Minutes of the Meeting of the Audit Committee - 25 November 2020
|Group||Minutes of the Audit Committee|
|Location||HELD BY REMOTE ACCESS THROUGH MICROSOFT TEAMS|
|Date||25th November 20|
|Minutes Membership|| In attendance by electronic device and contributing towards the meeting quorum, in accordance with Instrument 12. (Members may count towards the quorum if they are able to be present by electronic or digital communication (including attendance by video conferencing or telephone conferencing). |
N. Merchant, R. Sartain, C. Sharp (co-opted member) and M. Thompson. 1 vacancy.
|In Attendance|| In attendance by electronic device |
J. Staniforth, Principal/CEO
Member of the Senior Leadership Team: P. Partridge, Finance Director (FD)
Clerk to the Board, T. Cottee
In attendance by electronic device
W. Devitt, Engagement Lead, Grant Thornton, Financial Statement Auditors (FSA)
C. Parkes, TIAA, College Internal Audit Service (IAS)
|Apologies||N. Coombe, Senior Audit Manager, Grant Thornton, Financial Statement Auditors (FSA)|
18/20. Election of Chair
Having been proposed by R. Sartain and seconded by C. Sharp, it was
Resolved: That N. Merchant be appointed Chair of the Committee.
N. Merchant in the Chair.
19/20. Declarations of Interest
There were no declarations of interest.
20/20. Draft Minutes of the Meeting Held 10 June 2020 (Appendix Agenda Item 4)
The Minutes of the meeting held on 10 June 2020, were agreed as a true record.
21/20. Draft Audit Committee Workplan 2020 - 2021 (Appendix Agenda Item 5)
The Committee undertook a review of the Key Reports to be considered by the Committee for 2020 - 2021 (previously circulated).
Resolved: That the Annual Timetable of Standard Business for the Audit Committee 2020 – 2021, be approved.
22/20. Internal Audit Reports (Appendices Nos. 6a – 6dii)
Ms Parkes presented the following reports –
Follow-Up Review (2019 - 2020) (previously circulated).
The follow up review considered whether the management actions taken in respect of priority 1 and 2 recommendations arising from the internal audit reviews conducted had been implemented.
At the time of the review,
- 8 – recommendations were implemented; and
- 4 – actions were outstanding (two of the outstanding recommendations had not yet reached their due date for implementation)
- 1 – had been considered but not implemented
Ms Parkes reported that three of the recommendations that, according to the report, had not met the original target date, had now been implemented. The Committee enquired as to why the Payments recommendation with respect to IR35 had not been implemented, as it was outstanding from 2018/19. The Finance Director responded that this element of the recommendation (which had otherwise been implemented) has not been implemented initially due to capacity pressures, accentuated more recently by Covid-19 on the Finance Team. He explained that an additional member had recently been recruited to the Team to provide additional capacity and he would arrange for this recommendation to be addressed by this Team member.
The Finance Director explained that the recommendations made with respect to Financial Business Planning had been implemented and that he and the Group Vice Principal, Information & Strategic Development would continue to refine and improve processes into the 2021/22 budget year. He also assured that the recommendations that remained outstanding which had been delayed due to the Covid-19 pandemic would be added to the Recommendation Tracking Report submitted to the Committee at every meeting.
Internal Audit Annual Report 2019 – 2020 (previously circulated).
The annual internal audit report summarised the outcomes of the reviews carried out on the College’s framework of governance, risk management and control and was designed to assist the Governing Body in making its annual governance statement.
The 2019/20 Annual Audit Plan approved by the Audit Committee had been for 35 days of internal audit coverage in the year. During the year, the reviews of Risk – Mitigating Controls, Business Continuity and Disaster Recovery, and Apprenticeships had been cancelled due to the Covid-19 pandemic. One review, however, had been carried out in addition to the work set out in the Annual Audit Plan: an audit of the FE ITE Bursary Expenditure for the Financial Year 2018-19.
Ms Parkes explained therefore that, as the delivery of the internal audit work for 2019/20, had been impacted by the global Covid-19 pandemic which had taken hold during this accounting period and that three reviews had not been completed, the IAS had not been in a position to provide an Annual Opinion in line with Public Sector Internal Audit Standards/IIA – UK & Ireland Standards. An assessment of the outcomes from the work completed during the year, did suggest that the College would be heading for a reasonable assurance opinion, as the reviews undertaken had not resulted in any urgent recommendations and there were no areas reviewed by internal audit where it was assessed that the effectiveness of some of the internal control arrangements provided ‘limited' or 'no assurance’.
