Democracy Spraffa

8 - Internal Audit Reports Issued

North Ayrshire Council · 12 March 2026
Back to Audit and Scrutiny Committee — 12 March 2026 and its agenda

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OFFICIAL INFORMATION
OFFICIAL INFORMATION 
NORTH AYRSHIRE COUNCIL 
12 March 2026 
Audit and Scrutiny Committee 
Title:    Internal Audit Reports Issued 
Purpose:  To inform the Committee of the findings of Internal Audit work
completed since January 2026. 
Recommendation:  That the Committee considers the outcomes from the Internal
Audit work completed. 
1. Executive Summary 
1.1 The Council's local Code of Corporate Governance requires effective arrangements to be
put in place for the objective review of risk management and internal control.  Internal Audit
is an important element in this framework as it reviews internal controls and offers Elected
Members and officers an objective and independent appraisal of how effectively resources
are being managed. 
1.2 The remit of the Audit and Scrutiny Committee includes the monitoring of Internal Audit
activity.  The submission of regular reports assists the Committee in fulfilling this remit. 
2. Background 
2.1 This report provides information on Internal Audit work completed since January 2026. 
Internal control reviews have been completed in respect of the areas detailed in Appendix
A to this report. The aim of these reviews is to provide assurance that the internal control
framework within the areas examined is appropriate and operating effectively. 
2.2 The findings from each audit assignment have been notified in writing to the Chief
Executive, the Section 95 Officer and the relevant Executive Director and Head of Service
on the completion of each assignment.  Where appropriate, this has included an action
plan with recommendations for improving internal control.  Appendix A includes the report
and action plan from each audit. 
2.3 There are several audits nearing completion that will be presented to the following
committee.  These include the Payroll Transactional testing, Capital Monitoring & Buildings
and Estate Maintenance audits. 
2.4 The findings from the audit assignment completed are detailed at Appendix A to this report
and the levels of assurance for each are noted in the table below: 
Audit Title Assurance Level
School Funds Substantial

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OFFICIAL INFORMATION
OFFICIAL INFORMATION 
3. Proposals 
3.1 It is proposed that the Committee notes the outcomes from the Internal Audit work
completed since January 2026. 
4. Implications/Socio-economic Duty 
Financial 
4.1 None. 
Human Resources 
4.2 None. 
Legal 
4.3 None. 
Equality/Socio-economic 
4.4 None. 
Climate Change and Carbon 
4.5 None. 
Key Priorities 
4.6 The work of Internal Audit helps to support the efficient delivery of the strategic priorities
within Our Council Plan 2023-2028. 
Community Wealth Building 
4.7 None. 
Islands Communities Impact Assessment (ICIA) 
4.8 None. 
United Nations Rights of the Child (UNCRC) 
4.9 None. 
Consumer Duty 
4.10 None. 
5. Consultation

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OFFICIAL INFORMATION
OFFICIAL INFORMATION 
5.1 The relevant Services are consulted on Internal Audit findings during each audit
assignment. 
Mark Boyd
Head of Service (Finance) 
For further information please contact Paul Brown, Senior Manager (Internal Audit), on
paulbrown01@north-ayrshire.gov.uk. 
Background Papers
None.

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Appendix A 
OFFICIAL INFORMATION
OFFICIAL INFORMATION
SCHOOL FUNDS 
1 Background  
1.1    School funds are defined as funds which are associated with a particular school but
have not been provided by North Ayrshire Council.  
1.2  Whilst school funds are separate to council funds, the Council has a legal
responsibility to ensure they are appropriately managed.  
2 Objectives and Scope 
2.1 The objective of this audit was to ensure: -
• Schools are provided with sufficient guidance on how to manage school funds.
• Schools have implemented processes in line with the guidance.    
3 Findings   
Guidance  
3.1 Education has a School Fund procedure document which provides guidance on managing
school funds  
3.2 This procedure has recently been refreshed and is due to be presented to Education’s Policy
Review Group in early 2026 for final approval.  
3.3 Audit reviewed both the existing, and a draft version of the refreshed procedure.  Both versions
cover the same key topics, which are:- 
• General administration
• Cash held
• Bank accounts
• Expenditure
• Income
• Record keeping
• Audits
• Retention of records
• Closure of school funds  
3.4 Education confirmed that the existing guidance is made available to schools via Glow   
Management of School Funds  
3.5 To gain an understanding of how school funds are being managed across all North Ayrshire
schools and independent Early Years Centres, Audit asked all establishments to complete a
detailed questionnaire.   
3.6 The questionnaire was designed to cover all key areas of school fund management.    
3.7 Establishments were asked to confirm:-
• They have an up-to-date constitution document for the school fund
• Fund members meet regularly to discuss the management of the fund
• Fund accounts are audited annually
• Fund records are retained in line with Council retention requirements

