LEEDS CITY COLLEGE MINUTES OF THE MEETING OF THE AUDIT COMMITTEE HELD ON FRIDAY 12 JUNE 2015

Transcription

1 MINUTES OF THE MEETING OF THE AUDIT COMMITTEE HELD ON FRIDAY 12 JUNE 2015 Present Robert Clunas Julie Drake Cherry Fricker (Chair) Christine Smith Governor Co-optee Governor Governor The quorum for the meeting was three Members (with a majority of governors) In Attendance Brian Archer Lydia Devenny Melanie Halstead Madeline Hawley Phil Keown Clare Partridge Jane Pither Peter Roberts Jonathan Sharp Tracy Waite Tony Waring Salma Younis Executive Director Commercial Development Director of Finance Clerk to the Board Grant Thornton (internal auditors) Grant Thornton (internal auditors) KPMG (external auditors) Deputy Principal Corporate Services Principal and Chief Executive KPMG (Pensions Director) Head of Financial Accounting Director of Corporate Resources KPMG (external auditors) The meeting was held at Leeds College of Music and started at 9.30am PRESENTATION At the start of the meeting the Committee received a presentation/briefing from KPMG (Pensions Director) on pension reforms and the implications for FE colleges. The following key issues were discussed: Implementation of Government changes alongside funding reductions Significant increase in NI costs Increase in employer contribution rates (TPS) wef October 2015 It was noted that Leeds City College was ahead of other parts of the sector in that it had already set up an optional low cost alternative pension scheme (People s Pension). A discussion followed in relation to the additional opportunities for Leeds City College going forward, including the possibility of allowing staff to transfer from TPS/LGPS into People s Pension. MEETING ADMINISTRATION 1. Apologies for Absence There were no apologies for absence. 2. Declaration of Interests in any Agenda Items Members of the Committee were reminded of the requirement to declare their interest in any agenda items; none were declared. MINUTES OF THE AUDIT COMMITTEE 12 JUNE

2 C Partridge (KPMG) reminded the Committee that she was currently serving as a governor of Barnsley College. This declaration was made in the context of Colin Booth s appointment as Chief Executive of Leeds City College (currently Principal and Chief Executive of Barnsley College). It was noted that Colin would take up post on 28 September but in the interim period Leeds City College was reimbursing Barnsley College for the time currently being spent on Leeds City College business. Having considered this issue, the Committee confirmed its agreement to C Partridge remaining as lead for the College s external audit services during this period. 3. Minutes of the meeting of the Audit Committee held on 6 March 2015 RESOLVED (A 09/15): That the minutes of the meeting of the Audit Committee held on 6 March 2015 (parts I and II) be approved for signature by the Chair. 4. Matters Arising Members considered the rolling list of actions/matters arising from previous meetings; all identified actions had been completed or appeared separately on the agenda for this meeting. The Committee also received and noted the following updates: Internal Audit Payroll The Deputy Principal Corporate Services confirmed that the issue identified by Grant Thornton in relation to severance payment documentation had been investigated and confirmed as being an issue of timing in relation to filing of documentation within the HR Department. This had now been addressed. Apprenticeships The Chair provided feedback from a recent meeting of the Apprenticeships Scrutiny/Task & Finish Group established by the Board to oversee implementation of the College s recovery plan for apprenticeships. It was reported that good progress was being made overall. An Ofsted Support and Challenge Adviser had visited the College earlier that week and had met with a governor member of the Scrutiny/Task & Finish Group. RISK MANAGEMENT 5a. Monitoring of Strategic Risk Register The Committee received and considered the College s updated strategic risk register and key risk indicator dashboard. In particular members discussed the five red rated (significant) risks and the mitigating actions in place and/or planned. Three of the significant risks were projected to remain so until at least July (relating to the change agenda impacting on staff morale; failure to achieve income targets; clawback of SFA funding). In relation to the achievement of income targets, the Director of Finance reported that the surplus would be c 500k lower than planned for Leeds City College, further details of which would be presented to the Board meeting on 15 June. In discussing the risk surrounding the change agenda and staff morale it was suggested that the many benefits of working at Leeds City College could potentially offset the red risk rating. It was also acknowledged that some contributing factors were outside of the College s control, such as changes in Government policy directly impacting on staff. It was agreed that this particular risk be reviewed further for 2015/16. Governors queried why the risk relating to funding clawback had increased from an amber rating to red; the Deputy Principal Corporate Services advised that this was as a result of the College s business case to the SFA being unsuccessful, resulting in some clawback of funds (adult skills budget). In response to a further query, the Deputy Principal confirmed that the clawback would be accounted for in the current financial year. It was suggested that this risk be shown separately on the MINUTES OF THE AUDIT COMMITTEE 12 JUNE

