Minutes of the Meeting of the Audit Committee of the Council, Friday, 15 November 2013

AUDIT COMMITTEE

Minutes of the meeting of the Audit Committee of the Council, Friday, 15 November 2013.

PRESENT:Mr Nick Tamblyn (in the Chair)

Ms Amanda Allen

Mr David Newcombe

Mr Paul Pharaoh

Mr Surinder Sharma

Mr Paul Williams

APOLOGIES:

BY INVITATION:Mr Mike Russell (Chair of the Finance & Major Projects Committee)

IN ATTENDANCE:Mr Richard BaconMr Andrew Bush

Mr Anthony FelthouseMs Katherine Millatt

Mr Alan HawkesworthProfessor Helen Higson

Mr Mark HodgsonMr John Walter (Secretary)

DECLARATIONS OF INTEREST

13/99NOTED:

that there were no new declarations of interest from members, or from those in attendance, with respect to any agenda items.

MINUTES

13/100RESOLVED:

that the Minutes of the meeting of the Committee held on 20 September 2013 be approved and that they be signed by the Chairman.

MATTERS ARISING FROM THE MINUTES

13/101RECEIVED:

a summary of matters arising from the minutes of the previous meeting in AU/13/53.

Audit Committee Agenda and Papers (minute 13/67)

13/102NOTED:

• that members were disappointed that the agenda and papers had been circulated unacceptably late on the Monday before the meeting,affording little time for their appropriate scrutiny.
• that a new format for the Audit Committee agenda has been adopted for this meeting, which aimed to clarify the items for discussion and agreement from those for noting and information. Members of the Committee were invited to provide feedback on the format to the Secretary.
• thatmembers found the quality of the documentation to be generally good and the new coversheets were helpful in providing a summary of the purpose of papers and indicating the action required by the Committee.

13/103RESOLVED:

• That in future the aim ideally should be to circulate papers 14 days before the meeting, with an absolute deadline of no later than 10 days before. If some papers were not available at this point then a draft should be circulated with an update provided later, perhaps electronically if necessary.

Action: Secretary

Membership and Chair of the Audit Committee (Minutes 13/68 & 13/70)

13/104RECEIVED:

a report that the Nominations Committee had approved the re-appointment of Mr David Newcombe to the Audit Committee for a further three year term for the period ending 31 December 2016. The Nominations Committee had started the process of seeking nominations for a new member of Council and Chair of the Audit Committee to replace Mr Nick Tamblyn when he completed his second term of office (31 July 2014).

Transparent Approach to Costing (TRAC) Return (M13/80)

13/105RECEIVED:

an oral progress report from the Chief Financial Officer on the proposed approach to the production of TRAC data, noting that Aston would be utilising a much more sophisticated and efficient academic staff time allocation system developed by Aberdeen University which should improve the TRAC submission for 2013/14.

13/106RESOLVED:

that instead of requesting the internal auditor to undertake a review of the process for the preparation of the next TRAC return, KPMG should be invited to provide an overview report on the process adopted to prepare the return, given that they had been providing expert advice to the University in this area.

Action: Chief Financial Officer

Implications of the Adoption of International Financial Reporting Standards (IFRS) (M13/94)

13/107RECEIVED:

an oral report from the Assistant Finance Director on preparations for the adoption of IFRS, noting that the outcome of HEFCE consultations on the adoption of a newStatement of Recommended Accounting Practice (SORP)would be published later this year which could impact on the University’s approach to adopting IFRS.

13/108RESOLVED:

that the Committee should be provided with a brief update on the IFRS position following the publication of the outcomes of the HEFCE SORP consultation at the next meeting, with a more detailed report to be received at May 2014 meeting.

