MINUTES AUDIT & RISK ASSURANCE COMMITTEE on 25 th June 2014

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1 MINUTES AUDIT & RISK ASSURANCE COMMITTEE on 25 th June 2014 Present: Bob Pointing Chair Bill Joughin External Governor Tracy Irwin External Governor Kerry Culley Support Staff Governor In Attendance John Smith Deputy Principal for Finance and Resources June Fielding College Accountant Zee Walker Director of Planning and Performance Helen Wharton Director of Employer & Adult Learning Lindsay-Anne Straughton Baker Tilly (Internal Auditor- out-going) Trevor Rees KPMG (External Auditor) Mark Ashton-Blanksby ICCA (Internal Auditor- incoming) Hannah Bell Clerk APOLOGIES FOR ABSENCE A/14/73 None. DECLARATION OF INTERESTS A/14/74 The Chair reminded governors of the requirement to declare their interests in any agenda items. For any such declaration Governors would not be eligible to speak or to vote on the matters under discussion. EQUALITY & DIVERSITY A/14/75 A/14/76 The Chair reminded Governors of the College s commitment to equality and diversity and the need to consider these issues along with health and safety in all Committee business. The Chair asked the Clerk to circulate the College s Equality & Diversity Policy to the Committee for their reference. MINUTES A/14/77 Resolved the minutes of the meeting held on 26 th March 2014 be approved as a correct record and signed by the Chair. MATTERS ARISING/ACTIONS A/14/78 The Chair reviewed the actions from the previous meeting with the following findings: ACTION 1. Discuss the payroll report disagreement with the Accountant. Amend the payroll report COMMENT Done. Minutes Audit & Risk Assurance Committee 25 th June of 8

2 accordingly and circulate to the Committee. 2. Implement the Internal Auditors suggestions. 3. Review why apprenticeship enrolment has declined and the efficacy of the new arrangements in Furness generally and report to the Committee. Done. Done, on agenda. A/14/79 The Chair asked the Clerk to ensure the Apprenticeship Update was on the next Board meeting Agenda and the Committee agreed they would wish to review apprenticeships over time. INTERNAL AUDIT REPORTS - FOLLOW UP OF PREVIOUS INTERNAL AUDIT RECOMMENDATIONS REPORT A/14/80 The (out-going) Internal Auditors- Baker Tilly ( BT )- presented the Follow Up of Previous Internal Audit Recommendations Report to the Committee and highlighted that the College had now implemented all previous recommendations. - PAYROLL REPORT A/14/81 BT presented the Payroll Report to the Committee and highlighted that the report had been updated following discussions with the Finance Manager. The Committee understood that the College had accepted the findings of the Payroll report. - INTERNAL AUDIT PROGRESS REPORT A/14/82 A/14/83 A/14/84 A/14/85 BT presented the Internal Audit Progress Report to the Committee. BT advised the Committee that, other than the review of Performance Management, all 2013/14 planned internal audit reviews had now been completed. BT explained that the College implemented a new Performance Management system in 2013/14 and because the system was yet to complete a full cycle this audit had been deferred. The Committee understood and agreed that this audit would be substituted for a review of the College s Complaints, Compliments and Comments procedure. The Finance Manager asked BT to update the Internal Audit Progress Report to accurately reflect the agreed updates to the Payroll Report. The Committee understood that BT would present the findings of the Complaints, Compliments and Comments review at the next Committee meeting. The Committee was generally encouraged by the findings of the Internal Audit Progress Report and thanked BT and the College staff for their continued efforts. AUDIT RECOMMENDATIONS MONITORING REPORT A/14/86 The Deputy Principal (F&R) presented the Audit Recommendations Monitoring Report to the Committee and highlighted that out of the 15 internal audit recommendations received in 2013/14 only two remained outstanding. The Committee understood that the two outstanding actions were; a) Written procedures to be developed for catering, covering cash, bank and stock control; and Minutes Audit & Risk Assurance Committee 25 th June of 8

