Minutes of the Meeting of the Audit Committee Held at 3.00Pm on Thursday 5 November 2015

CANTERBURY CHRIST CHURCH UNIVERSITY

MINUTES OF THE MEETING OF THE AUDIT COMMITTEE HELD AT 3.00PM ON THURSDAY 5 NOVEMBER 2015 IN THE FREDERIC MASON ROOM

AT THE PRIORY

Present:Mrs Janice Shiner (Chair), Mr Julian Hills, Ms Ruth Martin (by phone), Mr Quentin Roper, Mr Steve Sutton

In attendance:Ms Sue Barratt, Deloitte

Mr Paul Bogle (Clerk to the Governing Body)

Mr Phil Copestake, Programme Manager (for item 1 on the agenda)

Mr Andy Hornby, Deloitte

Mr Andrew Ironside (Pro Vice-Chancellor [Resources])

Mr David Leah (Director of Finance)

Mrs Heather McCulloch (Committee Officer)

Mrs Karen Pilgrim (Assistant Director of Finance [Accounting and Regulatory Systems])

Ms Lorna Raynes, RSM

Professor Rama Thirunamachandran (Vice-Chancellor)

68.Christ Church Process Improvement Programme Presentation (CCPIP)

[Paper H53]

Members of the Committee received a presentation on the Christ Church Process Improvement Programme from Mr Phil Copestake, the Programme Manager. The Pro Vice-Chancellor (Resources) provided the context for the work which had been driven by the need to improve every aspect of the student journey from first enquiry to established alumni. A root and branch review of systems and processes took place which highlighted many areas for improvement, and the challenge moving forward lay in implementing the improvements whilst maintaining a high level of service to students. The Vice-Chancellor added that it became clear that the risk of not making changesoutweighed the risks around any potential disruption to the student experience whilst making the improvements.

The presentation covered three main areas: the first considered the history and the case for change; the second considered which improvements could be delivered first; and the third looked at the current stage of CCPIP. In terms of the case for change external pressures and internal drivers were explored, together with a review of an ageing patchwork of systems and processes in need of modernisation. The review was wide ranging across both academic and professional service areas, and took a detailed look at each stage of the student journey and the quality of student interactions with the University at each stage.

Once the staffing resource from within the existing staff profile had been selected to deliver CCPIP, the three areas identified where improvements could be made quickly and effectively were Clearing, timetabling and roomingand welcome and orientation.

In terms of current activity CCPIP had moved on to consider those projects which will be delivered over a longer time scale, and these covered four key areas: student core data and administrative processes; student enquiry and recruitment; student attendance and participation tracking; and access to student support.

Throughout the three year project the importance of communicating with staff and effecting cultural change was highlighted in the presentation. The early indicators were positive with a real desire on the part of staff to make improvements for the benefit of students, and a recognition that there were many concurrent benefits to staff.

The Committee welcomed the presentation and offered some comments and reflections. It was suggested that the processes around enhancing employability could feature more prominently in the diagram referencing the student journey, and this amendment was agreed. The Chair highlighted the importance of using the data around employability to inform decisions on the future student curriculum.

The Committee highlighted the importance of a benefits realisation strategy, and was assured that this had been put in place. The executive confirmed that the focus was on enhancing the student experience rather than delivering savings, and an investment in the region of £1.5 – 2m had been made in the project. The Vice-Chancellor expressed a view that CCPIP was on a par with the Master Planning project in terms of its importance for moving the University forward.

Finally, the Committee commented on the importance of managing the transition period as smoothly as possible, and of paying attention to early warning indicators if progress was not being made as expected.

The Chair congratulated all involved on their efforts and looked forward to an update in a year’s time.

NOTED

69.Apologies

There were none.

70.Declarations of Interest

• Mr Andrew Ironside declared an interest as a Director of Medco.
• Mr Paul Bogle declared an interest as Company Secretary of Medco.
• Professor Rama Thirunamachandran declared an interest as a member of the USS pension scheme.

71.Minutes of the Meeting held on 14 May 2015

The minutes of the meeting held on 17 September 2015 were agreed and signed as a true record.

72.Matters arising not appearing elsewhere on the Agenda

72.1University Estate Master Plan High Level Risks [Minute 9 refers]

The Clerk advised that the University had not yet received the project risk pro forma referred to by the outgoing Internal Auditor at the last Committee meeting, and will be following up this suggested approach to the Master Plan high level risks as soon as it had been received.

NOTED

73.Financial Reports for the Year ended 31 July 2015

73.1Report on the University’s Financial Position [Paper H54]

Members of the Committee received Paper H54, Report on the University’s Financial Position. The Director of Finance advised that the focus had been on the University’s financial performance at the F&GP Committee meeting earlier in the week, and that the focus for the Audit Committee would be on the more technical, narrative aspects of the Report.

In terms of the Report, the Director of Finance highlighted the corresponding overall increases in both income and expenditure of 3.4%. He noted that a shift in the composition of income from reliance on HEFCE funding to reliance on tuition fees represented a different risk dynamic for the University. The Report indicated a strong asset/liability ratio of 2:1, and all KPI targets had been met with the exception of the number of liquidity days, which had been impacted owing to the late receipt of a payment from HEKSS. Forecasting had been particularly accurate; the overall income achieved for 2014/15 was £126.4m compared to a six month forecast of £126m and a nine month forecast of £126.7m.

