Appendix: Update on progress with our previous recommendations

Results of the 2019 school audits.

In this Appendix, we provide the Ministry’s progress on responding to our recommendations in our report Results of the 2018 school audits. We also refer to some recommendations from earlier reports that we followed up during our 2019 audits.

Recommendation	The Ministry’s progress	Our comment
School annual reports
We recommended that the Ministry actively monitor schools’ compliance with the legislative requirement to publish their annual report online.	The Ministry checked the website of each school who submitted their annual report following completion of their annual audit to determine whether its annual report has been published. Schools who had not published their annual report for 2019 have been contacted to remind them of their obligation to do so. As at 21 September 71% of schools that had completed their audits had published their 2019 annual reports.	As noted in Part 4 of the report, we identified that 82% of schools whose audits have been completed had published their 2018 annual reports. We will follow up on the publishing of 2019 annual reports as part of our 2020 school audits.
2017 recommendation: We recommended that the Ministry reinforce its guidance to schools on publishing their annual report, and consider how it can confirm that schools are reporting to their communities by publishing their annual reports online, in a timely manner	Schools were reminded of their obligation to publish their annual report on a website controlled by the board in the following communications: Annual Reporting Circular (November 2019); Annual Reporting Roadshows held in four locations in September 2019; School Bulletin issued on 28 May and 28 July 2020; and by email confirmation when submitting annual reports to the Ministry through the School Data Portal. Guidance is available in the Ministry’s Financial Information for Schools Handbook (FISH), supplemented by a set of frequently asked questions that were published on the Ministry’s website in July 2020.	Addressed.
School payroll reporting
We recommended that the Ministry: ensure that changes to the Novopay system include adding appropriate controls for schools, where possible, to help prevent fraud and error and ensure that all transactions are approved within the school’s delegations; and follow up unusual transactions or anomalies identified as part of the payroll audit so they do not reoccur, including giving boards additional support and guidance on payroll matters if necessary.	Through the implementation of EdPay, Education Payroll Limited (EPL) have introduced some validations to prevent data entry errors at and are progressively releasing an allowance rules engine to assist with this process. EPL have a number of reports to identify errors and irregularities and follow up unusual transactions with the intention to resolve with the schools. EPL also use this process to educate and advise School Payroll Administrators on an ongoing basis. The EPL Risk and Assurance Team have produced a payroll controls guide to assist in preventing payroll fraud by staff. Lessons from the 2019 audits will help refine the information provided to school auditors with the unusual payroll transactions for the 2020 audits. This is expected to result in better quality information being returned to the Ministry to inform additional targeted guidance.	Recommendations on school payroll reporting have been repeated. See Part 4.
Kura Kaupapa Māori (also a 2017 recommendation)
We recommended that the Ministry support kura by: monitoring how effectively kura follow its guidance and, if necessary, provide more targeted guidance; and continuing to work with those kura that have audits outstanding to help facilitate the completion of those audits.	Ministry staff have attended two Te Kura Kaupapa Māori (TKKM) hui during 2020, to present the Ministry’s Finance 101 materials, to assist in raising financial literacy, capability, and awareness within the management and governance of kura. The Ministry is collaborating with Te Rūnanga Nui o Ngā Kura Kaupapa Māori o Aotearoa (TRN) on strategies to provide more targeted guidance and support. This includes identifying key areas of financial guidance for which Te Reo translations will be prepared and continuing to participate in regional hui. The Ministry has partnered with TRN and OAG to agree an action plan for addressing the outstanding audits. The status of each has been established and any matters stopping the audits being completed have been identified.	As noted in Part 1, progress has been made on the kura audits in arrears but this has been affected by Covid-19. We will continue to work with the Ministry and TRN to ensure plans are in place to complete the remaining audits.
Budgeting
We recommended that the Ministry prepare additional guidance to schools on how to budget effectively, including how to prepare a budgeted balance sheet and cash flow budget.	The Ministry is reviewing its guidance and will developing tools to assist boards with preparing budgets, including a balance sheet and cash flow budget. This project has been resourced and will be completed during the final quarter of 2020. The Ministry’s presentation materials on budgeting have recently been reviewed and refreshed. These are used by School Finance Advisors to brief individual schools, or groups of schools.	As indicated in Part 4 we will obtain information on those schools that are not preparing their budgets correctly. We will share this information with the Ministry so they can engage directly with those schools.
Internal controls (also a 2017 recommendation)
We recommended that the Ministry: improve its guidance on what good controls look like; continue to encourage schools to have fraud policies and report suspected fraud.	The Ministry is reviewing its guidance and developing tools to assist boards with preparing budgets, including a balance sheet and cash flow budget. This project has been resourced and will be completed during the final quarter of 2020. The Ministry’s presentation materials on budgeting have recently been reviewed and refreshed. These are used by School Finance Advisors to brief individual schools, or groups of schools.	Recommendations on internal controls have been repeated – see Part 4.
2017 recommendation: Cyclical maintenance
We recommend that the Ministry ensure that schools are complying with its property planning requirements by having an up-to-date cyclical maintenance plan. The Ministry’s review of a school’s 10-year property plan should include a review of the cyclical maintenance plan, to ensure that it is reasonable and consistent with the school’s condition assessment and any planned capital works.	The Ministry’s property team implemented improvements to processes and guidance from 1 June 2019. This includes school property advisors talking to schools about their maintenance obligations during school visits and a requirement for them to review the school’s maintenance plans at that visit. A review of the school’s maintenance plans is specifically mentioned on the Annual School Visit Reference Sheet.	As noted in Part 2, we issued fewer audit opinions that referred to a lack of evidence for school’s cyclical maintenance provisions. We will continue to monitor this for the 2020 school audits.
2017 recommendation: Leasing school equipment
We recommended that the Ministry provide guidance to schools to help them: decide whether to lease or buy equipment: and ensure that they get value for money if they decide to lease, including how to access all-of-government contracts.	The Ministry developed a “Lease vs Buy” model to help schools with purchasing decisions. This was published on the Ministry’s website in May 2020.	Addressed.
2017 recommendation: Schools leasing IT equipment to students
We recommended that the Ministry consider the adequacy of the guidance available to schools on managing laptop schemes for their students, including through a third party.	Guidance on schools leasing IT equipment to students was included in the Ministry’s 2019 annual reporting workshops and will be repeated in key messages for 2020.	We agreed to provide information to the Ministry on arrangements of concern. We did not identify any from our 2018 school audits.
2017 recommendation: Principal’s remuneration – concurrence
We recommended that the Ministry give schools practical guidance on how to assess the extent of private benefit for a sensitive payment to a Principal, and how it evidences this assessment, so the school complies with the Ministry’s circular.	Circular 2013/27 – Principal Concurrence is being updated to include further guidance on the meaning of “incidental private benefit”, an illustrative example, and guidance on how to evidence the board’s assessment of the extent of private benefit.	Addressed.
2017 recommendation: Accounting for “other activities”
We recommended that the Ministry: provide guidance to schools on accounting for “other activities” (including Resource Teacher: Learning & Behaviour clusters) that they receive funding for; and consider whether the funding schools receive for Communities of Learning should be disclosed separately in school financial statements.	The Ministry is still considering the financial reporting requirements for the 40 Resource Teacher: Learning & Behaviour (RTLB) clusters, for discussion with the OAG in 2021. As an interim measure, additional disclosure has been incorporated into the Kiwi Park model financial statements to ensure that the activities of the RTLB clusters are disclosed in the host schools’ financial statements.	We will follow up as part of our 2020 school audits.