10 THE TRAFFORD COLLEGE GROUP Minutes Of The Audit

10 the trafford college group minutes of the audit committee meeting held at 6.00pm on wednesday 25 november 2020 via microsoft teams

10
THE TRAFFORD COLLEGE GROUP
Minutes of the Audit Committee Meeting
held at 6.00pm on Wednesday 25 November 2020 Via Microsoft Teams
Present:
Jed Hassid
Louise Richardson
Dawn Cole
Brian Bradley
Ian Duncan
(Chairperson)
In Attendance:
Barry Watson
Andrea Bennett
Katherine McBurnie
Anthony Gribben-Lisle
Michael Frankish
Jenny Alger
Natalie Hinchcliffe
(Corporation Secretary)
(Director of Finance & Strategy)
(Associate Director Finance)
(Data Protection Officer)
(Grant Thornton)
(Grant Thornton)
(BDO)
Minute No
AUD/45/20
Apologies for Absence
The Corporation Secretary (CS) reported that no apologies for absence
had been received.
AUD/46/20
Declarations of Direct or Indirect Interest in any of the Meeting’s
Business Items
LR reported that she had recently been appointed a s a Governor at
Cheadle and Marple Sixth Form College (CAMSFC) and ID reported that he
had also recently been appointed as a Co-opted member of the Audit
Committee at the same institution.
The declarations were duly noted with no action required to be taken.
The Financial Statements and Regularity Auditors (FSRA) declared an
interest in agenda item 15 (Letter of Engagement – Financial
Statements and Regularity Auditors) and it was resolved that they
should leave the meeting after they had presented the item.
AUD/47/20
Minutes of the Meeting held on 21 September 2020
The minutes of the meeting were approved and accepted as a correct
account of the meetings proceedings subject to a textual amendment to
Minute Number AUD/37/20 – Assessing timings of cash flows.
The Corporation Secretary undertook to amend the minute as agreed.
Action: Corporation Secretary
AUD/48/20
Matters Arising from the Minutes
i.
AUD/42/20 – Audit Committee Self-Assessment 2019/2020 – Membership
Arrangements Update
The CS advised the Committee that the recruitment process for the
appointment of two independent members to the Board of the Corporation
had commenced and that the Governors’ Appointment Panel was meeting on
1 December 2020 to assess the shortlisted applicants.
The CS further advised that one of the candidates had extensive
experience and relevant qualifications in relation to Audit and
Accountancy and if appointed she would be a valuable addition to the
membership of the Committee.
It was noted that a final decision on the appointments would be made
by the Board of the Corporation at its meeting on 15 December 2020.
Action: Board of the Corporation
There were no other matters raised by members arising from the
minutes.
AUD/49/20
Data Protection Progress Report – November 2020
The Data Protection Officer (DPO) presented a report which provided
members with an overview of the latest position regarding Data
Protection and its effectiveness across the Group.
The DPO provided the Committee with an overview relating to the
following issues:
*
The Data Protection Framework and the increases in the use of
Blended Learning across the Group.
*
Merger update in respect of the proposed merger with CAMSFC.
*
Training for Staff.
*
Subject Access Requests.
*
Data Breaches.
The DPO advised that a minor review of the Data Protection Policy was
being undertaken and that discussions with Trades Unions had taken
place regarding the use of Data Images to a satisfactory conclusion.
He further advised that good progress was being made in planning for
the proposed merger with all the necessary requirements in place along
with mandatory training for staff which had been well attended.
With regard to Data Breaches and Subject Access Requests it was noted
that there was nothing further to report since the last update and
currently there was a low risk level in these areas.
Members raised a number od issues arising from the report as follows:
*
How many members of staff had completed the mandatory training and
how many remained outstanding? THE DPO advised that the HR
Department were currently collating the figures, but the vast
majority of staff had completed the required training including
all new staff through the induction process.
*
A member asked if there was anything to note in respect of the
near misses? The DPO advised that there was not and outlined the
actions taken in respect of data information sharing at the Group
in order to mitigate and minimise any risk.
*
A member asked concerning the extent to which there was liaison
with the solicitors in respect of Due Diligence for the merger
proposal. The Director of Finance & Strategy (DFS) advised that
the Legal Due Diligence Phase 1 had been completed and that any
identified risks were reported to the Transition Board on a
monthly basis. The DFS also confirmed that the management
Strategic Oversight Groups pick up the practical issues arising
through their regular meetings and that she was not aware of any
current issues relating to the Legal Due Diligence Phase 1 and
Data Protection.