3 b) The college should update all Payroll procedures into the standard college format The Deputy Principal (F&R) advised the Committee that the two outstanding recommendations were scheduled for implementation by October A/14/87 The Committee understood that the implementation of the outstanding internal audit recommendations would be reviewed at the next Committee meeting. Lindsey-Anne Straughton left the meeting. APPOINTMENT OF INTERNAL/ EXTERNAL AUDITORS FOR 2014/15 A/14/88 A/14/89 A/14/90 The Chair advised the Committee that following the last Committee meeting he had attended an appointment panel (in conjunction with Kendal College and Lakes College) with a view to appointing the Internal Auditors for 2014/15. The Chair confirmed that as a result of the appointment panel meeting he had recommended the appointment of ICCA as the College s Internal Auditors to the Board of Governors. The Chair advised the Committee that the Board had approved the appointment of ICCA as the College s Internal Auditors for a period of three years from the academic year 2014/15. The (incoming) Internal Auditors- ICCA provided an overview of their business, experience and skills to the Committee highlighting their considerable experience in the education sector. ICCA advised the Committee that their internal audit service provides clients with additional benefits such as seminars and helpdesks. The Committee understood that the provision and appointment of the External Auditors would need to be considered by the Committee during the next academic year. RISK MANAGEMENT REPORT A/14/92 A/14/93 A/14/94 A/14/95 The Director for P&P presented the Risk Management Report to the Committee and provided an overview of the College s risk management process. The Deputy Principal (F&R) advised the Committee that risk management was embedded in the culture of the College. The Chair asked the Clerk to ensure that the one page Risk Register Summary was circulated to the Board with the Audit & Risk Assurance Committee Update for information. The Committee considered the updates that had been made to the risk register since the Committee last met. The Director for P&P highlighted the following items: 1. Risk 1, appetite has changed from 2 to 1 to reflect that the College is rick averse on solvency and financial stability. 2. Risk 6, residual risk remains higher that the College s appetite due to the difficulties experienced in recruiting Engineering and Maths tutors. The Committee were advised that the College implementing a comprehensive recruitment drive was mitigating this risk. 3. Risk 7, residual risk increased from 1 to 3 due to on going issues around the reliability of the ICT infrastructure and the increased pressures placed on the Engineering workshop space. Risk appetite increased from 1 to 2 as the College continues to manage resources in order to meet need. Minutes Audit & Risk Assurance Committee 25 th June of 8

4 4. Risk 8, an additional sub risk Minimise risk for students in the workplace has been incorporated under the wide risk Health & Safety. 5. Risk 10, updated to replace the scope around UTC in Barrow with Infrastructure of secondary education in Barrow changes A/14/96 A/14/97 A/14/98 A/14/99 The Director for P&P confirmed that all of the internal audit recommendations in respect of risk management had been implemented. The Committee reviewed the effectiveness of the internal risk management controls. The Deputy Principal (F&R) confirmed that plans were underway to recruit the required additional tutors for 2014/15. The Committee identified that the residual risk for Business Continuity remained higher than the College appetite but understood that this would remain so while the business continuity plan became embedded. The Committee was advised that the Assurance/Assured By columns on the Risk Register Report was a new addition to the report format and would be added to and updated at future Committee meetings. APPRENTICESHIPS UPDATE A/14/100 A/14/101 A/14/102 A/14/103 A/14/104 A/14/105 The Director for E&AL presented the Apprenticeships Report to the Committee and provided an overview of her role and responsibilities. The Committee understood that the Director for E&AL had assumed responsibility for apprenticeships at the College. The Director for E&AL explained that when she assumed her role the department was undergoing a redundancy programme and a number of students were out of funding. The Director for E&AL advised the Committee that following her appointment the department had undergone a programme of review. The Committee understood that the department was now fully staffed with staff trained in their appropriate skill area. The Director for E&AL explained that the legacy of out of funding students had also been addressed and that only 5 students in 2014/15 would be out of funding. The Committee questioned why the department had undergone a redundancy programme when there was a requirement for further staff. The Director for E&AL explained that at the time the redundancy programme was required because certain areas had experienced reduced apprenticeship students. The Committee understood that the staffing requirements could not be met by the staff which were made redundant. The Committee understood that the College currently had 99 fewer apprenticeship students than was anticipated in the College growth plan. The Director for E&AL advised the Committee that she hoped to grow apprenticeship numbers in 2014/15. The Committee understood that the Internal Auditors had recommended that the College should consider remunerating apprenticeship assessors based on recruitment and retention. The Director for E&AL explained that the College was considering this approach. The Committee understood that the Cumbria County Council had procured apprenticeship services from Colleges elsewhere in Cumbria during 2013/14 but had not procured any apprenticeship services from Furness College in 2013/14. The Deputy Principal (F&R) advised the Committee that the Board had Minutes Audit & Risk Assurance Committee 25 th June of 8

