MINUTES of the Fourthmeeting of the 2012/2013 Academic Year Held On

the

COURT

AUDIT COMMITTEE

MINUTES of the fourthmeeting of the 2012/2013 academic year held on

Monday, 20th May, 2013, in Room 084, Queen Anne Court, Greenwich Campus,

Park Row, Greenwich SE10 9LS, commencing at 5.00 pm.

Present:

Mr S Davie (Chairman)

Mr S Howlett

Mr J Stoker

In attendance:

Mrs T A Brighton (Minutes Clerk)

Mr R Daly (Director of Finance)

Mr C Hallas (Interim University Secretary)

Professor D Maguire (Vice-Chancellor)

Mr M Norris (Chief Operating Officer)

Professor M Snowden (Pro Vice-Chancellor: Engineering & Science)

Mr D Barnes (External Auditor)

Mr M Cheetham(Internal Auditor)

AUD 12/31PRIVATE MEETING

The meeting was preceded by a private meeting of the Committee Members.

AUD 12/32DECLARATION OF CONFLICTS OF INTEREST

There were no declarations of conflict of interests.

AUD 12/33MINUTES OF PREVIOUS MEETING (AUD 12/P33)

The minutes of the meeting held on 11th March 2013 were agreed and signed as a true record.

AUD 12/34MATTERS ARISING FROM THE MINUTES

34.1Membership of the Committee

The Chairman reported that a potential candidate to fill the vacancy for an “independent” member of the Committee had been identified. Subject to satisfactory completion of formalities, the candidate would be invited to membership of the Committee. The appointment would need the ratification of the Court.

The Committee was reminded that Stephen Howlett would need torelinquish his membership of the Committee once he assumed the chairmanship of Court on 1st August. It was hoped that the Audit Committee could be brought up to full complement in order to make the workload more manageable. The University Secretary reported that recruiting of new Members for Court was in progress.

34.2Finance Office Staffing

The Director of Finance reported that since the last meeting there had been one resignation from the Procurement team. There were no immediate plans to fill the post.

AUD 12/35COMMITTEE TERMS OF REFERENCE (AUD 12/P34)

The Committee reviewed its Terms of Reference which had been approved by Court on 2nd July 2012. It was agreedthat the Terms of Reference remained appropriate and there was no need for amendment (appended to these minutes).

AUD 12/36VALUE FOR MONEY

iValue for Money Studies – Follow Up (AUD 12/P35(i))

The Committee reviewed progress in implementing the recommendations emanating from the value for money study on marketing undertaken during the 2010-11 academicyear. It was noted that a key recommendationrelated to Open Days. The need for continuous review of the number and timing of Open Days and of their impacton recruitment and brand awareness had been highlighted. These actions had been completed but the issues would continue to be kept under review. A further recommendation had highlighted the need for exploitation of new media channels. The Vice-Chancellor reported that consideration was being given to deferring the introduction of the new Customer Relationship Management system for a year. He was satisfied that such a postponement would not have any detrimental effect on operations.

It was noted that the implementation date for three of the recommendations was July 2013. The Committee agreed to revisit progress after this time and asked that a further update be provided to the next meeting.

iiValue for Money Study on Student Accommodation (AUD 12/P35(ii))

The Committee considered the executive summary of a Value for Money Study on Student Accommodation.

It was noted that the University currently had 2,300 bed spaces across its three campuses. There had been an overall occupancy of 97% in 2012-2013 despite a fall in recruitment. Future demand for accommodation was unpredictable but given the likely adverse changes in overseas and domestic demand, the University would need to consider ways in which to mitigate the risk of voids. In addition, the future relocation of Schools to Greenwich would expose the University to the risk of oversupply of accommodation at its other campuses. There was some discussion on the elasticity of pricing and the other avenues available to ensure full accommodation was maintained. The potential interest of other educational establishments in the vicinity was being explored. It was also noted that the accommodation was used both for vacation conferences and for summer school activities. Opportunities for maximising this revenue stream would need to be more fully examined.

Committee Members were pleased to note the inclusion of helpful benchmarking information in the report. It was agreed that the report provided considerable comfort that value for money was substantially achieved in the provision of the University’s accommodation and related services. TheCommittee believed that the recommendations for enhancing and sustaining value for money were both sensible and realistic and endorsed their implementation.

