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Internal audit in further education

Graeme Clarke explains what it means to be an internal auditor in further education.

Skills are vital to the economy, enabling not only individuals to realise their potential but to help businesses achieve their objectives. The further education (FE) sector plays a key part in this by educating and training over 3.3m learners each year. 

The term FE is used to refer to education for people over compulsory school age which does not take place in a secondary school. This can cover anything from basic training to a Higher National Diploma or Foundation Degree. 

Within the UK, the FE sector is made of a wide range and type of colleges (according to the Association of Colleges there are 414 colleges in the UK – 347 in England, 41 in Scotland, 20 in Wales and 6 in Northern Ireland). These include general further education and tertiary colleges, sixth form colleges and specialist colleges offering provision in areas such as art and design, agriculture, etc. FE courses may also be offered in the school sector, such as in sixth form (16-19) schools, sixth forms within secondary schools or academies. 

Government policy and the regulatory environment
It is important to recognise that there are differences in government policy and the regulatory environment across the different parts of the UK; however for the purposes of this article we have focused on England only.  

The government has set out its vision for reform of the further education and skills system within its strategy for skills publication, Skills for Sustainable Growth, and parallel publication Investing in Skills for Sustainable Growth. This includes matters such as expanding the number of adult apprenticeships available as well as reducing bureaucracy in the sector (see the Department for Business Innovation & Skills (BIS) website for further details).

Within BIS is the Skills Funding Agency, whose main function is to fund and regulate adult further education and skills training in England. This Agency was introduced in April 2010 as part of the so-called ‘machinery of government’ changes which led to the replacement of the former regulator, the Learning Skills Council (LSC) which had been setup in 2001. 

Also as part of these changes, the Young People’s Learning Agency (YPLA) was also established with a responsibility to support the delivery of training and education to all 16-19 year olds in England. In November 2010, it was announced that the YPLA would be abolished and the Education Funding Agency would be established as an executive agency of the Department for Education, responsible for funding. This is also in the context of reform and restructuring of the Skills Funding Agency in the context of the Coalition’s plans under the Comprehensive Spending Review (CSR) to reduce the public sector borrowing deficit.

Colleges in the FE sector are currently subject to inspection by the Office for Standards in Education, Children’s Services and Skills (Ofsted) using their common inspection framework.  Ofsted uses a four point scale to summarise its judgements about achievement and standards, the quality of provision and leadership and management. These are Grade 1 (outstanding), 2 (good), 3 (satisfactory) and 4 (inadequate). Once completed and discussed with the college, reports are published on the Ofsted website and are often a useful source of background information to the college as well as certain areas that may feature as part of internal audit plans (e.g. quality of provision or safeguarding).

On 1 September, Ofsted launched a consultation on proposed changes to the inspection framework which will run to 24 November. One of the proposed changes is to cease the routine inspection of most providers judged outstanding at their last inspection unless their performance drops.

Internal audit
There is currently a requirement for FE colleges to have an internal audit service and, as is common with other parts of the public sector, there is a specific audit code of practice in place setting out roles, responsibilities and requirements for colleges and their respective auditors. The role of internal audit is no different to other sectors, in providing an opinion on the overall adequacy of the organisation’s risk management, control and governance processes. The existing code also includes an annex of mandatory areas of coverage which internal audit must cover annually (governance and risk management) and within a three to five year cycle (e.g. long term planning).

At the time of drafting this article, the Skills Funding Agency and YPLA are in the process of producing a new Joint Audit Code of Practice (JACOP) for the sector. In the interim, colleges are required to comply with Part 1 of the JACOP which took effect from 1 April 2010 and dealt almost exclusively with the high level roles and responsibilities of funding and assurance between various bodies; and the former LSC ACoP which sets out the more detailed roles, etc. The LSC Audit Code of Practice also makes reference to the need for compliance with Government Internal Audit Standards (GIAS).

Whilst in other sectors, you will often see a range of in-house, co-sourced and outsourced arrangements for internal audit, the current nature of internal audit in FE means predominantly such work is outsourced to third parties such as accountancy firms.

In terms of detailed assignments, there are a number of similar areas of activity which internal audit come across to other sectors, all be the nature, complexity and volume of activity does vary.  For example, with colleges, a significant proportion (often over 60%) of expenditure is pay-related and there can often be a high degree of recruitment in colleges recruiting staff for the new academic term each year.

Another key area for internal audit is the review of the accuracy and integrity of learner data in support of the funding claims of the college. For example, records of eligibility for funding entitlement, attendance, etc. Others areas which you could be involved in auditing in a college environment include:

  • partnership activities – including sub-contracted provision, often involving site visits to partner premises
  • arrangements for safeguarding of learners
  • the means by which the college ensure the quality of its provision and its quality management systems
  • arrangements for the recruitment, monitoring and remuneration of any part time / sessional teaching staff used by the college
  • student support and welfare processes such as personal tutoring and financial support.


Graeme Clarke FCCA

Graeme is vice chair of ACCA’s Internal Audit Network Panel. He was first attracted to internal audit by the opportunity to work with a varied and diverse range of organisations and making a difference by recommending ways for improvement. He has delivered internal audit services to further education colleges for the past 14 years and is a director within the governance, risk and internal control team of Mazars LLP in the UK.

The author is writing in a personal capacity and the views expressed above do not necessarily reflect those held by ACCA or Mazars LLP.

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