5 discussed this issue and that the matter was being raised with Cumbria County Council. A/14/106 The Deputy Principal (F&R) reminded the Committee that there were two apprenticeship offerings at the College, one provided Furness College apprentices to local SME s and the other dealt with providing training to the apprentices of the towns large employers. A/14/107 A/14/108 A/14/109 A/14/110 A/14/111 A/14/112 The Director of E&AL advised the Committee that it was hoped that the College could expand the number of Furness College apprentices by developing links with local SME businesses. The Director of E&AL explained that the College was currently developing these links by delivering The Edge training. The Committee understood that early signs indicate the College approaching SME s was having a positive impact on the number of apprenticeships delivered. The Director for E&AL identified that the lack of career guidance available to students has negatively impacted on apprenticeship numbers. The Director for E&AL highlighted that the College needed to ensure that the planned growth of apprenticeships did not negatively affect the quality of the provision. The Committee agreed that the growth of apprenticeships should be monitored to ensure that the quality of the provision was not negatively affected. The Committee understood that the College was currently in talks with the NHS about the future of the Cadet Scheme. The Director for E&AL confirmed that under the current scheme students were employed directly by the NHS but received no remuneration. The Director of E&AL explained that the College was negotiating with the NHS to convert the Cadet Scheme to an apprenticeship programme where by students would receive remuneration. The Committee understood that the Employment and Adult Learning department was now in a better position to move forward but faced future challenges as the funding of apprenticeships was being reviewed. The Committee thanked the Director for E&AL for her comprehensive report and continued efforts. Helen Wharton left the meeting. 2014/14 INTERNAL AUDIT PLAN A/14/113 A/14/114 ICCA presented the Internal Audit Plan to the Committee and welcomed the Committee s comments. ICCA advised the Committee that the plan had been developed with the assistance of the Deputy Principal (F&R). ICCA provided an overview of the plan and highlighted the following items: 1. The plan had been developed to cover the three-year period beginning with the 2014/15 academic year. 2. The College s risk register had been used to develop the plan and clear links had been made to provide assurance to Governors. 3. ICCA will provide pre-inspection support to Governors in anticipation of the Colleges next Ofsted inspection. 4. ICCA are currently discussing the development of a benchmarking system with all of the Cumbrian colleges. Minutes Audit & Risk Assurance Committee 25 th June of 8

