WESTMINSTER KINGSWAY CORPORATION Draft minutes of the meeting of the Audit Committee held at 6.00 pm on Thursday 6 December 2012 in Room 106 at Westminster Kingsway College, Victoria Centre, London SW1P 2PD Present Margaret McKinlay Chair and external governor Joel Featherman External governor Kieran Houston Support staff governor In attendance Paul Stephen Director of Finance Andy Wilson Principal Chris Mundy on behalf of PKF, IAS Providers Avnish Savjani on behalf of Buzzacott, External Auditors Sheila Daley Clerk There were no declarations of interest. 1 Apologies for absence 1.1 Apologies for absence had been received in advance of the meeting by Susan Hunter, external governor. Preliminary item The meeting received a presentation from the Principal on the strategic risks identified by the college under the general heading WKC s reputation and community standing. A number of points were raised during the presentation, including the following: the key potential risk to the college s reputation and community standing was a fall in success rates such that they were below benchmark and feedback was given on how this risk was mitigated. The risk was mitigated primarily through the monitoring role of the Quality and Standards (Q&S) Committee. The Principal described the range and scope of the reports that the Q&S Committee considered, including the Self-Assessment Report (SAR) and the benchmarking data it received; that current success rates showed an improvement over the previous year (by 10% overall) and the findings of the most recent inspection had confirmed that the college was at or above benchmark; the Principal said that college management and the Q&S Committee were fully aware of the areas where improvement was needed and he summarised these. He said that the Committee monitored progress in terms of the effectiveness of the interventions that the college had put in place; there was discussion about progress with the college s target of improving teaching and learning, to good or outstanding, crucial to retaining and improving successes rates and the mechanisms that the college had instituted to achieve this. This was also an area that was monitored by the Q&S Committee. The DoF said that one of the reputational risks that was currently being well managed was in relation to achieving funding contract targets. Many colleges had struggled in 2011-2012 to meet adult responsive (AR) targets and, as a result, had been subject to clawback. WKC had managed this risk through its effective partnership arrangements and had achieved its SFA contract. The meeting was reminded that the Governors Strategic Planning Event on 18/19 January 2013 included a discussion panel and dinner aimed at eliciting feedback from representatives of the college s key communities. The feedback would be used to consider and address ongoing reputational risks. 6 December 2013.Docx 1
2 Minutes of the meeting of the Audit Committee held on 26 September 2012 2.1 The minutes of the meeting of the Audit Committee held on 26 September 2012 were agreed as an accurate record and signed by the Chair. 3 Matters arising from the minutes of the meeting of the Audit Committee held on 26 September 2012 3.1 The Principal confirmed, in response to a question, that an appointment had now been made to the role of Assistant Director: Human Resources and Professional Development (minute 6.1.1). The DoF confirmed, in response to a question, that the risk monitoring dashboard would be updated by CET and made available to the next meeting of the Audit Committee. There were no other matters arising from the minutes not covered on the current agenda. 4 External Audit 4.1 Draft financial statements for the year ended 31 July 2012 and management letter for the year ended 31 July 2012 4.1.1 Mr Savjani and the DoF spoke to this item and referred the meeting to the draft accounts and audit management letters for the year to 31 July 2012. Mr Savjani said that the audit had run smoothly and the timetable for overall audit completion was met. 4.1.2 The college had achieved an overall surplus in excess of that forecast, comprising an operational surplus and net proceeds from the completion of the sales of surplus land at St James Park (SJP) Centre. The figures were noted. 4.1.3 The balance sheet showed an increase in net assets over the year, the details of which were noted. The DoF said that this was predominantly due to the increase in cash reserves following the sale of the SJP Centre although it was offset in part by an increase in net pension liability. The figures for year end current assets were noted and the current liabilities. The ratio was 3.82 compared with 2.39 in 2010-2011. The total of cash and deposit balances held by the college was also noted. These figures were significantly higher than in 2010-2011. 4.1.4 The SFA financial health criteria showed the college s financial assessment as outstanding, taking account of the I&E surplus, current ratio and borrowings. 4.1.5 The meeting was referred in particular to the following reports and statements, all of which formed part of the financial statements signed on behalf of the Corporation. Operating and Financial Review Report of the Members of the Corporation This was a narrative report for the year. Some headings were required by the Statement of Recommended Practice (SORP) and guidance was given by the SFA in this regard but the rest of the content was for the Corporation to decide. The DoF said that the draft presented covered all the required areas. Statement of Corporate Governance and Internal Control This statement both explained the nature of the Corporation and acknowledged that it was ultimately responsible for the governance of the College and its system of internal control. Statement of the Responsibilities of the Members of the Corporation This statement acknowledged that the Corporation was ultimately responsible for preparing the financial statements, including the selection of accounting policies, and for ensuring that funds were properly used for the purposes intended. 4.1.6 There were no management recommendations. 6 December 2013.Docx 2
