audit providers and further education institutions. A matrix detailing key risks as an illustration might help.
2 Do you agree that regularity audit should be based on college self assessment process that can be used to contribute to other audit work, minimising the duplication of audit work and associated costs?
CIPFA welcomes the proposal for a regularity audit based on colleges self assessment processes. Institutions are already familiar with the self assessment process as used in the OFSTED inspections by LSC auditors carrying out the Provider Assurance Review. In CIPFA view, placing appropriate reliance on the control environment will not only reduce the duplication of audit work but the emphasis on auditing spending will bring the further education sector more into line with audit practice in other public service bodies including schools and higher education institutions. The reduction in the audit burden will enable a greater attention and focus on the strategic and ongoing financial management of colleges as a whole.
3 Do you agree that colleges as part of their corporate governance responsibility statements, give the LSC assurances on the colleges' proper and regular use of funds based on all evidence available to the college (including regularity audit self-assessment)?
As the consultation document notes, further education institutions spend significant amounts of public money and it is essential that they operate using the highest standards of probity and stewardship. Corporate governance statements are part of the overall accountability framework in place in colleges and, in CIPFA's view, these assurances will strengthen the framework.
4 Do you agree that college financial statement auditors should deliver annual independence assurance on colleges' regular and proper use of LSC and other funds?
In CIPFA's view it is appropriate for the college financial statement auditors to undertake this role. Paragraphs 43 to 46 of the consultation document include references to the conduct expected by the PAC of public servants and the precedent regarding what is considered proper and regular spending. In CIPFA's view it would be helpful for the LSC to give guidance on these issues to help ensure consistency of approach by audit providers. It would be helpful for this part of the document to include a cross reference to the assurance referred to in question 6.
5 Do you agree that the LSC should secure its duty of care for regularity audit opinions by becoming a party to the letter of engagement between colleges and their financial statement auditors?
In CIPFA's view, it is inappropriate for the LSC to become a party to the letter of engagement between colleges and their financial statement auditors. Although CIPFA can appreciate the LSC's concerns, CIPFA believes that such a move could essentially undermine the independent status of further education colleges. An alternative way of giving the LSC the assurance it requires regarding regularity audits would be for the audit opinion provided by the financial statement auditors for colleges to be shared with the LSC.
6 Do you think that the LSC should prescribe the level of coverage of colleges' learner number systems by college internal auditors?
Learner number systems influence the allocation of funds between institutions and are key to the effective operation of this process. In CIPFA's view, the level of coverage of colleges' learner number systems by college internal auditors should be based on a sound assessment of relative risk. The college and particularly its audit committee, are best placed to evaluate such a risk and allocate internal audit resources accordingly. However, CIPFA believes that a framework developed by the LSC to indicate the internal audit coverage expected would be very useful for the sector.
7 Do you think the LSC should require annual coverage of learner numbers by internal auditors?
As mentioned in the response to question 6, learner number systems influence the allocation of funds and are therefore essential in ensuring the effective operation of this process. In CIPFA's view it might be useful to encourage annual coverage of learner numbers by internal auditors, at least in the first stages. It could be reviewed thereafter.