There were no further issues raised by members arising from the report
and it was resolved that it be noted.
AUD/50/20
Internal Control Weaknesses Disclosure for inclusion in the Annual
Report and Financial Statements
The DFS presented a report which advised members that, for the first
time, there was a requirement for disclosures to be made, within the
Statement of Governance and Internal Control of the Annual Report and
Financial Statements, relating to any significant internal control
weaknesses or failures that have arisen and the action taken.
The DFS informed the Committee that the presented proposals comply
with the Casterbridge model and that she had discussed the proposed
disclosure with both the Chairperson of the Audit Committee and both
the Internal auditors and the FSRA who were content with the
proposals.
It was also advised that the disclose had been added to the draft
accounts (page19).
In this context the DFS provided the Committee with a summary of the
Internal audit findings for 2019/2020 and the proposed disclosures for
inclusion in the Annual Report.
The DFS advised that there had been 5 high category recommendations
arising from the internal audit reports and detailed the actions that
management had taken to improve the internal controls.
A member commented that it would be helpful to put the number of High
recommendations from the Internal Audit Reports in the context of all
the other recommendations and the DFS undertook to add this suggestion
to the narrative.
The FRSA (JE) advised that the proposed approach was not out of kilter
with what was happening in the sector and that the inclusion of
context as suggested would be helpful.
The DFS undertook to amend the narrative accordingly.
Action: Director of Finance & Strategy.
The Committee had a detailed discussion around the suggestion of
putting more detail in than was required by Casterbridge and the
inclusion of dates for actions/ implementation.
The Committee also discussed linking the disclosure statement with the
Committee’s Annual Report to the Board of the Corporation.
The DFS explained why in her view the arrangements as detailed should
remain as presented, and the Committee agreed that given that both
sets of Auditors were content with the proposals then they should
remain unchanged in the context of the issues discussed.
There were no further issues raised by members arising from the report
and after due discussion it was unanimously resolved that the
Committee note and support the disclosure statement, as detailed in
the report, with the addition of context for the High rated audit
recommendations.
Action: Director of Finance & Strategy
AUD/51/20
Going Concern 2019/2020 Update and Next Steps
The DFS presented a report which provided the Committee with evidence
to support the Going Concern recommendation for 2019?2020 to the Board
of the Corporation.
The DFS reminded members of the process for going concern that had
been approved by both the Audit Committee and Board of the Corporation
in July 2020 and provided a brief over of the process.
The DFS identified the current position to support going concern
within the following key areas:
*
Forecasts and Budget. It was advised that the forecasts and budget
had been considered and supported by the Resources Committee at
its meeting on 18 November 2020. The DFS detailed the position in
terms of best case (exceeded), mid (in line) and worst case
(slightly off) scenarios. In terms of the worst case position the
DFS advised that actions could be taken to get back to plan in
terms of reductions in costs. It was noted that the Board had
approved the budget mid case scenario at its meeting in July 2020.
*
Cash Flow. The DFS advised that there had been several cash flow
improvements since May 2020 and provided the Committee with full
details of the reasons for the improvements. It was further
advised that the cash position, at the moment, was particularly
strong but that was due to a number phasing factors, relating to
the GMCA Grant, the Capital Cash allocation and Office for
Students (OfS) funding. The DFS also advised on the position if
the land sale at Stockport was not realised which was still
positive and informed that the SMBC Planning Committee was meeting
on the 26 November 2020 with a recommendation to approve the
application.
*
Bank Covenants. It was advised that the performance against the
Bank Covenants was better than planned and that they were all RAG
Rated as green for 2019/2020. With regard to the forecasts for
2020/2021 it was advised that the predicted performances were all
RAG Rated green other than the worst case scenario for debts
service and operational leverage. The DFS outlined the mitigating
actions that could be taken to address these scenarios in order to
prevent them occurring. With regard to the forecasts for 2021/2022
the DFS advised that all scenarios were predicted to be achieved
and were green RAG Rated.
*
Financial Health Score. The DFS advised that for 2019/2020 the
Group had met its target of requires improvement and that the
position had improved across all three ratios compared to
2018/2019. The DFS also provided information for the Financial
Health score forecasts for 2020/2021 which was assessed as being
good for all three scenarios.
