Format for Governors Meeting Minutes - Tyne Metropolitan College

Item xxxMinutes of the Meeting of the Audit Committee ofTyne Metropolitan College held at 9.00 a.m. onTuesday 29 November 2011 in the HawkeysConference Room at Queen Alexandra CampusPresent:In attendance:Dr Adam Langman, ChairMs Sheila Cooper (until 11.05 am)Mr Kym Norman (until 12.10 pm)Mr Steven Nicklin, Co-opted Committee MemberMrs Rosamund Moore, Clerk to the CorporationMrs Ann-Marie Crozier, Deputy Principal: Finance & Corp. Development (until 12.10 pm)Mr James Robson, KPMG (until 11.33 am)Mr Stephen Reid, KPMG (until 11.33 am)Mr Chris Moss, RSM Tenon (from 9.15 until 11.33 am)Mr David Clayton, RSM Tenon (from 9.15 until 11.33 am)Mr Victor Reid, Director of Business Development (from 9.00 to 9.30 am)Mrs Susan Ross, Director of Funding & Planning (from 9.15 am to 10.20 am)[The meeting started at 9.00 am.]The Committee Chair confirmed that the Corporation Board had formally appointed MrNicklin as a Co-opted Member of the Audit Committee on 20 October. Introductions weremade.ACTION1. Apologies for absenceNone.2. Declarations of interestDr Langman declared an interest in the revaluation of land and buildings stated in thefinancial statements and the management letter.It was noted that the Staff Governor and the Deputy Principal: Finance & CorporateDevelopment would leave the meeting for the item of restricted business, item 14, related tothe performance of Senior Post Holders in the Committee’s Annual Report.3. Minutes and Matters Arising from the Meeting held on 22 September 2011In respect of item 4.a, since the distribution of the minutes, KPMG had raised two points ofaccuracy and the Clerk to the Corporation tabled amended minutes.The amended minutes were approved and signed as a true record.Item 5, Annual Internal Audit Report 2010/11: It was noted that KPMG had revised itsopinion in the Annual Internal Audit Report 2010/11 as requested and this had duly beenapproved by the Corporation Board on 20 October.With respect to item 4 a) Learner Number Systems, the Director of Funding & Planningreported that the volume of unlisted provision in the year 2010/11 was 6.57% of theCollege’s overall income.Mr Moss and Mr Clayton of RSM Tenon joined the meeting at 9.15 am and furtherintroductions were made.S:\Ros M\Clerk Corp\Website Minutes\2011_12\2. Mar 2012 Upload\Minutes Audit Committee 29 November 2011.doc Page 1

Item xxx4. PFA Audit Follow Up on 2009/10 Train to Gain and Apprenticeship ReportsThe Director of Funding & Planning and the Director of Business Development provided asummary of the key findings and recommendations in the Follow-up audits undertaken bythe Skills Funding Agency’s PFA team. All recommendations would be added to thefunding tracker and monitored on a regular basis by the College’s cross-college Fundingand Compliance Task Group, senior managers and the Audit Committee. It was noted thatthe reports related to a follow-up audit of Employer Responsive provision and therefore theydid not include an audit opinion. The reports demonstrated positive distance travelledalthough it was recognised that processes needed to be further embedded andimprovements made regarding the accurate and timely completion of paperwork. Stafftraining in the new apprenticeship framework was helping to improve understanding of, andcompliance with, audit requirements to maximise funding, but training would inevitably beongoing in an area where regulations were subject to frequent change. In response toCommittee members’ questions, it was noted that Success Rates in the Train to Gain areaof provision were outstanding, but from an audit perspective this was irrelevant if thenecessary documentation was not completed as required.Committee members noted the PFA Audit Follow Up on 2009/10 Train to Gain andApprenticeship Reports and the action being taken by College management.The Director of Business Development left the meeting at 9.30 am.5. Revised IT Disaster Recovery Plan (part of overarching Disaster Recovery Plan)The Director of Funding & Planning presented the revised IT Disaster Recovery Plan whichhad been updated to take into account the new technology installed over the summer. Thistechnology enabled replication of all data in the secondary server room in the event of adisaster in the primary server room. The recovery plan set out standard maintenanceprocedures and the steps that would be taken to recover IT services after a service break.The recovery plan included a detailed action plan for recovery in the event of a total loss ofthe server room, as well as a schedule for reviewing processes. For the eventuality thatthere was a major disaster in both server rooms, the College had engaged Tribal toreconfigure the Oracle platform to enable restoration of data within 24 hours. The systemwould be tested in December and the College was in discussion with Tribal about what formthe testing should take.Committee members agreed to recommend the revised IT Disaster Recovery Plan tothe Corporation Board for approval on 15 December 2011.AgendaCorp.15 Dec.6. Funding Audit TrackerThe Director of Funding & Planning presented the Funding Audit Tracker which had beenupdated in October 2011 and showed that the majority of the actions identified in last year’sfunding audit undertaken by PWC had been completed. Where the actions were