PUBLIC MINUTES. of the HCA Audit & Risk Committee meeting held at 1.30pm on Wednesday 11 June 2014 at Maple House, 149 Tottenham Court Rd, London

Transcription

1 PUBLIC MINUTES of the HCA Audit & Risk Committee meeting held at 1.30pm on Wednesday 11 June 2014 at Maple House, 149 Tottenham Court Rd, London Present: Ian Robertson Richard Hyde Inge Kettner Robert Napier Ann Limb Chairman Regulation Committee representative (observing) In attendance: Andrew Rose Chief Executive Richard Ennis Executive Director Finance and Corporate Services Doug Livingstone Head of Risk & Assurance Services Maria Craig Head of Internal Audit Jane Castor Head of Finance & Performance Robert Procter Head of Accounting Jason Essenhigh Head of Risk Items 6-8 David Lyall Head of IT Item 9 Marc Crompton Information Security Officer Item 9 Isabella Freeman Head of Legal Services Helen Booth Darren Stewart Nick Ward Sara Le-Surf National Audit Office National Audit Office Department for Communities and Local Government Secretariat Assistant - Board 1

2 Apologies 01/06/14 No apologies were received. Item 1 Minutes of the previous meeting 02/06/14 The minutes of the meeting of 17 April 2014 were agreed as a true record. Item 2 Matters Arising from Previous Meetings 03/06/14 20/09/13 The Chair asked that a programme of training for members is brought back to the September meeting following the recruitment of new HCA Board members. 04/06/14 07/11/13 Members NOTED the NAO Help to Buy Equity Loan VFM report in their agenda packs and agreed to discuss it at their meeting in September DL NAO Item 3 Draft Revised ARC TORs 05/06/14 Following the HCA Chairman s review of the Agency s committees, the Board approved the changes in principle in May and it is expected they will approve the details at their meeting in June, including revised Terms of Reference for Audit and Risk Committee which have been amended to reflect its function in terms of reviewing and advising on the overall risk outturn to HCA of all its programmes and activities. 06/06/14 Members AGREED the draft revised Audit and Risk Terms of Reference. Item 4 Internal Audit Update Report 07/06/14 The Head of Internal Audit informed members of the outcome of Internal Audit reviews finalised during the period since the last Audit and Risk Committee. There were no reports highlighted for Committee discussion. Members NOTED the 8 final reports which received a full or substantial level of assurance. 08/06/14 In terms of outstanding 2013/14 reports and ongoing assurance work, one report remains in the reporting cycle relating to Large Sites and Enterprise Zones and it is expected that this will be issued in final form very soon. MC 09/06/14 Following the Internal Audit Review on the HR function, HR is progressing its actions. Internal Audit will evaluate the effectiveness of the actions through their scheduled follow up review later in the year. 11/06/14 The Committee noted that the improvement in the proportion of follow up actions overdue; this had significantly reduced from 57% in April to 13% at 2nd June /06/14 The Head of Internal Audit also highlighted the completion of the overdue action which related to the risk of double counting of assets. This action was concerned with the provision of appropriate and suitable data from the 2

