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Audit Committee Wednesday, 4 November 2009
Review of Data Handling Internal Audit had reviewed the methodology, framework and ownership of data
handing and concluded that some work was required in order to reach a satisfactory
level of control which included: the establishment of a central data handling policy;
mandatory staff training; and, clearly assigned responsibilities.
Follow Up of 2007/08 Network Security Review In 2007/08 Internal Audit had assessed the University’s controls over network security
infrastructure, systems and hardware. A follow-up review concluded that further
improvements were required but progress was hindered by the decentralised nature of
IT support services. The Committee noted that this issue would be considered in the
current restructuring discussions, and the Principal suggested that Audit Committee
should therefore aim to revisit this around May 2010. The Convener agreed that this
would tie in with the Committee’s plan to meet with the Director of IT.
Follow Up on Prior Recommendations Internal Audit concluded that out of 190 outstanding recommendations, 43% had been
fully implemented, 39% partially implemented and 18% not implemented. Whilst a
review of outstanding recommendations per year indicated a year on year reduction in
the total number, full implementation one year forward should be in the range 50% –
75%. It was noted that implementation of some recommendations was reliant on
significant system developments and restructuring within the University. Internal
Audit agreed that future update reports should include an explanation of the reason for
specific recommendations.
The Committee agreed the revised 2009/10 Internal Audit Plan which included a
review of Endowments and Estates Acquisition and Disposal.
AUDIT/2009/16. University Financial Statements
1
Review of the University Financial Statements for the Year ending 31 July 2009
The Group Financial Controller pointed out that there had been a minor prior year
adjustment relating to the inclusion of Strathclyde Pension Fund as a defined benefit
scheme under FRS 17. The Committee noted a £5.3m operating surplus which, whilst
£1.6m ahead of the original budget for 2009, was £1.6m less than the previous year
position; and a cash balance of £60.4m, a decrease on £6.7m on last year’s figure.
Factors impacting the financial statements included: a reduction in the market value of
endowments from £120.5m to £102.5m although dividend income had grown
marginally; an increase in the pension liability of £7m resulting in a net pension
liability of £66m; a salary increase of 3% in May 2008 and another 5% in October
2008 due to the national wage settlement; a reduction in interest receivable due to
reduced deposit interest rates; notional charges on the pension opening position
resulting in a decrease of £2.8m on the pension credit to the Income and Expenditure
Account; continued investment in Estates with £47m towards Capex projects funded
by £29m of capital grants, mainly from the Funding Council; this included the
purchase of a new residence at £14.5m.
There was uncertainty regarding future funding. The Funding Council recurrent grants
were likely to decrease given the pressure on public finances. In addition a number of
Funding Council grants, totalling c£6m to the University, such as those provided for
knowledge transfer, widening access and disabled premium had been consolidated by
the Funding Council into the Horizon Fund. Allocations from this fund would be
based on government outcomes. Overseas student growth projections within budgets
were fairly aggressive and this was an area of high competition. Research volume in
2008/09 had levelled but 3% - 5% income growth had been projected in 2009/10 and
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Audit Committee Wednesday, 4 November 2009
this was not expected to be sustained in future years. There was an increase of 2% on
employers’ USS contributions in October 2009 from 14% to 16%. The future funding
of USS was under review in the sector which may lead to a further increase in
contributions. The UGPS net pension liability at July 2009 showed a £64m deficit but
was subject to high volatility for example there had been significant movement since
March 2009 when the deficit had been calculated at c£90m.
It was noted that there was a great deal of risk in going forward. The Committee
thanked the Group Financial Controller for the helpful and informative summary and
requested the provision of a similar summary in advance of future meetings.
The Committee suggested the following amendments to the Accounts:
• amend the wording of the Audit Committee Section of the Corporate Governance
Statement regarding the Strategic Risk Management Committee.
• amend the pensions section of the Statement of Principal Accounting Policies to
include reference to Strathclyde Pension Fund;
• update note 30 to show the pension contributions paid in the year in line with the
disclosure in note 6;
• update note 12 to state that external funding was obtained to procure the design archive
of Stoddard International plc.
2
Reports of the External Auditors for the year ending 31 July 2009
(1) Audit Results
The Committee was informed that the agreed audit plan had been completed and
a clean position was reported. The Committee noted that External Audit had met
with the Principal and Conveners of the Audit and Finance Committees prior to
the meeting and were satisfied that there were no major issues of concern.
External Audit commended the University and the Finance Team on achieving a
£5.3m surplus and a cash balance of £60m with no debt, in the current climate.
The Committee requested that Internal and External Audit ensure they were
satisfied with the treatment and reporting of National Insurance. External Audit
confirmed that risks were assessed in relation to work they carry out to ensure
there were no conflicts of interest. The Committee queried whether there had
been any adjustments during the audit process and the Group Financial Controller
confirmed that there had been a reallocation between accrued and deferred
income but this had remained within working capital. External Audit confirmed
that a materiality level and trend analysis would be applied in assessing any
issues of concern.
(2) Draft Representations by Management
The document was noted.
(3) Fee Schedule
The Committee requested inclusion of prior year figures for comparative
purposes.
The Committee thanked the Director of Finance and his team for the high standard of
information and commentary to the accounts and congratulated the University on a
very positive audit.
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Audit Committee Wednesday, 4 November 2009
AUDIT/2009/17. Draft Accounts of the Subsidiary Companies and University Trust for
the year ending 31 July 2009
The Group Financial Controller informed the Committee that the reported loss on the
Trust Accounts resulted from a timing issue concerning the receipt of unrestricted
funds and their subsequent disbursement to the University.
The Committee queried the power bestowed on the Trust to be more involved in
fundraising and it was confirmed that the Trust would not actively fundraise. The
Secretary of Court confirmed that the increase in GU Heritage Retail’s stock had been
driven by a business need.
The Committee otherwise noted the Accounts.
AUDIT/2009/18. Audit Committee Annual Report to Court
It was agreed that the report should include a summary of the areas the Audit
Committee would be considering in the coming year such as IT, risk management and
pensions. The report should be amended to state that the Committee required a better
understanding of the process of risk management rather than reporting a concern
regarding risk management. The Report would be redrafted and authorised by the
Convener on behalf of the Committee before being presented to the December Court
meeting.
AUDIT/2009/19. A Review Under the Public Interest Disclosure Act - Update
The Committee was informed that a complaint had been raised initially with Audit
Scotland and then referred to the University. The complaint had been raised under the
University’s Whistleblowing Policy and the Committee agreed that the correct
procedure had been followed.
AUDIT/2009/20. Any Other Business
1
Internal and External Audit Contracts
It was noted that the Internal and External Audit Contracts were due for review in July
2010 and that the Committee would be meeting in this regard with the Secretary of
Court and Director of Finance directly after this meeting.
2 Farewell
Ms Margo Manson was demitting her role on the Committee and the Convener thanked
her for the valuable contribution she had made to the Committee and the University.
The Committee wished her well for the future.
AUDIT/2009/21. Date of Next Meeting
Wednesday, 24 February 2010
Prepared by: Paula Vinaccia, Clerk to Committee, [email address]
Last modified on: Wednesday, 11 November 2009
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