Minutes of the Sixty-Seventh Meeting of the Audit Committee held on Thursday 7 March 2013 at 6.00pm in Room 614 at the Shiney Row Campus.

PRESENT: Mr G Blyth (Chair), Mrs A Hodgson.

IN ATTENDANCE: Mr D Howells, Mrs J Ridley, Mr D Claybrook, Ms G Denny, Mr I Falconer (Grant Thornton),Mr J Morgan (KPMG).

CLERK: Ms R Ferguson.

A/13/01 DISCUSSION BETWEEN INTERNAL AND EXTERNAL AUDITORS AND MEMBERS

All staff members and the Clerk withdrew in order that the discussion between Internal and External Audit and Members could be held in private. The meeting resumed at 6.05pm.

A/13/02 APOLOGIES FOR ABSENCE

Apologies were received from Cllr C Gofton and Ms J Johnson.

A/13/03 MINUTES OF THE PREVIOUS MEETING HELD ON 27 SEPTEMBER 2012

The minutes were accepted as an accurate record.

A/13/04 MATTERS ARISING THEREFROM

A/12/46 – Reserved Business The discussion relating to this item was recorded as reserved business of the Audit Committee and minuted as a separate appendix.

A/13/05 REPORT ON THE IMPLEMENTATION OF INTERNAL AND EXTERNAL AUDIT RECOMMENDATIONS

The Vice Principal Finance and Resources presented the report on the implementation of Internal and External Audit recommendations. It was noted that, of the sixteen recommendations brought forward from the 2011/12 internal audits, fourteen had now been implemented, one was undergoing a final consultation exercise and one had not been completed due to reasons of timing. The Committee discussed the progress report provided in Annex B and queried whether the third recommendation should now read as having been implemented, as a system for documenting post completion project reviews was now in place despite not yet having been used in practice. Internal Audit confirmed that a green opinion had been given however the system had not yet been tested in live use. Follow up work in June would determine whether it had been implemented.

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In respect of the recommendations arising from the Financial Statements and Funding Assurance audits conducted by KPMG it was noted that four had now been implemented with a further three due to be implemented as a future date.

The Committee:

received the report noting the implementation of Internal and External Audit recommendations.

A/13/06 INTERNAL AUDIT PROGRESS REPORT

David Claybrook (Grant Thornton) presented the Internal Audit Progress Report explaining that the Internal Audit Plan remains on target to be completed within the agreed timescale and budget. The Committee noted that: a meeting between Grant Thornton and the new principal has taken place; initial planning meetings for every review in the 2012-13 Internal Audit

Plan have been completed; the reviews in the first tranche of fieldwork have been completed. The

review of interim management arrangements had been deferred and replaced by the review of cash handling arrangements, as agreed by the Committee at its last meeting;

the second tranche of fieldwork had commenced and the corresponding reports will be presented to the next Audit Committee meeting in June 2013;

as agreed with the Chairman of the Audit Committee and Vice-Principal (Finance and Resources) the proposed review of Higher Education provision have been deferred to 2013-14 with the time proposed for this review being used to undertake a review of core financial controls, including a review of budgeting and financial reporting arrangements. The two separate reviews of estates capital project management and the IT infrastructure investment project currently included within the internal audit plan will be combined as a single internal audit review of capital project management. A small contingency would be held and be used to undertake follow up work in June;

discussions were taking place regarding proposed topics to be included in the Internal Audit plan for 2013-14. The draft plan will be brought to the next meeting.

The Committee:

received the Internal Audit Progress Report.

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A/13/07 INTERNAL AUDIT REPORTS

David Claybrook (Grant Thornton) presented the Internal Audit Reports.

Workforce Restructuring (Annex A)The scope of this review was to give assurance on the progress in delivering the restructure. A Green opinion had been given with two Medium priority findings relating to the monitoring of the A, B and C staffing ratios and the utilisation of agency staff. It was noted that Management had agreed with the recommendations to produce reports on staff utilisation to ensure that staff are adhering to the agreed ratios and to monitor of the use of agency staff to ensure that the planned budget savings are realised.

The Vice Principal Finance and Resources explained that the increase in 16-18 learner numbers had had an impact on staffing and the additional teaching costs were putting a strain on the budget however management were monitoring the situation and were reporting regularly to the Resources Committee and the Board.

The Committee:

discussed the report and agreed to refer it to the attention of the Resources Committee to ensure that monitoring takes place.

Marketing (Annex B)This review was focused on the College’s marketing arrangements following a restructure of its marketing function. A Green opinion had been given with two Medium priority, two Low priority and one Improvement recommendations. The Committee discussed the recommendation in relation to the use of the CRM system and was disappointed to note that the College was not getting the benefit from its investment in the system as it was not being utilised effectively and that Internal Audit had been unable to establish who within the College was responsible for the system.

It was noted that the College agreed with the recommendation to establish whether it intends to use the system and if so, to assign responsibility for maintaining and monitoring the system to a designated member of staff and to clearly communicate to staff how the system is to be used.

