Minutes of the Audit Committee
AC13.2 held on 18 November 2013
Present:
Peter Fenwick (Chair); Richard Hefford-Hobbs (RHH); Colin Russell (CR)
Huw Williams (HW); Sam Wolfe (SW)
In attendance: Fiona Campbell (FSC); Heather Chambers EHC); Heather Dodgson (HD)
(Grant Thornton), Chris Sherwin (ECS)
Clerk:
Ref:
AC13/2.1
Elisabeth Silver (EAS)
Action
Apologies
There were apologies for absence from Kevin Limn (TIAA) and Catherine
Rice
AC13/2.2
Declaration of Interests
There were no declarations of interest.
AC13/2.3
Request for Any Other Business
There were no requests for other business
AC13/2.4
Minutes of meeting AC13.1 held on 23 September 2013
A minor spelling error was corrected and with this amendment the
minutes were agreed and signed as a true and correct record.
AC13/2.5
Matters arising
It was noted that the College had not yet received information from Kevin
Limn regarding how many Sixth Form Colleges were audited by TIAA
following the merger with Parkhill. The College Accountant was asked to
follow up this action It was noted that further information had been
received regarding the queries raised about the FSA Audit plan.
AC13/2.6
Progress on Internal Audit Reports
There were two actions outstanding on the progress report, one of which
was already completed after a short postponement during the summer
and one which had already been given an extended deadline. One of the
governors raised the issue of whether the number of postponements over
the last few years was an issue. The Committee did not feel that this was
a recurrent problem and management advised that the recent
postponements were due to an inappropriate timescale being given
without agreement from the managers responsible for what were
considered low risk actions. It was agreed that for future postponements
it would be good practice if the reason for the delay was logged on the
progress sheet so it was easily identifiable and that no more than one
postponement is allowed for any action. The importance of management
ensuring that realistic timeframes, taking into account the nature of the
risk, are agreed by the manager responsible for the corrective action.
AC13/2.7
Risk Management Annual Report
FSC presented the report, which is a standard format and gives a
summary of all Risk Management processes carried out during the year.
The purpose is to give the Audit Committee and Board assurance that the
college has a sound system of risk management (compliant with Turnbull
recommendations) so that a statement to this effect can be signed off in
the financial statements. FSC advised that there have been no significant
changes during the last year. Governors reviewed the report and
checked the statements detailing how the College has addressed the
College’s risk management plan during the year.
Governors were advised that the Policy had been scrutinised against the
Risk Management good practice guidelines that Parkhill had produced.
The governors also looked at the section entitled “The role of the
Governing Body in Managing Risk” and identified areas where further
improvements could be made.
It was noted that the current Policy does not describe the risk appetite of
the College and it was agreed that inclusion of a clear statement (similar
to the one in the financial statements) would be valuable (as suggested in
2b of the guidance). It was decided that this should be agreed when the
policy comes for review at the summer Corporation meeting and an
opportunity given for discussion. It was noted that whilst the Corporation
generally is very cautious in their approach there have been occasions,
such as the decision to be involved with the UTC where it has been
necessary to consider more risky options. In addition it was noted that the
cautious approach may be linked to the current difficult financial climate
and that in the future when finances have improved the Corporation may
become more willing to take on risk e.g. through an income generation
plan. With regard to Risk Assessments the Committee agreed that
financial and strategic assessments were very good as were some
operational areas such as trips but the lack of a central storage system
means that there may be weaknesses (as identified in the Health & Safety
report). One of the governors mentioned that he had identified a number
of minor possible H& S issues during his Induction tour e.g. slippery
leaves on a path, leaking water cooler and the Committee were advised
that the Estates Manager will be meeting with him in the near future to
tour the Estate and ensure that the College is aware of any potential
issues. It was noted that Health & Safety whilst monitored by the Estates
Manager is the responsibility of all staff and that this point is covered in
the staff induction training, but that consideration should be given to wider
adoption of risk management as outlined in point 2e. One strategy under
consideration is for Risk Management to be included in the training
programme for Deputy Heads of Department and for them to have this as
a specific departmental responsibility.
