School financial audits are critical checkpoints to guarantee proper stewardship of public funds and compliance with stringent regulatory requirements. With UK schools receiving over £60 billion in revenue funding for 2024-25, maintaining solid financial management has never been more important. Having a good understanding of common audit pitfalls and implementing preventative measures helps schools avoid regulatory sanctions whilst making sure resources support the highest quality education outcomes for pupils.
- Understanding Audit Requirements
The basis of successful school financial management is in the understanding of the Schools Financial Value Standard (SFVS), which provides the framework for maintaining good financial health and resource management. Local-authority-maintained schools must submit their SFVS checklist annually by 31 March, showing compliance with 30 specific questions covering six key areas of resource management. The SFVS is both a self-assessment tool and an early warning system, helping governing bodies identify potential issues before they escalate into audit failures. Schools must show effective budget planning, appropriate governance structures, and solid financial controls that protect against fraud and misuse of public funds.
- Addressing High-Risk Audit Issues
Common high-risk issues frequently identified during school audits include inadequate payroll authorisation procedures, incomplete bank reconciliations, and insufficient approval processes for significant purchases. These seemingly operational matters can result in serious compliance failures when left unaddressed. Payroll is the largest expenditure for most schools, making accurate authorisation processes essential. Schools should implement clear procedures for approving new appointments, salary changes, and overtime payments, with appropriate segregation of duties between those who authorise payments and those who process them. Regular reconciliation of budget holders’ records with central finance systems helps identify discrepancies before they compound into major issues.
- Improving Governance and Financial Oversight
Strong governance practices are the foundation of effective financial management, with regular trustee reviews and accurate reporting preventing many common audit failures. The Department for Education issues Notices to Improve when schools show financial mismanagement, highlighting the critical importance of good oversight mechanisms. Governing bodies must collectively possess adequate financial skills to fulfil their statutory responsibilities effectively. This doesn’t need every governor to be financially qualified, but the board must include sufficient expertise to challenge budget assumptions, understand financial reports, and make informed decisions about resource allocation. Professional education accountants are important in supporting solid financial management practices, providing specialist expertise in navigating complex regulatory requirements whilst implementing systems that guarantee ongoing compliance. Their involvement helps schools establish great financial frameworks that withstand audit scrutiny whilst supporting educational objectives.
- Preparing for SEND Funding Challenges
Special Educational Needs and Disabilities (SEND) funding presents particular challenges for school budgets and audits, with high needs funding increasing by £1 billion in 2025-26 showing the growing complexity of provision requirements. Over half the increase in school funding between 2019 and 2024 can be attributed to growth in high needs funding, showing the impact on overall school finances. Schools must implement robust systems for tracking SEND expenditure, ensuring appropriate allocation of resources whilst maintaining records that show value for money. This includes clear documentation of individual pupil needs assessments, appropriate procurement of specialist services, and regular review of provision effectiveness. Effective SEND financial management needs close collaboration between educational and financial teams, making sure that statutory obligations are met whilst maintaining financial sustainability. Schools should establish clear procedures for authorising additional support, monitoring expenditure against budgets, and demonstrating outcomes achieved through additional investment.
Successful audit preparation is about understanding regulatory requirements, implementing good financial controls, and maintaining strong governance oversight. When addressing these fundamental areas proactively, schools can guarantee that their financial management supports educational excellence whilst meeting all compliance obligations.