However, whilst the IAS had not, at the time of writing the report, been in a position to formally confirm this opinion, following the re-opening of the College in September, the IAS had completed two of the three postponed reviews, which were presented to the Committee at this meeting, which provided assurance that the IAS had been able to progress the Plan.
As the report was designed to assist the Board in making its annual governance statement and complete its Annual Report to Board, the Committee, whilst understanding of the unprecedented circumstances surrounding the Covid – 19 pandemic and its effect on the College’s operations, sought to understand why the programme had not been completed to target.
The Principal/CEO explained that two of the postponed audits required the involvement of senior managers who were also responsible for delivering on the College’s Covid-19 preparations. During the time the reviews were planned to be conducted, it had been a priority to ensure that the College remained a safe and secure environment during partial opening and was fully prepared for the September full opening. After having sought assurance that not completing the IAS Plan within year, would not detrimentally affect the Financial Statement’s auditor’s ability to undertake the FS audit, a decision was taken to postpone the Plan. Mr Devitt confirmed that this was the case. As already confirmed by Ms Parkes, two of the three postponed audits had already been undertaken, with the last postponed audit scheduled for completion in 2020/21.
The Committee sought assurance that the Finance Director now had sufficient resources to support the IAS function going forward. The Finance Director responded that he was now assured that, with the additional resource secured, the IAS Plan would be delivered, as expected.
The Committee was of the view that, as two of the three outstanding reviews had been progressed and had secured assurance, it had received sufficient assurance on the adequacy of the College’s controls and this be reflected in the Committee’s Annual Report to Board.
Resolved: That the report be noted.
Audit Strategy 2020 – 2021 and Annual Internal Audit Plan (previously circulated).
The Draft Audit Plan for 2020 – 2021, had been informed by a risk assessment carried out across all of the service’s education clients (with members and senior management) and by an updated audit risk assessment to ensure that planned coverage for the year was focussed on the key audit risks, and that the coverage would enable a robust annual Head of Internal Audit Opinion to be provided.
The Committee acknowledged that the year ahead would continue to be challenging for education providers not only due to the ongoing impact of the COVID-19 pandemic, which had already had an unprecedented impact across all areas of the College, but also due to risks such as fraud and cyber security, the practical implications of the United Kingdom’s position on Brexit and income pressure.
In considering these risks, the Board Chair sought assurance that all the reviews planned for 2020/21, would be conducted, considering the continued pressure on the Senior Leadership Team’s workload. Ms Parkes explained that most of the reviews were already programmed and she was confident that the Service and the College could deliver the 2020/21 Plan, as presented. In response to a question from a Committee member, she confirmed that the Service would conduct reviews remotely until March 2021.
The Committee sought to understand why no contingency audits had been planned for the year. It was explained that contingency had been built into the Plan should the need for audits of this nature be required and was flexible to accommodate any emerging issues.
The Committee sought assurance on the planned timing of the Safeguarding review. The Finance Director explained that the Plan included a review of Safeguarding in 2020/21, in recognition of its importance. Should any issues emerge from that Review, the Plan was flexible enough to include further Safeguarding reviews in 2021/22. The Principal/CEO reminded the Committee that the College had other sources of assurance with respect to Safeguarding, in addition the IAS Reviews, including the recent FE Commissioner’s Report and the Independent Report on Safeguarding carried out in late 2019, which could be re-commissioned if required. The Committee required that any recommendations emerging from the IAS review be implemented.
In accordance with Audit Committee Terms of Reference, the Internal Audit Strategy and Plan was required to be recommended to Board.
RECOMMENDED TO BOARD the Internal Audit Strategy and Plan.
ACTION: ITEM TO BOARD
Assurance Review of Mitigating Controls (previously circulated).
The review had considered the College’s arrangements for identifying and monitoring the mitigating controls with regards to the business significant risk map. Three risks currently included in the business significant risk map were selected and the effectiveness of the identified controls reviewed. The scope of the review did not include consideration of all potential mitigating arrangements or their effectiveness in minimising the opportunities for the identified risks to occur.
The review had identified two instances of good practice in that the Risk Register had recently been revised to incorporate a new set of definitions and working methodology, proposed by the Audit Committee and approved by the Board and that all Board and committee reports included reference to the risks in the Risk Register. There were no recommendations arising from the report and thus had Substantial Assurance.
Resolved: That the report be noted.
Assurance Review of Business Continuity (previously circulated)
The review had considered the College’s arrangements for business continuity planning including policy/strategy and procedures, organisational responsibility and plan details for various scenarios and testing. The review had also considered whether existing non-IT continuity planning in place was proportionate and appropriate to the College’s setting and to identify areas where these should be enhanced or refined. The scope of the review did not include providing assurance that the business continuity planning covers all the risks faced, or that the arrangements proposed operate continuously and effectively.
