Minutes Meeting of the Audit Committee Wednesday 23 November 2016 at 4.30pm Principal s Office Present: John Petitt (JP) Governor (Acting Chair) Andrew Try (AT) Governor Apologies: Gareth Osborn (GO) Governor (Chair) Frank Pitkin (FP) Governor In attendance: Gillian May (GM) Principal Richard Munday (RM) Finance Director James Newton (JN) RSM UK LLP (External Auditors) Tracy Reeve (TR) Clerk to the Corporation Scott Winter (SW) ICCA (Internal Auditors) 47/16 Chair s Agenda Item The management team left the meeting and the Acting Chair sought, and was given, confirmation that there was nothing that the auditors or other Committee Members wished to discuss under this item. The acting chair sought specific feedback from the external auditor (JN) that there was nothing he wished to raise with governors in respect of the financial statements audit 2015/16. JN confirmed that the audit had gone well, the College finance team had been well prepared and had responded well to any queries raised by the RSM audit team. JN also confirmed that there were no issues raised within the Regularity Audit and no issues identified around management over-ride of controls. 48/16 Apologies for absence Apologies had been received from Gareth Osborn and Frank Pitkin. 49/16 Notification of any other business There was none. 50/16 Notification of any interests There was none. 51/16 Minutes of the Audit Committee meeting held on 21 September 2016 The minutes were approved and signed by the Acting Chairman as a correct record. 52/16 Matters Arising Curriculum Efficiency and Benchmarking (minute 33/16 page 1). Governors sought an update on whether the follow-up sample to this Internal Audit report had yet been actioned. The Finance Director (RM) informed the meeting that this followup review was scheduled to be undertaken by ICCA in March 2017 after the deadline for the submission of the RO6 return (learner numbers) in February 2017. 1
Update on sourcing funds for ALFIE provision from Grant-finder (minute 27/16 page 7) The meeting noted that the College was unlikely to deliver any ALFIE provision during 2016/17; relevant staff in the Foundation department had been informed. RM assured governors that this would be reconsidered for 2017/18 delivery. Celebrating success with staff (minute 43/16 page 5) The meeting was given a verbal update on recent activity within College to enhance staff morale and celebrate success with staff at all levels. Recent activities had included a number of Principal s Awards given out at the last staff meeting before Christmas (people nominated by other staff for excellent work or going above their required duties). Other activities had been centred on a programme of Wellbeing Days for staff with free healthchecks and activities available during the day e.g. Golf, Martial Arts. Governors were given confirmation that the SLT and the HR Department were looking at alternative ways of rewarding staff whilst budgets were still tight. Facility letter, Lloyds Bank The meeting noted a copy of the formal letter from Lloyds Bank which confirmed BCA s access to an overdraft of 950,000 for the period 1 st February 2017 to 31 st May 2017. This would cover the period of tight cash-flow which would occur due to the phasing of agency funding payments during spring 2017. NOTED There were no other matters arising that were not already covered on the agenda. 53/16 External Audit: Draft Annual Audit of Accounts and Report 2015/16 Members considered the final paperwork for the Annual Audit of Accounts provided by RSM UK Audit LLP; the Report and Accounts to 31 July 2016 and the Draft Audit Findings Report ( Management Letter ). JN presented the report and informed Members that the audit had gone well; the Finance Director (RM) and his team had made a valuable contribution to the audit; all requisite information had been readily available and was shown to be robust and accurate. He informed Members that an unqualified audit report would be issued; the finalised figures and supporting narrative of the Members Report was considered. The meeting was reminded that the format of the accounts had been changed for 2015/16 to reflect the mandatory adoption of FRS102; the figures for 2014/15 shown in the accounts had also been restated to meet this new format. The meeting was reminded that the FRS102 format had a detrimental impact on the final outturn compared with the figures shown in the monthly management accounts. RM confirmed that the year-end position 2015/16 was in line with the forecast which had been shown in the monthly management accounts during the year. The final out-turn (post FRS102) was a year-end operating deficit of 285,000. After taking account of a surplus on the disposal of assets of 1.116m an overall surplus of 831,000 was reported; this was in line with the forecast prepared in spring 2016. Total income for the year had increased to 12.967m compared with 12.694m in 2014/15. Expenditure decreased by 258,000 in the year to 13.252m (from 13.511m in 2014/15). This decrease was attributed to a reduction in other operating costs of 352,000 offset by an increase in staff costs of 52,000 and an increase in the depreciation charge of 39,000. The net pension liability at 9.01m ( 6.65m at 31 July 2015), was noted and also the fact that this was an element of the accounts over which BCA had no control. The meeting 2
