The role of the audit and risk committee in academy trusts

Academies
Audit & Assurance
Corporate
Education and academies
Planning

The remit of an academy trust’s audit and risk committee is to oversee internal and external audits, review the academy trust’s internal control framework, ensure risk management is effective, and report to the full governing board on financial and non-financial risks.

Many academy trusts integrate the responsibilities of this committee with those of the finance committee; however, it is important to ensure that the audit and risk committee’s remit is appropriately discharged.

The finance committee serves as an integral component of the control process and budgetary oversight framework. While the audit and risk committee is expected to maintain objectivity and critically assess the effectiveness of the control process.

Given the significant expectations placed on the finance function, it may be appropriate to reassess whether these two areas can operate effectively within a single structure.

Does your combined committee truly fulfil the audit and risk committee’s remit?

The requirements

The DfE Academy Trust Handbook states an academy trust must establish an audit and risk committee, appointed by the board.

Academy trusts with an annual revenue income over £50 million (based on their last audited accounts) must have a dedicated audit and risk committee.
Other academy trusts must either have a dedicated audit and risk committee or can combine it with another committee, such as finance.

The audit and risk committee should meet at least 3 times a year.

Membership of the committee

Employees of the academy trust should not be audit and risk committee members, but the accounting officer and chief financial officer should attend to provide information and participate in discussions.

The chair of trustees should not be chair of the audit and risk committee. Where the finance committee and audit and risk committee are separate, the chair should not be the same.

Where the audit and risk committee is combined with another committee, employees should not participate as members when audit matters are discussed.

The DfE voices that members of the committee ideally will collectively have relevant experience in risk management, finance and assurance. Ultimately, though, the abilities of the membership will reflect the needs of the academy trust, extending as far as is possible to expertise in each relevant financial and non-financial area. Audit and risk committees will be most effective when the membership is prepared to support, challenge, and highlight concerns to the board.

Committee responsibilities

The audit and risk committee, in relation to internal scrutiny, must:

oversee and approve the academy trust’s programme of internal scrutiny;
ensure that risks are being addressed appropriately; and
report to the full governing board on the adequacy of the academy trust’s internal control framework, including financial and non-financial controls and management of risks.

The committee, in relation to external audit, must:

review the external auditor’s plan each year
review the annual report and accounts
review the auditor’s findings and actions taken by academy trust’s management in response to those findings
assess the effectiveness and resources of the external auditor
report the committee’s conclusions annually to the board of trustees and members, including recommendations on the reappointment or dismissal or retendering of the external auditor, and their remuneration.

The audit and risk committee, in relation to risk management, must:

monitor the effectiveness of risk management framework
review the risk register regularly.

The committee must have a written terms of reference.

The DfE have published a comprehensive suggested terms of reference for an audit and risk committee

Does your committee have a clear and up to date terms of reference?

A deeper look at the internal scrutiny responsibilities

The committee must agree a programme of work annually to deliver internal scrutiny (i.e. internal audit) that provides coverage across the year, agree who will perform the work and consider their reports and the academy trust’s progress in addressing recommendations. This is a critical element of the academy trust’s reporting requirements.

The committee must use the risk register to inform the programme of work. Regular reviews of the risk register by the committee are key.

Audit and risk committees should meet at least three times a year to monitor the internal scrutiny programme, as well as fulfil their other roles. Meetings should be timed to follow visits so interim findings can be discussed.

Whilst the audit and risk committee is responsible for overseeing the internal scrutiny, the findings must also be made available to all trustees promptly.

The committee will also consult with the accounting officer as the outcome of the internal scrutiny programme may impact on the accounting officer’s statement of regularity in the academy trust’s annual accounts.

Closing remarks

The effectiveness of an academy trust’s audit and risk committee is fundamental to maintaining robust governance, transparency, and accountability. By ensuring the committee’s remit is clearly defined, its membership is suitably skilled, and its responsibilities are diligently fulfilled, academy trusts can better manage risk and safeguard public funds. For further support or tailored advice regarding your audit and risk committee, please contact our team using the details provided below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

Sign up to receive exclusive business insights

Join our community of industry leaders and receive exclusive reports, early event access, and expert advice to stay ahead – all delivered straight to your inbox.