THE SIXTH FORM COLLEGE FARNBOROUGH
MINUTES OF THE AUDIT COMMITTEE MEETING
WEDNESDAY 18 NOVEMBER 2009
The meeting opened at 6.06 pm.
A 09/14 Private meeting with the internal and external auditors
The Committee held a private meeting with the internal auditor (Tenon Ltd) and the external auditor, (RSM Bentley Jennison).
A 09/15 Apologies for absence
John Guy OBE
Members present
Phyllis Chan (Chair), David Dallison (from agenda item A 09/19), Harminder Dhillon, Derek Stroud
Clerk
Richard Compton
Also present
Simon Jarvis, Gordon Dodds, Lorna Raynes (Tenon Ltd), Alastair Campbell (RSM Bentley Jennison)
A 09/16 Minutes of 21 May 2009 meeting.
The minutes were approved and signed by the Chair.
A 09/17 Matters arising
(a) Approvals by the Corporation, 6 July 2009
(i) Component accounting policy A 09/08
(ii) Appointment of internal and external auditors (Tenon Ltd and RSM Bentley Jennison) for 2009/10 A 09/10
A 09/18 Chair’s Business
None.
A 09/19 Annual Internal Audit Report for 2008/09
Laura Raynes introduced the final draft report for 2008/09 from Tenon Ltd. which incorporated a performance assessment for the internal auditor.
The actual number of audit days (17) was as planned.
Overall assessments of six areas reviewed were ‘Good’, that of financial planning, budget setting and monitoring, ‘Outstanding.’ No recommendations to College management had been made.
Management’s responses (para. 3) indicated that the College satisfactorily implemented the recommendations made in previous years.
The overall assurance (section 5) was that the internal auditor could provide to the Governors and the Principal reasonable assurance that there were no major weaknesses in the College’s framework of governance, risk management and control.
The Audit Opinion (section 6) was that the College had an adequate and effective framework of governance, risk management, and control processes to manage its achievement of the College’s objectives.
The working relationships between the internal audit and College Finance teams had again been very constructive and productive.
The Committee discussed and then endorsed the conclusions of the report.
DECISION
The Committee recommended Corporation approval of the 2008/09 Internal Audit Report.
A 09/20 Annual Review of the Internal Audit Service, 2008/09
In considering the assessment given for items 1b and 1c of the Annual Review, the Committee discussed in detail how the proceedings of the Audit Committee could be improved in order to better demonstrate that the priorities shown in the Strategic Risk Register are reflected in the Strategic Internal Audit Plan (‘SIAP’). At present, while most members of the Audit Committee receive the Strategic Risk Register of the College as part of the papers of the Policy and Resources Committee and therefore, implicitly, would have ensured that the priorities in the Risk Register are reflected in the SIAP, this thought process is not sufficiently transparent. Additionally, David Dallison, the external observer of the Audit Committee, does not receive the Risk Register as he is not a Member of the Corporation. Therefore, the Committee concluded that, from 2010 onwards, the following steps will be followed:
• The latest Strategic Risk Register produced by College management should be formally presented at its November meeting; and
• The Committee will formally consider the audit work proposed for the priority risks in the SIAP and that its consideration will be formally documented as part of the proceedings.
For 2009, the Chair would liaise with Members of the Audit Committee, the College management and the Internal Auditor in ensuring that the priorities in the latest Strategic Risk Register (issued in June 2009) are reflected in the Strategic Internal Audit Plan.
The Committee noted that no indication had been provided that External Audit reports and recommendations had been reviewed (2f) although it had been agreed during discussion of the 2007/08 review (minute A 08/19) that this would be included in subsequent reports. Tenon Ltd. confirmed that they would have referred to the findings of External Audit as part of their audit and therefore this was an oversight on documentation only. The Audit Committee requested that in future, the consideration of External Audit reports and recommendations should be explicitly stated in the Internal Audit reports.
After further discussion of the internal audit service provided by Tenon Ltd., the Committee assessed overall performance as ‘Good.’