3 Agency s two main systems to enable outputs to be reviewed and adjusted to prevent double counting. This has now been done although further work is being progressed to ensure that this information is available to Operating Area staff on a timely basis (through overnight system updates) going forwards. Item 5 NAO Final Audit Progress Report on the 2013/14 Financial Statement Audit 13/06/14 The NAO introduced their Final Audit Progress Report on the 2013/14 Financial Statements and reported that, whilst the audit for 2013/14 was still ongoing and progressing well they had identified nine key matters that required resolution prior to the completion of the audit that was due to end on 20 th June Upon satisfactory completion, this would enable the Comptroller and Auditor General (C&AG) to certify the financial statements with an unqualified audit opinion in accordance with DCLG s timetable. 14/06/14 NAO s testing of accruals for Help to Buy identified one instance where a transaction with an exchange date of 2nd April had been erroneously included in the financial statement. A further 50 additional samples were then selected for testing and the finance team provided 37 at the time of the meeting which the NAO were currently working through. This leaves 13 contracts still to be received and the Director of Programmes will ensure these are received before the next meeting. It was confirmed to members that there is an obligation on providers to store copies of contracts. An update would be provided at the next ARC meeting. JC NAO 15/06/14 The NAO reported that in addition to the above they were still awaiting 15 home equity transactions for testing which they are expecting imminently and although it is not expected this will delay the audit, the NAO will provide a report back to the next ARC. 18/06/14 Members NOTED the report which would be formally reported to the ARC meeting on 19th June. NAO 19/06/13 The Committee NOTED the report. Item 7 Annual Review of Information Risk 2013/15 20/06/14 The Head of IT and the Information Security Officer presented the annual review of information risk for the period ending 31 March 2014, to support the written statement to the Accounting Officer by the Senior Information Risk Owner and the Chairman of the Audit & Risk Committee. He also provided the annual assessment of information risk within the Agency, for inclusion in the Governance Statement. 21/06/14 There had been good progress with successful achievement of the Public Service Network code of connection; continued ISO27001 certification with number of non-conformities reduced to zero; 100% staff compliance with information risk training for the 2 nd year running; continued improvements in Disaster Recovery and successful business continuity test in Gateshead. Migration of e-financials from a legacy unix platform to Windows 2008 had been completed; and there was progress on the management of the security implications of various new IT initiatives; and of a set of aging systems that IT 3

4 are currently unable to replace and which may pose a rising security risk. 22/06/14 Overall the HCA maintained a strong internal focus on continuous review and improvement of information security, coupled with a strong regime of external and independent certification and assessment. The continuous set of new challenges to HCA s security from changes in business need, working practices, system requirements and external threats was being proactively managed. 23/06/14 IT confirmed that they had no issues relating to forthcoming office moves as information is securely held on servers located at the Gateshead and Warrington sites and members noted that IT were seeking the right security solution for the roll out for smart phone and tablet devices. There were no security concerns relating to laptops and blackberries as these are secure. In terms of Disaster Recovery plans there was a provision made by both DCLG and HCA to provide desks in the case of Maple House or Eland House being evacuated. With both the Department and HCA moving to Marsham Street this solution is no longer valid and a review will be undertaken. DL Item 6 Development Assets (Valuation Variances Review 2013) 24/06/14 The Head of Risk and Procurement (as valuation Head of Profession) provided members with a report on the HCA s annual asset valuation cold review exercise, analysing assumption accuracy. The sample covered 16 assets. This year the scope was widened to include nil and low value development assets recorded at the sampling date. 25/06/14 The valuation Head of Profession explained that following a number of systematic and procedural changes introduced this year to the Annual Land Validation and Valuation Exercise there were improvements to timeliness, quality and accuracy of assumptions and reporting has improved. 26/06/14 Of the 16 assets selected 70% of the sample was challenged as part of the review. 34/06/14 The Valuation Head of Profession was of the opinion that ALVVE timeliness, quality and accuracy of assumptions and reporting had improved this year in line with the higher standards now demanded; however further incremental improvements would be required in 2015 and this will be taken forward with the new property panel and peer review and challenge process. 35/06/14 As a result of the 2014 review challenge process, three of the sixteen asset values sampled warranted correction and one further asset was migrated from negative to nil value. Where any differences of professional opinion remained, the assumptions and values adopted fell within an acceptable level of valuation tolerance. 36/06/14 Members NOTED the report. Item 9 & 10 Annual Report and Financial Statements and HCA Governance Statement 37/06/14 The Executive Director Finance and Corporate Services introduced the item and the Head of Accounting gave a presentation on the Annual Report and 4

