Part 4: Annual accounts and external audit
How colleges must report on their finances to give assurance to Parliament and the public about their use of resources.
4.1. The college must maintain adequate accounting records and prepare an annual report and accounts in line with the:
- Further and Higher Education Statement of Recommended Practice (SORP)
- Education and Skills Funding Agency’s (ESFA’s) College accounts direction
4.2. The accounts must be audited in line with the requirements of the Post-16 audit code of practice (P16ACOP).
4.3. The accounting period of a college will end on 31 July as described in the ESFA’s College accounts direction and its accountability agreement.
4.4. The audited report and accounts must be:
- submitted to ESFA by 31 December
- published on the college’s website as soon as possible after the accounts are signed and no later than 31 January
- provided to anyone who requests a copy
4.5. The Association of College’s (AoC’s) College accounts direction handbook and the Casterbridge model accounts provide guidance to colleges on the preparation of their annual report and accounts. The Casterbridge model complies with the requirements of the Further and Higher Education SORP and the College accounts direction.
4.6. Colleges that are registered with the Office for Students (OfS) are subject to the OfS regulatory framework, including the OfS accounts direction.
Appointment of external auditors
4.7. In accordance with the Post-16 audit code of practice (P16ACOP), colleges must appoint an external auditor to give an opinion on whether their annual report and accounts present a true and fair view of the college’s financial performance and position. Colleges should retender their external audit contract at least every 5 years, though for the avoidance of doubt this does not necessarily require a different firm of auditors to be appointed.
The regularity engagement
4.8. The external auditor must also perform the role of reporting accountant and will provide a conclusion on regularity in accordance with a separate engagement to the opinion on the accounts, the scope of which is set out in the Post-16 audit code of practice (P16ACOP). Since the provisions of this handbook form part of the regularity framework for colleges, the regularity review performed by the reporting accountant must encompass (but will not be limited to) consideration of whether the college has complied with the provisions of this handbook
Accounting officer’s statement
4.9. In accordance with the College accounts direction, an accounting officer’s statement of regularity, propriety and compliance must be included in the college’s annual report and accounts. That statement will encompass compliance with this handbook as well as the other aspects of the framework of authorities that the college must follow. The statement is a declaration by the accounting officer that they have met their responsibilities to Parliament for the resources under their control during the year. It includes responsibility to ensure:
- efficient and effective use of resources (value for money)
- public money is spent for the purposes intended by Parliament (regularity)
- appropriate standards of conduct, behaviour and corporate governance are maintained (propriety).
4.10. The format of the statement is in the College accounts direction. The accounting officer also has responsibility to advise the board of governors and ESFA of instances of irregularity or impropriety, or non-compliance with the accountability agreement or this handbook.
Reporting accountant’s review of regularity
4.11. In accordance with the Post-16 audit code of practice (P16ACOP), a review of the accounting officer’s statement of regularity, propriety and compliance must be included within the remit of the regularity engagement of the reporting accountant. The reporting accountant’s conclusions on regularity must be addressed jointly to the college and ESFA.
4.12. The external audit process can support colleges by identifying areas that may require improvement. The board of governors, taking advice from the audit committee, must ensure there is an appropriate, reasonable and timely response by the college’s management team to findings by external auditors, taking opportunities to strengthen systems of financial management and control.
4.13 . The audit committee must also assure itself as to the quality of the service being provided by the external auditors and, in accordance with the Post-16 audit code of practice (P16ACOP), produce an annual report of the committee’s conclusions to advise the board on the reappointment or dismissal of the external auditors, and their remuneration.