the
COURT
AUDIT COMMITTEE
MINUTES of the second meeting of the 2007/2008 academic year
held on Monday, 19thNovember, 2007, in Room 084, Queen Anne Court,
Greenwich Campus, Old Royal Naval College, Park Row, Greenwich SE10 9LS,
commencing at 4.00 pm.
Present:
Mr R J Baglin (Chairman)
Mr S Atkinson
Mr S Davie
Mrs M McKinlay
Dr A Pugh
In attendance:
Mrs T A Brighton (Minutes Clerk)
Mrs L Cording (Secretary and Registrar)
Mr R V T Daly (Director of Finance)
Mrs A-M Nelson
Mr S Banerjee (External Auditor)
Mr M Grundy (External Auditor)
Ms D Cripps (Internal Auditor)
Ms A Lancefield (Internal Auditor)
07/13PRIVATE MEETINGS
The Audit Committee was preceded by:
ia private meeting of the Members of the Committee
iia private meeting of the Members of the Committee and the External Auditors.
07/14DECLARATION OF CONFLICTS OF INTEREST
There were no declarations of conflict of interests.
07/15REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2007 (A07/30)
15.1Introducing the 2006-2007 Financial Statements, the Director of Finance reported that the audit was near to completion. Since the papers had been distributed, the University had received a letter from HEFCE notifying the amount of the holdback relating to the main student contract. The financial statements would need to be updated to reflect the new figures but there would be no adverse change to the overall position.
15.2The Director of Finance reported an overall surplus for 2006-07 of £4.6m. Taking into account that £2.5m was an exceptional income arising from the restatement at market value of the University’s bond (to comply with FRS 25/26), the operational surplus for the year was £2.1m. As a result, the University target for a 1% return on revenue had been substantially exceeded. The surplus, together with improvements in the FRS 17 pension deficit,had resulted in significant strengthening of the University’s Balance Sheet. It was also reported that all key bond covenants had been met.
15.3The Committee was pleased to notethat the University’s financial performance had been ahead of budget although this was in large part due to changes in market interest rates and FRS requirements. The University would need to maintain its stringent financial monitoring.
15.4The Committee considered the Statement on Corporate Governance. A number of minor amendments were agreed. The Internal Auditors reminded Committee Members that, in the interests of good practice, they should meet together once a year for an independent discussion.
15.5The External Auditor reported that the audit was completesubject to clarification of a number of issues, but he anticipatedthat an unqualified opinion would be issued on the consolidated financial statements of the University. The Auditor highlighted the following issues from the audit:
ithe provision for tuition fee debtors had been too cautious. Officers had been advised to take account of historical experience when anticipating the likelihood of recovering debts when setting the level of provision in future years;
iia long-standing provision in the region of £1m to cover the estimated costs of decontaminating the former pyrotechnic site in North Dartford had remained unchanged for a number of years. Officers needed to make a judgement on the likelihood of having to decontaminate the land and determine whether the provision remained appropriate;
iiithe University had received a number of grants from HEFCE towards specific projects during the course of the year. Grant income totalling c. £3.3m which hitherto had not been spent had been categorised as deferred income. The outstanding allocations had been discussed with Officers in order to determine whether the deferrals were appropriate and as a result the provision relating to Teaching Quality Enhancement Funding had been reduced. At the Committee’s request, the Director of Finance agreed to look into the matter.
15.6The Committee resolved to recommend to Court for approval:
ithe report by the Director of Finance on the 2006/2007 Financial Statements
iithe draft Report and Financial Statements for the year ended 31 July 2007 for the University of Greenwich
iiithe draft Report and Financial Statements for the year ended 31 July 2007 for the Centre for Consolidated Land Remediation
ivthe draft Report and Financial Statements for the year ended 31 July 2007 for Greenwich University Enterprises Limited
vthe External Auditors Report to Management for the year ended 31 July 2007
vithe draft Directors’ Letter of Representation to the External Auditors for signature by the Vice-Chancellor and Chair of Court.
07/16MINUTES OF PREVIOUS MEETING (A07/31)
The minutes of the meeting held on 14th May 2007 were agreed and signed as a true record subject to incorporation of the following amendments:
iPara 07/7, penultimate line to read: “Officers were asked to highlight significant policies within the Regulations, for example relating to fraud and personal interests, to staff at the time of dissemination.”
iiPara 07/11.6, 2nd paragraph; insertion of new 2nd sentence to read: “The Internal Auditors explained that this impression was given as a result of the different methodology adopted by RSM Bentley-Jennison and they would amplify that point in the final version.”