3 2015/16 risk register in terms of performance and cash risks. Committee members also queried why the risk relating to an effective QA system with external partners was still rated as amber rather than green. The Executive Director Commercial Development advised that although the mitigating actions had been completed, the system improvements were yet to be fully embedded, hence the amber risk rating. The Principal advised that the English and Maths staffing risk remained an issue for the sector. In response to a query from members regarding plans for minimising this risk for 2015/16, the Deputy Principal Corporate Services reported that the College s new blocking/timetable system would assist, together with a more holistic approach to the enrolment process. A discussion followed in relation to capacity and student intake; the Principal advised that final numbers would not be known until September but the College did now have a higher proportion of English and Maths teachers. RESOLVED (A 10/15): (a) To note and endorse the strategic risks currently facing the College and the mitigating actions in place/planned by College management. (b) That the risk relating to the change agenda and staff morale be reviewed further for 2015/16 in the light of discussions at this meeting. (c) That the risk relating to clawback of funding be shown separately on the 2015/16 risk register in terms of performance and cash risks. (T Waring left the meeting at this point) 5b. Emerging risks impacting on the internal audit plan None identified. 6. Monitoring of Audit Recommendations The Deputy Principal Corporate Services presented a report on the progress made by management in implementing agreed audit recommendations. Four internal audit recommendations were reported as being behind schedule for completion. The Committee asked that an update on the HE related recommendation be provided at the September meeting. In response to a query from governors the Deputy Principal Corporate Services advised that the recommendation relating to internal communications would be addressed as part of the staff development day in July and would be reviewed further for 2015/16. RESOLVED (A 11/15): To note the progress made by management in implementing agreed audit recommendations and to agree the proposed revised deadlines for those currently behind schedule, as detailed within the circulated report. INTERNAL AUDIT 7. Internal Audit Progress Report 2014/15 Grant Thornton presented a report summarising the progress made against the 2014/15 internal audit plan. It was proposed to reduce the number of audit days allocated to the curriculum and business planning review from 20 to 14 days. At its previous meeting the Committee had requested that any unused days be utilised to review the commercial aspects of ESF contracts. The timing of such work was considered in the context of the current delay with ESF contracts; Committee members were of the view that a review of the College s previous contracts in terms of commerciality would still be useful in order to learn any lessons for future contracts. It was agreed that the specific timing and detailed brief for this work be agreed between Grant Thornton and College management. MINUTES OF THE AUDIT COMMITTEE 12 JUNE

4 RESOLVED (A 12/15): To note the progress made against the 2014/15 internal audit plan and to agree changes to the plan as outlined above. 8. Internal Audit Visit Reports 2014/15 a) Marketing Grant Thornton presented the report produced following their review of the College s marketing processes. The report contained an overall amber rating, with seven individual recommendations. Of the seven recommendations, six were of medium priority and one of low priority. In summary, the recommendations related to the use of market intelligence, product development, customer relationship management and the customer journey. The Committee expressed a level of disappointment at the outcome of this review and sought from management an explanation of the changes implemented since the conclusion of the audit work in January. These were outlined by the Executive Director Commercial Development and included a restructure and regular attendance of marketing staff at Curriculum & Quality Committee meetings. He also outlined the infrastructure now in place in relation to the gathering and use of market intelligence. Arising from discussion it was acknowledged that further work was required on the College s marketing strategy, linked to the longer term strategic plan. The Principal confirmed that this would be presented to the Board by December It was also suggested that the College s IT Strategy Group be tasked with considering the marketing systems issues identified in the audit report. b) Management Information The Committee considered an internal audit report relating to the College s management information processes. The report contained an overall green rating and the auditors had made a total of four low priority recommendations plus one further improvement point. These had been accepted by management and would be fully implemented by August Members expressed thanks and congratulations to the staff involved in such a positive audit. c) Partnerships The internal auditors presented the outcome of their review of the College s arrangements for managing its relationships with partners/subcontractors. The audit report contained an overall rating of green with three medium and six low priority recommendations. Grant Thornton reported that a lot of improvements had been evidenced during the audit compared to previous years. One of the medium priority recommendations identified related to learner validation and existence. In particular, the auditors recommended that where students are enrolled into the College by third parties, the College should request copies of proof of identity documentation to reduce the risk of ineligible or ghost learners being enrolled. Committee members were dissatisfied with the management response provided within the audit report and therefore requested that this be further reviewed and presented to the next meeting of the Apprenticeships Scrutiny/Task & Finish Group (July) for discussion. Members queried with Grant Thornton why the report included an overall rating of green when the management response to a medium priority recommendation was clearly inadequate. The auditors advised that the overall rating reflected the other mitigation in place. RESOLVED (A 13/15): (a) To receive and note the internal audit reports produced by Grant Thornton in relation to Marketing, Management Information and Partnerships. (b) That a revised and more robust management response to the audit recommendation relating to learner validation and existence be presented to the Apprenticeships Scrutiny/Task & Finish Group in July. MINUTES OF THE AUDIT COMMITTEE 12 JUNE

