School annual financial statements

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Text on screen: Kiwi Park Training Module – Introduction.

(Actor, facing and talking into the camera)

Welcome and thank you for taking time to view a series of short instructional videos on how to optimise the use the Kiwi Park model in order to complete a set of your school’s financial statements.

As you are well aware, the model has been evolving and improvements have been made over the past ten years with input from the sector including changes to reporting requirements in public sector accounting standards.

These sessions are separated into short and concise user activities.

We will demonstrate processes around trial balances, financial statements, submitting your annual report, and some tips on how to work efficiently with the model.

Before you begin these sessions, we recommend you download a current copy of the appropriate Kiwi Park model for your school from the Ministry website.

Please read the instructions at the first worksheet of the Kiwi Park Model “How to use the Kiwi Park Model “model.

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We hope you find these videos helpful. We are always happy to hear from you and welcome you feedback in these videos. Please contact your regional finance advisor to provide your feedback or suggestions on other videos that may be helpful.

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Text on screen: Kiwi Park Training Module – Preparing the school trial balance for export.

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Before you begin preparing a trial balance to use in the Kiwi Park model, it’s important to confirm that your financial system can export the trial balance in either CSV or XLS format. The XLS format would be a preferred option for this exercise.

If you need assistance confirming this functionality, check with your system provider or ask the system user to do this for you.

It’s also important to check that the trial balance does indeed balance by confirming debits are equal to credits.

Once you are happy with the preparation, run the trial balance report, confirming one more time that it has been saved in either CSV or XLS format and is located in the required folder.

Next, copy the exported file to the folder where you have saved the Kiwi Park model. Rename the file to something more appropriate for future reference and audit purposes.

(Actor, facing and talking into the camera)

Finally, open the saved file and check the following.

(Excel spreadsheet appears on screen): the user enters a formula in cell i2 “=round(+G2+H2,0)”, the formula is automatically copied down Column I by clicking on the little black square in the bottom of cell i2.

All numbers are in one column (pause).

All numbers are in whole dollars and the debits and credits are equal to zero (pause).

(Excel spreadsheet appears on screen): The user “hovers” over Column i and checks the SUM in the bottom right of the screen, the total sum to 2. The user alters the formula in cell i2 by entering a negative 2. The user hovers over Column I again to check the sum total is zero. Column I is copied, paste special - values. Column C to H are deleted. The user enters “Balance” into Cell c1.

(Actor, facing and talking into the camera)

If you are not familiar with your system’s reporting capability, please check your financial systems manual on how to run and export a GL Trial Balance report. Or use an expert to do this for you.

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We hope you find these videos helpful. We are always happy to hear from you and welcome you feedback. Please contact your regional finance advisor to provide your feedback or suggestions on other videos that may be helpful.

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Text on screen: Kiwi Park Training Module – Import and map a school trial balance for the first time.

(Actor, facing and talking into the camera)

In this video I'll be showing you how to import your trial balance, map the trial balance codes to the Ministry of Education codes and then complete the quality assurance necessary to ensure validity of the information.

Text on screen:

1. Check the financial statements are really blank.
2. Save iterations as you go.

As a progress tool, it is best to save iterations of the file as you go so you can go back a step or two in case you lose track of changes and updates.

(An Excel screen appears on screen being used: the user selects the command “File” (pause) “Open” (pause) to locate and open an electronic file in the folder containing the school’s trail balance).

Open the GL file that contains the school's trial balance, budget and last year and copy the three columns and rows.

Paste those values into the “School Trial Balance Input” worksheet at cell A2.

Check that column C, D, E and F all equal zero by selecting each column header and save the blank file

(Actor, facing and talking into the camera)

Next, we are going to build the links to show the auditor to how each GL code is mapped to the financial statements in the “Trial Balance Converter”. This can take some time to set up initially, but it is a worthwhile exercise.

(Actor, facing and talking into the camera)

In future years, you only have to review and modify the mapping for new codes or delete old codes.

(An Excel screen appears on screen: the user copies and paste GL codes from one worksheet to the next worksheet until all codes are mapped (pause). The user also checks the Excel screen for any error messages):

Once all the general ledger codes are mapped, check in both worksheets if all the codes have been correctly mapped. Do this by checking if the message in cell G 12 reads “Balances” in the “Trial Balance Converter” worksheet.

Also check column I in the “School Trial Balance Input” worksheet to see if there are any lines that show a message “Missing from Converter Sheet”.

If the mapping is correctly completed the message in column C to G in row 12 should read “Balances".

(Actor, facing and talking into the camera)

Finally, if you are populating the model for the first time save the file as Version 1. This will allow for easier version control.

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We hope you find these videos helpful. We are always happy to hear from you and welcome your feedback.

Please contact your regional finance advisor to provide your suggestions on other videos that may be helpful.

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Text on screen: Kiwi Park Training Module – Populating the Trial Balance Converter in Kiwi Park Model.

(Actor, facing and talking into the camera)

In this video you will learn how to remap the school's existing links for the latest version of Kiwi Park.

I'll show you how to arrange the worksheet vertically and in synchronous side-by-side viewing in Microsoft Windows, compare your current mapping of the trial balance to the latest template, add and delete rows to the existing mapping to align to the latest template.

(Actor, facing and talking into the camera)

Copy paste value the old mapping to the new template, copy paste value the previous year trial balance and align the current year trial balance and save the new mapping conversion for the auditor.

(An internet webpage appears on screen: the user accesses the Ministry of Education’s School’ annual report (annual financial statement) webpage)

Open the MOE web page that contains the Kiwi Park models and select the file you want to download. “Save as” into the working folder you are using for the school's latest financial statements.

(An Excel screen appears)

Check that the downloaded financial statements are blank.

(Actor, facing and talking into the camera)

As a progress tool, it is best to save iterations of the file as you go so you can go back a step or two, if you lose track of where you are in developing the Kiwi Park model for the school.

(Text appears on screen: Open the school’s audited model for last year’s and save to the working folder you are using to produce the latest financial statements.)

(An Excel screen appears)

Close all Excel worksheets and open last year's audited model and this year's blank model.

With only these two Excel workbooks open, the new model and the old model, we're going to try synchronizing the scrolling of the worksheets vertically and side-by-side. This allows us to make sure the schematics of the old model can be copied onto the new model and save us a lot of time. 

Check that you're on the same worksheet in each sheet of the trial balance converter. Set the window freeze on each screen separately to be the same cell in each worksheet. “Control home” on each workbook. You may have to unfreeze and refreeze to set this up. 

Next select View, Arrange All, Vertical.

Select view side-by-side and synchronous scrolling. Scroll down the two worksheets side-by-side to make sure each row number and description are the same is the new model.

When all the codes align, we will use Excel’s copy function to copy last year's trial balance converter mapping to the new model’s trial balance converter.

Copy Paste Value the old model GL codes mapped in E 16 through CR 270 to the new model cell using Excel’s control C Copy and Paste Value.

Check that all trial balance codes are mapped. See trial balance converters cell G 12 and school trial balance input column I.

Check for duplicate codes column G to column CR or omitted codes school trial balance input column I.

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We hope you find these videos helpful. We are always happy to hear from you and welcome your feedback.

Please contact your regional finance advisor to provide your suggestions on other videos that may be helpful.

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Text on screen: Kiwi Park Training Module – Populating the “Inputs” worksheet manually.

(Actor, facing and talking into the camera)

This method of populating the financial statements is time consuming and can cause errors if you are not sure how the schools GL codes are mapped to the Ministry codes.

When entering data please ensure that all balances are in whole dollars as it will save with balancing at completion.

I'm going to show you some key steps for populating the inputs worksheet manually.

(Actor, facing and talking into the camera)

I'll show you how to blank each row and column in preparation for manual data entry in the input worksheet, check the blanked input worksheet balances and all the financial statements and notes are blank and balanced and how to key data into each section and to check them against your system generated financial statements.

(A computer screen appears showing an Excel worksheet for Kiwi Park School 2020)

Select the inputs worksheet in your model and start deleting all formulas section by section.

Leave the totals line so that you have a mechanism to check if you agree with your school's totals.

The blank worksheet can now be completed by entering in the balances for each code. Complete the data input section by section so that you can check totals as you enter data for each category.

Once all the data has been entered check at the top of the page on line 4 to see if the worksheet is balanced.

(the computer screen highlights the cells on line 4 by a bold blue coloured rectangle)

If it has balanced, you will see a comment “Balances” highlighted in green. If it does not balance you will see a highlighted comment “Does Not Balance”.

Check your figures from your worksheet section by section.

Complete the exercise until you balance the worksheet.

(Actor, facing and talking into the camera)

We hope you find these videos helpful. We are always happy to hear from you and welcome your feedback.

Please contact your regional finance advisor to provide your suggestions on other videos that may be helpful.

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Text on screen: Lifting aspiration and educational achievement for every New Zealander.

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Text on screen: Kiwi Park Training Module – Quality checking the financial statements.

(Actor, facing and talking into the camera)

I'm going to show you how to quality assure each worksheet with a red coloured tab. These worksheets will form the printed pages of the financial statements.

(Actor, facing and talking into the camera)

I'll also show you how to hide a row that has no number or has a zero value in all three columns to improve the presentation of the financial statements and I'll show you how to format the worksheet to show a white background.