*
Assessment of other risks and the merger proposal with Cheadle and
Marple Sixth Form College. The DFS provided the Committee with
details of the other risks that had need considered including
Covid19 and Brexit and detailed the mitigating actions in relation
to the risks. The DFS also advised of the up to date position in
respect of the merger proposal and that due to the timings it
would not impact on the going concern assessment.
The DFS provided, in the report, a summary of all the assessments for
each area of consideration and advised that given the evidence
presented the recommendation was that the going concern assessment was
appropriate and that there were no material uncertainties applicable.
The DFS also presented details of the proposals for the appropriate
wording relating to going concern for the Annual Report and Financial
Statements.
Members raised several issues/ made several comments arising from the
report as follows:
*
A member thanked the DFS for her clear and concise report which
had presented the required evidence relating to going concern very
clearly and accurately.
*
A member commented that it was a very thorough report and that all
her questions had been pre-empted by the report. The member asked
for the FSRA view of the report. JE commented and agreed that it
was a very detailed report which had made their audit work a lot
easier and she thanked the DFS and the finance team for their
support. It was added that they supported the assumptions
including sensitivities with appropriate headroom and that there
was necessarily a lot of mitigation actions. MF commented that the
presented scenarios excluded the merger proposal and if the merger
did require cash then that was a scenario that had not been
considered. The CS reminded members of the Group’s red lines
relating to the matter which would preclude this and the fact the
Group had been given a circa £400,000 pre-merger grant to support
the merger proposal.
After due discussion and consideration, it was unanimously resolved
that the going concern basis and wording in the Financial Statements
be recommended to the Board of the Corporation for approval.
Action: Board of the Corporation
AUD/52/20
Draft Annual Report and Financial Statements for the period ending 31
July 2020
The DFS presented a report which included a copy of the Draft Annual
Report and Financial Statements for the period ending 31 July 2020.
The DFS advised that the income and expenditure figures had been
considered by the Resources Committee at its meeting on 18 November
2020 and advised members that everything in the Annual Report and
Financial Statements was as to be expected but drew the Committees to
the key issues in respect of the following changes:
*
The impact of Covid19.
*
Post Event balance sheets concerning the land sale at Stockport
College.
*
Going concern as discussed earlier in the meeting.
*
Merger with CAMSFC which was still on going.
*
New Energy and Disclosure Reporting as previously considered by
the Committee.
The FSRA (MF) reminded members that their work was still ongoing and
that there was likely to be a number of very low impact changes in
terms of additional closures into the accounts.
Members raised a number of issues arising from the presentation of the
Annual Report and Financial Statements 2019/2020 as follows:
*
A member sought clarification regarding the statement concerning
the improvement of achievement rates compared to 2018/2019 and the
decline in achievement rates for apprenticeship provision. The DFS
explained the performance of apprenticeship provision in terms of
the nature of the provision, the impact of Covid19 and comparisons
with national benchmarks to support the statement.
*
A member asked why the narrative relating to equipment inherited
from the local authority was still in the statement and was it
necessary. The DFS confirmed that it was historical and no longer
needed and agreed to remove the relevant sentence.
Action: Director of Finance & Strategy
*
A member commented that the Committee needs to know if the pension
actuarial loss was going to have an impact and how the Group
compared to other providers. The DFS advised that the numbers were
significant and that the percentage figure for the Group was not
out of kilter with the sector.
*
A member sought clarification around the use of “expenditure” for
the graphics in the Resources narrative and sought clarification
around the apparent disparity in staff numbers in the report. The
DFS explained the reasons for the use of expenditure in the
graphics and staff numbers to the members satisfaction. A member
also drew the DFS’s attention to a spelling error relating to the
Principle Risks and Uncertainties which she took to amend.
Action: Director of Finance & Strategy
*
The CS advised that there are number of recent changes to
Governance membership that need to be incorporated in the
Financial Statements and agreed to update the DFS with the
changes. It was also noted that the date that the Board of the
Corporation would consider the Annual Report and Financial
Statements had been changed to 15 December 2020.
Action: Corporation Secretary
There were no further issues raised by members and after due
discussion and consideration it was unanimously resolved that, subject
to any minor adjustments made by the FSRA, the Annual Report and
Financial Statements 2019/2020 be recommended to the Board of the
Corporation for approval.