AC13/2.8
Financial Statements and Regularity Audit
This item was presented by Heather Dodgson. She introduced herself as
the Audit Manager at Grant Thornton (the College’s external auditors),
who had overseen the recent College audits. HD took the Committee
through the Audit Findings paper, which is a new format for reporting to
the Committee on key issues identified during the financial statements
audit and the preparation of the College’s financial statements for the year
ended 31/7/13. She advised that the work was done in September and is
complete and the accounts will be signed off next month, with an
unqualified audit opinion on both the financial statements and the
regularity audit. Four key risks were identified during the planning stage:
i)
Improper revenue recognition – no issues identified
ii)
Management override of controls – no issues identified
iii)
Valuation (gross) of fixed assets – the high level of capital
activity means there is an increased risk of material
misstatement in the capitalisation of costs incurred. Significant
management judgements surround the capitalisation of the
additions & these have previously been agreed with Grant
Thornton - no issues were identified.
iv)
Going Concern – the impact of local changes including the
opening of the UTC next Autumn were considered but recent
increases in student numbers and financial health forecasts
indicate that the adoption of a going concern basis is
appropriate. The potential impact of loan covenants was also
considered – 2 deficits in any 3 year period leads to a breach
causing the loan to become repayable on demand.
Issues identified during the audit were as follows:
i)
Regularity Audit – no significant issues highlighted.
ii)
Cambridge Area Partnership – funds held by Long Road acting
as “banker” for the Cambridge Area Partnership. Funds have
again increased and the College were made aware that if this
continues then further disclosures may become necessary in
the accounts. The Committee were advised that it is planned
that this money will be moved to a separate bank account
following incorporation of CAP early next year.
iii)
FRS17 – pension liability has reduced from £1.75m to
£1.422m at 31 July 2013
It was noted that although the College made a small surplus prior to
adjustments that the FRS17 Pension liabilities gave an overall small
deficit. FSC confirmed to the Committee that she would be clarifying with
the Bank Manager that the figure that they would be looking at was the
small surplus prior to adjustments since the loan was taken out before
adoption of this accounting treatment. She noted that this had been
confirmed in 2010 by the previous bank manager by e-mail.
A Future Developments Appendix was also presented to the Committee.
This document includes a summary of the proposed changes to align with
International accounting, which are currently out for consultation with the
significant impact of the change in grant accounting being a key issue for
colleges.
AC13/2.9
Draft Letter of representation for the Financial Statements and
Regularity Audits
A letter of representation is required each year to confirm relevant
information to the financial statements auditors and bring to their attention
any significant changes. A draft of the letter was presented to the
Committee for review and recommendation for Board approval. FSC
indicated that there were no changes although there has been some
reordering of the bullet points since last year.
The Audit Committee recommends that the Board approve the letter
of representation for the financial statements and regularity audits.
AC13/2.10
Draft Statutory Accounts 2012/13
FSC presented the accounts for information. She reminded the Audit
Committee that the Finance Committee would be looking at them in detail,
but asked the Committee to review the report sections in particular &
comment on any other areas of concern. The following points were
raised:
Page 4 – the quoted success rate was checked and agreed
Page 5 – it was noted that the identified risks have been taken directly
from College documentation and include reduction in numbers but it was
noted that there is also a risk with increasing numbers because of lagged
funding and needing to employ extra teachers prior to any additional
funding. It was agreed that this was not applicable to 2012/13 but may be
for the present year.
The Committee advised that they were happy with the wording of the
reports section. This will be reported to the Finance Committee at their
next meeting when they consider the accounts.
Board
AC13/2.11
Financial Procedures for Exceptional Circumstances
The Committee were advised that the procedure had been reviewed at
the Chairs’ group and a number of changes made to improve the
proposed procedure. The implications of the changes were discussed in
detail and the following changes were proposed:
 That the level of contingency for capital spend will vary for each
year and will be formally approved by the Corporation as part
of the annual budget setting process so that it is considered
and set in line with the College’s financial circumstances
 Once the contingency is spent (whether in a single transaction or
multiple transactions) then the Chairs Committee will be required
to agree the appropriate course of action (normally by meeting
but communication by other methods is acceptable)
 That where authority is delegated by a Chair this should be to
an independent or parent governor
 That in the situation where a Chair is not contactable that a
deputy can be nominated by either the Clerk, Chair or Vice
Chair
It was agreed that these proposals should be taken to the next Finance
Committee prior to recommendation of the procedure to the Board for
approval.
AC13/2.12
Audit Assurance
The Committee were reminded that this is a Standing item that is taken at
every meeting to ensure that there is an opportunity for updating the list
when required. One of the governors asked if there should be an audit to
prevent fraud but after discussion it was agreed that controls to mitigate
the risk of fraud are audited as part of all financial systems audits and it
would be extremely difficult to audit separately. Governors discussed
whether Risk Management should be considered as a high priority audit
but it was agreed to leave as a medium risk. Governors confirmed that
there were no identified changes to the Assurance Assessment listing.
AC13/2.14
Any Other Business
There was no other business
AC13/2.15
Date of next meeting
10 March 2014 at 5.15pm
Signed ………………………………………………… Dated ……………………………