(A computer screen appears showing an Excel worksheet for Kiwi Park School 2020 the statement of comprehensive revenue and expense)

In order to check that all data for the statement of comprehensive revenue and expense has flowed through correctly from the inputs worksheet, have a look at line 41 under column H to J.

The balance in the checks should be zero. If there are balances then you will need to start checking each line item and locate the error at its source. Please do not force a balance by changing the formula.

In order to check the statement of changes in net assets and equity, refer to check calculations on line 10 under columns H to J.

(A computer screen appears with a bold blue coloured rectangle drawn around the cells H10 to K10)

The balance in the checks should be 0. If there are balances, then you will need to start checking each line item and locate the error at its source. Please do not force a balance by changing the formula.

Finally, in order to check the statement of financial position refer to check calculations on line 54 under columns H to J.

(A computer screen appears with a bold blue coloured rectangle drawn around the cells H54 to K54)

The balance in the checks should be 0. Again, if there are balances then you will need to start checking each line item and locate the error at its source. Please do not force a balance by changing the formula.

(Actor, facing and talking into the camera)

If there are differences you will need to investigate, locate and fix these errors.

We will provide a separate video session on how to quality check the statement of cash flow and the notes and disclosures.

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We hope you find these videos helpful. We are always happy to hear from you and welcome your feedback.

Please contact your regional finance advisor to provide your suggestions on other videos that may be helpful.

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Text on screen: Kiwi Park Training Module – Financial Statements: Quality review the Statement of Cash Flows.

(Actor, facing and talking into the camera)

The Statement of Cash Flow is important because it informs the reader of the school's cash position.

It summarizes the amount of cash and cash equivalents entering and leaving the school.

In this session, I'm going to show you how to manually adjust the cash flow for non-cash items, manually add back information on any assets disposed of at a loss, add back information on any assets disposed at a surplus, review the acquisition of assets under a lease or hire purchase security document.

The cash flow statement measures how well the school manages its cash position, meaning how well the school generates cash to pay its debt obligations and fund its operating expenses.

A school can use a Statement of Cash Flow to predict future cash flow which helps with matters of budgeting.

(An Excel spreadsheet appears on screen - the user selects the Statement of Cash Flows; the user scrolls down the screen and moves the mouse to cell i47 to K47)

Now let's go to the Statement of Cash Flows worksheet. Check that line 47 and columns I through K have returned and nil balance for each column. If not, then you will have to investigate the reason for any imbalance and fix accordingly at its source.

(On screen the user selects the Actual CF Model CY and Budget CF Model CY worksheet, the user scrolls down the worksheets and moves the mouse to row 263)

The Statement of Cash Flows worksheet is linked to the Actual C F Model C Y and the Budget C F Model C Y worksheets please ensure that you have checked both of the cash flow worksheet totals on line 263 which should be showing a nil balance from Column D to column T. If some columns are not, you will need to investigate and fix errors.

(On screen the user selects the Actual CF Model CY – Column G)

The Kiwi Park cash flow model has a number of pre-set formulas to adjust for financial transactions that have not passed through the school's bank accounts.

We have done this to make the job of producing the financial statements easier.

In column G, we have pre-set the more common adjustments which you don't need to change.

1. Teacher Salaries Grants Revenue is set off against Learning Resources.
2. Land Use Grants revenues is set off against property expenses.
3. Impairments to Property, Plant and Equipment and Accounts Receivable set off against Assets and Receivables. 
4. The annual charge for Cyclical Maintenance Provision is accumulated in the provision for Cyclical Maintenance.
5. The annual SAAR accrual for unpaid teachers’ salaries receivable from the Ministry of Education is set off against the unpaid salaries, wages and holiday pay for school employees. 

(On screen the user highlights Column H, pause. The user moves the cursor to H10 and H75)

Column H is for the school to add their own non-cash adjustments.

An example of this is where a school has a statutory intervention and the Ministry contributes to the cost. The adjustment is not pre-set in the Kiwi Park model. The level of support provided by the Ministry is confirmed by email and this should be manually adjusted in sales H10 and H75. In our example, the Ministry provided a subsidy of $8,000. This is entered into Cell H10, towards the expense of the intervention expense minus $8,000 is entered into cell H75.

(On screen the user moves the cursor to Columns Q, R and S and scrolls down to S88)

The cash flow model needs some more refinement to improve the presentation of information around the buying, selling and disposal of assets.

(On screen a bold blue rectangle is drawn around cells around cell T88)

We need to work with column Q R and S. In our example, a motor vehicle has been sold for $5000 and some furniture and equipment has been disposed for nothing. That is, no cash was paid to the school.

(On screen a bold blue rectangle is drawn around cells around cell S169 and then around S181. The user attention is also drawn to the automatic sum function of excel at the bottom the screen. A bold blue rectangle is drawn around cell T 88 to show the calculated receipt from the disposal. The cursor then scrolls over to Cell D88 to show the surplus on disposal).

We bought the vehicle for $25,000 and over the years we depreciated the vehicle by $21,000. The net book value of the vehicle at the time of disposal was $4,000 and we sold it for $5,000 cash, GST exclusive. This resulted in a gain of $1,000 to the school.

(On screen a bold blue rectangle is drawn around cells around cell S 168 and scrolls down to S179. A bold blue rectangle is drawn around cell S 97 and the rectangle moves across to T 97 and then D97)

We bought the furniture and equipment for $12,345 and over the years we depreciated the furniture and equipment by $9,088. The net book value of the furniture and equipment at the time of disposal was $3,257.

No money was paid to the school. This resulted in a loss on disposal of $3,257.

(On screen a bold blue rectangle is drawn around cells S 164 to S172, the rectangle scrolls down to cells S177 to S184)

The original cost of the assets disposed of are added back at cost in column S Rows 164 to 172.

The depreciation that was accumulated by the assets disposed of are added back as negative numbers in column S Rows 177 to 184.

(On screen a bold blue rectangle is drawn around cells S 164 to S184, the user attention is also drawn, by drawing a bold blue rectangle around the sum function at the bottom of the screen)

If you highlight cells S 164 to S 184 you will be able to check the net book value of the assets disposed of.

The net book value of the assets disposed of at a surplus needs to be separately set off and cell S88.

(On screen a bold blue rectangle is drawn around cells S 88, the rectangle then scrolls down to cell S97)

You will see we have entered minus $4,000 here.

The net book value of the assets disposed of at a loss needs to be separately set off on row S 97. We have entered minus $3,257 here. These adjustments help the cash flow model to calculate the cash receipts, if any, given to the school when they disposed of this surplus or obsolete assets.

(On screen the cursor scrolls from column T to column Ai, a bold blue rectangle is drawn around cells Ai 88 Ai 97)

If we scroll over to Column A I and to rows Ai 88 to Ai 97 we will see the school received $5,000 for the disposal of assets. This is the figure shown in the statement of cash flow and should agree with your banking records.

(On screen the cursor highlights Q 171, [pause], the cursor scrolls down to Q234)

Assets acquired by lease or higher purchase do not generate cash transactions in the bank account other than paying the periodic instalments. We need to check that the pre-set adjustment is working correctly in column Q. In our example, the school signed new leases for equipment worth $20,368. The purchase on row Q171 is set off against lease liabilities on row Q234.

This adjustment helps the cash flow model to calculate the cash paid by the school to the leasing company as a borrowing cost.

(Actor, facing and talking into the camera)

We hope you find these videos helpful. We are always happy to hear from you and welcome your feedback.

Please contact your regional finance advisor to provide your suggestions on other videos that may be helpful.

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Text on screen: Lifting aspiration and educational achievement for every New Zealander.

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Text on screen: Kiwi Park Training Module – Hiding Rows and Notes that are not required for your school.

(Actor, facing and talking into the camera)

I'm going to show you how to hide rows and notes that are not required for your school.

This is an appropriate way to simplify your document as it is important you do not delete any rows. Before we start the session, it is important that you keep a copy of the model.

It's also important that you check and complete each note if you are required to include information manually.

These areas will be in grey and a note to the side saying “‘Requires Manual Entry.”

(An Excel spreadsheet appears on screen - a user selects the Statement of comprehensive revenue and expense worksheet; the user moves the mouse to cell B1, untick “No” and OK)

I will guide you through some tips to make it easier for you when you are ready to print the financial statements either for your own visual checking or providing it to the board for signing.

Select the worksheet “Statement of Comprehensive Revenue and Expense”.

Go to cell B1 and click on the icon to the right of the cell unclick “No” and click on OK.

(the computer screen shows a user moving through the red tab worksheets repeating the same steps – selecting B1 and unclicking “No”)

Repeat this on the next four worksheets, “Statement of Changes in Net Assets Equity”, “Statement of Financial Position”, “Statement of Cash Flows”, and “Statement of Accounting Policies”.

Select the worksheet “Notes and Disclosures”.

(An Excel spreadsheet appears on screen - a user selects the Notes and Disclosures worksheet; pause the user moves the mouse to cell C1, unclicks “Blanks” and OK)

On this worksheet, you need to make some manual selections in column B to choose the rows to print.

Go to Cell C 1 and click on the icon to the right of the cell. Untick “Blanks” and click on OK.