AUD 12/37IMPAIRMENT REVIEW OF ASSETS (AUD 12/P36)

The Committee considered the annual impairment review of University assets.

All freehold and leasehold properties had been reviewed in the context of current and planned future use to ascertain the likelihood of any under-utilisation.

The Committee noted that the 2013 review had concluded that there was no evidence of impairment. The planned relocation of the School of Architecture, Construction & Design to Greenwich in 2014 was not anticipated to create any impairment. Despite its reduced usage, the estimated market value of the Mansion site was expected to remain in excess of the current net book value.

AUD 12/38POLICY ON RETENTION OF INTERNATIONAL STUDENT DEPOSITS

(AUD 12/P37)

The Committee considered a proposed policy on the retention of fees paid by international students (ie UKBA Tier 4 students).

The Director of Finance reported that the need to formalise the University’s policy on the retention of deposits paid by international students had been an issue raised by the External Auditor during the 2012 financial audit. All international students applying for programmes of study were required to pay a pre-registration deposit of £3,000 once they had accepted an offer of study. These deposits were offset against their programme fees but in the case of students who failed to obtain a student visa or wished to defer the start of their study, the deposits were held until such time as the student began their course of study.

He further reported that the proposed policy clarified that in future the University would retain these deposits for a maximum of two years. Following this period international students would need to either enrol or provide evidence of a failed visa application. In the event that neither of these courses of action was pursued, the deposits would be released as revenue to the University.

The Committee approved the policy for immediate implementation on the understanding that:

ithe University would review and correct its current holdings of these deposits in order to accord with the terms of the policy. The External Auditor would discuss the most appropriate accounting mechanism with the Director of Finance.

iithe student contract would provide greater transparency on the right to have deposits returned. The Director of Finance would liaise with the Head of Student Finance to ensure that the contracts were amended in line with the policy.

The Committee requested that the policy be reviewed at its October 2014 meeting.

AUD 12/39ANNUAL REVIEW OF RISK MANAGEMENT (AUD 12/P38)

The Committee received:

(i)the annual review of risk management for 2012-2013

(ii)the current Institutional Risk Register dated March 2013.

The Committee noted the activities carried out during the 2012-13 academic year in compliance with the institutional policy and strategy on risk management. The Vice-Chancellor stated that anexamination of the University’s risk framework and risk register was planned using first principles. The Committee agreed that a fundamental review of the arrangements was timely and noted that the exercise would be led by the Chief Operating Officer.

The Committee noted that the version of the Institutional Risk Register accompanying the annual review had recently been considered and approved by Court at its April meeting. Prior to submission to Court, the Committee had agreed that Risk 20 (Failure to build effective, efficient and sustainable services and infrastructure in support of University activities) should be expanded to include reference to operating risks within the Human Resources Office. A number of controls/mitigating actions, sources of assurance and improvement actions had been specified for this area and the Committee suggested that the Chief Operating Officer should re-assess the validity of these measures as part of his review.

In discussion two further issues were flagged up for specific examination by the Chief Operating Officer:

ithe appropriateness of the level of financial loss (currently £500k) where the impact of risk is considered catastrophic

iithe possibility of extending the range of impact and likelihood scores from

1-5 to 1-10 in the table of risk scores.

The Vice-Chancellor noted, in relation to Risk 12 (Inability to recruit to target student numbers home or overseas) that the residual risk score had been increased to16. As a consequence, this was now the highest risk in the Register and required Court review. He believed that the risk was more significant than indicated by the current risk score. This was not to suggest that the mitigating controls were weak, but a realistic reflection of the competitive environment in which all higher education institutions were operating. He emphasised that Schools/Faculties continued to work hard to recruit students to study at the University.

On the basis of the review and information previously provided, the Committee:

iconfirmed, subject to review and updating of the risks associated with the operation of the HR Office, that the spread of risk in the institutional risk register was an accurate reflection of the University’s internal and external risk profiles for the coming year

iiconfirmed that the internal control arrangements for managing risk were likely to be effective

iiiagreed to recommend the Annual Review to Court.

AUD 12/40ASSOCIATED COMPANIES (AUD 12/P39)

The Committee received an updated schedule summarising the University’s associated undertakings.

AUD 12/41EXTERNAL AUDIT (AUD 12/P40)

The External Auditor presented the audit plan for the year ended 31 July 2013. The audit would continue to adopt a risk-focused approach although in future Grant Thornton intended to move towards a controls based audit.

