Topic
Being ready for a funding audit
What an audit tests, how sampling turns a few errors into a large adjustment, and the preparation that actually helps.
Enough detail to do the job and hold a sensible conversation with MIS or Finance.
- Official requirement: Stated by the official funding document named in the sources for this page.
- FEFunding explanation: Our plain-English explanation. Helpful, but the official document is the rule.
- Worked example: An illustration of how the rule applies in one situation. Not a universal rule.
- Recommended good practice: Operational advice from FEFunding. Not itself a funding requirement.
What an audit actually tests
The test is not whether you know the learner was eligible. It is whether you can demonstrate it, from records that existed at the time.
The most important consequence of sampling is extrapolation: where an error found in a sample looks systematic, the conclusion may be applied to the whole population. That is how a handful of errors becomes a large adjustment.
Evidence is strongest when it is created at the time of the event it describes and is retrievable without reconstruction. Evidence assembled after a query is asked is weaker and takes longer to produce.
The sampling frame is drawn from the closed return, which is why the final return matters for assurance as well as for funding and performance.
Because extrapolation is the mechanism, consistency matters more than perfection on any single record. A systematic error in a small sample is assumed to be systematic everywhere.
R14 is the final hard close for the funding year. Post-close, the year's earnings, the qualification achievement rate population and the audit sampling frame are drawn from the closed return.
Preparation that actually helps
The preparation that works is the routine you were doing anyway. The preparation that does not work is a scramble in the fortnight before.
- Run the data quality routine all year, not before the visit.
- Test retrievability of evidence on a sample, termly.
- Work the funding monitoring and data quality reports as they arrive.
- Keep the submitted files, validation output and funding reports per period.
- Record the reason for any change to reported data, at the time.
The single most effective preparation is working the assurance reports properly during the year, because they test the same things an auditor will and they arrive while the data can still be corrected.
The second most effective is keeping the per-period evidence set, because it answers most retrospective questions without re-derivation.
Appearing on a data-quality or funding-monitoring report usually means a record has been flagged for investigation, not that it is confirmed wrong. Some flagged records are entirely correct and simply need evidence.
Maintain a standing evidence pack per funding year: the submitted files and reports per period, the reconciliations, the data quality trend, the exception log with explanations, and the change log.
Assembled as you go, that pack takes minutes to produce. Assembled afterwards, it takes weeks and is weaker.
During the audit
Answer what is asked, produce the evidence you have, and be honest about what you do not have.
Where you disagree, say so clearly and show why, with evidence rather than assertion.
A known and documented issue is a far better position than one discovered by the auditor. Colleges that record what they know is wrong, and why it could not be corrected, are treated very differently from those that do not.
Where a flagged record is correct but unusual, produce the explanation you wrote when you first investigated it. This is why documenting correct exceptions is worth the time.
Keep a single point of contact and a log of every item requested and produced, so the position at the end of the audit is clear on both sides.
Where a finding is extrapolated, understand the basis of the extrapolation before accepting it: the population, the error rate and the method are all legitimate questions.
Worked examples
Worked example
How ten errors become a large adjustment
An audit samples fifty adult learners and finds six without retrievable eligibility evidence.
- The finding. Twelve per cent of the sample cannot be evidenced.
- The question. Is this systematic, or specific to those six records?
- The evidence. All six enrolled through the same route in the same period, which suggests a process cause.
- The consequence. The finding is treated as systematic and applied across the affected population.
- The defence. Evidence that the process was corrected during the year, with the date and the testing behind it.
Six records became a population finding. The only mitigation available was evidence of the college finding and fixing it first.
Illustrative. Extrapolation methods and outcomes depend on the audit arrangements and the circumstances.
Common pitfalls
Preparing for audit rather than being ready
What goes wrong: Effort concentrates in the weeks before a visit.
Consequence: Evidence assembled retrospectively is weaker, and the underlying processes are unchanged.
Prevention: Run the routine all year. The audit then tests what you were doing anyway.
Not documenting correct exceptions
What goes wrong: A legitimate but unusual case is investigated and the explanation is never written down.
Consequence: It is re-investigated every period and cannot be explained quickly at audit.
Prevention: Keep a standing exception log with the explanation and the evidence location.
What this means for your role
Senior leader, principal or COO
The audit outcome is determined months before the visit.
- Ask what the routine found this term, not what is being prepared for the audit.
Finance director or finance manager
Extrapolation is what makes audit findings material.
- Understand the basis of any extrapolated finding before accepting it.
See it play out
Scenario
A flagged record turns out to be entirely correct
A learner appears on a monitoring report every period. Each time, investigation shows the record is correct.
Work through itScenario
Evidence for subcontracted delivery cannot be produced
A subcontractor delivers provision the college claims for. When evidence is requested, the subcontractor is slow to provide it.
Work through itScenario
A governor asks what the funding risk actually is
At a board meeting, a governor asks what would have to go wrong for the funding position to be materially misstated. What is a good answer?
Work through itScenario
The only person who knows where the evidence is has left
Eligibility evidence for a cohort was filed by a member of staff who has since left. Nobody can find it.
Work through itKnowledge check
Knowledge check
Audit readiness
2 questions. Nothing is recorded unless you are signed in, and there is no time limit.
Sources
These are the official documents this page rests on. Where a figure, a deadline or an exact rule matters, the document is the authority and this page is the explanation.
Content reused from GOV.UK is Crown copyright, used under the Open Government Licence. FEFunding is not endorsed by the Department for Education.