(on the computer screen the user selects the relevant cells in Column B and changes the yellow highlighted cells from “No” to “Yes”)

If any of these disclosures are required for your school, change the yellow highlighted “No” to “Yes” [pause] and make sure the commentary has been updated.

(on the computer screen the user selects the relevant cells in Column D and enters an explanation for the Note disclosure in cells D51 and D205)

In our example, cell D 205, four thousand five hundred forty-one dollars cash is held on behalf of the Ministry of Education and required to be spent in 2021.

(on the computer screen the user selects the relevant cells in Column C and clicks on the “Select All)” and the “OK” icon. The user then selects cell B1, unticks “No” and clicks on the “OK” icon. The user also selects File - Save).

Go back to Cell C1 click on the icon to the right of the cell, tick “Select All” and click on OK. Go to cell B1 and click on the icon to the right of the cell. Untick “No” and click on OK. Save the document.

(on the computer screen the user selects the Statement of Comprehensive Revenue and Expense, scrolls over to and clicks on the Notes and Disclosures worksheet)

Select all the worksheets from “Statement of Comprehensive Revenue and Expense” to “Notes and Disclosures” by clicking on the “Statement of Comprehensive Revenue and Expense” tab, hold down the Shift key then left mouse click on the “Notes and Disclosures” tab.

(the screen shows the highlighted Column C to J, the mouse selects “Format Cells” “Fill” and then the white colour palette. The user then selects “Font” and then the black colour palette)

While the six worksheets are selected, highlight Column C to J. Right click on your mouse or other pointing device and select Format Cells click on Fill and then select the white as the background colour. Click on Font and then Colour and choose the black theme colour. Click on OK.

Now the worksheets are grouped, please note any changes you make will be applied to all six worksheets. So please be careful not to type anything or make any other changes.

(the screen shows the 6 selected highlighted worksheets. The user hovers over the selected worksheets, right mouse click and selects “Ungroup Sheets”).

To ungroup the sheets, right mouse click on the bottom of the worksheet and select Ungroup Sheets.
You are now ready to print the financial statements.

(The screen shows the user selecting the red coloured Title Page, scrolls over to and clicks on the Notes and Disclosures worksheet. The user selects File, Print, Printer. The user then ungroups the selected worksheets, closes and saves the spreadsheet).

Select all the red worksheets by left mouse clicking on the title page worksheet. Hold down the Shift key, scroll over to the “Notes and Disclosures” worksheet and left mouse click on the “Notes and Disclosures” worksheet.

Click on File, scroll down to Print, select your preferred printer and the quantity required and click on the Print icon.

We hope you find these videos helpful. We are always happy to hear from you and welcome your feedback.

Please contact your regional finance advisor to provide your suggestions on other videos that may be helpful.

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Text on screen: Lifting aspiration and educational achievement for every New Zealander.

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Text on screen: Kiwi Park Training Module – Gathering all parts of the Annual report, uploading to the Education Portal and publishing online.

(Actor, facing and talking into the camera)

I'm going to show you how to gather all parts of the Annual Report, upload into the Education Portal and put a copy onto the school's website.

This requires the following steps.

Text on screen:

1. Accessing the Ministry website for the latest Annual Reporting circular
2. Gathering the 5 component parts of the “Annual Report”, check for legibility and authenticate the final version of the audited financial statements
3. Scan all pages to 1 PDF
4. Check you are an authorized user of the School Data Portal.
5. Open the school data portal and log in.
6. Upload the annual report as 1 PDF
7. Upload the Kiwi Park model (optional)
8. Provide the PDF to your website provider for publishing, if your school has a website.
9. Or, if your school doesn't have a website request the Ministry to host your annual report by sending an email to planning.reporting@education.govt.nz along with the PDF and approval from the Board.

So let's look at these in some detail.

(An internet webpage appears on screen: the user accesses the Ministry of Education’s - School’ annual report (annual financial statement) webpage)

You will see lower down on this page, information related to the annual reporting process.

(the computer image on screen shows a user scrolling down the webpage)

Scroll down to the link for this year's annual reporting circular.

(the computer image on screen has drawn a bold blue boarder around the Annual Reporting Circular hyperlink on the webpage)

Click on the link to view the contents of the circular.

(An internet webpage appears on screen: the user accesses the Ministry of Education’s Education Circular on the website and scrolls down to Appendix 3: Annual Report Checklist)

The next step is to ensure that you have all the components that make up the Annual Report.

You will find the checklist showing the five components required included in the link above under the heading Annual Report Checklist.

Check you have the signed original documents at hand as per the checklist.

(Actor, facing and talking into the camera)

Once you have all the information together, scan it into one PDF document ready for uploading via the school portal.

(An internet explorer webpage appears on screen: the user types services.education.govt.nz and hits “enter” on their keyboard, a new webpage appears: the user clicks on Education Sector Logon icon)

To access the School Data Portal, go to services.education.govt.nz, click on the Education Sector Logon,
choose Education Sector Logon, and finally select School Sector logon links.

(Another webpage appears on screen: the user clicks on the “School Sector Logon Links” under the column - Application Logon Links)

Now select SDP School Data Portal from the list of options.

(An internet webpage appears on screen: the user scrolls down the webpage to clicks on the “SDP - School Data Portal”)

(the next computer image shows a user reading the Education Circular - Filing your Annual Report)

Follow the steps outlined in the Annual Reporting Circular under the heading “Filing your Annual Report”

(An image on screen showing a user accessing their school data portal, scrolling on the File Type and selecting “Annual Reports (31 May)” and browsing for the school’s folders for the PDF of their Annual Report)

Once you have logged in select the dropdown option Annual Report 31 May in the School Data Portal to ensure your annual report is submitted correctly.

(Actor, facing and talking into the camera)

We hope you find these videos helpful. We are always happy to hear from you and welcome your feedback.

Please contact your regional finance advisor to provide your suggestions on other videos that may be helpful.

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(The video is divided in 2 sections, on the left hand-side, the presenter is standing, facing the camera. On the right hand-side, the powerpoint presentation is showing the webinar's title 'Managing School Finances Annual Reporting')

Kia ora katoa, kō Chad tōku ingoa, nō Kirikiriroa ahau. Nau mai ki tēnei huihuingā o tenei rā. Welcome everybody to the 2021 Annual Reporting Webinar. My name is Chad Britton, I am one of the Team Leaders of the School Financial Advice Team and I’m based up in our Hamilton office. For today’s session I want to just welcome my fellow presenters, Jane Rogers the School Sector Manager from the Office of the Auditor-General and Hamish Anton, Audit Partner for Deloitte and one of our appointed Auditors. They’re both going to take you through a session a little bit later on around a couple of various topics.

(Starting power point presentation)

Just what today’s session is all about, really it’s about just obtaining understanding of the process of preparing your yearend financial statements and some requirements around the audit annual process, and just trying to make that as smooth as we possibly can. Today we’re going to cover some things off and we’re going to be looking at a bit of a briefing. Jane’s going to give us a bit of a briefing from the Auditor-General’s office, Hamish is going to give us some tips on what it’s like being a school auditor and what we can do to help facilitate the audit process. Then we’re going to come and talk about what you need to do in preparing your Annual Report, what are the things you need to be aware of. We’re going to look at some guidance or some key areas, key problem items or troublesome areas that we find each year that we want to try and give a bit more help on. And then we’re going to look at some links to some information and some guidance that the Ministry’s released this year and where you can find it, and actually how to contact your regional school finance advisors who are here to help support you through any financial challenges you may have. So now I’d just like to take this opportunity to welcome Jane for the first session. Jane

(Jane Rogers continues to present from power point presentation)

Kia ora, my name is Jane Rogers, I’m the Sector Manager for Schools at the Office of the Auditor-General. Today I’m just going to talk a little bit about the role of the Office of the Auditor-General in relation to schools and school audits. I’m also going to talk about sensitive expenditure which is a specific aspect that we look at in our audit of schools, and also I’m going to talk about fraud.

So, in talking about the role of the Office of the Auditor-General, the Auditor-General is an Officer of Parliament. That means he’s independent of the government, so our work gives the parliament and public an independent view of how public organisations are operating, and because of this we’re often called the public’s watchdog. About 80% of what we do is actually annual audits of organisations. We audit about 3,400 organisations in the public sector, that’s across the whole of the public sector which includes government departments, DHBs, councils and of course schools. About 2,400 of those are school audits. We also audit about 45 entities that are controlled by schools so they’re usually fundraising trusts, that sort of thing.

Some other functions of the Auditor-General, we also have a controller function and that’s looking at government departments and how they spend their appropriations to make sure they’re spending in accordance with the government’s expectations. We also do performance audits, these are looking at effectiveness, efficiency, we look at matters of probity, waste, financial prudence, and we also look at whether organisations are complying with their statutory obligations. We are also asked sometimes to do inquiries, and that’s inquiries into an organisation’s use of resources, and those performance audits and our inquiries are what we call our discretionary work.

The main objective of the Office of the Auditor-General is to improve the trust and confidence in the public sector, so we also do a raft of good practice guides as well to help the public sector improve. In terms of our annual audits, we have what we call a devolved model, so that means we appoint auditors from outside from across New Zealand, so that includes our own business unit Audit New Zealand and also external audit service providers. We currently have got about 60 appointed auditors who audit schools for us across the country.