The Committee:

discussed and noted the Internal Audit report on Marketing.

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Cash Handling (Annex C)Gemma Denny (Grant Thornton) presented the report explaining that this review had been undertaken at the request of the College following two minor incidents involving cash handling. A Green opinion had been given in relation to the adequacy of policies and procedures in place. A Red opinion had however been given in relation to the adherence to those policies and procedures. It was noted that although staff were aware of the petty cash and cash handling procedures some staff were not complying with them and the spot checks undertaken were not sufficient to highlight this non adherence.

The Committee discussed the report and noted that management had agreed with all the recommendations and had put actions in place to address the issue. It was acknowledged that management needed to ensure an effective means of communicating the procedures to staff along with the consequences of non-compliance.

The Committee:

noted the Internal Audit report on Cash Handling and supported the actions being undertaken by management.

A/13/08 REVIEW OF FINANCIAL REGULATIONS

The Vice Principal Finance and Resources presented the report explaining that a review of the financial regulations had recently been undertaken to take account of a number of changes to approval limits for purchase orders within the Procurement policy; changes to treasury management regulations in relation to the institutions with whom the college would be prepared to lodge treasury deposits and changes to staffing roles and responsibilities and job titles which had taken place since the last update.

The changes were discussed and the following points were noted: the Committee and the Vice Principal Finance and Resources agreed that

the last sentence in paragraph C.2 of the regulations which states “This shall include the power to transfer funds between different types of banking schemes.” should be removed from the Regulations because it no longer seemed appropriate in view of the changed approach to treasury management;

whilst accepting that the College had removed the requirement to invest with institutions rated A+ and A1 by the credit rating agencies the committee felt that, as the College was moving towards a less prescribed arrangement, then more frequent reports should be taken to the Resources Committee to provide assurance to governors that funds were being invested with the most appropriate institutions;

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it was confirmed that there was no requirement for the College to re-tender for the services of external auditor every seven years however the College could choose to place such a time limit within its Financial Regulations.

The Committee:

i. approved the revised financial regulations subject to removal of the final sentence in paragraph C.2;

ii. agreed that the number of treasury management reports to be taken to the Resources Committee should be increased to twice per year in November and April.

A/12/09 CONSULTANCIES UNDERTAKEN BY INTERNAL AND EXTERNAL AUDIT

The Committee:

received the report noting the consultancy work undertaken by KPMG and Grant Thornton .

A/13/10 REVIEW OF COMMITTEE MEMBERSHIP AND TERMS OF REFERENCE

The Committee noted that the SFA would shortly be issuing part 2 of the Joint Audit Code of Practice for consultation and that it would be appropriate to review the terms of reference again when the final version of the Code of Practice was published.

The Committee:

reviewed its membership and terms of reference and agreed that both the current membership and terms of reference were effective and should remain unchanged subject to amending the reference to the LSC in paragraph g) to read the SFA.

Mr Paul Moran and Mr David Mitchell (KPMG) and Mr Ian Falconer and Ms Sarah Willis (Grant Thornton) withdrew from the meeting at 7.55pm

A/13/11 MANAGEMENT REVIEW OF EXTERNAL AUDIT PERFORMANCE AND RE-APPOINTMENT AND REMUNERATION OF EXTERNAL AUDITOR

The Vice Principal Finance took the Committee through the performance indicators presented at Annex A, concluding that management were satisfied with the way in which KPMG had carried out their work on the 2011/12 financial statements and regularity audit. It was recommended that KPMG be reappointed for the 2012/13 financial year.

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The Committee discussed the level of fees to be applied and whilst it was acknowledged that the proposed increase in fees were lower than the current rate of inflation, it was felt appropriate to ask if KPMG would be prepared to hold their fees once again in recognition of the current strain on College’s funds. It was agreed that the Vice Principal Finance and Resources would discuss this with KPMG.

A Governor queried the assessment criteria used in the performance indicators, particularly in relation to meeting deadlines and agreed timetables. It was requested that this be reviewed prior to completion for next year.

Mr James Morgan (KPMG) was invited to return to the meeting at 8.05pm

The Committee:

i. received the report on the management review of external audit performance;

ii. agreed to recommend the re-appointment of KPMG as financial statements and regularity auditors to the College at a rate of remuneration to be agreed between the College and the firm;

iii. agreed the performance indicators to be used in relation to 2012/13 subject to re-visiting the assessment criteria in relation to meeting deadlines/agreed timetables.

A/13/12 ANY OTHER BUSINESS

There was none.

A/13/13 DATE, TIME AND VENUE OF NEXT MEETING AND CALENDAR OF BUSINESS

Due to apologies received in advance and to ensure that the meeting is quorate, the next meeting will be rescheduled to take place on Wednesday 12 June 2013 at 6.00pm in Room 614, Shiney Row Centre.

Meeting closed at 8.10pm

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