In response to a question from a member of the Committee, the final number of students registered for 2014/15 was confirmed as 16,976. An accurate figure could not yet be provided for 2015/16, partly due to staggered entry arrangements throughout the year, and partly due to reporting requirements which were still being compiled. An update on 2015/16 student recruitment will be provided at the Governing Body meeting on 24 November.

A similar query was posed around staff numbers and staff costs, and members were informed that the most accurate picture was to be derived from a comparison of year on year spend on staff costs, which had remained consistent.

The Committee discussed the University’s debt level, which stood at just below the KPI maximum level of 40%. The Director of Finance confirmed that the figure was in line with projections and was due to decrease to 35% over the next two years. He added a caveat that a level of 35% would be challengingto maintain once Master Planning had progressed to a more advanced stage.

With regard to pension scheme assumptions, the University had challenged those of the actuary and agreed a more balanced position for reporting the pension’s liability for LGPS on the balance sheet. A decrease of 47.9% in interest payable included a credit of £370k for notional interest charged on the pension scheme under FRS17.

A member of the Committee raised a query around the calculation of risk, and asked when the next actuarial review was scheduled and how long before its findings might be expected to take effect. The Director of Finance confirmed that, in collaboration with the firm Mercer, a piece of work was being undertaken around the potential risks posed by the pension scheme arrangements, with particular focus on the LGPS. A paper on this work will be presented to the SMT in due course. The next triennial review will be in 2016 for LGPS.

The executive identified the risks around increased employer contributions and the unlikely possibility of a crystallising event whereby all contributors drew out their entire pension entitlements at the same time. An option to offer a defined contribution pension scheme to staff was considered to offer potential benefits to the University and to staff in terms of lower contributions.

NOTED

73.2University’s Consolidated Financial Statements [Paper H55]

Members of the Committee considered Paper H55, the University’s Consolidated Financial Statements, in conjunction with the Report above. The Assistant Director of Finance [Accounting and Regulatory Systems] confirmed their consolidated status due to the reactivation of the Medco company from 1 February 2015. A member of the Committee raised a query with regard to a lack of reflection on the strategic aims, including employability outcomes, for the period 2010-15 and the lessons learned within the narrative of the Statements. The Pro Vice-Chancellor (Resources) confirmed that there will be a report detailing the University’s performance against its KPIs at the next meeting.

RESOLVED TO RECOMMEND:

that, subject to any minor typographical amendments, the University’s Financial Statements be approved by the Governing Body for onward transmission to HEFCE.

73.3Medco Financial Statements [Paper H56]

Members of the Committee received Paper H56, Medco Financial Statements. Since the reactivation of Medco in February 2015, the company (trading as Unitemps) had made a small surplus of £55k, which will be gift-aided back to the University. This was acknowledged as a significant achievement in its first full year of trading.

RESOLVED:

that Paper H56 be approved.

74.External Auditor’s Report to the Audit Committee for the Audit of the 2014/15 Financial Statements including FRS102 and HE SORP [Paper H57]

Members of the Committee received Paper H57, External Auditor’s Report to the Audit Committee for the Audit of the 2014/15 Financial Statements including FRS102 and HE SORP. The External Auditor commented that the scope and scale of the audit had been in line with the Plan and was now completed with the exception of some minor adjustments which can only be made right at the end. In terms of the detail, the External Auditor highlighted the following points.

• Risk 1 Revenue recognition – no issues
• Risk 2 Management override of controls – attention was drawn to the number of lower value journals - the Auditor and the Assistant Director of Finance [Accounting and Regulatory Systems] confirmed that these were part of the normal postings activity. In terms of the University’s approach to bad debt provision, credit note provisioning and HEFCE clawback provision, the Auditor considered that management’s approach was reasonable.
• Risk 3 Actuarial assumptions in respect of the LGPS – no issues. The Auditor noted a shift in the University’s approach to the actuarial assumptions this year whereby it had adopted a more balanced position for reporting pension liability on the balance sheet.
• Risk 4 Accounting for capital projects – no issues
• Risk 5 Recoverability of debtors – no issues
• Risk 6 Loan covenants and going concern – no issues

In terms of the Medco accounts, under the two significant risks of revenue recognition and management override of controls, no issues had been identified.

The Auditor had considered a number of other areas – student numbers data, consolidation, partnerships – and no issues had been identified.

Finally the Auditor had made two low priority recommendations around IT access control policy and prepayment schedules.

RESOLVEDTO RECOMMEND:

thatthe External Auditor’s Report be approved by the Governing Body.

75.Data Assurance Annual Report 2014/15 [Paper H58]

Members of the Committee received Paper H58, Data Assurance Annual Report 2014/15. The Report, and the assurance derived from both internal and external auditors, was intended to enable the Committee to gain assurance around the management and quality assurance of data provided to HEFCE. One of the key ways in which the University ensured that it complied with requirements around data returns was through the work of the Data Integrity Group founded in 2009.

