Minutes of the Sixty-Second Meeting of the Audit Committee held on Thursday 24 November 2011 at 6.00pm in Room 614 at the Shiney Row Campus. PRESENT:
Mr G Blyth (Chair), Mrs A Hodgson.
Mr P Moran, Ms A Atkinson and Mr J Robson (KPMG), Mr O Tauqir (Grant Thornton), Mr D Howells, Mrs J Ridley.
Mr C Crossman.
Chair’s remarks The Chair advised members that this would have been Kathleen Murray’s last meeting and wished to place on record the Committee’s thanks for her contribution to the work of the Audit Committee. A/11/44
DISCUSSION BETWEEN INTERNAL AND EXTERNAL AUDITORS AND MEMBERS All staff members withdrew in order that the discussion between Internal and External Audit and Members could be held in private. The meeting resumed at 6.05pm.
APOLOGIES FOR ABSENCE Apologies were received from Cllr C Gofton and Ms K Murray.
MINUTES OF THE PREVIOUS MEETING HELD ON 29 SEPTEMBER 2011 The minutes were accepted as an accurate record.
MATTERS ARISING THEREFROM There were none.
INTERNAL AUDIT PROGRESS REPORT Omer Tauqir (Grant Thornton) presented the Internal Audit Progress Report, explaining that the detailed planning meetings had taken place and confirmed that the first tranche of audit reports on the reviews of Risk Management and Sub-contracting would be brought to the March meeting. It was noted that the Shared Services review had been deferred due to uncertainties in terms of timing. Internal Audit confirmed that there was an error in Appendix A of their Report and that the revised budget days in the table for Shared Services and the IT Infrastructure respectively had been transposed.
The Committee discussed whether Internal Audit should review the process and the risks surrounding the Estates Strategy. It was acknowledged that Internal Audit should look at the risks but that there was an issue with timing. As Management were already working towards bringing options to the February Board meeting it would not be helpful to bring recommendations in July when much of the work had been done. It was agreed that the Vice Principal Finance would forward a copy of the report provided for the Special Board meeting which outlined the process for Internal Audit to review. The Committee: received the Internal Audit Progress Report. A/11/49
EXTERNAL AUDIT MANAGEMENT LETTER An amended copy of the Members’ Report and Financial Statements was tabled. Paul Moran (KPMG) reassured members that there were no issues to raise as the amendments were purely presentational in nature and did not alter the actual figures in the accounts or the underlying accuracy of the version the Committee had already received. The Committee was taken through the Audit Highlights Memorandum and Management Letter in detail. Members asked a number of questions and the following was noted: • The College had declined to receive the results of the KPMG benchmarking survey as the SFA issues data which is benchmarked against 157 Colleges. KPMG confirmed that it was a free service that was optional • The College as part of the 157 Group had made representations on the proposed changes to the funding methodology • The Committee considered that it had addressed all of the points required for consideration by the Audit Code of Practice and CIPFA Guidance. The Chair commented that the report demonstrates the strong financial position of the College and commended the work of the Senior Management Team and the members of the Finance team in achieving this position. The Committee: i.
reviewed the College’s Report and Financial Statements for 2009/10; ii. noted the issues relating to a memorandum of Understanding and the Gifts and Hospitality Policy in the context of International Work were receiving attention iii. reviewed the Management Letter of the Financial Statements Auditors and that of the statement on Corporate Governance in the 2
light of the financial statements, as required by the Audit Code of Practice. A/11/50
KPMG – ILR FUNDING AUDIT MANAGEMENT LETTER The Vice Principal Finance explained that whilst it is not a requirement, the College commissions KPMG to undertake an ILR funding audit as part of its risk management strategy. The SFA carries out an external funding audit on a sample of colleges each year and it was expected that the College would be subject to such a review in the coming year. The Committee received the management letter which was split into two documents. In terms of the controls report attention was drawn to the KPMG overall opinion on page 2 of the report that “In our view the overall controls on individual Learner Record (ILR) data within your College are Good/Satisfactory”. External Audit confirmed that this was the second best opinion available and that they had never given anyone a “Good” rating for this activity. In relation to the substantive report the Committee noted the opinion that “A number of errors had been identified within the College’s ILR data which require amendment. Subject to those errors identified being corrected across the entire population, then in our view, no material errors have been identified in the college’s funding claim in the areas reviewed”. External Audit confirmed that it was expected that there would always be a number of errors due to the complexity and the number of transactions involved and that the recommendations had been actioned and implemented by management. The audit had been focused on “hard to comply” areas. The Committee discussed the report a length. It was noted that the errors related to a number of incomplete paper records in the sample such as: a lack of evidence to support fee remission; differences between start and end dates; missing signatures on learning agreements and transfer forms; insufficient checks on guided learning hours on ‘unlisted courses’. External Audit commented that it was not realistic to expect 100% compliance and that the College did have a further monitoring control in place which would act as a safety net and identify any errors at the year end prior to the funding claim being submitted to the SFA. The Committee was assured that whilst there were a number of data errors there were no funding implications. It was agreed that the Vice Principal Finance would provide the Committee with an update on the implementation of the recommendations outlined in the action plan and would report on any risks, lessons learned and any additional controls which may be required. The Committee: received KPMG’s management letter in respect of their IRL data audit. 3
DRAFT FIFTEENTH AUDIT COMMITTEE ANNUAL REPORT The Vice Principal Finance presented the draft report which would provide the Board with an account of the Committee’s work during 2010-11 and to give the Committee’s opinion on the College’s controls for that year. It was agreed to amend the wording in the last paragraph of the report to read: “The Audit Committee is of the opinion, based on all of its work during the year, taking account of the views and management letter of external auditors and in particular on the assurance given in the Internal Audit Annual Report, that: i. the governing body’s responsibilities, included in the annual financial statement have been satisfactorily discharged; ii. the College’s systems of internal control and its arrangements for risk management, control and governance processes, and securing economy, efficiency and effectiveness are adequate and effective and the Board may rely on them.” The Committee: received the report and recommended it to the Board for approval subject to the amendment described above.
FINANCIAL MANAGEMENT AND CONTROL EVALUATION (FMCE) The Vice Principal Finance explained that the College was proposing to submit the short version of the FMCE return to the SFA before the 30 November deadline on the basis that: • the College did not wish to change its previous year’s overall selfassessed grade • the College had not undergone any relevant significant changes since the previous year, such as; organisational changes, changes in the governance framework, mergers, changes in ownership, deterioration in financial health, or adverse audits or inspection outcomes • at the January 2010 inspection the overall opinion of the PFA was to confirm the college’s self assessment grades for the FMCE return • there was no requirement on the College to complete the longer version for 2010/11, and to do so would be an inefficient use of management time, considering how relatively recently the exercise was last carried out It was agreed to amend the FMCE Improvement Plan as follows: Area 1, Section 2, Question 6 – Proposed Actions – amend to read “This will be done at least biennially.” 4
Area 3, Section 1, Question 6 – Proposed Actions – amend to read “The College will continue to review its risk management plans on a timely basis, and at least every six months, and ensure…” The Committee: i.
approved the completion of the short FMCE return subject to the above amendments; and ii. recommended it to the Corporation for its approval. A/11/53
CONFERENCES AND CORRESPONDENCE There was nothing to report in terms of conferences attended or correspondence received.
ANY OTHER BUSINESS There was none.
DATE, TIME AND VENUE OF NEXT MEETING AND CALENDAR OF BUSINESS The next meeting will take place on Thursday 1 March 2012 at 6.00pm in Room 614, Shiney Row Centre.
Meeting closed at 7.40pm