Action: Board of the Corporation
AUD/53/20
Audit Findings 2020
The FSRA presented their Audit Findings Report for 2020 and the
auditor commented that the going concern piece of work produced by the
DFS had been excellent and that the audit had gone smoothly with both
teams working well together particularly in the context of remote
working.
He added that the majority of the audit work had been completed and
that there was a low number of outstanding items to be completed.
The FSRA further advised that the confirmation of the direct grant
funding from the ESFA had not yet been received and if it was not
received by 15 December 2020 then it could impact on the signing off
of the accounts.
The Audit Findings Report covered the following matters:
*
Status of the audit and audit opinion.
*
Overview of the audit findings.
*
Observations in respect of significant and other risks.
*
Going Concern.
*
Other communication requirements.
*
Internal Controls.
*
Misstatements.
*
Regularity findings.
*
Independence and ethics.
*
Fees and non-audit services.
*
Communication of audit matters with those charged with Governance.
The FSRA, in particular, drew the Committee’s attention to issues
associated with the Pension Scheme Valuation in respect of:
*
the significant movement in numbers compared to last year,
*
the risks associated with the material uncertainty regarding
property assets held in the fund,
*
the impact of Covid19,
*
the roll forward of actuarial reports to the year-end which could
lead to material movement and additional disclosures in the
accounts.
The FSRA advised that they were working with the Greater Manchester
Pension Fund in order to resolve the valuation issues.
Action: Grant Thornton
A member asked about the time scale relating to this issue and how
long it would take to resolve.
The FSRA advised that he was confident it would be resolved by the
sign off date but was more concerned about the ESFA confirmation of
grant funding.
A member asked where the disclosure would sit within the accounts and
was advised that it would sit in the judgements in applying accounting
policies and key sources of estimate uncertainty and that the
disclosure was quite common in terms of wording.
The Chairperson commented that the implications are minimal and well
understood in terms of the disclosure.
The FRSA confirmed that there were no issues arising from their
Regularity Audit work which was duly noted.
A member asked, given the enhancement of fees last year, for an
overview of the FRSA fee position considering the positive issues
around going concern and that there were no misstatements.
The FRSA advised that he expected the fee position to be as reported
but that if there was a requirement for further work post 15 December
2020 due to the failure of the ESFA to deliver the confirmation of
grant funding then the position may need to be reviewed.
A member sought clarification around the issue of salary increase
assumption included in the actuarial report and the FSRA confirmed
that the matter had now been resolved.
A member commented around a numerical error relating to the fees
statement which the auditor undertook to amend.
Action: Financial Statements and Regularity Auditor
A member asked about the draft letter of representation as it did not
appear to be included in the Auditors report.
The FSRA advised that unfortunately it had been omitted and that it
would be sent out to the Finance team. It was further advised that the
draft letter would be unchanged from previous letters.
Action: Financial Statements and Regularity Auditor
There were no further issues raised by members arising from the report
and after due discussion and consideration it was unanimously resolved
that it be recommended to the Board of the Corporation for approval.
Action: Board of the Corporation
AUD/54/20
Self-Assessment of Compliance with Regularity and Propriety
Requirements 2019/2020
The DFS presented the completed Self-Assessment Questionnaire in
respect of the Group’s compliance with Regularity and Propriety
requirements for 2019/2020.
There were no issues raised by members arising from the completed
Self-Assessment Questionnaire and it was resolved that it be
recommended to the Board of the Corporation for approval.
Action: Board of the Corporation.
AUD/55/20
Annual Report of the Audit Committee to the Board of the Corporation
and the Principal 2019/2020
The CS presented a report, which included a copy of the Draft Annual
Report of the Audit Committee to the Board of the Corporation and the
Principal for the period ending 31 July 2020 for the Committee’s
consideration.
Members made several comments relating to the consistency of wording
and the inclusion of the work undertaken by the Committee regarding
the monitoring of the performance of both sets of Auditors. The CS
undertook to amend the report accordingly.
Action: Corporation Secretary
Regarding the statement relating to the Financial Statements it was
agreed that this would need to be updated in the light of the
Committee’s deliberations and recommendations concerning the matter.
It was also agreed that the issue of Going Concern should be further
developed in the report.
Action: Corporation Secretary
After due discussion and consideration, it was agreed that the CS
should amend the Annual Report as detailed and that final sign off be
confirmed by the Chairperson of the Audit Committee before submission
and recommendation to the Board of the Corporation for approval.
