ASTON UNIVERSITY

AUDIT COMMITTEE

Minutes of the meeting of the Audit Committee of the Council, Tuesday, 14thSeptember 2012.

PRESENT:Mr Nick Tamblyn (in the Chair)

Mr Roger Hurley

Mr David Newcombe

Mr Paul Williams

APOLOGIES:Ms Amanda Allen

Dr Christine Braddock

IN ATTENDANCE:Ms Liz Furey

Mr Alan Hawkesworth

Mr Mark Hodgson

Professor Helen Higson

Ms Alison Levey

Mr Alan Lees (Grant Thornton)

Mr Howard Munson (Grant Thornton)

Mr Mike Rowley (KPMG)

Mr John Walter (Secretary)

WELCOME

12/53RESOLVED:

To welcome Mr Mark Hodgson, Chief Financial Officer, and Ms Alison Levey, Director of Registry and Student Planningwho were attending the Committee for the first time.

DECLARATIONS OF INTEREST

12/54NOTED:

The following revisions to declarations of interest:

(1)That Mr Mark Hodgson, Chief Financial Officer, was one of the University’s Trustees on the Board of ASV, the charitable vehicle through which the residential estate was being redeveloped and managed.

(2)That Mr David Newcombe was no longer employed by Thomas Vale Construction Limitedand accordingly no longer had an interest to declare in this regard.

CONSTITUTIONAL MATTERS

12/55RECEIVED:

(1)Paper AU/11/24, listing the current members of the Audit Committee and their respective lengths of time served.

(2)Paper AU/11/25, setting out the Committee’s Terms of Reference, as revised by the University Council at its meeting held on 14th September 2011.

12/56RESOLVED:

That the Audit Committee’s Terms of Reference should be updated to reflect the transfer to the Committee, from the Finance and Major Projects Committee, of responsibility for overseeing the University’sBank Mandate, Finance and Governance Regulations and Financial Authority-limits; and that “all” should be changed to “any” in the first bullet point relating to duties associated with HEFCE.

MINUTES

12/57RESOLVED:

That the Minutes of the meeting of the Committee held on 15thMay 2012 be approved and that they be signed by the Chairman as an accurate record.

MATTERS ARISING FROM THE MINUTES

University ERDF (European Regional Development Fund) Projects (Minute 12/12/32)

12/58 RECEIVED:

A report that the value of ERDF funding ranged between £200,000 and £8.1million for the seven projects managed by Aston University.

12/59 RESOLVED:

To approve a proposal that, since all of the above projects were material, a summary of the results of any audits of these projects should be provided to Audit Committee at its May meeting. If significant concerns were identified in respect toany of the projects these should be brought to the attention of Audit Committee at its next meeting.

Data Quality for Reports on Projects funded by the European Union (Minute 12/42)

12/60RECEIVED:

The Senior Pro-Vice-Chancellor reported that a data quality group had been establishedcomprising all of the areas involved in major projects funded by the European Union (EU) and chaired by Mr Peter Shearer, Director of the Business Partnerships Unit. The group aimed to ensure full compliance with EU requirements in relation to data records and reporting. The first meeting of the group had been very successful in sharing best current practice, which was particularly useful for staff involved in new projects. The Deputy Director of Finance undertook to include a summary of the group’s activities in the annual report to the Audit Committee on data quality.

ACTION: Deputy Director of Finance

Procurement Champions (Minute12/44(i)

12/61NOTED:

That members of the University Executive had been reminded of the importance of the role of Procurement Champions and that Procurement Champions were required to send a deputy if they were unable to attend termly Champion’s meetings. Attendance at the subsequentProcurement Champions’ meeting had been significantly improved.

School Risk Registers(Minute 12/44(ii)

12/62NOTED:

That Schools were in the process of updating their risk registers to reflect their revised School strategies.

Template for School Audits (Minutes 12/45)

12/63RESOLVED:

To approve a proposed standard template for use in future School Audits.

Local Government Pension Scheme (LGPS) (Minute 12/47(iii)

12/64RECEIVED:

A report that the Officers had considered the accounting treatment for the LGPS pension scheme in liaison with the University’s actuaries, PWC, and the external auditors, KPMG. PWC had prepared an overview of the effect on the University accounts had the LGPS scheme been accounted for as a defined benefit scheme over the past 5 years. It appeared, in summary, that the charge in the accounts would not have been dissimilar to that already included as a charge on a contribution basis. It would be necessary to increase the pension reserve to the extent of the liability valued by the scheme actuaries, Mercers, which would beprovided at the end of September 2012; the liability was expected to be less than £2million.

VAT Health Check (Minute 12/48)

12/65RECEIVED:

A report that KPMG VAT advisors and the Deputy Director of Finance had met to review progress since the VAT health check carried out in August 2011. The key action that remained outstanding was to make available to the University a comprehensive VAT guide for staff and KMPG had been invitedto provide a quotation for the provision of this. The Deputy Director of Finance and the Group Financial Accountant had regular update meetings with the VAT advisors, to ensure that any taxation risks arising from new projects were identified and managed well in advance.