07/17MATTERS ARISING FROM THE MINUTES
17.1Appointment of External Auditors
The Committee noted that the appointment of Grant Thornton UK LLP was confirmed by Court at its meeting on 15 October 2007 on the terms contained in a Letter of Engagement dated 27 July 2007.
17.2Greenwich Property Limited Accounts
The Director of Finance reported that the 2006 and 2007 financial statements had now been agreed with the External Auditors.
17.3Financial Regulations
The Committee noted that Court had agreed at its October 2007 meeting that the authority to approve Financial Regulations should remain within the ambit of the Finance Committee. Thereafter, the Finance Committee had agreed, at its November 2007 meeting, that the revised Regulations should be recommended to the December 2007 meeting of Court for approval.
17.4Value for Money Study on Student Recruitment
It was noted that the report on the VfM Study had not yet been finalised.
17.5Value for Money Study on Students’ Union
It was reported that the Students’ Union had questioned the accuracy of the VfM Study report produced by the Internal Auditors and had now independently contacted a specialist within RSM Bentley-Jennison to review the report on their behalf. It was recalled that the study had originally been commissioned by the Finance Committee and that the findings of the final report had subsequently received the endorsement of both the Finance and the Audit Committees.
The Committee understood that the Students’ Union performance was an important issue for the University. The Secretary and Registrar reported that the University’s Administrative Secretary was working with the Students’ Union to make progress on the matter. Committee Members would be kept informed of developments.
07/18DRAFT 2006/2007 AUDIT COMMITTEE ANNUAL REPORT (A07/32)
The Committee considered the revised draft 2006-2007 Audit Committee Annual Report. There was some discussion on the section covering corporate governance issues and the HEFCE recommendation that Audit Committees should oversee academic quality. The Committee did not believe that its responsibilities in this area went beyond satisfying itself that an appropriate internal framework was in place to monitor academic quality. Members were content that through the Academic Council and its committee structure adequate internal systems existed and asked that the wording in the report be amended to reflect this. It was noted that the Internal Audit Strategy planned to review academic quality and validation in 2008. Mindful of its continuing responsibilities in this area, the Committee asked the Internal Auditors to focus on the operational processes of Academic Council. Subject to incorporation of the above and other minor amendments, and to updating to reflect the findings of the External Audit Report to Court, the Committee:
agreed to recommend to Court that the revised draft Annual Report of the Audit Committee for 2006-2007 be submitted to HEFCE.
07/19PROCUREMENT & BUSINESS SERVICES ANNUAL REPORT 2006-2007 (A07/33)
19.1The Committee received the annual report on the activities and performance of the Office of Procurement and Business Services during 2006-07.
19.2It was noted that during the past year staff had overseen the procurement of supplies, services and works amounting to £25.43 million using a range of competitive tendering procedures to ascertain value for money. Through these procedures, the Procurement Office had influenced 77% of corporate spending decisions, thereby maintaining the drive towards better value for money. It was also noted that a recent internal audit of Schools had indicated that unmanaged spending was taking place.
19.3The Director of Finance reported thatprogress in implementing e-Procurement had been disappointingly slow. On the positive side, the manual tendering arrangements had been replaced by an e-tendering system so that all elements of the tendering process from supplier registration through to contact award were fully computerised. However, the substantial benefits of bulk purchasing and other modern procurement practices would not be realized in full until e-procurement was available.
19.4The Committee noted that work on rationalising the University’s supplier base had started. The target to reduce the supplier base to below 5000 during the year had proved to be somewhat over-ambitious. All approved and preferred Contractors had now been transferred to the new electronic tendering system but in order for further rationalisation to be achieved considerable enhancement of the IT support infrastructure would be necessary.
19.5The Committee expressed considerable concern at the slowness with which up-to-date procurement technologies and processes were being adopted. It was vital for procurement staff to keep abreast of developments in procurement processes and for those staff to be given the opportunity for appropriate training. The Committee:
iendorsed the 2007-08 procurement targets within the annual report
iiurged Officers to give priority to the implementation of e-procurement
iiiasked the Chairman of the Committee to convey to Court the views of Members that urgent modernisation of the procurement systems was necessary.
07/20IMPLEMENTATION OF INTERNAL AUDIT RECOMMENDATIONS (A07/34)
The Committee noted progress in implementing the internal audit recommendation on formulation of procedures for the disposal and movement of assets/inventory items (cf Internal Audit Report 08.06/07 on Assets and Inventory Controls). Procedures were now incorporated in the revised Financial Regulations which would be recommended to Court at its next meeting.
