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Minutes
Meeting of the Audit Committee
Wednesday27 November 2013 at 3.30pm
Principal’s Office
Present :Malcolm CameronChairman
Bruce AdamsGovernor
Apologies:Mike SteynGovernor
John PetittGovernor
In attendance:Gillian MayPrincipal
Glynn MurphyFinance Director
James NewtonBaker Tilly (External Auditors)
Laura HallezMazars LLP (Internal Auditors)
Peter WilliamsonMazars LLP (Internal Auditors)
Tracy ReeveClerk to the Corporation
43/13Chair’s Agenda Item
The Chair and members discussed the operation of the College’s risk and financial controls system without officers of the College present. It was confirmed that neither set of auditors had anything they wished to bring to the attention of the meeting.
44/13Apologies for absence
Apologies had been received fromMr Steyn and Mr Petitt.
45/13 Notification of any other business
There was none.
46/13 Notification of any interests
There was none.
47/13Minutes of the Audit Committee meeting held on 25 September 2013
The minutes were approved and signed by the Chairman as a correct record.
48/13 Matters Arising
There were no matters arising that were not already covered on the agenda.
49/13External Audit: Draft Annual Audit of Accounts 2012/13, Management Letter and Letters of Representation
- Financial Statements to 31 July 2013
Members considered the final paperwork for the Annual Audit of Accounts provided by Baker Tilly (previously RSM Tenon); the Report and Accounts to 31 July 2013 and the Management Report. Mr Newton presented the report and informed Members that the audit had gone well; the Finance Director and her team had made a valuable contribution to the audit; all requisite information had been available and proved robust. He informed Members that an unqualified audit report would be issued; the finalised figures and supporting narrative was considered. The final out-turn was a year-end deficit of £1.641m from operating activities after depreciation, disposal of assets and tax, (this was compared with a budgeted surplus of £54,000). It was noted that F&GP Committee would be considering a forensic analysis of this large movement against forecast in their meeting on 27thNovember; this analysis would then be taken to the full Corporation meeting on 4th December 2013. Total income for the year had increased to £10.712m compared with £9.50m in 2011/12. The net pension liability at £2,944,000, (compared with £3,137,000 at 31 July 2012), was noted and also the fact that this was an element of the accounts over which BCA had no control. Members were reminded that at present FRS17 was simply a book entry and was excluded when assessing financial health by both the SFA and the banks. It was noted that the auditors were fully comfortable around the crucial ‘going concern’ judgement.
- Audit Management Letter
Members considered the external audit management letter for the year-end 31 July 2013 in detail. The Principal highlighted the unqualified audit opinion and commended all the work done by the Finance Director since the end of September 2013 which had enabled this clean opinion to be secured. Members considered the control weaknesses identified, relating to: financial forecasting; cut-off errors; incorrect capitalisation of costs; and the fixed asset register. The management responses were noted and members were pleased to see all 4 recommendations would be actioned during the first few months of 2014. Members noted the low level of adjustments made on the balance sheet at £31,000. The meeting also considered the Annex to the Management Report which provided information on: sector accounting changes; other accounting and tax developments; and general FE sector developments.
- Letter of Representation
The draft letter of representation, in the standard format required by the Joint Audit Code of Practice,was considered and approved as presented. The letter of representation for the regularity audit was also considered and approved as presented.
The meeting noted that the draft accounts would also be considered in detail by the Finance & General Purposes Committee (27/11/13). The Audit Committee agreed to recommend the accounts for approval. The Chair thanked JN for Baker Tilly’s work as external auditors and commended the good working relationship that had been built up over the last year.
Resolved:
i)That the accounts be APPROVED and RECOMMENDED to the Corporation for approval and signing by the Chair on behalf of the Corporation, and the Principal as Chief Accounting Officer of BCA.
ii)That the Management letter be RECEIVED and RECOMMENDED to the Corporation for approval.
iii)That the Letters of Representation be APPROVED and RECOMMENDED to the Corporation for approval and signing by the Chair on behalf of the Corporation, and the Principal as Chief Accounting Officer of BCA.
50/13Annual Internal Audit Report 2012/13
Mr Williamson presented the annual report which summarised Mazars work as internal auditors throughout the year. The report contained a clean opinion with a qualification around IT security and disaster recovery. Members were assured that all recommendations around the issues arising from the audit of IT Security and Disaster Recovery had been, or were in the process of being addressed (this had been verified by Mazars in a follow-up audit in October 2013). Members were reminded that this year had been the second year of the contract with Mazars LLP to provide internal audit services to the college. It was noted that the internal audit work had gone well during the year and Mazars were still providing rigorous challenge. The Clerk informed the meeting that a copy of this report would be sent to the SFA as required by the Audit Code of Practice.
Resolved:That the Internal Audit Annual Report 2012/13 from Mazars
LLP be received.