Action: Assistant Director of Finance

IMPROVEMENT OF PROCESS FOR PREPARATION OF EXTERNAL FUNDING RETURNS AND DATA QUALITY

Student Recruitment 2013/14

13/109RECEIVED:

Paper AU/13/53 and an oral report from Professor Helen Higson, Deputy Vice-Chancellor, on student recruitment for 2013/14, noting that, overall, the University had achieved its student number and tuition fee targets. Efforts were being made to reduce the impact of any possible HEFCE clawback in respect of over-recruitment of Core Home-EU undergraduates. Recruitment of postgraduate students was being pursued vigorously for intakes later in the current academic year. Planning for next year’s student targets was proceeding well, with most growth anticipated to be in taught postgraduate student numbers. A review of this year’s international recruitment suggested that Aston’s applicants had been affected by financial difficulties, which had prompted a review of scholarships to be offered in 2014/15 and it was anticipated that fewer but more substantial scholarships would be offered. Aston had recently been informed that it was successful in a bid to HEFCE for £1.5 million to provide fee scholarships to postgraduate students.

Progress Report on Preparation of External Funding-related Returns

13/110RECEIVED:

anoral update from Professor Higson on progress in implementing measures to improve the quality of student data and the accuracy of external funding-related returns. She also presented Paper AU/13/54 which provided an update on progress in responding to audits of data quality management and Student Loans Company Arrangements, and a new policy clarifying the ownership and responsibilities associated with student record data.The Data Quality Management Group was meeting monthlyto address system and process issues and to improve forecasting of student numbers and associated income streams. A range of measures were being implemented to improve data quality, such as the automation of the process for keeping students’ expected end dates up-to-date, piloting an audit trail of key data changes on SITS (the University student record system), increased staff training for all SITS users, and a detailed field-by-field action plan to address issues identified with the preparation of the HESA return. It was anticipated that the University would have implemented responses to all the issues identified by internal and external auditors in relation to student data quality by the end of this calendar year. The latest HESA student return had been submitted on time and the HESA/HESES reconciliation for 2012/13 had been completed much earlier this year than hitherto. Registry and Finance staff were working together more effectively, and the next major area for review and improvement was in relation to student number and fee forecasting.

13/111RESOLVED:

that the Committee should be informed when the issues relating to student data quality and Student Loans Companyarrangements raised by internal and external auditors had been addressed.

Action: Deputy V-C

Key Information Sets (KIS)

13/112RECEIVED:

Paper AU/13/55 which provided an update on the action plan for responses to issues raised in the HEFCE Audit of Aston’s KIS held in November 2012. It was agreed that the wording of the response to the issues around the accreditation of programmes should be reviewed and clarified.

Action: Deputy V-C

Compliance with UK Border Agency (UKBA) requirements

13/113RECEIVED:

Paper AU/13/56 and an oral report from the Deputy Vice-Chancellor, on progress in implementing the action plan for responses to the Internal Audit of Aston’s compliance with UK Border Agency requirements. A group, comprising staff from across the University, was meeting fortnightly to ensure that all the issues were addressed effectively. It was noted that members of the UKBA education team (HEAT) had recently visited the University and had commented favourably on Aston’s procedures.

13/114RESOLVED:

that the Committee should be informed when the UKBA compliance issues raised by internal auditors had been addressed.

Action: Deputy V-C

STRATEGIC RISK REGISTER

13/115CONSIDERED:

Paper AU/13/57, comprising an updated version of the Institutional Risk Profile and Strategic Risk Register as at November 2013, which had been reviewed by the Executive Team at its last meeting.The format of the register was as per the revisions discussed and agreed at the last meeting of the Audit Committee. The format had also been discussed with colleagues from PWC to ensure that it reflected current best practice.

13/116NOTED:

i)thatmembers welcomed the new format for the Risk Register which represented a major improvement and should enable the University to be more effective in assessing progress in identifying and addressing the various strategic risks.

ii)that members felt that a number of the risks identified as “environmental” should also be regarded as “operational”, such as failure to recruit high-quality overseas students and failure to improve research reputation and funding. It was agreed that the Executive should consider reclassifying these risks.

iii)thatthe student residence risk had increased and the Finance Committee would be reviewing the risk and reporting to Council on the proposed actions being taken to mitigate the risk.

iv)that members were invited to submit any further comments on the Risk Register, particularly in relation to possible actions to mitigate risks, to Mr Alan Hawkesworth.

ACTION: Head of Strategic Risk & Insurance

EXTERNAL AUDIT REPORT

13/117CONSIDERED:

Paper AU/13/61, comprising a report from KPMG LLP, External Auditors to the University, on their audit findings for the year ended 31 July 2013.