Action: Corporation Secretary/ Chairperson of the Audit Committee/
Board of the Corporation
AUD/56/20
Internal Audit Progress Report
The Internal Auditors presented their progress report for the Audit
Committees consideration.
The Internal auditor advised of the progress that had been made in
year to date and added that the Internal Audit report into
Safeguarding in Lockdown would need to be added to the Annual Report
of the Audit Committee for 2019/2020.
Action: Corporation Secretary
There were no issues raised by members arising from the report and it
was resolved that it be noted.
AUD/57/20
Internal Audit Reports 2019/2020
The Committee received an Internal Audit report as follows:
The Internal Auditor presented a report arising from the review that
had been undertaken in order to assess how the safeguarding needs of
students were being met due to the changes circumstances caused by
Covid19 and to provide assurance that the Group was still meeting its
legislative requirements in terms of Safeguarding in Lockdown.
The Internal Auditor advised that the audit had identified several
areas of good practice and that there were 4 low recommendations
arising from the report which had been agreed and implemented by with
management with one recommendation still in progress.
It was further advised that the level of assurance for design was
Substantial – Green and for Operational Effectiveness it was Moderate
– Blue.
Members raised several issues arising from the report as follows:
*
A member commented that there was some fantastic work evidenced
from the report and asked how the staff were coping with the
increased workload from a Safeguarding perspective. The DFS
advised that additional resources had been made available to
support the staff and that currently there were no delays to
dealing with cases.
*
A member asked how mental health issues were being addressed
arising from lockdown and the DFS provided a detailed explanation
of the actions that had been initiated at the Group to address the
identified issues.
There were no further issues raised by members arising from the report
and after due discussion and consideration it was resolved that it be
recommended to the Board of the Corporation for approval
Action: Board of the Corporation
AUD/58/20
Board Assurance and Risk Management Framework 2020/2021
The DFS presented a report, which updated the Committee in respect of
the Board Assurance and Risk Management Framework.
The DFS drew the Committee’s attention to the error relating to Risk
12 which was duly noted.
The report provided members with a summary of the proposed changes to
risk scores considered by the Risk Management Group at its most recent
meeting.
The DFS went through in detail the changes in scores which related to
the strategic risks and advised the Committee that the following risks
needed to be escalated to the Board of the Corporation as the net
risks were in excess of 15:
*
Failure to deliver financial sustainability.
*
Failure to manage the impact of the potential merger which could
have a negative impact in destabilising the Group.
There were no issues raised by members arising from the report and
after due discussion and consideration it was resolved that the
identified escalations in risk be presented to the Board of the
Corporation.
Action: Director of Finance & Strategy
AUD/59/20
Letter of Engagement – Financial Statements and Regularity Auditors
The DFS presented a copy of the proposed Letter of Engagement with the
Group’s Financial Statements and Regularity Auditors – Grant Thornton.
The FRSA (MF) went through the letter identifying the main change from
previous practice around the limit of indemnity of £1m for the
Regularity Audit which brought Grant Thornton in line with other audit
firms.
The DFS advised on the background to the proposed letter, including
the reasons for its delay and discussions that had been held with the
ESFA who had confirmed that this amendment was the norm for the
sector.
A member asked about the arrangements going forward for 2021 and the
CS advised that Grant Thornton were on the second year of a three-year
contract which was subject to an annual satisfactory performance
review.
There were no further issues raised by members arising from the
updated Letter of Engagement and it was resolved that the Chairperson
of the Audit Committee be authorised to sign the document as detailed.
Action: Chairperson of the Audit Committee
AUD/60/20
Any Other Business
There were no matters raised under any other business.
AUD/61/20
Date of Next Meeting
Following discussion, it was agreed that the next meeting would be
held at 6.00pm on Monday 26 April 2021.
The CS advised that the Summer term meeting would now be held on
Monday 28 June 2021.
Action: Corporation Secretary
The meeting closed at 7.46 pm.
The Data Protection Officer left the meeting at 6.14 after the
consideration of Agenda item 5.
The Financial Statements and Regularity Auditor (MF) joined the
meeting at 6.30pm during the consideration of Agenda item 7.
The Financial Statements and Regularity Auditors left the meeting at
7.38 pm during the consideration of Agenda item 15.
G1.2.5/JBW/YR/03.12.20