ACTION: Deputy Director of Finance

12/66RESOLVED:

That normally any additional non-audit services carried out by the External Auditors should be reported to the Audit Committee via the Statutory Accounts. However, any large scale non-audit projects undertaken by the External Auditors would require the specific pre-approval of the Committee.

Strategic Risk Register (Minute 12/15)

12/67 RECEIVED:

A report that the latest version of the Strategic Risk Register included the following additional risks: retention of key academic staff, retention of UKBA Highly Trusted Sponsor status and data quality.

DATA QUALITY

Internal Audit of Student Data

12/68RECEIVED:

The report of the review of Student Data undertaken by the Internal Auditors. The University had requested this review following the late adjustment that had been required to the draft 2010-11 financial statements, reducing its income by some £2.47 million, in the light of a higher than forecast dropout rate, impacting the £1.8 million University Modernisation Funding received and a lower than expected completion rate for co-funded foundation degree students, impacting funding received by a further £700,000.The review was undertaken at a time when the University was in the process of taking action to understand and address the issues that had led to the funding clawback.

Overall, the Auditors had concluded that, except for the specific weaknesses identified by the audit, in the areas examined, the risk management activities and controls were suitably designed to achieve the risk management objectives required by management.Whilst the University has made significant progress in addressing the issues that gave rise to the funding clawback, a number of issues remainedconcerning the arrangements for ensuring the accuracy and completeness of student data, in particular where students were educated at other institutions.Testing had found that complete and accurate data was not held on SITS for those students educated at other institutions and that there were some inaccuracies in student data held which could affect funding.

A key finding rated as High priority related to the decision to utilise an estimated non-completion rate of 6.5% which was significantly lower that the estimate of 8.5% used in previous years and lower that the actual non-completion figureof 8.5%, giving rise to the additional clawback. The Auditors had recommended that in future the University should consider the risks associated with changes in targets and the use of separate internally and externally reported targets for non-completion rates. Seven key findings were rated as Medium priority relating to current procedures and systems to ensure data completeness, validation and accuracy.

Actions Being Taken by the University to Improve Student Data Quality

12/69RECEIVED:

A report from the Senior Pro-Vice-Chancellor (SPVC), Professor Helen Higson, and the recently appointed Director of Registry and Student Planning (DRSP), Alison Levey, on measures taken and being taken to improve student data quality. The University had found the above-mentioned Report of the Internal Auditors to be extremely helpful in identifying and addressing issues. Progress in implementing improvements to systems and processes included:

  • the Data Quality Management Group was working effectively in improving communication and training for all staff involved in student data processing.
  • a HESA-HESES calendar had been prepared showing key dates for the input of data and identifying where compulsory training would be provided for all staff involved. A weekly cross-University meeting was being held to plan the HESA 2011-12 return involving Registry and School Accountants.
  • 70 exception reports were produced on a weekly basis to assist staff to identify problems with data, and any non-compliance issues were vigorously pursued with the areas concerned.
  • The members of staff responsible for SITS (Aston’s student record system) training and for Business Objects reporting had been relocated within the Registry, so that their activities could be better co-ordinated with the needs of users and in addressing issues.
  • A range of initiatives to improve data associated with collaborative provision, including regular meetings with partner organisations and University training for their staff. Three collaborative arrangements were being closed in view of associated additional risks and the lack of added-value to Aston.

The DRSP would be undertaking a root and branch review to ensure the quality, accessibility and usefulness of management information, data and registry processes during the Autumn Term 2012.This would consider whether data processingstaff responsibilities and resources were appropriately located within the University.

In response to a question from a member of the Audit Committee, the SPVC reported that the Executive Operations Group had decided to use in the HESES 2010 an estimated non-completion rate of 6.5%, recognising that this was significantly lower that the estimate of 8.5% used in previous years and that considerable efforts would be required to achieve this challenging target. Notwithstanding the initiatives to improve academic support for students and the improvement of training and awareness of staff responsible for recording student assessments, the recreation of the HESES return using actual HESA data demonstrated that non-completions had not significantly reduced compared to previous years. The principal shortcoming had been in the failure of in-year monitoring to highlight that the ambitious non-completion target would not be met, so that appropriate action could be taken to manage the associated financial risk. The additional risk associated with the decision had not been highlighted within the management accounts received by Council. For HESES2011 a non-completion rate of 8.5% had been used, even though the University was continuing with a range of initiatives which aimed to reduce this.

12/70RESOLVED:

That in future any risks associated with changes in the assumptions used in external funding returns should be made visible to Council within the management accounts and any issues concerning their delivery should be highlighted.