13/118NOTED:

i)KPMG anticipated issuing an unqualified audit opinion for the year on the University and subsidiary financial statements, following the approval of the financial statements by the Audit Committee and Council.The treatment of the following matters wascurrently being discussed with Finance Officers:

• Provision in the accounts for the outcome of the final HESA/HESES reconciliation for 2012/13, in the order of a £100,000 reduction in income.(Secretary’s note: this was later confirmed to be £174,000)
• Review of the outcome of the VAT re-profiling exercise on the EBRI ERDF grant and consequent consideration of the recoverability of the associated capital grant debtor of £270,000.

(Secretary’s note: this was later confirmed to be £158,000)

The financial statements would be updated as a result of the above reviews and revised accounts would be presented to Council for approval.

Action: KPMG and Chief Financial Officer

ii)that KPMG’s audit highlighted four management letter points of high priority (audit preparation and financial statements production processes; monitoring and reporting of research activity; Student Loan Company reconciliation; and IT control environment) and two of medium priority (formal policy for clearing outstanding sales leger credits and unallocated research receipts; and purchase cut-off and procurement). In addition, KPMGhighlighted one management letter point of medium priority (review of manual journals) and one of low priority (periodic confirmations of establishment lists) which had been identified in the previous year’s audit but had not yet been addressed. The University was taking positive action to address all of the above issues identified by KPMG.

iii)thata staff reorganisation process was underway within the finance department which aimed to deliver efficiencies, increase the skill levels within certain teams and to implement stronger controls. Consultation ended on the 14th October and since then a number of redeployments had been agreed. The department had maintained its previous headcount number but four members of staff had left or would leave as part of the process. Recruitment to resultant vacant posts would result in the appointment of more qualified accountants and a general strengthening of the department going forward.The team would be understrength until the recruitment process was complete. The internal auditor would be invited to assist with the development of the plan for implementing the scheduled process improvements.

Action: Chief Financial Officer to report on progress to the May 2014 meeting

iv)that KPMG’s observations about the quality of financial systems for monitoring and reporting of research activity appeared to Committee members to be discordant with the University’s aspirations to be research-led and to maximise research income. Mr Hodgson reported that following the restructuring of the finance department a new Research Finance Manager, dedicated to managing the finances of the University research portfolio, would be appointed in order to address the current deficiencies. This new Manager would lead the creation of a new centralised research team allowing for a common approach to research across all the schools whilst increasing the robustness of the reporting and monitoring. Aston would be utilising the new Agresso research award management system to create a definitive analysis of research expenditure built up from project level.

Action: Chief Financial Oficer to report on progress to May 2014 meeting

v)that the new Director of Information Services would be invited to attend the January 2014 meeting of the Committee, to report on the development of the University’s ICT strategy, and on progress in responding to issues raised by internal and external auditors concerning ICT systems, security and timeliness of follow up-action.

Action: Director of Information Services to report to January 2014 meeting

vi)that paragraph 5 on Fraud, in section 5 of the KPMG report should be reviewed with a view to making its content more specific to Aston.

Action: KPMG

13/119RESOLVED:

that the External Auditors be thanked for their Report, and that the Report be approved for submission to Council, subject to the resolution of the detailed outstanding audit points by Finance Officers and the Auditors.

Action: Chief Financial Officer/Secretary

UNIVERSITY ACCOUNTS

13/120CONSIDERED:

i)Paper AU/13/62, comprising the Report and draft audited Financial Statements for Aston University for the year ended 31st July 2013.

ii)Paper AU/13/64, setting out a draft letter of representation to KPMG.

iii)Paper AU/13/72, comprising the draft University Accountable Officer’s Annual Assurance Return to HEFCE for 2012/13.

13/121NOTED:

i)thatmembers welcomed the new and more succinct format for the Financial Statements, which could now be used to market the University in a variety of contexts.

