Minutes of the meeting held on 6 June Lisa Greenhalgh Independent member Committee Chair

Transcription

1 PUBLIC BOARD OF GOVERNORS AUDIT COMMITTEE Minutes of the meeting held on 6 June 2016 Present Lisa Greenhalgh Independent member Committee Chair Lesley Munro Clerk to the Board Clive Edwards Simon Pope Louise Robinson Independent member Independent member Independent member Chris Paisley KPMG External Audit representative Jane Forbes PwC Internal Audit representative Jennifer Finlay PwC Internal Audit representative Officers in attendance John Cater Carl Gibson Craig Hutchinson-Howorth Steve Igoe Vice-Chancellor Director of Finance Director of Strategic Planning Deputy Vice-Chancellor Apologies Clare Partridge KPMG External Audit representative The Chair welcomed Chris Paisley to his first meeting of the committee. AC In-camera meeting Prior to the commencement of scheduled business, Independent members held a private meeting with the Internal and External Auditors who confirmed there were no issues to bring to the attention of the committee. 1

2 AC Declarations of Interest There were no Declarations of Interest specific to the meeting. AC Chair s Announcements There were no Chair s Announcements. AC Chair s Action There was no Chair s Action to report. AC Minutes of the previous meeting Document AC/027/15 The minutes of the meetings held on 7 March, 6 April and 20 April 2015 were agreed and signed by the Chair as a correct record. AC Action Log Document AC/028/15 Members received the Action Log. In relation to the current fraud investigation, the Deputy Vice-Chancellor reported that the in-house legal advisor was scrutinising the University s insurance arrangements to see if any further claim could be made although it was felt this would be unlikely given the terms of the contract. AC Matters Arising There were no matters arising. SECTION A ITEMS AC Higher Education Financial Statements Benchmarking 2014/15 Document AC/029/15 The External Audit representative introduced the report which provided comparative information on institutional performance across a range of KPMG s HE client institutions. 2

3 The Vice-Chancellor highlighted the University s best in sector performance in relation to Measure 3 (surplus as a percentage of total income) whilst the Deputy Vice-Chancellor drew attention to the small number of institutions achieving more than 8% (the average for post 92s) on this measure. Members requested that future reports should be produced in colour with Edge Hill s position highlighted. Action: Clerk The HE Financial Statements Benchmarking report was received. AC Education Sector Risk Profile Document AC/030/15 The Internal Audit representative (JF) introduced this report which provided benchmarking information in relation to risk management across PwC s HE client base. She drew attention to the top five risk themes from the analysis which were noted as: student recruitment in relation to financial sustainability, government policy and sector reform, IT systems and security, estates investment and transformational change programmes and research quality and funding. A number of developments in risk management practice were also highlighted. In discussion, it was suggested that the placement of some risks by Russell Group universities could be seen to reflect a level of (unfounded) complacency, especially in relation to aspects such as the NSS and pension deficits The Education Sector Risk Profile was received. SECTION B ITEMS AC Internal Audit Reports Document AC/031/15.01 Payroll The Internal Audit representative (JF) introduced this report which assessed the adequacy and effectiveness of the controls in place 3

4 for key payroll processes. It was noted that the audit had been undertaken using data analytic tools which allowed a review of all data over an 18 month period allowing the review work to focus on a sample of exceptions. The testing did not identify any genuine issues arising from the exceptions. Overall, the Audit was classified as low risk, providing substantial assurance with no recommendations an extremely rare result. In discussion, there was some concern that the sample size was very small in relation to the number of exceptions identified although the Internal Audit representative emphasised that the review was concentrated on evidencing that there were appropriate controls in place to deal with exceptions. The Director of Finance requested a full list of the exceptions relating to employee details also found in vendor accounts..02 Faculty Review Health Action: PwC The Internal Audit representative (EM) introduced this report which was undertaken to assess the effectiveness of the Faculty in complying with University regulations and procedures. It was noted that this was the first of three Faculty Reviews designed to provide additional assurance in relation to compliance with central university processes. Good practice was identified in budget management and student number monitoring with the Faculty often running under budget allowing flexibility in a changing environment. The segregation of duties within the procurement, sales and expenses process was also operating very effectively and there was a versatile methodology employed for student number planning which had proved to be very successful. Overall, the Audit was classified as low risk, providing substantial assurance with one low risk recommendation relating to the management and approval of expenses claims to avoid duplicate entries and one advisory recommendation relating to the retention of customer invoicing requirements. It was noted that the recommendations had been agreed by the University and implementation was in train. 4

5 .03 Compliance with UUK Accommodation Code of Practice The Internal Audit representative (EM) introduced this report which was undertaken to ensure that the University remained compliant with the UUK Code of Practice for the Management of Student Housing in the management of its residential accommodation. This was a mandatory audit area with different aspects of the Code reviewed each year allowing all areas to be reviewed on a three year cycle. The focus this year was on Health and Safety and Maintenance requirements. Overall, the Audit was classified as low risk, providing substantial assurance with two low risk recommendations relating to the need for a regular check that hot and cold taps were appropriately marked and that the Adverse Weather Conditions policy was made accessible to students via the website. It was noted that the recommendations had been agreed by the University and implementation was in train..04 Student Retention and Experience The Internal Audit representative (JF) introduced this report which assessed the effectiveness of the processes and controls in place to prevent and identify at risk students who could be more susceptible to withdrawal and the provision of appropriate interventions to provide support to them. Good practice was identified in relation to communication, student relationships with Course and Personal Tutors, monitoring, staff recruitment and support interventions. Overall, the Audit was classified as low risk, providing substantial assurance with two advisory recommendations relating to the provision of feedback mechanisms following intervention support and the development of a university-wide recording system for actions taken in relation to at risk students. The Internal Audit reports were received. AC Internal Audit Strategy 2016/17 Document AC/032/15 The Internal Audit representative (JF) introduced the proposed strategy for 2016/17 which was suggested at 83 days. The plan covered all mandatory areas and additionally incorporated areas such as work 5