In terms of school audits, the requirement for a school audit is set out in the Education and Training Act. The Education and Training Act says that every school must prepare financial statements, they must prepare an Annual Report that includes financial statements, and they must have those audited. So those financial statements must comply with generally accepted accounting practice, which means it must follow the accounting framework which is set out by the external reporting board and follow the accounting reporting standards. And the Education and Training Act also says that a school’s financial statements must follow the Kiwi Park Model, and that’s been mandated by the Ministry of Education.

The Auditor-General is the auditor of all schools, that’s set out in the Education and Training Act, but we don’t audit the other information that you produce as part of your Annual Report, we just audit the financial statements, but we will look at your other information, which is your analysis of variance, to make sure that it isn’t inconsistent with the financial statements.

In terms of responsibilities, the board is responsible for its financial statements. You may decide to devolve that responsibility of the preparation of the financial statements to a financial service provider, many schools do that, but ultimately it is the responsibility of the board, they are your financial statements. And that includes any disclosure that’s included in there. We may at times ask you to put in some additional disclosure, examples of that are often to do with breaches of legislation or financial difficulties. We may give you a guidance on some wording to use, but essentially they are your financial statements, so you should be able to tell your own story in that disclosure so if you want to add to that standard working that’s absolutely fine, they are your financial statements.

Just a couple of key dates. The draft financial statements have to be given to your auditor in auditable form by the 31st of March and then you must submit your Annual Report to the Ministry by the 31st of May.

In terms of the outputs from your audit, you will receive an Audit Report which will need to be submitted with your published Annual Report to the Ministry of Education. In our Audit Report we set out our opinion on the financial statements, and that’s saying whether the financial statements are a fair reflection of the transactions in the year and the financial position at the end of the year.

We may, if there’s a qualification to your opinion, that means we are unable to give that opinion that they are a fair reflection, and it will explain why. We may also refer to matters we want to draw readers’ attention too, these we call ‘emphasis of matter’ or ‘the matter paragraphs and examples of those are breaches of legislation or financial difficulties, and often we might to refer to those in your Audit Report as well. Your Audit Report is a public document, and it should be published on your website along with your financial statements and your Annual Report. Then you will also get a management letter, that is a letter that’s addressed to the board. That isn’t a public document, that’s a letter addressed to the board and in that we’ll set out our detailed findings from your audit, and that will include any weaknesses in controls that we find.

We would expect our auditors, obviously if there’s anything significant in your management letter, to have discussed that with you prior to sending the letter. If they haven’t and you don’t agree with something in the letter, please contact them to discuss it. And we would expect the board to actually discuss the management letter at one of their meetings and think about some of the recommendations the auditor has made, and we will follow that up at the next year’s audit.

The third thing is annually we do a report to the Ministry of Education on the results of the school audits, and we also publish that on our website, and that comes out usually around November in the year of audit.

And as I said before, the Auditor-General’s the auditor of all schools and we have a devolved audit model, so we actually have contracts for school audits for three yearly contracts. We’re just going into the next three yearly contract at the moment which is for the 2021 to the 2023 audits. You should all have had your audit proposal by now relating to those years if you haven’t please contact the office and we will chase that up for you.

That proposal set out the proposed audit fees for the next three years and we just want to talk a little bit about fees. The complexity of school audits has increased over recent years, there’s also been additional requirements on our auditors in response to concerns about audit quality, those are international concerns, so this is a profession wide issue. This has all driven up the cost of school audits which has been exacerbated this year by an acute shortage of school auditors. There is a shortage of auditors throughout New Zealand, not just school auditors, so this is a nationwide issue. This has meant that there has been some increases in fees, and we just wanted to explain a little about the factors that would affect your audit fee. So effectively your audit fee will be dependent on the number of audit hours that it takes to carry out the work, and those are usually driven by complexity and risk. However, there is a minimum amount of work that is required in all audits. We have to comply with auditing standards which means a certain amount of work needs to be done at every single school no matter how small you are. So even if you’re a very small school your audit fee might not be that much smaller than another school that may appear to be significantly larger than you.

So just to talk about, again the shortage of auditors which I just talked about, that has caused us delays this year and we do apologise for those delays for those of you who’s audit was late or hasn’t yet been completed. We did actually get 96% of the draft financial statements for audit by the 31st of March this year which was the highest we’ve had for a number of years. We’ve been working very closely with the Ministry of Education and with the sector to try and get information to auditors as soon as possible, and we could see that coming through this year. But unfortunately, only 70% of audits were completed by the May deadline which was disappointing and most of that was due to the acute shortage of auditors.

This shortage of auditors is being caused by the border closures and COVID-19 has made the whole situation very acute, so it may affect our 2021 audits if the borders remain closed. We have done some things to try and mitigate against that. We’ve tried to resize audit portfolios where we can when we’ve been going through the reappointment of our auditors for the next three years, we’ve moved some audits where auditors feel they haven’t got the resources to complete all their audits. We’ve also been talking to the Ministry about some efficiencies, some simplification of Kiwi Park and also looking at the information flows.

The best thing that you can do as a school is get this sort of information to your auditor as soon as possible because the more time we have the earlier we can start the audits, and the more time we’ve got to get through them all the more likely we’re going to get through them all by the end of May. But again, we do apologise for the ongoing delays, but it’s a little bit out of our hands.

I just want to talk a little bit about Good Practice Guides. We do publish a number of Good Practice Guides on our website and there’s some other resources also available on our website. These are the ones that we think are relevant to schools. We’ve got a guide on managing sensitive expenditure, one on managing conflicts of interest, discouraging fraud and severance payments. So, if you go on our website there is a Good Practice tab and also on this slide which will be shared there is links on the slides. The other resources we have are, we’ve got some videos and we’ve got an interactive tool as well called Integrity Town which looks at different types of potential conflicts of interest.

Just moving on to sensitive expenditure. What is sensitive expenditure? Sensitive expenditure is any spending by an organisation that could be seen to be giving private benefit to staff additional to the business benefit to the organisation. As I said before, when our auditors carry out their audits they are required to follow auditing standards. The Auditor-General has their own auditing standards, these are based on the normal international standards of auditing, but we also have some of our own statements and standards, and these reflect public sector aspects of the audit which wouldn’t be done in a normal private sector audit. One of these is the testing of sensitive expenditure. All auditors will do some testing of sensitive expenditure as part of their audit of your school.

We do set out, and this is actually in our good practice guide which I just mentioned, we do set out principles that we think should underpin decision making about sensitive expenditure, so these are the things you should be thinking about as you’re deciding to spend money in these areas. The first one is it needs to have a justifiable business purpose, and that should be consistent with the school’s objectives so there’s a clear business purpose for the expenditure, be made with integrity and impartiality, so it has to be free of conflicts or bias, and we expect people to behave in an acceptable way so it’s in keeping with accepted moral and ethical principles. Be moderate and conservative, so not excessive, or extravagant, and we would like to see that you have considered other options so could the same objective or outcome that you’re trying to get from that expenditure, could it be achieved at a lower cost? So, it’s making sure you’ve thought about that. Be made transparently so there’s an openness about your spending, about what you’ve spent your money on, and also the decision-making process, so how you’ve come to the decision that that’s an appropriate expenditure of the school. And be made with proper authority, so that’s following any policies you have on expenditure and also use under the correct delegation, so the person who’s decided or approved that expenditure had the appropriate delegation to do that.

So, as I said, your audit will consider how public funds have been spent and your auditor will carry out specific testing of sensitive expenditure. That means they will look at a sample of expenditure and they will probably look at it more closely than they would at some of the other expenditure testing they will do. We normally, as most of our testing in an audit is done, we have a term called materiality, so we look at elements of the financial statements that are significant, but because of the nature of the expenditure, materiality doesn’t really apply so we may look at things that are relatively small amounts, but we’re looking at them from a different perspective, from more a public sector perspective rather than looking at them from the financial statements perspective.

We will look at these more closely, we’ll want to know why the expenditure was incurred and we may also want to look at some of the information and the audit trail and supporting information behind the decision-making process, and that’s not because we suspect there’s any wrongdoing, but just because of the nature of the expenditure we just want to make sure that the principles that I’ve just spoken about have actually been followed in making the decision to actually spend that money.

In terms of types of sensitive expenditure, here’s some examples on this slide. There’s travel, so obviously travel, accommodation, in particular personal aspects of travel if people travel for work and then they take a little bit of time at the end to do a little bit of personal travel. Just making sure that there’s a clear demarcation between that and there’s no personal benefit, and the school hasn’t paid for the personal part of the travel. Entertainment and hospitality, sort of goods and services. By that we mean the use of school assets for personal use or staff using school suppliers to get preferential treatment or discounts, and also selling assets, when you’re disposing of assets selling assets to staff. Wellbeing, that’s about staff social activities or any sort of social activity. Gifts can be retirement gifts or gifts to students, lots of different sort of gift.