stillflagged as ‘amber’, this denoted work in progress and further refinement required. KPMGwould now pick up any outstanding actions as part of their ILR Assurance follow-up. Thecross-college Funding and Compliance Task Group, mentioned above, was revisiting somecomplete actions in order to bring about continuous improvement in College systems andprocesses and to ensure that staff were up-to-date with any changes in fundingrequirements. Responding to Committee members’ questions about continued issuesaround data collection and input, senior managers explained that there was ongoing stafftraining to increase understanding of audit requirements which were subject to change fromone year to the next. The Funding and Compliance Task Group was exploring ways ofsimplifying paperwork and processes whilst still complying with requirements to safeguardfunding.Committee members noted the update on the Funding Audit Tracker.S:\Ros M\Clerk Corp\Website Minutes\2011_12\2. Mar 2012 Upload\Minutes Audit Committee 29 November 2011.doc Page 2

Item xxx7. Internal Audit TrackerThe Deputy Principal: Finance & Corporate Development reported that all items whichKPMG had signed off in the follow-up review had been removed from the tracker. Sheindicated that good progress had been made in the first term to complete actions. The oneitem flagged as ‘red’ related to recovery testing of the new network infrastructure. The firsttest was currently being devised and was scheduled for December as stated above.In response to Committee members questions about actions related to the review 07-10 HEIncome Streams, it was noted that the first part of the HEIFES return had been submittedlast week following which there had been an exchange between HEFCE and the College.The actual sign-off of the HEIFES return for 2010/11 would be on 17 December.Committee members noted the update on the Internal Audit Tracker.8. External Audit TrackerThe Deputy Principal: Finance & Corporate Development reported that this tracker was inrespect of the 2009/10 external audit. Both management letter points had been completedand signed off by RSM Tenon.Committee members noted the completion of the External Audit Tracker in respect ofthe 2009/10 external audit.9. ILR Assurance Review for the Period 1/8/2010 to 31/7/2011 (KPMG)Mr Robson explained that KPMG had undertaken the 2010/11 ILR Assurance Review asthe College had not been selected for the Skills Funding Agency’s Funding Audit as in theprevious two years. This review had covered Learner Responsive income only and hadfocussed on attendance, enrolment, fee remission, disadvantage uplift and additionallearner support. Mr Robson drew attention to the opinion given on page 2 of the report. Atthe time of the audit visit (w/c 24 October), data cleansing of the ILR was still underway,with a deadline of 21 November for submission to the Skills Funding Agency. Subject toidentified errors in the sample testing being corrected across the entire population, KPMGwas of the view ‘that no material errors have been identified in the College’s funding claim inthe areas reviewed.” It was noted that movement in data between funding claims wasmonitored by the SFA and used to form part of the risk profiling of colleges. Committeemembers acknowledged the reasons for data cleansing routines running behind schedule(particularly due to the staff restructuring in the summer term). Senior managers wereconfident that going forward issues would be addressed in a timelier manner by the newMIS team and the cross-college Funding and Compliance Task Group who would follow acalendar of events and tasks to improve the quality of ILR data. In response to Committeemembers, the Director of Funding & Planning stated that she was monitoring this workschedule very closely to ensure processes were embedded, and that there was a direct linkto staff development, objectives for teams and performance management. In addition,KPMG’s annual review of ILR Controls was another means of checking how effectively theCollege’s systems were being applied. Committee members asked the Director ofFunding & Planning to give a report at the March Audit Committee meeting outliningthe Funding and Compliance Task Group’s action plan and demonstrating theprogress being made to streamline processes and reduce data errors at source.SRAgenda6 MarchSRMr Nicklin, as a new member of the Committee, received background information which setILR Assurance Reviews in context from the perspective of the FE sector as well as ofTyneMet.In response to the Committee Chair, KPMG representatives stated that they did not requireany discussion with the Committee without College management being present.The Director of Funding & Planning left the meeting at 10.20 am.S:\Ros M\Clerk Corp\Website Minutes\2011_12\2. Mar 2012 Upload\Minutes Audit Committee 29 November 2011.doc Page 3