The review had identified two instances of good practice in that the Covid-19 Planning Checklist helped to ensure that, as the pandemic progressed, actions and mitigations were prepared and daily meetings and briefings kept staff aware of the current Covid-19 situation and the College's contingency plans. There were five recommendation and thus had Reasonable Assurance. There were no urgent Action Points and all recommendations had been accepted by College management
Resolved: That the report be noted.
23/20. External Audit Reports (Appendices No. 7)
Mr Devitt presented the following reports –
Financial Statements for the Year Ended 31 July 2020
The external auditors from Grant Thornton (GT) presented the Financial Statements for the Year Ended 31 July 2020 (previously circulated). The Draft Financial Statements for the year ended 31 July 2020, had been audited by the Financial Statements auditors who indicated a ‘clean’ unqualified audit opinion in terms of both truth and fairness and regularity, although several minor amendments were still required.
Going Concern Assessment
In July 2020, the College had provided a 24-month cashflow forecast to the Education & Skills Funding Agency (ESFA), based on the 2020-21 Budget and 2021-22 Plan’s expected cashflow profiles (“The July Return”). At the end of November 2020, the College was required to submit an updated cashflow forecast covering at least the next 12 months to the end of October 2021 (“The November return”).
The report provided a financial commentary on the COVID-19 November financial return provided to the ESFA, which provided:
- a bridge between the July and November returns;
- a Summary assessment of cashflow cover;
- an Exception report on key variables and sensitivities; and
- an assessment of the College’s status as a going concern to provide governors with the assurance required to approve the 2019-20 Financial statements.
The Committee accordingly reviewed a list of considerations and the responding management comments in order to make their assessment, including the key changes in Cash between the July return and the November return to the ESFA, the key drivers behind these changes, and a summary assessment of cash flow cover. The Committee agreed that the paper indicated that the College had sufficient resources to meet the going concern requirement.
Mr Devitt asked the Finance Director to consider ‘stress testing’ the Going Concern Assessment further, anticipating scenarios where the College could run out of cash. The Finance Director agreed to consider this.
The Clerk reported that the Board would be recommended to appoint to the current Committee vacancy at its meeting in December 2020.
The Committee thanked the Finance Manager and Team for their hard work in assisting the Financial Statements Auditors.
Resolved: That, having considered the draft Financial Statements, the report of the Finance Director and Financial Statements auditors and the reports on going concern, the Committee RECOMMENDED TO BOARD that
- the Committee considered the Shrewsbury Colleges Group to be a going concern; and
- the audit findings and draft year-end financial statements 31 July 2020 be recommended to the Board for approval.
ACTION: REPORT TO BOARD
The Audit Findings for Shrewsbury Colleges Group
The Committee considered the report of the College’s Financial Statements’ Auditor (previously circulated), highlighting the key matters arising from its audit of the Shrewsbury Colleges Group) financial statements for the year ended 31 July 2020.
Mr Devitt advised that there was nothing adverse in the findings and that there was little outstanding in terms of work to do. He explained the report’s contents, as follows –
- The work was substantially complete and there were currently no matters of which Grant Thornton were aware of that would require modification of the audit opinion, subject to minor outstanding matters;
- Audit findings – significant risks – the commentary was explained to the Committee’s satisfaction;
- Audit findings against other risks;
- Going Concern – Grant Thornton considered that the Board’s Going Concern assessment was reasonable and therefore the accounts have been appropriately prepared on the going concern basis;
- No matters in relation to fraud or breaches in relation to laws and regulations had been identified;
- colleges that had registered with the Office for Students (OfS) would be required to comply with the OfS accounts direction including the provision of an audit opinion on the appropriate use of funds;
- The Letter of Representation (previously circulated) was brought to the Committee’s attention, which would be signed at the Board meeting in December 2020;
- Regarding fees and non-audit services, the Committee noted the Statement to the effect that Grant Thornton was independent of the College and provided no other services.
Mr Devitt confirmed that, as part of new internal procedures being applied to all clients, the College’s Going Concern Statement had been scrutinised by the firm’s Technical Team whose review would provide additional rigour and assessment and if necessary, challenge the College’s assumptions.
Mr Devitt explained that, based on the work done to date, Grant Thornton was proposing an unmodified opinion, though there was a potential that it may include an Emphasis of Matter Paragraph in respect of material valuation uncertainties on property assets within the local government pension fund, which the College contributed to and had a share in. The anticipated regularity assurance opinion would be unmodified
In conclusion, Grant Thornton anticipated that it would provide the College with an unmodified audit report.