Also, we include in our Good Practice Guide we talk about the use of credit and debit cards. And these are often used for this type of expenditure so that’s one of the reasons we put that in there, and also there is a sort of risk with credit and debit cards that the approval of the expenditure is usually after the fact because you’ve already incurred the expenditure before you’ve got the approval, whereas most other expenditure goes through an approval process before it’s actually paid. It’s also there are risks with credit and debit cards of personal use of their credit and debit cards, and also if people take out cash advances on those credit and debit cards, so there’s sort of a risk area.

In terms of the processes and procedures that we should expect you to have in place, we would expect schools to have appropriate sensitive expenditure policies. There is a general policy available on the Ministry of Education’s website, but we would expect schools to set their own limits of what they think is appropriate. For expenses, well for all expenditure but particularly for expenses or credit cards we expect there should always be a one up approval process, so that means the person approving the expenditure should be more senior to the person incurring the expenditure. And that is a common finding that we often find in schools that that isn’t actually happening. So that means if it’s the principal’s expenditure it has to be approved by the board chair.

And the other thing is supporting records, that’s just making sure there’s a clear audit trail for your decision making, especially where there’s significant expenditure such as travel, so it’s making sure there’s a clear trail of the decision making and why the board thinks that there is a clear business purpose for that expenditure. And just some of the recurring issues that we find when we’re looking at sensitive expenditure in public organisations, so it’s extravagant or immoderate expenditure, that’s organisations spending money but not really considering whether they could achieve the same thing at a lesser cost. So that’s extravagant expenditure. Expenditure which doesn’t have an adequately documented or justifiable business purpose, so when you’re going through these decision-making processes it’s very important to actually link it back to what you’re trying to achieve by spending that money, and how it is actually linked to your school’s objective.

Poorly defined sensitive expenditure policies and procedures. Like I say, you do really need to have very clear guidelines for your staff about what rules and what limits there are in spending sensitive expenditure. Expenditure not adequately supported by invoices or receipts, we often find this in terms of credit cards, and again there is a risk there because you’ve already incurred the expenditure so it’s just making sure it’s adequately supported by receipts so those approving actually know exactly what the money was spent on. Expenditure that is made before appropriate authority has been obtained, so again even if you’re going to spend it on a credit card because that’s sometimes the easiest way depending on what you’re buying, I mean you may need a credit card or a debit card to make that purchase, but there should be authorisation before that. There should be some sort of authorisation from the appropriate person before you actually spend the money. And then expenditure that’s made without proper scrutiny, so that’s people spending without really thinking about whether it actually is in line with the policies. And as I said before, we do have a guide on controlling sensitive expenditure that’s available on our website, we also have a number of videos on our website as well and some other resources like blog posts and other things like that that if you go on our website you will be able to see those.

The next thing I just wanted to talk about was fraud. The definition of fraud, fraud is an intentional act by one or more individuals involving the use of deception to obtain an unjust or illegal advantage. And obviously the situation we’re in at the moment, the pandemic, people are under pressure, we’re often working outside our normal routines and people are having to work in different places because of the lockdowns, and we’re also being subject as a country and I think this is probably worldwide, to more external attacks in terms of cybercrime. So, we feel like there probably at the moment is a heightened risk of fraud.

And so, this fraud triangle says that there’s three things that need to be in place for a fraud to occur. The first one is the pressure incentive, that’s the temptation or perceived pressure to commit fraud, again that’s if somebody’s under financial pressure or some other reason that’s going to drive them to maybe think about committing fraud. There’s rationalisation, this is the argument of fraudsters built up for themselves to explain why it’s actually justified for them to actually do that. And then the third one is opportunity, that’s the possibility to commit fraud. So, the first two – pressure, incentive and rationalisation are personal to the individual and it’s more difficult as an organisation to have an input into those, and obviously if it’s an external fraud threat you don’t know the person anyway so you couldn’t obviously have any input on that. So, the main one that a school can control, or any public organisation, is the opportunity. That’s why it’s important to have appropriate controls in place to mitigate against fraud, and obviously that’s frauds from the inside, that’s your employees. So that’s your own internal controls, but also as we are seeing at the moment, there’s an increasing risk of fraud from outside, sort of cyber fraud, and there have been some recent examples of this in the school sector.

Talking about discouraging fraud, does an auditor look for fraud? Well, the answer to that is actually no, our audits aren’t designed to look for fraud. The aim of an audit is to give an independent opinion on your financial statements, but obviously the auditor may uncover fraud but it’s not actually the focus of our audit so that’s not actually what we’re looking for. We actually find the main way fraud is detected is through an organisation’s internal controls, so it’s very important for an organisation just to ensure that the controls are up to date and fit for purpose. And one of the main controls that helps against fraud is segregation of duties, so that’s having more than one person involved in a process, because then to have fraud you have to have collusion between those two people. And we do understand that particularly in small schools it is actually difficult to segregate duties because you don’t have a large number of staff to be able to segregate those duties, but it’s important to consider how you can bring in some sort of independent oversight so you can sort of mitigate against the fact that you haven’t got that segregation of duties.

In terms of getting controls right, good systems can include having a staff code of conduct and communicating about it regularly, having a fraud prevention policy, and again communicating with your staff about that regularly, reviewing your fraud controls regularly, managers and employees understand their responsibilities for preventing and detecting fraud, so that’s making sure that they understand their responsibilities in terms of the internal controls. A clear policy on accepting gifts or services, screening your new employees including criminal history checks, due diligence checks on new suppliers including credit checks, and thinking about offering fraud awareness training for your staff. And then getting the culture right, that’s about minimising the opportunities and removing the temptation to commit fraud. And again, that’s promoting fraud awareness, ‘cause a fraud is less likely to happen if people know the likelihood of being caught, and if it’s clear that if a fraud is found there will be a prosecution, so it’s also making sure if you do find a fraud that it’s followed through.

Want to talk about some fraud. We do actually collect information; our auditors collect information on any actual or suspected frauds from across the public sector. We pull that together and we do actually report that on our website. So in terms of schools, just some of the fraud trends we’ve seen over the past few years and some mitigations. The first one is theft of cash. Often this is relatively small amounts of cash, but theft is theft. The way to mitigate against that is to encourage electronic payment for fees or large invoices rather than cash payments, and to make sure if you do collect cash that you keep it in a secure location that a few people have access too, and minimise the time you hold cash, so bank it as often as you can, particularly if you’ve built up quite a large amount of cash.

Theft of assets. In terms of schools these tend to be small, desirable mobile equipment such as iPads and Chromebooks, that sort of thing. So again, it’s important to have strong controls over those sort of equipment, make sure that you have a log of them, make sure that if they are lent to students that you log them out and log them back in again, and it’s just reminding staff about the controls and making sure they follow the controls and taking action when you’re actually told of any theft.

Misuse of credit cards. I’ve already spoken about this a little bit in terms of sensitive expenditure. So, these should be approved on a one up basis and receipts should be provided for all expenditure to make sure there’s no personal expenditure being put through credit cards.

And then in terms of fraudulent payments, I mean a lot of the theft of cash, theft of assets are relatively small frauds that we see, but there have been a number of significant frauds in schools in recent years which have been reported in the media, and these are usually through false invoicing, that sort of thing. In terms of fraudulent payments, it’s making sure you’ve got a second person to review and authorise all master file changes, that’s in particular any changes to bank accounts, senior management reviewing master file change reports regularly, obtaining and reviewing supporting documentation before making payments and then marking them as cancelled after, so not making payments without the proper documentation, and investigating all suspicious invoices.

The last one is cybercrime. I think since COVID-19 has happened, and I think this is worldwide, but New Zealand has been under a lot more cyber fraud attacks than we have before, so it’s really important to be vigilant and be prepared and think about how you can mitigate against those. And again, a lot of it’s about education, make sure you are vigilant, make sure your staff are vigilant, ensure existing controls aren’t overridden, don’t click on any links that look suspicious. Some of the frauds that do happen are where fraudsters pretend to be one of your suppliers or pretend to be somebody in your organisation and ask you to make a payment or ask you to make a change to a bank account, so again if you’re getting those sort of things the best thing to do is actually follow up with a phone call to that person to make sure they’re appropriate and don’t bypass your controls, still follow your normal controls to make sure that these payments don’t get made in error.

 

 

(Hamish Anton continues to present from power point presentation)

Tēnā koutou katoa. My name’s Hamish Anton, I’m a Deloitte Audit Partner and an appointed auditor on behalf of the Auditor-General. Today I wanted to touch a little bit on the audit process and a few tips and tricks really to help make sure your audit runs smoothly for the coming year.

For many of you, you may only see your auditor for one or two days throughout the year and so I thought it might be useful to give a little bit of context to the overall audit timeline as there are a number of activities that happen across the audit cycle. We typically have our nationwide audit planning meeting sometime in August, and really look to get in touch with the school around September to October. That’s to agree the upcoming audit and the timing for the coming year. The audit brief comes out from the Office of the Auditor-General around September/October, and that outlines really any major changes in the industry across the year and any areas that the Auditor-General would like us to focus on for the coming audit. We then start our audit planning work anytime between September and November, before the schools really start preparing their accounts in January or February of the year, and that may or may not be in conjunction with a service provider, depending on whether you have one. Our audits then start in proper anytime from February right through to the end of May which is the statutory deadline to have your accounts prepared and filed. And the board meetings occur anytime between April and May, really to make sure that you’ve reviewed appropriately the financial statements and signed off as appropriate.