6 placements and IT general controls. She drew attention to a change in the audit approach for the Financial Health Check which would encompass all core financial processes on an annual basis in future. A number of suggestions for additional audit work were also highlighted. In discussion, it was noted that the days set aside for academic quality had been based on the need for a review of actions following the planned QAA audit which but it was noted that this would not now take place in the light of recently agreed changes to the national academic quality assurance methodology. However, it was agreed to retain the provision with a view to providing assurance around implementation of the new Teaching Excellence Framework (TEF) and the revised Annual Assurance Statement to HEFCE which would now incorporate academic quality. Following consideration, the Committee approved the 2016/17 Internal Audit Plan at 83 days as presented. Action: PwC/DVC AC External Audit Strategy for Audit of Accounts to 31 July 2016 Document AC/033/15 The External Audit representative introduced the strategy for the audit of end of year accounts drawing attention to the following aspects: The Audit cycle and timeline; The materiality level which was set at 2 million given the size of the University s activities; Reporting of all individual adjusted and unadjusted differences greater than 100,000; A specific risk focus on fraud and tuition fee income; Implementation of the new reporting standard FRS 102. In terms of fees, it was noted that a 1% uplift had been applied to the basic audit function with an indicative sum of 4,000 identified in relation to the implementation of FRS 102. In relation to the HE sector update which was provided as Appendix 7, attention was drawn to the implications of the White Paper and implementation of the Modern Slavery Act. The Vice-Chancellor 6

7 suggested that the introduction of the TEF could be usefully included in the Appendix. The Deputy Vice-Chancellor indicated that he was looking to finalise the FRS 102 requirements as soon as possible with an early meeting with KPMG to discuss areas of judgement. The Committee approved the External Audit Strategy for the Audit of Accounts to 31 July Action: KPMG/DVC AC Impact of FRS 102 Adoption Document AC/034/15 The Director of Finance introduced the paper which set out the implications of FRS 102 adoption for Edge Hill University. He drew attention to the purpose of the standard in seeking to enable users of accounts to receive high quality, understandable financial reporting proportionate to the size and complexity of the organisation. The paper provided a detailed analysis of the new requirements and it was noted that, apart from the presentation of accounts, only a small number of clauses would necessitate changes to current accounting practice at Edge Hill. The requirement to provide for obligations on funded multi-employer pension schemes such as USS would have a minimal impact on the University which only had a small number of staff in the scheme adding around 600k to the balance sheet whilst the requirement to account for outstanding leave entitlement was expected to add a similar amount. Following discussion with the External Auditors, it had been agreed that the grant received in relation to Sporting Edge would not be treated as a government grant and would be released to income as part of the FRS 102 restatement. In discussion, it was noted that the calculation for outstanding leave entitlement would be calculated annually but would be largely automated. The Deputy Vice-Chancellor indicated that the changes would have significant implications for some universities, especially in terms of the recognition of pension deficits, bringing down the net asset value for the sector which could affect future borrowing capability. 7

8 It was noted that the previous year s accounts would be represented in the new format to allow for meaningful comparisons. Members congratulated the Director of Finance for a very clear exposition of the new requirements. The report on the impact of FRS102 adoption was received. AC Risk Management Report Document AC/035/15 The Director of Strategic Planning introduced the paper (copy of the full risk register included) which focused on the risks emanating from Government policy as identified in the HE White Paper. These were little changed from the last report and centred on increased marketisation, the introduction of the Teaching Excellence Framework with a confirmed link to fee levels, the creation of the Office for Students (OfS) with an increased emphasis on regulation and the impact of changes to the Research Council structure. Attention was drawn to the range of mitigating actions that had been put in hand including consideration of the changes to Level 2 and Level 3 qualifications to ensure a good match with programme requirements. In addition, the known risk around teacher training remained alongside the switch from bursaries to loans for nursing students and the introduction of a new Nursing Associate role which could impact on university provision. It was noted that recent Union action in respect of this year s pay claim was not expected to cause significant disruption and the University had appropriate processes in hand. Set against the risks, the growth in applications provided a strong base for 2016 recruitment despite a decrease in conversion rates from the previous year. In discussion, it was noted that the introduction of loans for nursing students would provide a higher income level than the previous bursary arrangement and, although the switch could impact on applicant demand, numbers were sufficiently high to absorb this. The Risk Management report was received. 8

9 AC Fraud and Irregularity/Serious Incident Statement The Vice-Chancellor and Deputy Vice-Chancellor updated the committee on progress to date. AC Extension of Internal Audit Contract It was noted that the current contract term for PwC completed at the end of July Following discussion, the Committee agreed an extension for a further two years to July Action: Deputy Vice-Chancellor SECTION C AC Any other Business There was no other business. AC Date and time of next meeting The next meeting of the Committee is scheduled for 12 September