07/21INTERNAL AUDIT
21.12006/2007 Audit Plan : Internal Audit Reports
21.1.1The Committee was pleased to note that, following review by the Internal Auditors, the opinion of the audit of Data Protection & Freedom of Information (15.06/07) had been upgraded to “substantial assurance”.
21.1.2The Committee considered the findings and recommendations of the Internal Audit report on School Reviews (A07/35). Areview of the framework of key controls within the Schools of Science, Health and Social Care and Humanities had concluded that the audited controls in place provided substantial assurance. However, a significant recommendation had been raised regarding reconciliation of purchase orders with invoices prior to payment. The Committee believed that this specific issue needed monitoring and asked the Internal Auditors to ensure that implementation of the recommendation was covered in its follow-up review scheduled for later in the session.
21.1.3The Committee noted that the reports on the IDEA Review (21.06/07) and the Follow-Up Review (20.06/07) were still being finalised and would be submitted to the next meeting.
21.22007/2008 Audit Plan : Internal Audit Reports
The Committee considered the findings and recommendations of the following internal audit reports:
02.07/08 – Performance Management (A07/38)
01.07/08 – Security (A07/39).
The Management Responses for both internal audit reviews were regarded as satisfactory by the Committee and Auditors. The following issues were highlighted in discussion:
21.2.1Internal Audit Report on Performance Management (A07/38)
The Committee noted that the performance management review had examined the establishment and review of performance indicators at a strategic level. The internal controls framework had been assessed as providing substantial assurance. Officers had raised objections to both of the report’s recommendations. The Committee noted disagreement between Officers and Auditors on the need for a formal performance management policy and procedure to be drawn up.
21.2.2Internal Audit Report on Security (A07/39)
The Committee noted that the security arrangements at the University’s Greenwich campus had been assessed as only providing limited assurance. Officers had not accepted four of the six recommendations raised. The Internal Auditors believed that entry to the University buildings was not adequately controlled and that the safety of staff and students and security of property was compromised as a result. The Auditors had raised one fundamental recommendation relating toQueen Anne Courtand had recommended that the number of entrances should be reduced to one or two or that an electronic entry system should be introduced.
The Secretary and Registrar reminded the Committee that the Greenwich campus was part of the World Heritage Site managed by the Greenwich Foundation. The site was open to visitors and members of the public throughout the year and, with the exception of vehicular access,access was not restricted during normal working hours. She further reported that management believed that ease of accessibility to buildings and facilities was desirable to both students and staff. Although cost and resource implications had been cited as reasons against limited access, there would also be logistical problems if the measures suggested were implemented, especially at changeover times for lectures.
The Internal Auditors acknowledged that the costs of enhancing security in the ways suggested considerably outweighed the likelihood of risk but a single incident could have serious reputational implications.
The Committee recognised that there was a strong case for both sides of the argument. It was understood that the University had a responsibility for the safety of staff and students and to the security of property but Members were also sympathetic to the view that people should be able to move unhindered around University premises. It was suggested that a possible way forward might be to identify vulnerable areas which couldbenefit from greater security arrangements and to implement measures to mitigate against the possibility of security incidents in these areas. The Committee asked the Chairman to bring the matter to the attention of Court.
21.3Internal Audit Progress Report (A07/40)
The Committee noted that the 2007-08 programme of audits was already behind schedule. The Internal Auditors reassured Members that the audit plan would soon be back on track.
21.4Draft Internal Audit Annual Report 2006-07 (A07/41)
The Committee considered the revised version of the Internal Auditors’ Annual Report for the year ending July 2007. The Internal Auditors advised that the report would be updated to reflect completion of the reviews on Schools, the IDEA Interrogation and the follow-up audit. It was noted that the findings of these reviews would not impact on the overall Audit Opinion.
07/22MATTERS FOR REPORT (A07/42)
The Committee received a report on the following items relevant to its work:
iRisk Management – the Executive Committee had introduced a new method of monitoring the Institutional Risk Register to ensure that the Register was current and up-to-date. The Secretary and Registrar reported that the Administrative Secretary would be reviewing the institutional process of risk management to ascertain its appropriateness.
iiHEFCE Assurance Review Visit – February 2008 – the visit had now been confirmed for Tuesday, 19 February 2008. Further information on the programme was still awaited from HEFCE.
The meeting ended at 6.40 pm.
T.A.Brighton
04.12.07
LC/AuditCtte/Minutes/Audit extracts – 19 Nov 2007 – Audit Committee
Audit Committee: 19 November 2007 page 1