5 9. Draft Internal Audit Plan 2015/16 Grant Thornton presented the draft internal audit plan for 2015/16 and clarified that, unless stated otherwise, each planned review would include Leeds College of Music. In response to a query from members, it was confirmed that the proposed review of equality and diversity would cover both staff and student aspects. The Director of Finance advised that White Rose Resourcing Ltd (a College subsidiary company) would go live on 1 st August 2015 and would therefore be included in the planned review of flexible labour arrangements. The Committee went on to discuss the overall number of audit days for 2015/16 (currently planned at 90 days) and whether fewer but more detailed reviews would add more value than a large number of separate reviews. The Finance Director advised that a number of areas suggested for review in 2015/16 had not been reviewed in recent years. In response to a query from the Committee, Grant Thornton undertook to review the proposed daily rate and overall fee for 2015/16. RESOLVED (A 14/15): That a final version of the internal audit plan for 2015/16 be presented to the next meeting for approval/recommendation to the Board in September. EXTERNAL AUDIT 10. Draft External Audit Plan and Strategy for financial year ending 31 July 2015 KPMG presented for approval their draft external audit plan and strategy, describing how they would deliver the audit for Leeds City College and Leeds College of Music for the year ending 31 July The Committee was in agreement with the level of materiality and reporting of audit differences as proposed by KPMG. Members went on to consider the risks identified as part of the audit planning process, focusing in particular on the significant risks and other areas of focus for the audit work. Members queried whether these differed much from the previous year; KPMG advised that the risks relating to revenue recognition and going concern had a slightly increased risk status, reflecting sector wide issues. Following a discussion around audit fees, it was acknowledged that the proposed fee for 2015/16 was proportionate to the increased level of work required to be carried out by the external auditors due to the changing external environment. The Committee asked management to consider ways in which to reduce audit costs in future years, whilst retaining an appropriate level of assurance. RESOLVED (A 15/15): To approve the external audit plan and strategy and the proposed fee for the year ending 31 July Audit Committee Update Impact of FRS 102 KPMG provided a detailed briefing on FRS 102, the content of which included: Background to FRS 102 Timeline for implementation Planned approach to conversion FRS 102 presentation of financial statements Expected impact on colleges The Committee was pleased to note that the College had a detailed project/conversion plan in place. It was also noted that FRS 102 would result in a number of revised accounting policies for the College; these would be presented to the Audit Committee for approval. (C Partridge left the meeting at this point) MINUTES OF THE AUDIT COMMITTEE 12 JUNE

6 GOVERNANCE 12. Annual Review of Committee Effectiveness The Committee discussed its effectiveness during 2014/15 with a view to identifying any areas for improvement in the following year. The following particular points were raised: Reporting Members generally felt that there was a good level of reporting. However, it would be helpful going forward if the presentation of internal audit visit reports were more evenly spread throughout the year. The Committee also asked that where for any reason there had been a significant period of time between the visit report being finalised and it being presented to the Committee, then an update be provided for the Committee by way of an addendum to reflect any updates/changes implemented since the date of the original report. Committee Membership It was acknowledged that there was a good skills mix of Audit Committee members but that it would be worth exploring the possibility of recruiting a second co-optee in 2015/16 to further strengthen the Committee. Terms of Reference As part of the circulated report members received and considered a summary of the business conducted by the Committee throughout 2014/15 mapped against its agreed terms of reference. This showed that the Committee had addressed each of its responsibilities fully throughout the year. It was noted that any proposed changes to the Committee s terms of reference would be presented in September along with the proposed annual reporting schedule for 2015/16. (Both sets of auditors withdrew for the following item of business) 13. Review of Performance of Internal and External Audit Service Providers and recommendation on reappointment for 2015/16 The Committee carried out its annual performance review of the College s internal and external auditors against the performance indicators previously agreed. Following discussion it was agreed to recommend to the Board that Grant Thornton (internal auditors) be reappointed for the period 1 August 2015 to 31 July 2016, that being the third and final year of their current contract. With regard to external audit, it was agreed to recommend that KPMG be reappointed for the financial years ending 31 July 2015 and 31 July 2016, providing for a level of continuity following the introduction of FRS 102. It was also agreed that the Committee would review its options for 2016/17 onwards early in the next academic/financial year. RESOLVED (A 16/15): (a) That the Board be recommended to reappoint Grant Thornton as the College s internal auditors for the period 1 August 2015 to 31 July (b) That the Board be recommended to reappoint KPMG as the College s external auditors for the financial years ending 31 July 2015 and 31 July (c) That the Committee review its options for 2016/17 onwards early in the next academic/financial year. The meeting closed at 12.30pm Signed:.. (Chair) Date: MINUTES OF THE AUDIT COMMITTEE 12 JUNE