You will notice that there are some payroll information that we don’t get through until March or April, so even if your audit has started and you think it’s largely complete in February, we’re really unable to complete that process properly until that information has been received.

So, what are a few of the tips to really make sure your audit runs smoothly? The big one on the blue box there on the left is really a big tip around, just engage really early on, one, with your auditor, and two, with your service provider if you do have one. And what should you really be looking to talk to them about? Firstly, you want to agree an audit timetable, that’s what are the dates that your auditor will be visiting and what are the deliverables that will be due and when. So, leading on from that, you’ll want to ask for a list of, what work papers or information is required by the auditor at each different stage of the audit, and then you’ll want to collect that information in an audit file. And we’ll talk a little bit more about that in the next couple of slides.

Another thing you’d want to talk about is, really is it advantageous for your auditor to have access to your system? This can make it a lot easier and the process a lot smoother. If your auditor can go in, get listings, breakdowns, and to the extent you have uploaded support into your systems such as invoices, they can pull that down directly. An important point to note though is you’ll want to make sure that you’ve only given your auditor read only access to that system.

If you’re preparing your own financial statements you’ll want to check that you’re familiar with the Kiwi Park Model financial statements and any changes to those accounts from the previous year. If you need some help your Ministry’s financial advisor is a great place to start. Service providers and auditors are also available and we’re all here to help answer questions. We really all have the same goal of trying to make sure that your audit process runs as smoothly as possible, so please do, if you’re unsure speak up.

The audit file that we talked about earlier, I wanted to step through a few of the areas that schools should be thinking about making sure they have prepared support in behind a number of these areas and have put them in that audit file ready for your auditor once they arrive. So really your audit file should include any supporting documentation that you’ve used in the preparation of your financial statements. And that should include any judgements that you’ve made along the way. Some of the key information that we ask for as part of the audit, firstly a draft of your financial statements, and you should really make sure that the board has seen a copy of those and are comfortable with the draft that you’re providing to your auditor before you give them to them. Board Minutes, we’re required to look at Board Minutes from the very beginning of the year right up until the date of signing, so having copies of your Board Minutes, your Finance Committee Minutes, and any in Committee Minutes are really important and ensuring that each of those minutes have been approved by the board. A copy of your General Ledger and Trial Balance. That really forms the basis of our audit, so having a copy of that in Excel really does save your auditor a lot of time at the beginning of the process. You’ll also need to have a copy of your Annual Budget. That forms a key part of your financial statements and it’s important to note that you’ll need that not only for your Statement of Financial Performance or your P&L, but also for your Statement of Financial Position or your Balance Sheet. The last thing there is really, any supporting work papers or documentation that you’ve used in the preparation of your financial statements, and we’ll talk a little bit more about that on the next slide.

The key point really to note here is that documentation is critical to the audit process and making sure that you have the support that you need behind each balance can really mean the difference between a smooth and successful audit and a difficult and prolonged audit. So, what are some are the areas that we look at, and what are the types of support we ask for? If we step through a few of these balances here, revenue at the top. A large portion of school’s revenue comes through the operational grants from the Ministry. So having your Quarterly Grants Notices available, and any other Ministry remittances or Community Grants Notices, are really important, and ensuring that those numbers do reconcile to the numbers that you’re showing in your financial statements, a really important place to start. Cash, bank, and investment balances, we typically look to see your bank reconciliations for these, the bank statements which will confirm the balances at year end, we also request bank confirmation directly from your bank, and also Term Deposit Notices. These are really important to confirm not only the balances but also how they’re classified within the face of your financial statements.

In terms of payroll, School’s Annual Accrual Reports and Staff Usage and Expenditure Reports, also known as the SAAR and SUE Reports, are really the foundation of our payroll testing. We also look at any Error Schedules, Leave Liability Reports, and local payroll information if that’s applicable to your school. And again, you’ll notice a common theme here, that ensuring those numbers do reconcile back to the numbers you’re showing in your financial statements is a really important part of the process.

Next is accounts receivable. That’s a listing of people who owe the school money, and so having a listing of those along with any supporting invoices behind those at year end, and also making a consideration of any amounts that you think may be uncollectable. That’s really a key judgement and something the auditor is likely to ask about. The opposite of accounts receivable is accounts payable. That’s the amount that school owes to suppliers and other parties. Again, we’ll look to see a listing of those and potentially supporting invoices behind a sample.

If we move to the next slide some more areas. Fixed assets. They’re the assets that are owned by the school and we’ll look to see a full listing of those assets that you hold at the end of the year, and if we start at the beginning of the year, we also like to see anything that’s been purchased during the year often called additions, anything that’s been sold or discarded during the year called disposals, and a calculation of any depreciation expense against those assets during the year. We’ve touched in a number of areas around judgements that are made, and often if you have assets that you think are no longer useful to the school and you’ve impaired those assets, then making sure you’ve recorded that judgement and an explanation of why is also something else that can make the audit go much more smoothly.

Inventory for most schools tends to be school uniforms that are held on site, so having a listing of what you held at 31 December, both in term of the number of units and dollar value against those units is really important. Doing a stock count at the end of the year and make sure that you are recording what the school is actually holding and making sure you keep evidence of that stock count. That might be count sheets that have been signed by the relevant counter or reviewer to really support that balance that you’re holding at year end.

Cyclical maintenance provision is probably one of the more challenging areas we see amongst a number of our schools, and really there’s some pretty easy things that a school can do to help make sure, one, you get this right, and two, you limit the number of unnecessary questions around this. So, keeping a copy of your cyclical maintenance plan at year end and having a calculation that ties back to your both cyclical maintenance plan and the provision recorded in your financial statements is really important. It’s also a great step to make sure that the board has seen the cyclical maintenance calculation and has approved that as part of your year-end process.

Really the last one there is just a catch all around any other balances that you have in your financial statements and making sure that you have reconciliations and supporting information that sits in behind each of those.

If we move on, one of the common questions we get is, what is our role as auditor, and do we look at everything that’s in your accounts down to the dollar and cent? And so, I’ve sort of laid out a few different aspects here, but if we start with, what is the objective of the audit? It’s really to provide independent assurance that your financial statements present fairly in all material respects, that the financial position and transactions during the year are presented fairly. So, what is that level of assurance? It’s considered a high but not absolute level of assurance. We don’t go and look at everything, but we use some fairly clever statistical and analytical techniques to test on a test basis. We also operate to a concept known as materiality, so we’re really looking for any errors or omissions in the financial statements that are of a size or a particular nature that would lead a third party to come to a different conclusion about what’s recorded in your financial statements.

So where do we focus our efforts? We really focus on balances that might be riskier or larger, and really try to home in those areas, as well as looking across a range of other areas within your accounts. As all schools are public sector entities and take taxpayer funding we are required to also look at some other public sector aspects of the accounts in the way you process transactions, such as expenditure that may be considered more sensitive to ensure that has been spent appropriately and has an underlying business need, and also looking at a selection of policies and procedures to make sure, one, that they’re in place, and two, that they’re being followed.

So, to summarise there’s a number of things you can do to prepare in advance of the audit visit, pulling together your audit file that has the support in behind the numbers that are in your accounts. And if you’re not sure, there’s a number of people you can ask, so please give us a call, we’re more than happy to help as you go through your process.

(Chad Britton continues to present from power point presentation)

Welcome back everybody. Glad that you’ve managed to stick in with us this long. Now it’s my turn to go through a few key areas for you. I just want to thank Hamish for his parts on getting ready for your audit and key things to think about there, and Jane for how the Auditor-General really reacts in the audit sector itself and around school audits. So without any more further ado, in reporting compliance all schools must prepare an Annual Report under Section 87 of the Education Act 1989. Now I just want to say here that we still have the Education Act 1989 in play because Section 134 of the Education and Training Act 2020 doesn’t come in force until the 1st of January 2023, so just forgive me here if it sounds like I’m talking about the wrong Act, we have a transitional arrangement in place at the moment.

I guess moving along, the Annual Report must include the audited financial statements, a Statement of Variance, a list of the school board members, Kiwi Sport funding, and a Statement of Responsibility and the Audit Report. You must use Kiwi Park Model statements as on our website, and there’s a PDF version, an Excel version with numbers worked through them so you can see how they all flow through, and also just a blank Excel version as well. Kiwi Park has been the model that’s been decided by the Secretary in consultation with the Office of the Auditor-General for all schools to use.

You must submit your report to the Ministry by the 31st of May and there are instructions on how to submit your Annual Report through our managing school finances webpage. You also need to make sure that your annual report is available to the public or to your school community on an internet site that is maintained by or on behalf of the board under Section 137 of the Education and Training Act, see that’s where the two Acts are talking at the same time. And we do strongly recommend that you do this at the same time as you submit your accounts to Te Tāhuhu, the Ministry. It just makes everything a bit easier and just flows a bit nicer.

Every year we get asked, what are the key changes to the Kiwi Park Model financial statements? ‘Cause we make a few changes each year. Think of it as a continuous improvement cycle. Fortunately, we’ve got no new accounting standards this year so that’s been quite a bonus for us, but some of the, I guess key changes that have happened this year really are, we’ve had some changes of wording and some codes that we no longer use, or the description of those codes have changed. I won’t go through all the codes there, they’re on the screen and you can certainly have a good read through them, you’re probably reading them as I’m talking to you.