noted the uplift achieved from the recent revaluation of the land; there was no associated depreciation with this increase in land value and the College would now be in a position of net assets rather than net liabilities. Audit Findings Report Members considered the detailed Audit Findings Report (management letter) for the year-end 31 July 2016 in detail and noted the unqualified audit opinion. The key areas of focus were noted as: income recognition; pension scheme liabilities; going concern; management over-ride of control; first year adoption of F&HE SORP 2015 (FRS102); and property disposal. Members noted the low level of adjustments made during the audit process at an underlying total of 19,000. JN also highlighted that there had been no issues of impropriety identified from the audit work which needed to be drawn to the attention of the governors. JN confirmed that the auditors were fully comfortable around the crucial going concern judgement; cash-flow during the remainder of 2016/17 had been reviewed and no issues had been identified regarding BCA s ability to operate within its financial headroom. The meeting were reminded that the cash-flow position would become tighter in March 2017 for a short time due to the profiling of SFA income. Governors were assured that the College Executive would be managing the cash-flow position very closely as had been previously undertaken during spring 2016. As discussed earlier in the meeting an overdraft facility had already been secured to cover the period 1 st February to 31 st May 2017. The Governors commended the good working relationship that had been built up over the last two years between the auditors and the College finance team. Letter of Representation The draft letter of representation, in the standard format required by the Joint Audit Code of Practice, was considered and approved as presented. The letter of representation for the regularity audit was also considered and approved as presented. Regularity Audit The meeting noted the detailed Regularity Audit questionnaire which the college had completed in order to self-assess compliance with regularity and propriety requirements. The Regularity Audit report from RSM was considered and the unqualified regularity opinion was noted. Letter of Engagement: RSM The meeting considered and approved an updated letter of engagement with RSM UK Audit LLP which reflected the requirements of the most recent Joint Audit Code of Practice (JACOP). It was AGREED that: i) The Report & Accounts to 31 July 2016 be APPROVED and RECOMMENDED to the Corporation for approval and signing by the Chair on behalf of the Corporation, and the Principal as Chief Accounting Officer of BCA. ii) The Audit Findings Report 2015/16 (management letter) be RECEIVED and RECOMMENDED to the Corporation for approval. iii) iv) The Letters of Representation be APPROVED and RECOMMENDED to the Corporation for approval and signing by the Chair on behalf of the Corporation, and the Principal as Chief Accounting Officer of BCA. The Letter of Engagement should be APPROVED and RECOMMENDED to the Corporation for approval and signing by the Chair on behalf of the Corporation. 3
54/16 Annual Audit Committee Report The meeting considered the Audit Committee Report 2015/16 which had been considered in draft at the last meeting, (September 2016). The Clerk confirmed that the amendments suggested at the last meeting had been made. The key performance indicators of the auditors (internal and external) would be completed and appended to the report before it was taken to the Corporation, (7/12/16). The Annual Audit Committee Report 2015/16 was APPROVED and would be signed by the Chair of the Audit Committee. It would be presented to Corporation on 7/12/16 and subsequently submitted to the SFA with the 2015/16 Financial Statements. 55/16 Internal Audit Visit Reports 01.16/17 Support Staff costs benchmarking (follow-up) The meeting had received a copy of a follow-up advisory report from ICCA (internal auditors) which reviewed progress in the investigation of variances identified by the benchmarking review of support staff costs undertaken by ICCA in 2015/16. This high level benchmarking report had compared information gathered from the College in respect of support staff costs (pay costs). The Finance Director asked that detailed consideration of this follow-up report should be deferred until the March 2017 Audit Committee meeting in order to enable the management response to be discussed more fully with ICCA. The Audit Committee Members AGREED to defer the IAS visit report 01.16/17 for consideration until March 2017. 56/16 SFA Assessment of BCA Financial Health It was agreed that this item should be minuted in a Part 2 commercial-in-confidence minute. (See minute at 63/16 on page 7.) 57/16 Board Assurance Framework and Risk Register Report The meeting considered the College Assurance Framework and Risk Register report which had been updated since the last Audit Committee meeting in September 2016. The Principal highlighted the subtle but significant changes in the first three items relating to: Area Review; the fact that BCA continued to earn its 16-18 Education Funding Agency (EFA) allocation; and the ongoing support of the College bankers, Lloyds with respect to the College overdraft. Governors noted that each of these three items had been raised as important markers by the Skills Funding Agency (SFA) at the last informal Financial Notice of Concern meeting with the College, (Monday 7 th November). In addition, the curriculum narrative had been amended to reflect the higher retention levels (lower number of withdrawals) secured in 2016/17 during the first 6 weeks of term. This had partly mitigated the under-enrolment of 16-18 learners against the 2016/17 target; the difference year-on-year was now only 6 learners. An error on the Risk Register was noted; the arrow showing direction of travel for Risk 1 Failure to retain independent status should be amended to show an increased risk. Risk 1 Failure to Retain independent Status : The meeting was given a verbal update by the Principal on the mini Area Review involving the land-based Colleges in the South- East Region. It was noted that the first formal meeting of this group would be held on 6 th December at Chichester College. The benefit of a larger land-based college voice with employers was discussed by the meeting and the potential for growth within the higher- 4