Item xxx10. Extracts from the Draft financial Statements, Management Letter and RegularityAudit Report for the Period 1/8/2010 to 31/7/2011 (RSM Tenon)A discussion took place about the responsibility split between the Audit Committee and theFinance & Personnel Committee and it was noted that the Audit Committee was beingasked to review the Management Letter within the context of the Financial Statements andrecommend the Statement of Corporate Governance and Internal Control and theRegularity Opinion (see Committee’s Annual Report) to the Corporation Board whilst theFinance & Personnel Committee would be asked to recommend the Financial Statementsthemselves and the Letter of Representation. Any concerns that the Audit Committeemight have about the Financial Statements would be raised by the Audit Committee Chairwith the Chair of the Finance & Personnel Committee. Both Committee Chairs wouldprovide full feedback relative to their respective roles to Governors at the Corporation Boardmeeting in December. Mr Reid of KPMG indicated that different colleges had differentpractices, but some held a joint meeting of the two Committees at this time of year and theCommittee felt this would be worth further consideration by the Corporation Boardalthough it was noted that this would entail an additional meeting for bothCommittees.ALMr Clayton of RSM Tenon presented the Management Letter for the Year Ended 31 July2011, highlighting the audit risks identified during the audit and the conclusions reached.Mr Moss explained the position regarding the FRS17 LGPS pension prior year adjustmentwhich had been transferred as a credit from the balance sheet to the income andexpenditure account as a result of final guidance being issued by the UITF after the2009/10 statutory accounts had been approved by the Corporation.With respect to financial performance and going concern, RSM Tenon had concluded thatthe ‘the college has sufficient cash facilities to meet its ongoing liabilities’, that the financialhealth grading was ‘good’ and that it was anticipated that the Financial Notice to Improvewould shortly be lifted by the Skills Funding Agency. The Management Letter also coveredCorporate Governance, the Regularity Audit (no issues found) and adjusted and unadjustedaccruals.In response to the Committee Chair, RSM Tenon representatives stated that they did notrequire any discussion with the Committee without College management being present.Following some further points of clarification the Audit Committee accepted RSMTenon’s Management Letter, the Statement of Corporate Governance and InternalControl and the Regularity Opinion and would include the opinions provided in theCommittee’s Annual Report to the Corporation Board.11. Financial Management and Control Evaluation for 2010/11 and 2011/12 Action Plan(incl. unfinished actions from 2010/11)The Deputy Principal: Finance & Corporate Development indicated that the College’sgrading in respect of Financial Management and Control would be confirmed by the SkillsFunding Agency following return of the College’s annual self assessment questionnaire.The Audit Committee and subsequently the Corporation needed to formally approve thegrading. It was noted that the FMCE was also given to the Finance & Personnel Committeefor information.The assessment was in respect of the period 1 August 2010 to 31 July 2011 and theCollege was required to include any significant changes, both positive and negative, whichhad occurred up to the date of return.The College had evaluated financial management and control as ‘good’ for 2010/11including the period to end of November 2011. As this was an improvement to the grade of‘satisfactory’ for the previous reporting period the Skills Funding Agency required theCollege to make a “full” return. The return would need to be uploaded to the Portal by 30November with retrospective approval by the Corporation.S:\Ros M\Clerk Corp\Website Minutes\2011_12\2. Mar 2012 Upload\Minutes Audit Committee 29 November 2011.doc Page 4

Item xxxThe Deputy Principal stated that the overall grading in the FMCE self assessment wasunderpinned by 4 area grades and 8 section grades and highlighted key aspects of theevaluation, citing evidence of change. The grades reflected the improvements which theCollege had made over the last twelve months. The PFA validated grades for the previousreporting period were also included for reference, to allow comparison between the twoyears. It was noted that the self assessment had been reviewed and approved by thePrincipal.Ms Cooper left the meeting at 11.05 am.In response to Committee members’ questions, the Deputy Principal indicated that theCollege had achieved a significant milestone by moving to ‘good’. She confirmed that theCollege would wish to achieve a grading of ‘outstanding’ though it was sometimes difficultto pinpoint in practice the difference between ‘good’ and ‘outstanding’ in the guidance. Thisaspiration was contained within the Strategic Plan and it was a case of building momentumand being confident about the College’s improved position.In looking at the action plan contained within the FMCE, the Committee agreed to make asmall amendment to the wording to the action proposed in 3.2.2 with the sentence finishing:“…by targeting areas known to need improvement.”Committee members endorsed the judgement of ‘good’ in respect of FinancialManagement and Control for 2010/11 and recommended this for approval by theCorporation in December 2011.AgendaCorp.15 Dec.12. November Updates to Risk Management Plan 2011/12 (incl. Summary of High NetRisks)Mrs Moore, as Risk Management Champion, reported on the November updates to the2011/12 Risk Management Plan. A summary of high net risks had been added to the planfollowing discussion at the last Committee meeting and Mrs Moore indicated that she wouldadd a legend to