Probably the one that I really want to point out there is Code 1571, which is curriculum related activities goods and services. So, this used to be bequests and grants. Now I guess the key thing there is that curriculum related activities goods and services, this is for things like take home components or where there’s been an agreement to purchase a good and service. As we know, schools are unable to compel payment for curriculum related items, so this is just where there’s an agreed good or service for a matter that relates to a curriculum activity. Just in that little box too, a couple of other interesting ones, it’s just that very small line at the bottom there, that bequests are now coded to 1520 donations and grants are now coded to 1530 fundraising and community grants.

In note 18 we’ve added the use of the cyclical maintenance provision for the year. This is the actual amount you spend on painting in the year. This is something that has been added in as time has gone on by many schools, so actually we figured it was a good thing that we actually do add it in, it just made a lot of sense. In note 20 we’ve added in the line, this is the finance lease disclosure note, we’ve actually added in the future finance charges figure so now the note will actually agree to the face of the financial statements which is a really good thing, ‘cause that’s always been a point of confusion for many people. It was always the finance charge, or the interest not yet paid that was causing the issue. In note 9 the depreciation note has actually been removed because that information’s already stated within note 13 in the fixed asset note breakdown, so we felt there was no need to repeat the note in two places.

We will be bringing out a list of all the changes shortly and they’re going to be available on the website. They’ll come out at the same time that Kiwi Park is released, which we’re expecting is going to be by the end of October. We are hoping it will be a bit earlier than that but keep looking on the website and it should be up there within the next couple of weeks.

Annual payroll and centrally confirmed information. Annual payroll’s been my area that I’ve been working quite a bit over the last couple of years. Your payroll information will be provided to you in early February next year so that you can prepare or finish off preparing your financial statements as at the 31st of December. The payroll information is going to come through to you in two ways, it’s going to come through EdPay or Novapay online, and that will be your SAAR Report and the Leave Liability Reports. It will be really important to make sure to pull that information down from the website and get that to your auditor.

Also, the secure data portal, keep an eye out for it. This year was the first time we did it, so we’re going to do it again next year, it worked really well. Your Payroll Error Reports and Payroll Exception Reports are going to go through there. We’ll also be putting in some other information in the secure data portal, I just want to mention that a little bit later in this slide. Now, with the information that goes through the secure data portal it will be password protected, it’s just an extra security measure we have to put in place. So, to let you know what the password is, it will be the principal of the school as at pay period 21. It’s their MOE number. The password does exclude the pre-setting zeros, and this is the most popular question we receive every year of, what is my password? So, for the example here, if the password is 012345 the password for the Excel file is going to be 12345. If you do have any issues accessing these files please do get in contact with us through the school.finances@education.govt.nz mailbox, and we can certainly help you through that process, but we will be letting you know that information as it comes out.

This year very excitingly the SAAR Report is actually going to be provided in both a PDF and an Excel version. It’s really important to make sure you get both versions off to your auditor and your service provider ‘cause that will just help them prepare information, the auditor to audit it and the service provider to prepare your annual accounts if you have a service provider in place.

As I mentioned before, the secure data portal is going to have a few other confirmations come through it this year, and this was really because there’s information, there’s things that we do centrally at the Ministry that aren’t always reflected in the accounts or you as a school don’t have a knowledge of them because you don’t see the money coming in and out of your bank account. So, the things to be looking out for, and you’ll only receive these if they apply to you. Where you have an intervention in place and the Ministry is funding that intervention there’ll be information come through for you to include that. If there’s any payables to the Ministry at the end of the year, the Healthy School Lunches Programme and the Free Period Products Programme, these are all costs, they’re very similar to the Teacher’s Salary Grant whereby you don’t actually physically see the money for teacher’s salaries, but you do include that information into your financial accounts.

(Chad continues to present from  power point presentation)

I’m going to kick onto the next area here. What is here is just the Annual Reporting kind of important stuff we needed to get through. The next area here is where we talk about those areas that are a bit more challenging or that we find we have challenges or difficulties or it’s not always something easy to do and it’s where we might get audit exceptions pop up and things like that. This is probably, I think this is the fun section, for me at least anyway. So, conflicts of interest, actually now that doesn’t sound like it was overly fun, but hey conflict of interest is an interesting area. Obviously as a public entity a board member has a duty to make sure that they’re acting in a way that there’s not any actual conflict or perceived conflict where they could gain an interest from it.  Where there is a conflict this must be declared, and it must be noted in your Minutes. And the board member really needs to exclude themselves from that part of the meeting. The board may wish to go into committee to do that element or actually they can just simply exclude themselves from that part of the meeting. Chad continues to present from  power point presentation: I’m going to kick onto the next area here. What is here is just the Annual Reporting kind of important stuff we needed to get through. The next area here is where we talk about those areas that are a bit more challenging or that we find we have challenges or difficulties or it’s not always something easy to do and it’s where we might get audit exceptions pop up and things like that. This is probably, I think this is the fun section, for me at least anyway. So, conflicts of interest, actually now that doesn’t sound like it was overly fun, but hey conflict of interest is an interesting area. Obviously as a public entity a board member has a duty to make sure that they’re acting in a way that there’s not any actual conflict or perceived conflict where they could gain an interest from it.  Where there is a conflict this must be declared, and it must be noted in your Minutes. And the board member really needs to exclude themselves from that part of the meeting. The board may wish to go into committee to do that element or actually they can just simply exclude themselves from that part of the meeting. 

Where a board member is gaining payment for work that they’re doing, and it might be a builder for example, and that is going to be more than $25,000 including GST for the year, the board needs to apply for approval from the Secretary for Education to have that conflict of interest and that actually the board has gone through a robust process. There is a lot more information on this within our Financial Information for Schools Handbook in Section 2.6 which has just had a bit of a refresh in the last 12 months so it should be a bit easier to read now. But the key thing around conflict of interest and if I can impress this enough on you, is that actually, it’s about keeping yourself safe and letting people know that “Yes, I do do this work for the school but actually the board is still spending and using those public funds in a way that is not giving any extra benefit to me than would be available to anyone else”.

Borrowing. Schools have the lucky privilege where they’re one of the very few Crown entities that actually have an ability to borrow. The limit on this is set out in Section 155 of the Education and Training Act and also the Crown Entities Financial Powers Regulations 2005, Regulation 12. The total annual cost to the board of all borrowings, of both principal and interest, so what’s really key there is the repayments of principal and interest must be less than 10% of the board’s annual operational grant. When we’re calculating this, a couple of things we notice that often fall into this calculation when it’s being done and we see perhaps the calculation not being quite right, is that the Ministry contributions to the leases are not included, and any repayment of even debt, so if you pay a loan off early or exit say a photocopy contract and don’t go into another one, or you have a decline in operational funding due to a roll decline after you’ve undertaken the borrowing , it’s not going to cause you to breach. So that’s just something really important to be aware of when you’re looking at this, because you want to get these in advance, ‘cause you can apply to exceed the 10% limit, but it must be in advance and the difficulty here is that it’s both the Minister of Education and the Minister of Finance that have to approve you to be in breach of the borrowing threshold and it’s only for a period of time. So, if you have been breached there is still value in you getting an approval to continue breaching. One, then you won’t get the Breach Notice in your accounts so that’s always a bonus, but the one thing to note is it’s not retrospective, it’s only from the point in time forward, so that’s why it’s really important to do it up front. 

The 10% limit is really an amount that was agreed upon that, if you are repaying 10% of your operational grant towards debt arrangements, then actually that is not seen as limiting the educational opportunities for the students of the school at that time, so you’re not basically spending all your money repaying debts and loans and things like that. If you do want to make an application then there is again more information in the Information for Schools Handbook, Section 2.10.2. So, I do suggest you have a good look there, again you can also have a chat to your school finance advisor as well. We’re more than happy to help out.

Hamish was mentioning that cyclical maintenance is one of the highly judgemental, massive estimates within your financial accounts, and it is one of the more challenging areas to audit. We are looking to bring out some more guidance on this shortly, which is aimed to try and help through the process. It is a significant estimate and judgement, and because of that it requires you as a board or as a school to have more information to help support it of how you came to that amount, how you came to that provision, what is that based on? You can prepare it using your 10YPP and your 5YA, them being one document, but it does come with risks because often we see that your 10-year property plan, the cyclical maintenance provision or calculation, that may be out of date, it may be inaccurate, or it may not even be included in the plan. We have seen some instances of that. So, if you’ve got one it’s a great place to start as the basis of your provision, but realistically we’re talking about a liability here, something that’s a cost to you in the future, so actually really a judgment, really we need to be looking at this as, what is the most recent market information? Because that’s actually going to give us a more accurate idea of what that cost is moving forward. So, things like recent painting invoices, quotes, or even a painting contract are really useful in helping you determine, what is this cost for me in the future?

One thing that happens with cyclical maintenance plan is that it often gets prepared and then it gets stuffed away in the bottom drawer of the filing cabinet never to see the light of day until when the property team came out and might be asking a few questions or you’re looking to do your next capital work cycle. But it’s an annual document, you need to review it and update it annually. When you’re doing it consider the following, have the costs for painting changed significantly? Have we factored in inflation? Have we changed our school buildings, do we have new buildings, or have we had some demolished? Have we painted outside of our plan? Were we having our 150-year jubilee and actually we wanted our main heritage building to look really, really good for that so we painted it a year earlier? That’s going to change how our plan looks. Do we need to stagger the way we paint the school? Actually, have we got a cashflow issue that means that you know we planned to paint the school in two years’ time but actually we can’t afford to do that, but we can actually stagger our painting, we can do block A this year and block B next year and block C the year after. And have we delayed or brought forward painting? I sort of mentioned that earlier but if we’ve changed when we’re going to paint things, that changes our plan and how it all works.

As I mentioned, we are in the process of updating our guidance on it and that should be available very, very shortly. We think it’s quite a step forward, it has some worked examples of how to prepare a cyclical maintenance provision, it’s got some templates in there with calculators that automatically do inflation once you decide what your inflation rate should be. It details out what the board’s responsibilities are on this, ‘cause ultimately the board are responsible for this because cyclical maintenance comes out of the property occupancy document which is one of the key documents that found the school. It talks about types of evidence you could provide to your auditor to help justify the provision because that’s a key part for when your auditor is looking through it trying to understand your provision and why this appears materially correct or appropriate ‘cause they want to know how you’ve come to the number you’ve come to. 

We also in there have a look at how painting maintenance contracts interact with cyclical maintenance provisioning because they do work in conjunction, they do talk about the same thing, but they are doing two very different things. And there’s always with cyclical maintenance, because it’s not a cost today, it’s not money flowing out of your school today, it’s really important that you actually set aside these funds to pay for the painting in the future. So, you need to manage your cashflow. I always like to think of this sometimes as, people call it jam jar accounting or perhaps myself, and my wife does believe I’m quite crazy for this, in that I operate a number of bank accounts, but they all have a purpose, and also then that can potentially make it really easy for you to explain to your board what this money is sitting in this account for. So, it means that you’re tagging your funds out. 

Investments and Securities. This pops up every now and again because often we have power company shares or Fonterra shares or Zespri shares because there’s an element of the school that happens to run a kiwifruit orchard and wants to sell the kiwifruit off or has a dairy farm that it operates and so they sell the milk to Fonterra for example. But you can hold and acquire investments as set out in Section 161 of the Crown Entities Act and 154 of the Education and Training Act. To hold shares in a private or public company you need to apply for prior approval from the Minister of Finance and Minister of Education. And what you need to do, what information you need to provide, again there’s more information in our FISH handbook in Section 2.9.1. 

I guess the key thing there is you’ve got to remember that it is the Minister of Finance and the Minister of Education that are required to sign these off so they can take some time to get through, so be prepared for that. If the grant is approved it will approve from the date of the decision, and again it’s not retrospective, so this is why it needs to be done in advance. The approval is for that transaction only, so it doesn’t mean you can then go and buy more securities, you can’t go and start investing public money in the stock exchange that would be not a great move. And the Crown does not guarantee securities acquired or retained by school boards, so again this is where it’s difficult for Crown entities to really invest because you’re dealing with public funds and there’s a lot of extra scrutiny and a lot of extra care and caution needs to be taken around them.

So again, in Section 2.9 there is more information on how to acquire securities or investments or if you happen to have them gifted to you. That’s the other one that does pop up, is actually we’ve had a couple of instances where securities have been gifted to a school to use, and the annual returns from that are used for a scholarship for students moving forward into the future, so if that happens please get hold of your school finance advisor straight away and we can help you through that process. 
Capital works is one that pops up and we did a bit of, I guess a ring around within the school financial advice team this year, and with the Auditor-General for what the kind of queries coming through, and capital works was one that kind of popped up quite a bit. So, when we’re talking about capital works here, these are your 5YA projects, these are the refurbishment of classrooms, potentially new classrooms, modernisation, health and safety matters, things like that. So, you will receive funding in advance from the Ministry for the project, and usually we advance up to 90% to start with and then the last 10% is done at the end of the project.

It’s not revenue to your school. You are actually holding these funds on behalf of the Ministry to do the works where you as a school are leading the project. So as such you need to record it as a liability on the school’s accounts because that money does need to be returned to the Ministry if it’s unspent. Where we find some of the significant problems or challenges start occurring is when the payments for those capital works start happening. Now they shouldn’t be expensed through your profit and loss, it should be charged against the liability account, and often that works really well at the start of the project but as we get down to the nitty gritty of it and it all starts to get finalised, that’s when we start to sometimes run into a few issues where payments for the refurbishment of A block might somehow get its way into the P&L and so we end up with this capital works balance that’s never quite settled. 

So how can we address that? What can we do to try and change that, so it makes it a bit easier for the auditors to audit, schools to understand where their money’s going and how it’s all being used? Well, I’ve seen it a few times from a couple of service providers and a couple of schools as well, that often it’s a really good way to maintain separate ledger accounts that reference the project. It’s really handy to include the project number, now that will be all on the documentation that comes through when you’re working with your Ministry property advisor for that project, because if we get questions on it it’s a lot easier for us to tie back a project number than it is the name of the project, ‘cause sometimes the names do change, particularly if the project has slightly changed, over the course there’s been something added to it. 

Again, we’ve updated our guidance around how to account for capital works projects and all the stuff that I’ve just been talking about, and if you look into the Financial Information for Schools Handbook or creatively called our FISH handbook, in Section 4.10.1 there’s some good information in there, so I do encourage you to take some time to read that. Now just looking at some information or some links to information we have out there or guidance. We have very niftily this year, or is niftily a word I’m not sure but I’m going to use it anyway, this year we’ve added a link to the Managing School Finances homepage and you can see that there at the very bottom of that picture, second little tab in. We had feedback from the sector that it was very hard to find this information on the education.govt.nz website so we’ve managed to get a hotlink on the front page for you to directly access it. So hopefully that will make life a bit easier for you. 

Obviously the next one there is the Managing School Finances homepage which has got all the information we have around annual reporting but also other bits and pieces, capital works, taxation, and things like that. There’s a few different links in there, like I said there is Kiwi Park in there with the models, there’s also some videos on how to use Kiwi Park and actually funnily enough this webinar will also be there as well, so if you’ve managed to find the webinar through the website then congratulations you’ve found the Managing School Finances homepage and so you’re already well ahead of the game.  The Kiwi Park model financial statements. Now, these are more than just a set of financial statements, they do contain a significant amount of guidance on how to treat different financial elements within the school for a financial reporting purpose. It’s a great resource to use and it is updated every year and we do make sure the guidance is accurate and reflects what actually should be happening and how things do work. If you are stuck on an area and go, “How do I treat that RTLB funding?” then there is guidance in Kiwi Park under the specified guidance tab, so do have a look there and that will give you some good information on how you should look at how to account for RTLB services for example. 

The FISH handbook, the Financial Information for Schools Handbook. This is designed to be the one stop shop. It’s designed to give a whole bunch of information to you in the sector to help you through, when do I need to ask for approval, how should I be looking to treat this financial transaction? It used to be 117-page PDF, it was really great, and it was really good if you suffered from insomnia. Earlier this year we released the updated version which really tried to rewrite the way it was presented, tried to make it more easy to read and easy to understand. Not so much that it looked like an accountant had sat there and written it. It is on our website and it is relatively easy to search through, you can download it in a PDF and also a Word version as well, there’s also Word versions of potential finance policies that you might want to consider as well, there’s also a lease versus buy calculator in there as well, so there’s quite a few things in there and we are constantly trying to look at additional things that we could add in there that would help you in the sector go about doing your day-to-day work. 

Obviously then the next two there are the two Acts, really it’s the Education and Training Act 2020 that is the overriding legislation at the moment for everything, but like I said earlier we do have a couple of transitional arrangements still in place and the Education Act 1989 is still in place.

What you can see here, this is the Regional School Financial Advice Team, so this is our team based out in the regions, so we have come some way from a few years ago, about four years ago. There used to be four of us running around the countryside like headless chickens. We’ve now expanded to what is 11 of us in the field day-to-day there to help you in the sector, and we’ve got two team leaders to help organise that as well. What I would encourage you to do, is if you have questions around any finance related matters in your school, please do not hesitate to contact any person on that list. They are all here to help you, we are here to support you and that is our main focus and don’t ever fear coming to us. If there is that fear barrier please just pick up the phone and just give me a call. I’m a pretty nice guy. I’m happy to help, I’m happy to answer any questions you have because if we can work together then actually we’re going to get to a great answer which is going to have great outcomes for our kids and that’s what we’re really here for. 

(end of presentation) So that really brings us to the end of today’s session. I really just want to thank Jane for her time around what the Auditor-General’s purpose is and what they do and the considerations around fraud and how that can potentially look in a school environment. I really want to thank Hamish for his time around key things to think about when it comes to audit time and how we can look to make changes and what things you could do to help the process. And then I really just want to encourage that it really is a two-way street. Good open communication and agreeing of those timetables for audit can actually help you have a really successful audit, and that’s what we want to really get to.

I really just want to close up now, thank you all for your time for listening. Appreciate it. Please contact us at any opportunity you may have or any questions you may have, we are here to help. Kia ora. Thank you.

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