DECISIONS
(a) 2008/09 Annual Review
The Committee approved the 2008/09 Annual Review of the Internal Audit Service and agreed that the Chair should sign it on its behalf.
(b) Treatment of risk
The Committee agreed that:
(i) for 2009, the Chair would include the issue in the revised Audit Committee report to the Corporation; and that
(ii) from 2010 onwards, the Committee would consider the latest Strategic Risk Register at its November meeting.
A 09/21 Review of the Internal Audit Strategy and Action Plan, 2009/10 (tabled)
The Committee considered the tabled initial draft prepared by Tenon.
It discussed in particular section 2.3, the review of the College’s systems. It concluded that the rationale used in the selection of systems for audit testing could be more clearly demonstrated if each system is allocated an individual risk as high, medium, or low.
DECISION
The Committee commissioned Tenon to produce a revised version incorporating this conclusion.
A 09/22 Internal Audit visit in 2009/10
Laura Raynes commented on the draft report on the September 2009 audit visit. This had covered risk management, capital project management, health and safety, and IT systems and security.
Both risk management and capital; project management systems had received gradings of ‘Good’. There had been no recommendations. Health and safety systems had also received a grading of ‘Good’. The three Grade 3 recommendations had been accepted by College management.
IT systems and security had received a grading of ‘Satisfactory’. There had been three Grade 2 and one Grade 3 recommendations, which had been concerned essentially with procedures on IT systems.
The Chair and David Dallison commented in particular on the Grade 2 recommendation that the College produce and implement a policy on the download, security and use of confidential information. It would be necessary to develop monitoring mechanisms that were more consistent and comprehensive while not hindering staff's legitimate access to data. It was agreed that, as proposed in the management response, the current College policy and procedures should be strengthened and systematized. In particular, the College will ascertain whether its IT systems provide records of the persons who remove data from the College’s database in order to provide a basis of regular scrutiny and monitor.
DECISION
The Committee approved the September 2009 Internal Audit report under delegated authority.
A 09/23 External (Financial Statements) Auditor’s report on the 2008/09 College accounts
Alastair Campbell (RSM Bentley Jennison) briefed the Committee on the main features of the report.
The external auditor expected to issue an unqualified audit opinion with both an independent audit opinion and a separate opinion under the provisions for Regularity (section 1).
Alastair Campbell summarized the consolidated Income and expenditure account and balance sheet. The College continued overall to maintain a strong balance sheet and cashflow position.
The section on retirement benefits (pages 7 and 8) indicated an increased pension liability from £920k to £1700k. Pension contribution rates were likely to continue to rise to make good accumulated deficits, which would increase the College’s cash outflow.
The letter of representation was at Appendix A.
He expressed his thanks to the Gordon Dodds and the College finance team for their assistance in completing this audit.
In response to the Chair, Alastair Campbell commented on Financial Management and Control deadlines and Sub regional group in Section V.
DECISION
The Committee: recommended Corporation approval of the External Auditor’s report on the 2008/09 Accounts subject to any further minor textual amendments.
A 09/24 Audit Committee’s annual report to the Corporation
The Committee considered its draft report In the light of its discussions earlier in the meeting, particularly on risk management, a subject to which Governors should be specifically alerted. This would add to the material already produced on audit requirements for the year, the reports of the Internal Audit Service including the annual report for 2008/09, External Audit matters, overall College assurances, and the appointment of auditors for 2009/10.
DECISION
The Committee agreed that its report should be augmented to cover, in particular, the risk management issue. The Chair would prepare a redraft for circulation to members for approval before submission to the Corporation for its 7 December meeting (agenda item A 09/24).
A 09/25 Finance and Management Report for October 2009
Gordon Dodds summarized the major elements in the report and confirmed that there had been no major changes since its September predecessor. No audit issues had arisen. The Policy and Resources Committee would consider the report at its 23 November meeting.
A 09/26 Any other business
None.
The Chair closed the meeting at 7.47 p.m.