ACTION: Chair /Chief Financial Officer

13/122RESOLVED:

i)that members should forward any comments on the Financial Statements to the Assistant Director of Finance by the end of business on Monday, 18 November 2013.

ii)subject to any comments received from members, to recommend that the Financial Statements for 2012/13 be approved bythe Council.

iii)to recommend that the letter of representation be approved by the Council and signed by the Pro-Chancellor, subject to any final adjustments to be made in the light of discussions between the University and KPMG.

iv)to recommend that the Accountable Officer’s Assurance Return for 2012/13 be formally presented to the University Council, in advance of its submission to HEFCE, subject to some minor amendments suggested by members (eg ensuring that HEFCE had been informed of the following changes: PWC new internal auditor, new lead partner for KPMG, and the new Chief Operation Officer).

Action: Secretary

CONFERENCE ASTON LIMITED ACCOUNTS

13/123CONSIDERED:

Paper AU/13/66, comprising the draft audited Financial Statements for Conference Aston Limited for the year ended 31st July 2013, the letter of representation from the University, and a letter of support from Aston University.

13/124NOTED:

i)thatthe Company had made a loss after taxation of £353,459 (2012: profit of £263,273) which had been added to the accumulated losses.

ii)that the Directors did not recommend the payment of a dividend.

iii)that members felt that the third paragraph of the report should be reviewed and revised, with a view to giving greater clarity as to the reasons for last year’s performance in which a loss was made.

Action: Assistant Director of Finance

13/125RESOLVED:

that the Financial Statements for 2012/13 be recommended to the University Council, subject to any points of detail reported by members to the Assistant Director of Finance.

Action: Assistant Director of Finance

ANNUAL REPORT OF THE AUDIT COMMITTEE

13/126CONSIDERED:

Paper AU/13/58, being a revised draft of the Annual Report of the Audit Committee for 2012/13, which incorporated comments received from members.

13/127RESOLVED:

i)that the Annual Report, revised in the light of comments made at the meeting, be submitted to Council for onward transmission to HEFCE.

ACTION: Secretary

ii)that the Chair should introduce the Annual Report to Council to highlight the main themes of the Committee’s discussions over the previous year and its ongoing concerns.

ACTION: Chair

VALUE FOR MONEY

13/128RECEIVED:

Paper AU/13/64, comprising a draft value for money (VFM) annual report for the year ended 31st July 2013 and a current year plan, and a proposed VFM Strategy.The Report aimed to provide a summary of the VFM achievements during the year for the Executive and the Audit Committee. Thestrategy emphasised the key role that VFMcould play in optimising resources to help achieve the Aston 2020 vision. As the University grew, there would be increasing pressure on its resources and it was vital that all expendituredelivered the maximum possible beneficial impact. The Chief Financial Officer (CFO) and Chief Operating Officer (COO) would be the University’s VFM champions to ensure that the strategy and benefits were realised.

13/129NOTED:

that members welcomed the new VFM strategy which should make a major contribution to future financial health of the University. However, members felt that the VFM report contained inaccuracies, omissions and inconsistences, requiring considerable further work to transform it into a useful document.

Action – Assistant Director of Finance

13/130RESOLVED:

that the new VFM strategy be submitted to HEFCE as an appendix to the Annual Report of the Audit Committee. As the outcomes of the strategy had yet to be reported formally, it was agreed that the VFM report to HEFCE for 2012/13 would take the form of the strategy itself.
Action – Secretary

INTERNAL AUDIT

Internal Audit Plan 2013/14

13/131RECEIVED:

Paper AU/13/60a and oral report from Mr Mark Hodgson, the Chief Financial Officer, on progress with the preparation on an internal audit plan for 2013/14. Three internal audit reports were due to be submitted to this meeting of the Audit Committee by PWC: risk management and assurance; sources of assurance for key initiatives identified in Aston 2020; and control environment health check. It was intended that these three pieces of work would inform a proposed strategic plan of work across the three year PWC contract along with an operational plan for this current year, 2013/14. However, none of the reports were available for the meeting and Mr Hodgson had discussed the reasons for the reporting delayswith PWC and reiterated the University’s requirements. PWC had apologised and had committed to providing the three audit reports originally planned for this meeting, the audit plan and a further piece of work, exact scope yet to be determined, for the Audit Committee meeting on 24 January 2014.