CORPORATION OF WYGGESTON AND QUEEN ELIZABETH I COLLEGE, LEICESTER. Notes of an Inquorate meeting of the Audit Committee held at the College

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1 CORPORATION OF WYGGESTON AND QUEEN ELIZABETH I COLLEGE, LEICESTER Notes of an Inquorate meeting of the held at the College Commencing at hours Mr Julian Bird, Mr Rick Moore Present: Mr Peter Butcher (Clerk to the Corporation) Mrs Carolyn Davies (Finance Director) Apologies for absence Dr Saqib Anwar, Juliette Grant & Philip Parkinson As the meeting was inquorate the Clerk explained that (in accordance with Standing Order 6) informal discussions would be appropriate and that the conclusions would form the basis of recommendations to the Corporation to make the decisions on the Committee s behalf. 1. Election of Chair for 2012/13 The Clerk confirmed that this matter would be held over to the next meeting and it was agreed that Rick Moore should lead the informal discussions tonight. 2. Co-Option of Members Julian Bird was currently co-opted and was willing to continue. The Committee currently had a vacancy due to Lindsay Taylor becoming the Corporation Chair. To help with this, Members were informed that Dolatrai Mistry could be appointed as a co-opted member. Mr Mistry has been accepted for appointment as an external governor when the next vacancy occurred and as he had experience of finance matters through another governorship the Corporation had asked that he be considered for co-option until he could be confirmed as a governor. It was AGREED that the Corporation be asked to confirm the appointment of Julian Bird and Dolatrai Mistry as Co-opted members of the to 31 October Equality Duty Noted. 4. Declarations of interest with respect to any item on this agenda None. 5. Minutes The Clerk advised that the Minutes of the meeting held on 14 June 2012 would be re-submitted to the next meeting.

2 6. Matters outstanding The schedule showing the matters that were outstanding from previous meetings was reviewed. 7. Progress on internal audit recommendations The Committee reviewed a progress report on how the College was implementing the recommendations from All matters had been completed with the exception of item April 12/C5. 8. Annual Review of the Committee s Performance 2011/12 It was reported that each year committees reported on their performance to the Corporation through the Strategic Planning Committee. Attendance statistics for 2011/12 were submitted, which showed that the had achieved an 83% attendance overall and had met all the performance indicator benchmarks for committees. The Clerk advised that the outcomes would be reported to the Strategic Planning Committee. 9. Self-Assessment Results 2011/12 The Clerk outlined the results from the Committee s self-assessment for 2011/12 and advised that there were no matters requiring attention. Members noted the potential future developments concerning Governance and concluded that as the role of the was defined through the Learning & Skills Council s Audit Code of Practice the impact was likely to be marginal. The Clerk advised that the Strategic Planning Committee would be informed accordingly. 10. Annual Review of the Committee s Terms of Reference There were a number of changes consequential on the removal of the requirement to have internal audit. The Terms of Reference were largely determined by the Learning & Skills Council s Audit Code of Practice which had yet to be amended to take account of the removal of the internal audit requirement. The members agreed the changes were necessary. The Clerk advised that the Strategic Planning Committee would be asked to recommend the changes to the Corporation. 11. Proposals for Assurance on Internal Controls Following Removal of the Statutory Requirement to have an Internal Audit Service and to complete the Financial Management & Control Exercise It had been confirmed that with effect from 1 August 2012 the EFA had removed a number of statutory obligations for Sixth Form Colleges ( SFCs ): the requirement to appoint a separate internal auditor; the requirement to submit an annual internal audit report to the EFA; a prohibition on one firm providing external audit, internal audit and other assurance services; and the requirement for SFCs to submit an annual FMCE return. No changes were proposed in respect of the other two core aspects of the audit arrangements currently applicable to SFCs: being financial statements audit and regularity audit.