Resolved: That the Audit Findings for Shrewsbury Colleges Group for the year Ending 31 July 2020, be accepted.
24/20. Audit Committee Draft Annual Report 2019/20 (Appendix No. 8)
The Chair submitted the committee Draft Annual Report and advised that the report would be referred to the Board for approval. He invited comments on the report.
The purpose of the Annual Report was to submit to Board a précis of the activities of the Audit Committee in an annual report for the Year 1 August 2019 to 31 July 2020 and had been produced in accordance with the model as set out in the guidance on the latest edition of the Joint Audit Code of Practice. The Committee’s Terms of reference (previously circulated) remained complaint with Code of Practice requirements.
The Annual Report to the Board provided -
- a summary of the work of the Committee during the financial year under review, including any significant issues arising up to the date of preparation of the Report;
- any significant matters of internal control included in the management letters and reports from auditors or other assurance providers;
- the Committee’s view on its own effectiveness and how it had fulfilled its terms of reference; and
- the Committee’s opinion on the adequacy and effectiveness of the College’s audit arrangements, its framework of governance, risk management and control and its processes for securing economy, efficiency and effectiveness.
The Committee, having reviewed the Draft Report, AGREED that Section 4 on the Internal Audit Service be supplemented to reflect the updates to the IAS Annual Report (Min. No. 22/20) and that this had provided assurance to the Committee on the integrity of the College’s control systems.
Resolved: That the Draft Annual Audit Report for Audit be agreed and, subject to the further amendment requested be RECOMMENDED TO BOARD for approval.
ACTION: REPORT TO BOARD
25/20. Whistleblowing, Irregularity & Fraud – Annual Statement of Declaration of Incidents 2019 – 2020 and Policy (Appendices No. 9)
The Committee considered a report from the Clerk (previously circulated) presenting a Declaration that no incidents of Fraud, Corruption or Whistleblowing had been reported to the Clerk’s Office during 2019 – 2020, in accordance with Financial Procedures.
The Committee also reviewed the College’s Whistleblowing Policy (previously circulated) and concluded that it remained relevant and appropriate to the College’s needs.
Resolved: That the Committee RECEIVED the Statement of the Clerk regarding Incidents of Whistleblowing and Fraud 2019 – 2020 and AGREED that the annual reminder regarding the College’s Anti-Bribery arrangements be sent to all staff.
26/20. Risk Register and Board Assurance Framework (Appendix Agenda Item 10)
As recommended by the Committee (Audit Committee Min. No. 30/19 refers), the format of the Risk Register had been revised in line with the proposals subsequently approved by Board (Board Min. No. 65/19 refers) to incorporate a new set of definitions and working methodology.
The Finance Director explained that some structural changes had been made to the Register since the last review in July. All SLT members had been required to revisit the inherent risk scores to reflect the naturally occurring risk as if no key controls were in place. As a result of this and changes in presentation, some inherent risk scores were higher. The FE Commissioner had included in his recently published Report a recommendation that risk management processes be reviewed to ensure control measures could demonstrably mitigate identified risk and it was considered that these revisions met this recommendation. The Principal/CEO explained that the College had also moved away from risks being owned by more than one SLT member.
The Finance Director explained the risks identified and mitigating actions being undertaken. The Committee concluded that the risks to have been appropriately identified and the management actions reported were effectively mitigating these risks.
In response a question from the Committee Chair regarding Risk Board 11 (Risk that College is not aware of local threats to staff or student safety (e.g. drugs, gangs, county lines, terrorism or other local security threats)), the Principal/CEO explained that the College’s intelligence was gained through working with local and regional partners, for example SOCJAC.
Resolved: That it be RECOMMENDED TO BOARD that the Risk Register, be approved.
ACTION: REPORT TO BOARD
27/20. Audit Recommendation Tracking Report (Appendix Agenda Item 10)
The Committee received the Audit Recommendation Tracking Report (previously circulated).
28/20. Irregularity and Fraud
29/20. Date of Next Meeting – Wednesday, 17 March 2021 at 6.00 p.m. Venue – tbc.
Mr Devitt and Ms Parkes left the meeting at this point. The Committee took the opportunity to thank them for their work during this challenging period.
30/20. Performance Indicators for Internal Audit Service and Financial Statements Auditors (Confidential Appendices No. 11)
The Committee reviewed and completed a confidential report with respect to the performance monitoring of the Internal Audit Service and Financial Statements auditors during 2019 - 2020 (previously circulated).
The meeting concluded at 8.05 p.m.