level apprenticeships market when the new Apprenticeship Levy Funding rules came into force in April 2017. It was noted that a verbal update on this land-based colleges Area Review would be brought to the Corporation meeting on 7 th December 2016. Risk 2 Failure to address reductions in external funding : The meeting discussed the increased activity within the delivery of apprenticeships; the College was on-track to reach its break-even delivery level of 250,000. Governors were informed that BCA was applying to be included on the Register of Training Providers; the Principal had drafted the submission which would be reviewed by ICCA for good practice before submission. Risk 8 Land-based specialism- highly regarded centre of excellence : The meeting was given an update on the implementation of the College s Centre for Land-based Enterprise and Technology (CLET) Strategy. The Centre offers both professional and leisure courses, in subjects from beekeeping to brush-cutting. As a hub for knowledge and skills exchange, CLET aims to draw links and partnerships with other land-based universities, manufacturers, research bodies and organisations in the Thames Valley to ensure young people, enthusiasts, and industry professionals have the right skills demanded by today s modern land-based industries. Risk 9 Failure to maintain accurate and timely data : The Acting Chair sought clarification on why the risks around Information Technology had been reduced when there had only been small improvements. The Principal assured the meeting that the College had made substantial progress in this area; work was currently being finalised around securing a Service Level Agreement for IT support and progress had been made in achieving a move to cloud back-up. The Board Assurance Framework/ Risk Register was RECEIVED. 58/16 Register of Outstanding Audit Actions Members noted that all of the outstanding recommendations related to internal audit reports. The FD reminded the meeting that the current status column related to BCA Management s view of progress; the recommendations would only be deemed to have been completed when ICCA undertook their follow-up audit of previous years recommendations (in term 3 of 2016/17). Members were pleased to note that there were no outstanding recommendations rated red and were assured that the remaining amber recommendations were all moving towards a green classification by the yearend. The meeting considered the progress made to address the recommendations made within the review of High Needs and Additional Learning Support Funding (rated weak in application by the ICCA review). The meeting was assured that new procedures had now been fully implemented and would be reviewed by ICCA in January 2017; a report on the High Needs and ALS follow-up would be brought to the next Audit Committee meeting (March 2017). Monthly Payroll Reconciliation: The meeting noted a monthly payroll reconciliation report which had been recommended by the recent ICCA Review of Fundamental Financial Controls (Payroll). The FD confirmed that this monthly report would now be completed as part of the preparation of the monthly management accounts. The report was NOTED. 59/16 Debtors The meeting noted the Debtors Report which was now a standing item on the Audit Committee agenda. The FD informed the meeting that this report now included an 5
additional column which separated out the debts currently being repaid through instalment plans; these debts were being reviewed by the FD on a fortnightly basis. Governors noted the increase in overall debt since the last report (September 2016) but were informed that this was due to timing issues and the high level ( 360,000) of High Needs Funding currently due for payment from a 12 different local authorities. The meeting discussed the sector wide issue of local authorities trying to under-fund Element 3 provision within the High Needs funding The Debtors Report was RECEIVED. 60/16 Fraud, irregularity and whistleblowing report The meeting noted the report which was a nil return for the period 1 August 2016 to date. The Report was NOTED. 61/16 Date and Time of Audit Committee meetings 2016/17 The meetings were confirmed as: Wednesday 1 March 2017 at 4.30pm (subsequently changed to Friday 17 th March at 4.30pm.) Wednesday 21 June 2017 at 4.30pm 62/16 Any Other Business Planning Application: Care Village The Principal gave the meeting a verbal update on the current position as known with the planning application for the Care Village on site at BCA. The RBWM planners had made it clear that they needed to be convinced on a number of issues. These included the following: that the significant harm to greenbelt land was offset by the potential benefit to the long-term security around the heritage asset; that the development was no bigger than it needed to be to secure sufficient funds for BCA to maintain the heritage asset; that the money generated from the development would put BCA in a position of long-term financial viability; and that the developer s profit was within an acceptable level (17.5-20%). The meeting noted that NL Property were currently preparing an additional viability report which had been asked for by the planning department. It was noted that an additional 1.6m to fund repairs to the Mansion would be covered by NL Property in exchange for one additional acre of land; this would be brought to Corporation for approval as a contract variation when the details were finalised. There was no other business the meeting closed at 5.35pm. 6