5 Accounts for 2013/14. 38/06/14 The Agency s net expenditure before tax had reduced by 24.5% to 1.10 billion. Group net assets had doubled to 2.93 billion due to significant investment in financial assets. Total value of development assets increased to 833m. 39/06/14 Headline figures showed a 1.2m increase in staff costs, including 1.36m increase in permanent staff salaries, but there were underlying falls in admin costs. HCA had achieved savings in administration costs from 18m in 2012/13 to 12,839k, the underlying cost reductions largely due to reductions in legal fees. 40/06/14 The HCA Pension Scheme was well funded and two of the three final salary pension schemes show a surplus in the accounts, with the net surplus across all three schemes at March 2014 being 79.3m up from 1.5m at March /06/14 The current expectation was that the NAO would issue an unqualified audit opinion. The accounts showed successful delivery of programme and efficiency savings, while impairment charges had significantly reduced. The Accounts were complex and high value areas in the balance sheet were not measured at cost but at fair value. The Agency was on course to meet its timeline for preparing consolidation returns to DCLG, and DCLG hoped to lay the group accounts by the end of June /06/14 The Head of Accounting took members through the significant issues identified in the covering report to the draft financial statements, changes to the valuation of housing equity, valuation of development assets, financial impairments, and pensions. 43/06/14 Members then went through the draft financial statements section by section, and suggested some additional notes, clarifications, additions and changes to wording. JC/RP 44/06/14 The HCA Chairman and NAO confirmed that material supporting the accounts had been of high quality and they thanked the Head of Finance and Performance and her team for their contribution. 45/06/14 Members were satisfied that they had thoroughly considered and challenged the draft accounts, and were well placed to consider the final draft accounts the following week at the special ARC meeting before the Board on 19 June /06/14 The Committee recommended that the Accounting Officer should sign off the Governance Statement as amended. 47/06/14 Members NOTED the draft Annual Report and Accounts for the year ended 31 March /06/14 In addition to the above the HCA Chairman requested that Investment Committee receive an update on Hospital site accruals at their September meeting. JC Item 8 HCA Risk Update 5

6 49/06/14 The Head of Risk and Procurement provided members with a risk update summary, the Affordable Homes Programme Heat Map and Risk Register. 50/06/14 Members noted that four new risks had been added to the Affordable Homes Programme Risk Register relating to partner capability and capacity; value for money; scheduling and timescales; and other risks relating to plans to manage specialist programme closures by March Six risks had met risk appetite and of the six remaining, four registered amber on the heat map. There were no significant concerns to report. 51/06/14 Members NOTED the report. Item 10 Annual Report to Board 52/06/14 The Chair of the Committee introduced the report outlining the outcomes of the work performed by the Audit and Risk Committee (ARC) during 2013/14 and its overall opinion for the year. The report follows a prescribed standard as set out in the Terms of Reference and good practice guidance issued in the Audit Committee Handbook by HM Treasury. 53/06/14 The report provides detail to Board of the work undertaken by Audit and Risk Committee during the year and concludes that the assurances provided are reliable and sufficient, and that the overall control environment has operated in a satisfactory manner during 2013/14. 54/06/14 Members NOTED the report. Item 11 Fraud and Error Report 55/06/14 The Head of Risk and Assurance Services introduced the report and noted that reducing fraud and error in the public sector is a key priority for Government. 56/06/14 One example where error was now being identified and reported was within the Affordable Homes Programme where the team had introduced a regular review of grant reclaims within the Investment Management Systems (IMS) to see whether these related to systematic errors and whether lessons could be learned to reduce errors going forward. 58/06/14 During the year the HCA finance team arranged for Moore Stephens, an independent organisation, to analyse purchase ledger payments to identify unclaimed duplicate payments. The scope of the analysis covered payments made in the previous 5 years, a total of 16.4bn. 60/06/14 The Head of Risk and Assurance Services confirmed that the Agency had not identified any attempted or successful frauds during the year; the improved reporting of error within the Affordable Homes Programme and the very small level of error identified. 61/06/14 Members NOTED the report. 6

7 Item 12 Litigation Schedule 62/06/14 The Head of Legal Services updated members on recent material developments in litigation being carried out by and against the HCA since last reported to ARC in November She also advised members that the list of contingent liabilities had been removed from the schedules and will be maintained and reported by finance to ARC on an annual basis. The Head of Legal Services also proposed for the next edition to replace the columns within appendix 2a and b regarding the likelihood of favourable settlement with a more appropriate risk analysis methodology. 63/06/14 Members NOTED the report Item 13 Any Other Business 64/06/14 There was no other business. Item 14 Date of Next Meeting 65/06/14 The next meeting of the Audit and Risk Committee would take place at 9am on 19 June Chairman s signature: Date: 7