4.1.7 At the end of this item Mr Savjani and the DoF responded to questions raised and/or points of clarification. A number of points were noted in relation to the reasons for, and the treatment of bad debts and the clawback from HEFCE. 4.1.8 There was discussion about how the college may be able to provide additional comfort to the Audit Committee to enable it to recommend the letter of representation for signature by the Chair of the Corporation. It was agreed that the DoF would write to the Chair of the Audit Committee outlining how the Finance Department, on behalf of the college executive team (CET), had prepared the accounts which were in accordance with the accepted accounting principles and guidance provided to the FE sector. The DoF would also confirm formally that the college had made available to the auditors all data and provided access to the underlying systems to substantiate the statements. PS 4.1.9 There was discussion about Governor declarations in relation to related parties transactions. It was agreed that it would be helpful to have more explicit guidance notes and/or examples to ensure that Governors were aware, in signing their register of interests form, of range and level of declarations they were making. SD 4.1.10 At the end of this presentation, the recommendation below was agreed. The meeting noted also that the Resources Committee would also be considering the year-end financial statements at its meeting on 9 December 2013. RECOMMENDATION The Audit Committee agreed unanimously to recommend to Westminster Kingsway College Corporation the approval the report and financial statements for the year ended 31 July 2012, subject to the formal confirmation noted in 4.8 above. 4.2 Report on the outcomes of the KPMG funding audit 4.2.1 This item was presented by the Principal. He said that the college had been audited by KPMG on behalf of the Education Funding Agency (EFA) in terms of its 16-18 provision and the Skills Funding Agency (SFA) in relation to adult provision. The audit related to the final funding claims submitted by the college for the 2011-2012 academic year. It had taken place during October and November 2012. 4.2.2 The outcome of the audit was set out in the letter from KPMG that accompanied this item. This recorded the opinion that: We have no comments as a result of our work and in our opinion, in all material respects, the Providers Final Funding Claim: Final Funding Claim 2011-2012 has been properly complied in accordance with the relevant guidance. 4.2.3 The Principal said that there would be a management report in due course. When this was available it would be considered at the next meeting of the Audit Committee, at which time a representative from KPMG would be invited to attend. 4.2.4 At the end of this presentation the Principal responded to questions raised and/or points of clarification and the report was duly noted. 5 Internal Audit 5.1 Draft Annual Report of the Audit Committee (2011-2012) to Westminster Kingsway Corporation/Principal of Westminster Kingsway College, including the annual report on risk management 5.1.1 This item was presented by the Clerk who reminded the meeting of the range and scope of its annual report. After consideration of the report, and in particular of the annual report on risk management, the Committee confirmed the following recommendation. 6 December 2013.Docx 3
RECOMMENDATION The Audit Committee agreed unanimously to recommend that the Chair of the Audit Committee sign the Annual Report and that this be presented to the Corporation at its meeting on 13 December 2012 for endorsement 5.2 Internal audit visits and reviews 5.2.1 The meeting considered three internal audit reviews: ICT Strategy and Health Check Anti-Fraud Report UMAL Review of Business Continuity 5.2.2 The DoF and Mr Mundy spoke to this item. The ICT Strategy and Health Check had resulted in an assurance level of substantially meets expectations. There were 8 recommendations, 6 of which were medium priority and two of which were low priority. These were considered together, with the management responses. The Principal and the DoF responded to questions raised and/or points of clarification. In relation to the recommendation for an Information Strategy, the DoF said that the college had commissioned a follow-up study from PKF. 5.2.3 The Anti-Fraud Report was considered. There were 3 recommendations, 2 of which were medium priority and one of which was low priority. These were considered, together with the management responses. There was discussion in particular about what training was provided for staff to help to combat fraud and what was considered best practice in the sector in this regard. The DoF said that the college would be seeking to update budget holders, in particular, through an e-learning module. 5.2.4 The DoF spoke to this item. He said that the college had appointed UMAL as its insurers in July 2011. In the summer of 2012, UMAL notified the college that it was offering to fund an independent audit of the business continuity arrangements across all its education clients, to be conducted by Jermyn Consulting. WKC had accepted this offer and the ensuing report and management responses to this were attached. 5.2.5 The report considered 3 areas, namely the college s ability to: respond effectively to major incidents; recover operations following a disruption; and maintain the integrity of organisational resilience. The DoF said that a working group comprising the Head of Estates & Facilities, the Head of Finance, the Head of Management Information and the Head of Learner Experience. This group had met and produced the management responses. He said that the group would continue to meet and to deliver a programme that included business impact assessments, recovery time resources and the definition and delivery of departmental business continuity plans. 5.2.6 The report had been shared with PKF, whose original audit plan for 2012-2013 included a review of business continuity. In light of the UMAL report, PKF and the college had agreed to substitute their intended review for an additional day s testing on college cash control procedures at the college. The outcomes of the latter were included in the Anti-Fraud Report previously considered. A new report on ICT Project Management had also been included and this would be reported to the next Audit Committee meeting. 5.2.7 The management responses to the recommendations in the report were considered and the DoF responded to questions raised and/or points of clarification. There was a shared view that the deadlines in the report appeared to be tight. It was agreed that the working group would be asked to consider this feedback and re-prioritise their actions accordingly. The revised action plan would then be presented to the next meeting of the Audit Committee. PS 6 December 2013.Docx 4
6 The Skills Funding Agency (SFA) assessment of the college s financial health 6.1 A letter from the SFA to the Principal dated 2 November 2012 was considered. This included a table showing the college s financial health grades for the four years from 2011-2012 onwards, based on formulas set out under three headings ie calculated grade ; SFA grade ; and college grade. In all cases the grades awarded, other than those for 2013-2014, were outstanding with the three 2013-2014 grades showing as good. The DoF explained the criteria that was used by the SFA to determine its final calculated grades. As there was no other business the meeting was concluded. Name... Signed as an accurate record... Date... 6 December 2013.Docx 5