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Appendix A 
OFFICIAL INFORMATION
OFFICIAL INFORMATION
• Officers with a responsibility for administering the school fund have attended cash
handling training
• Cash is banked intact
• They are aware of the VAT free purchase scheme for qualifying equipment purchases  
3.8 Establishments were asked to give a brief description of:-
• The process for reconciling school fund records 
• How cash is stored on site
• How cash is banked (eg using G4S or via officers taking cash to the bank)
• The process for authorising expenditure
• The payments methods used for expenditure  
3.9 Establishments were asked to provide: -
• a transaction report for 2024/25
• copies of keyholder registers  
3.10 Audit received responses from all establishments (9 secondary, 50 primary, 5 Early
Year Centres and 1 ASN school).  Audit reviewed the return from each establishment.  
3.11 The most notable finding was that 3 schools are relying on verbal authorisation for
school fund expenditure.  2 of these 3 schools confirmed they are working on
introducing a written authorisation process.  Audit raised the issue of the 3rd school
with the relevant Education Business Officer (EBO) who immediately advised the
school on the need to introduce a new authorisation process. (action point a)  
3.12 Other issues identified included:-
• Not all officers had completed cash handling training
• Some keyholder registers needing updated  
3.13 Any issues identified were raised with the relevant EBO and as a result:-
• All officers have now either attended a cash handling training course, or are
awaiting the online version, due to be released early 2026.
• Updated keyholder registers have either been provided directly to Audit, or
EBOs have confirmed the updates are in the process of being completed.  
3.14 In addition to the above review, Audit also undertook establishment visits at a small
sample of schools to carry out more in-depth audit testing.  This testing included:-
• Securing all cash on arrival, counting it and agreeing it to fund records
• Testing a sample of lodgements to supporting documentation
• Testing a sample of expenditure items to supporting documentation, ensuring
it has been authorised
• Ensuring reconciliations to bank statements are being undertaken regularly
• Ensuring historical records are being retained  
3.15 No issues were identified during site visits.  
3.16 All establishments are required to submit copies of audited accounts and bank
account information to Financial Management by 30th November each year.    
3.17 Financial Management have confirmed that (as at 12/12/2025) the majority of
submissions have been received.  Financial Management have chased outstanding

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Appendix A 
OFFICIAL INFORMATION
OFFICIAL INFORMATION
submissions and intend to review each submission to ensure accuracy and
completeness.  
4 Internal Audit Opinion  
4.1 Overall, substantial assurance was obtained with regard to the overall management
of school funds. 
School funds are generally well-managed.  Any minor issues identified during the audit
have been addressed promptly by the EBO/school. 
Definitions of Assurance Levels: 
Substantial
A sound system of governance, risk management and control exist, with
internal controls operating effectively and being consistently applied to
support the achievement of objectives in the area audited.
Reasonable
There is a generally sound system of governance, risk management and
control in place. Some issues, non-compliance or scope for improvement
were identified which may put at risk the achievement of objectives in the
area audited.
Limited
Significant gaps, weaknesses or non-compliance were identified.
Improvement is required to the system of governance, risk management
and control to effectively manage risks to the achievement of objectives in
the area audited.
None
Immediate action is required to address fundamental gaps, weaknesses or
non-compliance identified. The system of governance, risk management
and control is inadequate to effectively manage risks to the achievement of
objectives in the area audited. 
NB The level of assurance given is at the discretion of Internal Audit.

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Appendix A 
OFFICIAL INFORMATION
OFFICIAL INFORMATION
KEY FINDINGS AND ACTION PLAN
SCHOOL FUNDS 
Action a
Finding Verbal authorisation of school fund expenditure is being used in 3
schools.
Action Description A process where written authorisation is retained for all school
fund expenditure should be implemented in these 3 schools.
Risk Misappropriation of school funds; failure to comply with the
Council’s school funds procedures.
Priority (1, 2, 3) 2
Paragraph Reference  3.11
Managed by Head of Service (Education)
Assigned to Senior Education Business Officer (EBO)
Due Date 28 February 2026
Management Comment A process for written authorisation for school fund expenditure will
be implemented for the three schools identified in the report and
the Senior EBO will review the situation annually thereafter.