the table. Highlighting the additions and amendments to plan andindicating the reasons for a reduction or increase in the level of risk, Mrs Moore drewattention to the following new gross risk sub-element which was considered a high net risk:5.13 Failure to monitor performance against funding targets due to continued absence ofthe Data Service ILR funding software. (The Data Service is commissioned by SkillsFunding Agency.) The Deputy Principal explained that the lack of accurate data from theData Service was hampering the College’s ability to monitor performance against fundingtargets and curriculum plans. Given the serious concerns expressed by colleges acrossthe FE sector, the Association of Colleges had taken up this issue at national level and hadwritten to senior politicians.In response to Committee members, Mrs Moore explained that the level of net risk waslowered in-year where appropriate. With respect to 1.6, Failure to recognise and respondappropriately to the risks of implementing a shared services model the action to date hadnot mitigated the fundamental nature of the risk and therefore it remained a high net risk.Commenting that the summary sheet was very helpful, the Committee noted theNovember updates to the 2010/11 Risk Management Plan which would be includedfor information in Corporation Board papers in December.Mr Reid, Mr Robson, Mr Moss and Mr Clayton left the meeting at 11.33 am.13. Consideration of continued Appointment of Internal Audit Service (KPMG) andFinancial Statements Auditors (RSM Tenon Ltd.) (benchmarking information)The Committee reviewed the performance of the internal auditors, KPMG and financialstatements auditors, RSM Tenon and agreed that both firms were performing as expected.The Committee therefore agreed to recommend to the Corporation Board thecontinuation of both KPMG and RSM Tenon in the third year of their respectivecontracts.AgendaCorp.15 Dec.AgendaCorp.15 Dec.S:\Ros M\Clerk Corp\Website Minutes\2011_12\2. Mar 2012 Upload\Minutes Audit Committee 29 November 2011.doc Page 5

Item xxxSecondly, being mindful of the continuing standard of their performance theCommittee felt it would be appropriate to recommend to the Corporation Board anextension of two years to KPMG’s and RMS Tenon’s respective contracts. Further itwas agreed that the Deputy Principal would be charged with negotiating the termsfor these contract extensions including a reduction in the number of internal auditdays, given the benchmarking data provided about other northern FE colleges. Thiswill be brought back to the Audit Committee’s March meeting for further discussionbefore making a recommendation to the Corporation Board.AMCAgenda6 March14. Draft Audit Committee Annual Report and Draft Self Assessment for 2010/11 (incl.restricted item)Before leaving the meeting at 11.33 am, Mr Reid had requested that the whole of KPMG’sAnnual Internal Audit Opinion be included in the Audit Committee’s Annual Report to theCorporation Board.Following discussion in item 10 regarding the split in responsibilities of the Audit andFinance & Personnel Committees, it was agreed to recommend a change to the AuditCommittee’s terms of reference. Two other small amendments were made to the terms ofreference. The amendments to the terms of reference will be recommended to theCorporation Board for approval in December.Committee members considered the Committee’s self assessment and draft Annual Reportand agreed updates to both for recommendation to the Corporation Board inDecember.The restricted section of the report was recorded separately following the departure of theDeputy Principal: Finance & Corporate Development and the Staff Governor at 12.10 pm.AgendaCorp.15 Dec.AgendaCorp.15 Dec.15. Any Other BusinessNone.16. Assessment of Impact of Committee’s ActionsTo inform the Committee’s annual assessment of the impact of its decisions, it was notedthat the Committee had:agreed to recommend for approval the revised IT Disaster Recovery Planagreed to recommend the FMCE 2010/11 and 2011/12 Action Plan for retrospectiveCorporation Board approval (FMCE to be uploaded to the Portal by 30 Novemberdeadline)agreed to recommend the continuation of KPMG and RSM Tenon in the third year oftheir respective contractsagreed in principle to recommend an extension of KPMG and RSM Tenon’s contractsby two years, pending negotiations by the Deputy Principal: Finance & CorporateDevelopment, with a report to the Committee in March 2012undertaken a self assessment of the Committee’s performance in 2010/11 forsubmission to the Corporation Board in Decemberagreed to recommend for approval updates to the Committee’s terms of referenceupdated and agreed to recommend for approval the Committee’s Annual Report to theCorporation Board, in accordance with the Audit Code of Practice17. Any items to be designated as non-confidential or no longer exempted following thismeeting and conversely any items to be designated as exempted/confidentialItem 13 – performance indicator pro-forma of internal and external auditors to remainconfidentialItem 14 – restricted section of Committee’s Annual Report 2010/11 to remainconfidentialThe meeting closed at 12.35 pm.Next meeting: 9.00 am, Tuesday, 6 March 2012, Queen Alexandra CampusS:\Ros M\Clerk Corp\Website Minutes\2011_12\2. Mar 2012 Upload\Minutes Audit Committee 29 November 2011.doc Page 6