The External Auditor reported that the plan identified a number of key audit risks and detailed the approach that the auditors would take to addressing them. The Committee noted that eight had been assessed as high risk, including the Other Debtors account. The External Auditor advised that the risk related to works in progress associated with research contracts. The Director of Finance reported that the University had a number of multi-year grants and contracts which straddled a number of financial years. He was confident that rigorous controls were in place to mitigate the risks inherent with long-term contract accounting. The Internal Auditor noted that a positive opinion had been given on a recent audit of controls relating to research grants and contracts (see minute 12/42.1.1).

It was also reported that the planning meeting had been held to agree the scope of the financial audit. An interim audit of systems and processes was to be held in July 2013 with the final testing scheduled to start at the end of September.

AUD 12/42INTERNAL AUDIT REPORTS

42.1Internal Audit Reports

The Committee considered the findings and recommendations of the following internal audit reports:

5-12-13 – Research Grants and Contracts (AUD 12/P41)

6-12-13 – Follow-Up – Part Two (AUD 12/P42)

7-12-13 – Key Financial Controls (AUD 12/P43)

8-12-13 – Data Quality: HESA Overseas Aggregate Return (AUD 12/P44)

10-12-13 – Student Retention – Complaints (AUD 12/P45)

The Management Responses for the internal audit reviews were regarded as satisfactory by the Committee and Auditors. The following issues were highlighted in discussion:

42.1.1Research Grants and Contracts (AUD 12/P41)

The Committee noted that the review of research grants and controls had provided a green level of assurance. The Internal Auditors had examined the procedures surrounding the application for and acceptance of research grants and contracts and concluded that they were well-designed and effective. Two recommendations had been raised. Officers anticipated that the issues highlighted would be addressed in the forthcoming revision of the Research & Enterprise Financial Procedures scheduled for September.

42.1.2Follow-Up – Part Two (AUD 12/P42)

The Committee noted good progress in implementing internal audit recommendations arising from five reviews undertaken in 2011-12. 82% of the recommendations had either been implemented or were no longer required. The Committee was satisfied that implementation of the five outstanding recommendations was envisaged to be straightforward.

42.1.3Data Quality: HESA Overseas Aggregate Return (AUD 12/P43)

The Committee noted that the audit of student data collected as part of a statutory return to HESA had provided a green level of assurance. In respect of the return for 2011/12, the Internal Auditors had been able to confirm that the data had been accurate in accordance with the Banner student record system. The Committee agreed that the findings of the audit provided good comfort about the quality of the University’s student data. It was pleased to note from the comparative benchmarking data provided within the report that the University’s performance in this area exceeded the sector average.

42.2Internal Audit Progress Report (AUD 12/P46)

The Internal Auditor reported that following the Committee’s concerns at the lack of progress, he had issued more detailed status reports on 23rd April 2013 and 15th May 2013 and had met with the interim University Secretary to discuss performance. He reassured Members that the programme of audits was back on track albeit that the remaining reports would necessarily have to flow over into the next academic year. The Chairman urged the Internal Auditors and Officers to use the full force of the Committee to encourage staff to finalise the audits.

Turning to the 2013/14 programme of internal audits, the Chairman sought clarification on the future level of resourcing. The Internal Auditor confirmed that more resources would be at his disposal and that preparation of next year’s audit plan would start earlier than in the past.

Members noted that the progress report indicated that the review on UKBA Compliance – Attendance Monitoring – although not yet finalised - had been given an amber-red level of assurance. They registered concern that this outcome contrasted with the conclusions of the audit undertaken by the UK Border Agency in September 2012. The University Secretary explained that the scope of the two audits had varied; the Internal Auditors had focussed on attendance monitoring in Schools and the training and development of the knowledge base of staff undertaking the monitoring. It was further explained that the attendance monitoring of international students was left to the discretion of universities. A variety of mechanisms were used although the need for consistency of application was acknowledged. The Committee understood that this was an importantmatter andasked that the finalised report be circulated to them promptly in order for them to familiarise themselves with the issues at hand.

AUD 12/43MATTERS FOR REPORT (AUD 12/P47)

43.1External Audit – Approval of Non-Audit Services

The Committee received a schedule of non-audit work carried out by Grant Thornton during the current session to date.