51/13 Internal Audit Plan 2013/14 and Strategy 2011-2014
The meeting considered the plan for 2013/14 and the Internal Audit Strategy to 31 July 2014 which had been prepared by the Internal Audit Service providers, Mazars LLP. This had been previously considered in detail at the Audit Committee meeting in September 2013. It was confirmed that the plan had been closely aligned to the College Risk Register as well as covering all necessary compliance and assurance issues. It was noted that the first IAS visit during 2013/14 had already taken place in October 2013. Members noted that an in depth audit of the December 2013 management accounts would be undertaken during the January 2014 visit of the IAS. Members sought, and were given assurance, that there would also be a follow-up review of IT provision, security and contingency around IT system failures during 2013/14. It was confirmed that the planned audit coverage of 30 days was consistent with other FE colleges of a similar size to BCA.
Resolved: That the Internal Audit Plan 2013/14 and Strategy as presented would be taken to Corporation (4th December 2013) with the Audit Committee’s recommendation for approval.
It was also AGREED that a member of the Audit Committee (Bruce Adams) should work with the Finance Director to undertake a monthly reconciliation of the management accounts to the trial balance; this would provide additional board assurance.
52/13 Internal Audit Visit Reports
Mr Williamson (PW) talked members through the draft internal audit reports from the October 2013 visit of the Internal Audit Service (IAS).
- Employer Engagement
The review of the College’s key controls and processes in respect of Employer Engagement was considered. This area had been included in the IAS audit plan due to the significance of a risk in relation to this area which had previously been included in the College Risk Register. Although the risk had been removed during 2012/13 it had been considered beneficial for a review of this area to be undertaken. The review had focussed on the high level processes in place for the management and administration of the College Apprenticeship programme. Members were pleased to note that the report provided ‘substantial’ assurance but had identified two Priority 2 (‘significant’) recommendations; one around the documentation of procedures covering some activities of the Apprenticeship Team; and the other in relation to information provided by the VQ Manager system. There were also 4 ‘housekeeping’ recommendations. Members were pleased to note that the two significant recommendations were scheduled for completion by December 2013.
- Follow-up
The visit report covering the review to follow up progress made by the College in implementing internal audit recommendations from previous years was considered. Members were pleased to see good progress with 11 of the recommendations now fully implemented, 12 in progress and 2 superseded.
Resolved: That the internal audit visit reports, October 2013 be approved.
53/13 Annual Audit Committee Report
The meeting considered the Audit Committee Report 2012/13 which had been considered in draft at the last meeting, (September 2013). The Clerk confirmed that all requisite amendments had been made; the key performance indicators of the auditors (internal and external) would be completed and appended to the report before it was taken to the Corporation, (4th December 2013).
Resolved:The Annual Audit Committee Report 2012/13 was APPROVED and signedby the Chair of the Audit Committee. It would bepresented to Corporation on 4/12/13.
54/13Accountability Review
The Clerk presented a paper for information which alerted Audit Committee members to the possible scope and content of any Accountability Review which would be carried out by the SFA’s Provider Financial Assurance Team. It was noted that any such review would cover governance arrangements and strategic oversight arrangements as well as financial management and internal control arrangements.
Noted
55/13Register of Outstanding Audit Actions
The meeting noted that due to the departure of the VP Finance & Corporate Services this had not yet been updated. However it was noted that in considering the Follow-Up visit report from Mazars (minuted at 52/13 above) governors had cleared this agenda item. The outstanding actions required on the Register of Audit Recommendations from the September 2013 would be carried forward.
It was AGREED that:
i)A column be added to the summary of outstanding audit recommendations to enable a narrative of SLT to be included in order to highlight progress.
ii)The Finance Director should update the Register of Outstanding Audit Recommendations (post Follow-Up visit from the IAS) and bring to the next Audit Committee meeting (5th March 2014).
56/13Risk Register Report
The meeting noted the Risk Register (unchanged since September 2013) which reflectedBCA’s Corporate Strategy. The areas of highest risk – those still classified as ‘red’ after mitigation – were considered in more detail. Members again queried the low risk score of 2 for risk 6.1 – Risk of Reputational loss. They also suggested that the risk associated with Risk 5.2 ‘Severe IT Failure’ was also too low at 6; the Principal assured the meeting that she believed that this was at the correct level and that the Follow-up audit review by Mazars had confirmed this.
The Risk Register was RECEIVED.
It was AGREED that the risk scores before and after mitigation for risks 5.2 and 6.1 should be considered further in light of the Follow-up IAS audit, (October 2013).
57/13 Any Other Business
There was none.
58/13Date of next meeting
Wednesday 5thMarch 2014, 4.30pm
Wednesday 25th June 2014, 4.30pm
Minutes
Meeting of the Audit Committee
Wednesday 27 November 2013 at 3.30pm
Principal’s Office
Part 2- CONFIDENTIAL
Present :Malcolm CameronChairman
Bruce AdamsGovernor
Apologies:Mike SteynGovernor
John PetittGovernor
In attendance:Gillian MayPrincipal
Glynn MurphyFinance Director
Tracy ReeveClerk to the Corporation
59/13 Assessment of Auditors performance against KPIs 2012/13
The meeting considered the performance indicators for the IAS during 2012/13, as well as the self-assessment provided by Mazars. The KPIs and performance for the external auditors, Baker Tilly (formerly RSM Tenon), was also considered. It was agreed that members should feedback their thoughts on these grades to the Chair as soon as possible.
Resolved: That members should feedback their judgements to the Chair of Audit Committee as soon as possible.
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