ACTION: Chief Financial Officer

Risks Arising from Tier 4 Visas

12/71RECEIVED:

A report from the SPVC on the University’s processes for the admission and monitoring of international students, in response to concerns expressed by members of the Committee in the light of the recent withdrawal of the Highly Trusted Sponsor Status from London Metropolitan University and the consequent significant financial and reputational impact on that institution. Aston had received a clean bill of health in a recent UKBA audit and the report of the audit would be submitted to the next meeting of the Committee. Over the last four months, a review of the processesfor admission, record keeping and monitoring of international students had been undertaken and improvements had been made/were planned. From 1 October 2012, all international students would be required to register a formal engagement with the University every two weeks and any non-compliance would be pursued. Staff associated with Tier 4 Visas (students) would be undertaking an audit of the processes and systems for Tier 2 (staff), and vice versa. The risks associated with loss of Highly Trusted Sponsor Status were now included in the Strategic Risk Register.

Student Recruitment in the Context of Higher Tuition Fees

12/72RECEIVED:

A report from the SPVC on the admission process for the 2012/13 entry of students, in response to questions from members of the Committee about the effectiveness and sensitivity of the University’s processes for monitoring the likely student intakes given the increased competition arising from the new funding arrangements and higher tuition fees for Home-EU students and the effect of the more stringent visa controls on international student recruitment. The following points were noted:

  • that the University had effective on-line reports refreshed on a daily basis showing the status of applications for all categories of applicant and these were discussed daily by a cross-university team throughout the clearing exercise. This resulted in the University being aware at an early stage of any potential shortfall in the intake numbers and to take action to ameliorate any issues. The national clearingexercise this year had not functioned in the same way as in previous years with applicants taking longer to make decisions, applicants changing institutions more often, and high quality competitor universities reducing offers. Evidence was emerging that a significant number of universities in England were facing large shortfalls in Home-EU undergraduate intakes.
  • that for Home-EU undergraduates students Aston was on track to achieve its core of non-AAB or equivalent students (for which HEFCE has set a hard target), but would not achieve its internal target for AAB students (which were not capped by HEFCE) by around 200 students (although applications were still being processed which could reduce this figure). The University was making strenuous efforts to ensure that every applicant that had accepted a place at Aston was converted to an actual enrolment; for example by a student ambassador contacting each applicant by telephone. The University would be closely reviewing the results of the survey of decliners and acceptors, so that any lessons could be quickly applied to the next admissions cycle.
  • that for international undergraduate and postgraduate students Aston was on track to achieve its intake targets. The major challenge would be to convert the applicants to actual enrolments in the face of the more stringent visa controls. Aston was encouraging all applicants to apply for visas via the University’s visa advisors.
  • The University had also introduced on-line reports showing the actual enrolment and re-enrolment status of all categories of students which were refreshed on a daily basis.

The Chief Financial Officer reported that the University forecast would be revised later in the year to take account of any financial implications arising from the actual intake of students when it was known.

12/73RESOLVED:

That a report on this year’s student intakes and associated financial implications should be presented to the next meeting.

ACTION: SPVC

INTERNAL AUDIT

12/74CONSIDERED:

(1)Final reports from the Internal Auditors in respect of the following:

  • Key Information Sets (KIS) (Paper AU/12/28)
  • Follow-up on progress by University management in implementing previous Internal Audit recommendations(Paper AU/12/29)

(2)Paper AU/12/30, draft Annual Report of the Internal Auditors for 2011/12

(3)Paper AU/12/31, a revised Internal Audit Plan for the new session 2012/13.

12/75NOTED:

That the Project Officer for the KIS had reported directly to the SPVC and that ABS marketing staff would be involved in the preparation and presentation of Aston’s KIS. The University hadrecognised the importance of the sustainability of the KIS arrangements and was taking steps to implement a framework to ensure the completeness and accuracy of KIS data going forward.

12/76RESOLVED:

That the Audit Committee should receive regular reports on the effectiveness of KIS.

ACTION: SPVC

12/77NOTED:

That the draft Annual Report of the Internal Auditors for 2011/12 included a qualification of their internal control opinion on student data due to weaknesses in respect of the accuracy of student data, particularly for franchise arrangements. Members of the Committee queried whether the qualification was necessary given the action taken by the University to address the issues and to HEFCE’s acceptance of Aston’s approach to amending the HESA return and the consequent reduced final clawback position. The Internal Auditors had felt the qualification to be necessary in view of the report of the Internal Audit of Student Data which included one key finding rated as High priority and seven as Mediumpriority (refer to Minute 12/68).

12/78RESOLVED:

That the Internal Auditors should consider the inclusion of a follow-up statement within the final version of the Annual Report on the effectiveness of actions taken by the University to address data quality issues in the light of the next set of external returns to be made to HESA and HEFCE, and to make clear their main concern was with weaknesses in respect of the franchise arrangements. They should also consider whether an Except for Opinion would be more appropriate than a Qualification.

ACTION: Internal Auditors

12/79NOTED:

That Members, in recognising the extension of the role of the Audit Committee from purely financial matters to include the management of risk in non-financial areas (for example the University’s reputation, governance, ethics and the quality of the student experience), queried whether internal audit was the appropriate vehicle for assessing the effectiveness of Aston’s systems and processes in all of these non-financial areas. The Internal Auditors indicated that they undertook such assessments for a wide range of HE institutions and could provide benchmarking data to assist the University in assessing its performance against current best practice.