43.2HEFCE’s Annual Assessment of Institutional Risk

The Committee received a copy of HEFCE’s letter dated 8 April 2013 confirming its assessment of the University’s risk status. On the basis of the accountability returns submitted during 2011-2012, HEFCE had determined that:

ithe University of Greenwich was not at higher risk

iithe University was meeting the accountability obligations set out in the Financial Memorandum and other HEFCE guidance with one exception. The University had failed to comply with point A.5.2. of the statement of requirements that the results of the annual TRAC tests be reviewed for reasonableness by a governing body committee and that the institution either confirm overall compliance with the statement of requirements or draw up an action plan for any areas where it was not fully compliant.

The Director of Finance would be addressing this shortcoming in respect of the TRAC returns for 2012-13 and beyond. In future the Audit Committee would review the TRAC tests and thereby satisfy the terms of the statement of requirements.

AUD 12/44EXTERNAL AUDIT BENCHMARKING EXERCISE

The External Auditor reported that Grant Thornton was currently undertaking a benchmarking exercise on higher education institutions. He agreed to circulate an initial draft of the information to Members.

The meeting ended at 6.45 pm.

T.A.Brighton

06.06.13

U/VCO/LC/AuditCtte/Minutes/Audit/20 May 2013

Appendix to minutes of Audit Committee meeting held on 20 May 2013

TERMS OF REFERENCE

Membership:

No fewer than 3 and not more than 5 Members comprising:

4 Members of Court who are not members of Finance Committee

1 independent member with recent and relevant experience in finance, accounting or auditing.

Period of Office:

The members of the Committee shall serve for a period of three years, and are eligible for re election. Membership shall cease on expiry of the member’s term of office on the University Court.

Meetings:

The Committee will meet at least three times per year.

Quorum:

At least two members.

Terms of Reference:

1. To advise Court on the appointment of the external auditors, the audit fee, the provision of any non-audit services by the external auditors and any questions of resignation or dismissal of the external auditors.

1. To discuss if necessary with the external auditors, before the audit begins, the nature and scope of the audit.

1. To discuss with the external auditors problems and reservations arising from the interim and final audits, including a review of the management letter incorporating management responses, and any other matters the external auditors may wish to discuss (in the absence of management where necessary).

1. To consider and advise the Court on the appointment and terms of engagement of the internal audit service, the audit fee, the provision of any non-audit services by the internal auditors and any questions of resignation or dismissal of the internal auditors.

1. To review the internal auditors’ audit risk assessment and strategy and programme, to consider major findings of internal audit investigations and managements’ response; and promote co-ordination between the internal and external auditors. The Committee will make recommendations to the Court to ensure that the resources made available for internal audit are sufficient to meet the University’s needs.

1. To keep under review the effectiveness of risk management, control andgovernance arrangements, and in particular to review the external auditors’ management letter, the internal auditors, annual report, and management responses.

1. To monitor the implementation of agreed audit-based recommendations from whatever source.

1. To ensure that all significant losses have been properly investigated and that the internal and external auditors, and where appropriate the HEFCE Accounting Officer, have been informed.

1. To oversee the University’s policy on fraud and irregularity, including being notified of any action taken under that policy.

1. To satisfy itself that satisfactory arrangements are in place to promote economy, efficiency and effectiveness.

1. To receive any relevant reports from the National Audit Office, the HEFCE and other organisations.

1. To monitor annually the performance and effectiveness of external and internal auditors including matters affecting their objectivity and to make recommendations to the Court concerning their re-appointment, where appropriate.

1. To agree the University’s accounting policies

1. To consider elements of the annual financial statements in the presence of the external auditors, including the auditor’s formal opinion, the statement of members’ responsibilities and the statement of internal control in accordance with HEFCE’S Accounts Directions.

1. To submit an annual report to the Court and designated officer, summarising the activity for the year. It will give the committee’s opinion on the adequacy and effectiveness of the University’s arrangements for the following; risk register, control and governance (including the accuracy of the statement of internal control); economy, efficiency and effectiveness. The audit committee annual report should normally be submitted to the Court before the members’ responsibility statement in the annual financial statements is signed.

1. To review the effectiveness of the Committee from time to time.

All references to the University mean the University of Greenwich and any subsidiary Companies it has formed.