6 A/14/115 A/14/116 A/14/117 A/14/118 A/14/119 A/14/120 The Finance Manager suggested that the Commercial Income Audit should be deferred because the College planned to implement a number of financial changes in this area in 2014/15. The Deputy Principal (F&R) advised the Committee that the Chair of the Learner Experience Committee had asked for an audit of the College s Performance Management strategy to be included in the 2014/15 Internal Audit Plan. The Committee agreed to include a Performance Management Audit in place of the proposed Commercial Income Audit in the 2014/15 Audit Plan. The Deputy Principal (F&R) advised the Committee that he had received an internal request for the College s Health & Safety strategy to form part of the 2014/15 Internal Audit Plan. The Committee agreed to include an audit of the College s Health & Safety strategy in the 2014/15 Audit Plan. ICCA suggested that, following earlier discussions, Employer Engagement should also be included in the three-year Audit Plan, which the Committee agreed. ICCA advised the Committee that they would update the three-year Audit Plan accordingly. 2014/15 FINANCIAL STATEMENTS AUDIT AND REGULATORY REVIEW PLAN A/14/121 A/14/122 A/14/123 A/14/124 A/14/125 KPMG presented the 2014/15 External Audit Plan to the Committee and highlighted the following items: 1. The materiality level was set at 240, KPMG will report all irregularities (whether adjusted or not) over 12, to the Audit Committee. 3. Changes to the Regulatory Audit were currently being considered by an SFA working group but this should not impact on the College s 2013/14 Regulatory Audit. 4. KPMG s fees for 2013/14 as indicated in the plan represent an increase on the fees charged in 2012/13. The Committee were advised that the proposed fees included expenses which had previously been charged separately. The Committee reviewed the Significant Risks and understood that they would be considered by KPMG during the external audit. The Deputy Principal (F&R) advised the Committee that development mentioned in the Property Strategy section of the Audit Plan at this stage remains a vision of the College. The Committee understood that KPMG provide seminars for clients and asked that invitations to the seminars be forwarded to the Clerk for circulation to the Committee. The Deputy Principal (F&R) advised the Committee that he planned to bring a paper on FRS102 to the next Committee meeting. KPMG advised the Committee that they were currently working with clients to develop FRS102 plans and confirmed that they could provide FRS102 assistance and assurance to the College as required. ANNUAL CALENDAR OF BUSINESS A/14/126 The Committee reviewed the annual calendar of business and agreed the content. Minutes Audit & Risk Assurance Committee 25 th June of 8

7 A/14/127 A/14/128 The Committee asked the Clerk to prepare the Annual Audit & Risk Assurance Committee Report to Board with the assistance of the Deputy Principal (F&R) for approval at the next Committee meeting. The Committee understood that the Audit & Risk Assurance Committee Report to Board assumes more importance under the new governance and financial reporting requirements. The Deputy Principal (F&R) explained that the Annual Report of the Audit & Risk Assurance Committee would now become the key document used by the College s regulatory body, the Skills Funding Agency, to monitor the adequacy and effectiveness of the college s risk management, control and governance arrangements. The Committee understood that the College s annual internal audit report, prepared by the independent Internal Auditors, had previously been used to serve this purpose. ANNUAL CALENDAR OF MEETINGS A/14/129 The Committee reviewed the 2014/15 Calendar of meetings and agreed the proposed meeting dates. The Committee considered the start time of meetings and agreed that future meetings should commence at 5pm. ITEMS FOR THE NEXT AGENDA A/14/130 The Committee asked the Clerk to prepare the next Committee meeting agenda using the Annual Calendar of Business. DATE OF NEXT MEETING - 13 th November 2014 MINUTES APPROVED Signed Bob Pointing, Chair of Audit Date Subject to Amendments / No Amendments Minutes Audit & Risk Assurance Committee 25 th June of 8

8 ACTIONS LIST FROM FURNESS COLLEGE AUDIT & RISK ASSURANCE COMMITTEE 25 TH JUNE 2014 ACTION 1. Circulate the College s Equality & Diversity Policy to the Committee for their reference. 2. Ensure the Apprenticeship Update was on the next Board meeting Agenda and the Committee would wish to review apprenticeships over time. 3. Update the Internal Audit Progress Report to accurately reflect the agreed amendments to the Payroll Report. 4. Ensure that the one page Risk Register Summary was circulated to the Board with the Audit & Risk Assurance Committee Update. 5. Prepare the Annual Audit & Risk Assurance Committee Report to Board with the assistance of the Deputy Principal (F&R) for approval. Ref WHO BY MINUTE WHEN A/14/76 Clerk ASAP A/14/79 Clerk 10 th July 2014 A/14/83 Lindsey- Anne Straughton ASAP A/14/94 Clerk 10 th July 2014 A/14/127 Clerk/ Deputy Principal (F&R) 13 th November 2014 Minutes Audit & Risk Assurance Committee 25 th June of 8