In terms of the recent HEFCE Student Data Audit, the University had identified the issues at an early stage and had taken immediate steps to address these, particularly those around the HESA return. HEFCE was content with the University’s response to the issues.

The work of the Christ Church Process Improvement Programme, discussed earlier in the meeting, was focusing attention on improving the integrity of data in the student record return.

The final section of the Report provided the opinion of the Audit Committee that the institution’s data assurance controls and governance arrangements were adequate and effective.

The Chair requested that a diagram, detailing how the various groups involved with data assurance work within the University related to each other, be brought to the next Committee meeting in February. She also resolved to attend a meeting of the Data Integrity Group as her predecessors had done.

RESOLVED:

that paper H58 be approved.

76.Draft Annual Report of the Audit Committee 2014/15 [Paper H59]

Members of the Committee received Paper H59, Draft Annual Report of the Audit Committee 2014/15. The Committee considered that the Report had covered its work over the year effectively, but one member considered that the lengthy discussion over the University’s international agenda could have been included in the Report. It was agreed that the issue will be covered under the Risk Management section, and that the amendment will be made before the Report was submitted to the Governing Body for approval.

RESOLVED TO RECOMMEND:

that, subject to the amendment above, the Draft Annual Report of the Audit Committee 2014/15 be approved by the Governing Body for onward transmission to HEFCE.

77.Internal Audit Annual Report 2014/15 [Paper H60]

Members of the Committee received Paper H60, Internal Audit Annual Report 2014/15. It was a Report compiled by the outgoing Internal Auditor and represented a factual account of their work.

RESOLVED TO RECOMMEND:

that Paper H60 be approved by the Governing Body before onward submission to HEFCE.

78.Internal Audit Recommendations – CCCU Management Control Report

[Paper H61]

Members of the Committee received Paper H61, Internal Audit Recommendations – CCCU Management Control Report. The Assistant Director of Finance [Accounting and Regulatory Systems] drew the Committee’s attention to a number of outstanding responses to recommendations, which mainly related to the IS Governance Review, and work was ongoing in this respect.

The Chair commented that a number of actions had revised completion dates by the end of the calendar year, and she cautioned that revised completion dates should be realistic and achievable.

NOTED

79.Internal Audit Progress Report [Paper H62]

Members of the Committee received Paper H62, Internal Audit Progress Report. Two audits had been completed, and others had commenced. Some changes to the Audit Plan were detailed. The Chair highlighted a number of typographical errors with regard to scheduled dates for audits.

Follow-Up of Previous Recommendations

The follow-up Report had tracked the University’s progress against actions on a number of audits and across the high/medium/low categories. The Auditor was satisfied regarding the accuracy of the status of progress against follow up actions.

Business Planning, Budgeting and Financial Forecasting

The audit had received an overall rating of amber/green with two medium rated recommendations. The first related to the design of the control framework whereby the viability of courses was assessed but there was no assessment of individual subjects within a course. The second related to the application of, and compliance with, the control framework whereby a number of concerns were raised by budget holders around the business planning process.

A further section of the Report provided additional feedback on good practice identified within the University’s approach to business planning, and there was a section on good practice identified across the sector for the University to consider.

The Director of Finance commented that robust processes were in place, but improvements could be considered to the monitoring arrangements for the performance of courses. A degree of granularity was required that the system was not yet set up to recognise. The Pro Vice-Chancellor (Resources) highlighted the annual quality review process being taken forward by the Pro Vice-Chancellor (Education and Student Experience), which aimed to tackle some of these issues.

NOTED

80.TRAC Update [Paper H63]

Members of the Committee received Paper H63, TRAC Update, for information. The Director of Finance confirmed that the University was a leading institution in the way it had improved the usefulness of TRAC for internal management information purposes. There will be a presentation on TRAC for the benefit of new Committee members at the next meeting in February.

NOTED

81.Risk Management: Termly Report of the Vice-Chancellor [Paper H64]

Members of the Committee received Paper H64, Risk Management: Termly Report of the Vice-Chancellor. The Clerk highlighted the following points from the Report.

• No new high level risks had been added to the University Risk Register and none had been removed as a result of this term’s risk review.
• Outstanding actions against one risk concerning the recruitment of European and International students were reported on the exception reporting basis agreed by the Committee.
• The risk concerning student recruitment and retention targets had been downgraded from a black rated risk to a red rated risk in view of successful recruitment of student numbers through Clearing for September 2015 intake.
• SMT had recommended that moving forward the retention aspect of the above risk should be separately identified in the University Risk Register under the ownership of the PVC (Education and Student Experience).
• It was recommended that from next term an overarching risk relating to the Christ Church Process Improvement Programme should appear in the University Risk Register under the ownership of the PVC (Resources).
• An update was provided regarding progress with risks associated with Master Planning following presentation of the project risk register at the last Audit Committee Meeting.

In terms of exception reporting of outstanding risks, Risk 14 Failure to recruit European and International Students, a new internationalisation strategy was due to be presented for approval by the Academic Board before reporting to the Governing Body.