3 As a result of this, at its meeting on 4 July, the Corporation endorsed the s proposals about securing assurance on internal controls. The Corporation agreed that the current Internal Audit Service arrangements should be dispensed with and that days be purchased on an as needed basis. The possibility of peer reviews in partnership with other colleges was also encouraged. a) Internal Audit To inform an SFC s decision on whether or not to retain an internal audit service, the EFA anticipated that the audit committee would consider the SFC s overall assurance needs for 2012/13 and advise the Corporation accordingly. The EFA also anticipated that audit committees would review these assurance needs annually. The Finance Director submitted a summary of the areas of assurance covered by the College s internal audit service in recent years. In a number of key control areas where the College did not have expertise in house, specialist advice was already taken (for example catering, procurement). The Management Team, which had operational responsibility for ensuring internal controls were operating effectively, had summarised how assurance was obtained and identified a number of areas for 2012/13 where external review would be desirable. Members noted that the was also free to consider whether they would like further external assurance in other areas. It was envisaged that this Plan will be reviewed by management on a regular basis and presented to the annually. The Management Team recommended that in 2012/13 additional external assurance should be sought in relation to: Learner number systems, including student enrolment and records Security of IT; and The need for additional assurance work in the area of procurement and disaster recovery/business continuity (over and above that already planned) is reviewed in March 2013 Members considered the schedule submitted was very useful and agreed that the Corporation should be asked to approve the proposals for 2012/13. b) Financial Management & Control Arrangements (FMCE) The Finance Director reported that the FMCE return had historically required all providers to selfassess, evaluate and grade their financial management and control arrangements. In completing this self-assessment, colleges had recognised that these arrangements were there to: support the delivery of high quality learning provision; contribute to effective self-assessment, quality improvement and corporate governance; give assurance to stakeholders (including the EFA); and demonstrate value for money. Although the requirement for the FMCE return to be submitted annually had been removed, college Corporations were still expected to continue to hold management to account for ensuring the above aims were achieved. The funding bodies had published indicative examples of control arrangements to assist Corporations in identifying the correct self-assessed grade for their financial management and control arrangements. The examples outlined the components the funding bodies would expect to

4 see under the four grades used for self-assessment purposes. The lists were not intended to be exhaustive or prescriptive. A balance needed to be struck between giving the sufficient information to hold management to account whilst reducing the duplication of questionnaires completed for their review. A proposal for review of 2011/12 for the Committee s consideration was: Use the examples of control arrangements referred to above as a yes/no checklist, thus reducing the amount of paperwork whilst still identifying key issues; Continue to review carefully the two other questionnaires that still need to come before the (and are on the agenda for this meeting) for regularity and financial statement audit purposes, which duplicated much of the detail in the FMCE. No changes were proposed in respect of the other two core aspects of the audit arrangements currently applicable to SFCs: the financial statements audit and regularity audit. Members agreed that the Corporation should be asked to approve these arrangements. 12. Internal Audit Report 2011/12 The Internal Audit Report 2011/12 was submitted covering internal audit work carried out in accordance with the internal audit plan approved by the Corporation 25 days of internal audit coverage for the year had been approved, all of which had been used to review the College s processes and to evaluate a number of business areas: Corporate Governance process Risk Management Student Enrolment and Record Procedures Budgetary Control Key Financial Controls Capital Projects Purchasers & Creditors Energy Management Communications Health & Safety PAYE/NIC Review Non Specific Systems Work In total, seven recommendations had been made all with a medium priority - there were no high priority recommendations. From these examinations the internal audit service concluded that the policies, procedures and operations in place were good. They had issued an unqualified opinion on the adequacy and effectiveness of the college s risk management control and governance process and had concluded that the college had adequate and effective management control and governance processes to manage its achievement of the college s objectives. The Clerk advised that the Corporation would be informed of the conclusions in the Internal Audit Annual Report. 13. College Self-Assessment and Information to Support the Regularity Audit This self-assessment questionnaire was completed by colleges on an annual basis to support regularity audit carried out by KPMG _ the College s external auditors.

5 The questionnaire covered a number of areas, as summarised below, and against each activity the college was required to provide a response together with supporting evidence: General activities; Financial memorandum; LSC (other funding); Non- LSC funding; Propriety. Members noted the College s responses as set out in the submitted document. 14. Compromise Agreements Lessons Learnt *Confidential text removed* 15. Fraud Risk Assessment Annually, the auditors required reasonable assurance that the College s financial statements taken as a whole were free from material mis-statement caused by fraud. It was noted that the primary responsibility for prevention and detection of fraud rested with those charged with governance and with management. The information in the Assessment covered the year ended 31 July 2012 and all activities of the college were considered on a case-by-case basis. It was also applicable to subsidiary companies. The areas considered were as follows, and information on the risk of material fraud, the overall fraud risk, specific fraud risk, and areas to consider in mitigation of any risk, along with a selfassessment comparison, were submitted: Payroll; Fixed assets and stock; Purchasing (general); Purchasing (contract management); Cash and remittance/cheques (income); Sales (debtors); Non-cash investments; Expense claims and credit cards; Other income (funding council grants, tuition fees, consultancy etc.). Financial reporting General controls Members agreed that the Corporation be asked to receive the Fraud Risk Assessment. 16. Any other business None. 17. Matters for the Corporation Except where indicated in these Notes, all matters would be submitted to the Corporation to approve.

6 18. Confidentiality Minute 14 was considered to be confidential. 19. Date of the next meeting and Deadlines Date: 27 November Deadline for notifying Clerk of items: 16 November Deadline for Clerk to receive items: 19 November Posting Date: 20 November The informal discussions ended at hours Signed:.. Chair Date: