Minute of the Meeting of the Audit Committee
held at 5.30 p.m. on 12 March 2009
A
in the Lord Provost Elder Room, Old College
Present:
Ms G Stewart (Convener)
Mr D Bentley
Professor S Monro
Ms A Richards
Mr M Sinclair
Professor A Smyth
In attendance:
Mr M D Cornish, The University Secretary
Mr N Paul, Director of Corporate Services
Mr J Gorringe, Director of Finance
Mr A Digance, Assistant Director of Finance
Mr H McKay, Chief Internal Auditor
Ms K Crichton, Internal Auditor
Mr M Rowley KPMG, External Auditor Director
Mr S Reid, KPMG, Director
Dr K Novosel, Head of Court Services
1
MINUTE OF THE MEETING HELD ON 20 NOVEMBER 2008
Paper A
The Minute of the meeting held on 20 November 2008 having previously been circulated was
approved as a correct record.
2 MATTERS
ARISING
2.1
Private Meeting with Internal and External Auditors
The Convener confirmed that meetings had taken place between members of the Audit
Committee and Internal and External Auditors. The meeting with Internal Audit had been
most helpful, particularly the opportunity to talk with all members of the Internal Audit Team;
no significant points had been raised. At the meeting with the External Auditors they had
confirmed that there were no further issues that had arisen in respect of the Annual Accounts
for the year ended 31 July 2008 which required to be brought to the attention of the
Committee; follow up items from the 2006/2007 audit had been satisfactorily progressed.
2.2 Membership
Paper B
The Audit Committee welcomed the appointment of Mr Martin Sinclair with immediate effect
until 31 August 2012.
2.3 Severance
Arrangements
The Committee noted that at its previous meeting there had been debate on the role of the
Audit Committee in reviewing severance payments. The University Secretary intimated that
the Scottish Funding Council required that Court have in place a monitoring process to
consider early retirement and voluntary severance packages where the salary of the individual
involved was over £70,000 or where the package amounted to more than £100,000; Court had
asked that the Audit Committee undertake this function on its behalf.
The Committee noted the various procedures and guidelines in place regarding early
retirement and voluntary severance including the robust procedure for authorising individual
cases and that Court had most recently approved these arrangements on 20 October 2008.
-1-
The role of the Audit Committee was to be satisfied that proper procedures had been followed
including that the individual cases had been properly authorised and that the agreement
reached met the criteria and was within the limits set by Court; in exceptional circumstances if
the agreement was beyond the limits set by Court that this had been appropriately authorised.
In order to discharge this role the Audit Committee relied on information presented by the
Chief Internal Auditor who had full access to all relevant documentation. It was confirmed
that it was not the role of the Audit Committee to form a view on the reasonableness of any
settlement.
The Audit Committee further noted that in respect of the Remuneration Committee its remit
only related to the most senior members of staff and any early retirement or voluntary
severance package for any member of the senior management team would be referred to the
Remuneration Committee for consideration; it did not have a role in regard to the University’s
wider early retirement/voluntary severance arrangements.
The Audit Committee noted the very comprehensive statement on its role in respect to
severance arrangements and was content with the current process.
FOR DISCUSSION
3
FINANCE FOLLOW UP OF EXTERNAL AUDIT REPORT
Paper C
The Committee noted that this was the second report it had received as part of the new
arrangements to monitor the items identified by External Audit in the action plan contained
within its Highlights Memorandum. Seven items had been identified in respect of the
2007/2008 External Audit and the Committee noted the updated information on progress to
date to take forward the agreed actions for each, particularly welcoming the process to review
the current arrangements to finalise the annual accounts. The Audit Committee further noted
that KPMG was content with progress to date and that these items would be routinely followed
up as part of the 2008/2009 external auditing process.
4
EXTERNAL AND INTERNAL AUDIT APPRAISAL METHODOLOGY
Paper D
The Audit Committee noted that it had previously been agreed following its review of the
CUC Handbook for Members of Audit Committees in Higher Education Institutions that a
formal process should be undertaken to review the performance of External and Internal Audit
on an annual basis. Audit Committee members were asked to consider and approve the
methodology to be adopted to take forward these reviews.
External Audit
The Audit Committee asked that a draft report be prepared by officers of the University for
consideration at its next meeting based on consideration of the broad headings of the check list
for the evaluation of External Auditors as contained in the CUC Handbook.
The Audit Committee was further content that in addition to this draft report it would seek the
oral views of the Director of Finance and the Chief Internal Auditor on their experiences and
opinions of the performance of the External Auditors at its next meeting as part of the review
process.
Internal Audit
The Audit Committee wished to ensure that as far as possible similar approaches were adopted
for the reviews of External and Internal Audit. The check list contained within the CUC
Handbook for the evaluation of Internal Audit was more extensive than that for External
-2-
Audit, containing a number of sections to be completed by various parties which the Audit
Committee considered was not appropriate.
The Audit Committee was content that a draft report be prepared by officers of the University
based on the headings of the sections to be completed by Audit Committee and senior officers
in the same way as with External Audit. It was noted that the Internal Audit Service was
currently part of a peer review benchmarking exercise and that an annual internal review of
satisfaction with internal audit reports and processes was already conducted. The Committee
agreed that it receive reports on the outcome of these exercises as part of its overall review
process. This was likely to be at the October meeting.
INTERNAL AUDIT
5 INTERNAL
AUDIT
REPORTS
Paper E
The Chief Internal Auditor reported on the nine Internal Audit assignments completed since
the last Audit Committee meeting.
Animal Hospitals – charging procedures
The Committee noted that this audit had taken place during the implementation stage of a new
practice management software system and the large number of recommendations, which were
all being actioned, would assist in ensuring that charging processes and procedures were
appropriately put into place. The Committee however expressed concern on the significant
number of fundamental control issues highlighted in the recommendations and asked that a
follow up review be undertaken as soon as possible so that the Committee could be provided
with a verbal update at its next meeting in June 2009.
Large Capital Projects – Costing of Running and Maintenance Costs
The Committee expressed some concern in respect of the final bullet point of the
recommendations and considered that there might have been a misunderstanding; it would
therefore be helpful if this could be clarified. The Audit Committee further suggested that it
may be appropriate for the Estates Advisory Group (EPAG) to have sight of this Report but
that in the first instance this should be discussed with the Convener of EPAG. The Committee
further asked for a follow up to be undertaken as soon as possible.
NHS Use of University space
The Committee noted the outcome of this audit. Given the complexities of the contractual
arrangements with the NHS and the Little France site some doubt was expressed that there was
scope for re-entering negotiations on space occupancy. It was however content that the
recommendations had been agreed and actions were being taken to progress this matter and
would await, with interest, the outcome.
Risk Management – Project Risk Assessments
It was noted that there was some confusion on those projects required to create a discrete risk
register which centred around the definition of what determined a “major project”. The
Committee was content to note that a draft document was currently out for comment which
provided guidance on this matter and that across the University in the last five years there had
been significant development of a risk management approach in all areas of University work.
The Committee also sought information on project management arrangements within the
University noting the significant skills and experience within such areas as Estates and
Buildings and ISG. It was confirmed that given the diversity of projects, the University took
the approach that detailed knowledge of the project area best served the objectives of
managing specific projects.
-3-
School of Informatics
It was noted that all the recommendations were being actively addressed.
School of Social and Political Science
The Committee noted the content of this routine Internal Audit Report on School activities and
that all six recommendations had been agreed and were actively being addressed.
School of Engineering and Electronics
The Committee noted the report and was assured that Internal Audit was satisfied with the
explanations for the amounts and periods covered by expenses claims. Assurances were also
provided on health and safety matters including the University’s monitoring arrangements.
Scottish Informatics and Computer Science Alliance (SICSA)
The Committee noted the report.
2007/2008 TRAC Process
Internal Audit had undertaken a review of the processes to collect data to support the annual
TRAC return and no issues had been identified which would suggest that the University had
not applied TRAC methodology on a robust basis. It was noted that there was no longer a
requirement for Internal Audit to provide assurance on the TRAC systems but it was the
intention to include consideration of this matter as a part of Internal Audit’s routine assessment
of the University’s risks in preparing its annual plan.
6
INTERNAL AUDIT FOLLOW UP REVIEWS
Paper F
The Committee noted the three Internal Audit follow up reviews completed since its last
meeting and was content with progress to date.
7
INTERNAL AUDIT - PROGRESS REPORT
Paper G
The Committee noted that the 2007/2008 Audit Plan had now been completed and that the
2008/2009 Plan was 52% advanced after 30 weeks.
It was noted that Internal Audit had been approached by Jewel and Esk College and invited to
submit a tender to provide their internal audit service; the outcome of the tender would not be
known until later this month. There had been previous discussions at Audit Committee
meetings on the adequacy of current resources available to Internal Audit to undertake its
agreed programme of work for the University. The reason for undertaking external work was
that selling Internal Audit services on a commercial basis benefited the University in a number
of ways including allowing a greater flexibility to buy in additional resources, particularly to
undertake specialised University audits and increasing the skill mix of the Internal Audit team.
The University’s reputation as an organisation with a centre of excellence in Internal Audit
work was enhanced and its willingness to share services with other institutions was
demonstrated. The Audit Committee was content that as it had no evidence of a decline in the
quality of the service provided by Internal Audit to the University, and in view of the
anticipated benefits, it supported Internal Audit tendering for external work on an appropriate
scale. The Audit Committee would however continue to monitor this position carefully to
ensure that the University was not being adversely affected. The Committee further suggested
that it would be helpful if it could be provided with information on the income generated from
and the cost of servicing the current external contracts.
-4-
FOR INFORMATION
8
SCHEDULE OF DATES OF MEETING IN SESSION 2009/2010
Paper H
The Audit Committee noted the agreed dates of meetings for 2009/2010 and asked that
consideration be given to rescheduling the meeting to be held on 26 November 2009.
9
DATE OF NEXT MEETING
The next meeting will be held on Thursday, 11 June 2009 at 5.30 pm in the Carstares Room,
Old College if no other appropriate date could be determined.
-5-
Minute of the Meeting of the Audit Committee
held at 5.30 p.m. on 11 June 2009
A
in the Carstares Room, Old College
Present:
Ms G Stewart (Convener)
Mr D Bentley
Professor S Monro
Ms A Richards
Professor A Smyth
In attendance:
Mr M D Cornish, The University Secretary
Mr N Paul, Director of Corporate Services
Mr J Gorringe, Director of Finance
Mr A Digance, Assistant Director of Finance
Mr H McKay, Chief Internal Auditor
Mr P Gough, Internal Auditor
Mr S Reid, KPMG, Director (via telephone conferencing facility)
Dr K Novosel, Head of Court Services
Apologies:
Mr M Sinclair
Mr M Rowley, KPMG
1
MINUTE OF THE MEETING HELD ON 12 MARCH 2009
Paper A
The Minute of the meeting held on 12 March 2009 having previously been circulated was
approved as a correct record.
2 MATTERS
ARISING
2.1
Internal Audit Reports
Animal Hospital-Charging Procedures
The Audit Committee had asked for a verbal update on progress on addressing the issues
raised by this report. Internal Audit intimated that, on investigation, 15 of its 19
recommendations had either been completed or were planned to be completed as part of
the financial year end procedures with actions in progress to complete the remaining four;
the Hospital’s financial arrangements had been improved as had drug control practices. A
further follow up would be undertaken and a report presented to a future meeting of the
Audit Committee. The Internal Audit Service was content with progress to date.
Large Capital Projects – Costings of Running and Maintenance Costs
At its last meeting the Committee had been of the view that there may have been some
misunderstanding in respect of one of the recommendations and had asked for clarification
on this matter and had further suggested that it might be appropriate to circulate the
internal audit report to members of the Estates Advisory Group (EPAG).
The Convener of EPAG and the Director of Estates and Buildings had further considered
this matter and the misunderstanding had now been clarified. A paper had been submitted
and agreed by EPAG on the new estates development procedures to take forward the
gateway process; project planning documentation would require a quantity surveyor (QS)
to forecast running and maintenance costs two to three years after completion of new
buildings. The Convener of EPAG was content that the paper to EPAG dealt with the
issues raised by the internal audit report. It was not normal practice to present internal
audit reports to EPAG and such operational issues were for the Director of Estates and
Buildings to resolve.
The Audit Committee further noted that as part of the governance arrangements each large
capital project required to be approved by EPAG, the Finance and General Purposes
Committee and Court.
Internal Audit confirmed it was satisfied with the responses from Estates and Buildings,
that the paper to EPAG had highlighted and addressed the issues raised and that
accountability arrangements for significant capital projects were sound.
2.2
2009/2010 Meeting Schedule
The Committee noted that the meeting originally scheduled to be held on 26 November
2009 would now be held on Monday, 23 November at 5.30 pm in the Lord Provost Elder
Room, Old College. It was further noted that the Principal, in accordance with good
practice, had intimated that he would be attending the meeting on 23 November 2009 at
which there would be discussion on the Annual Accounts.
FOR DISCUSSION
3 INTERNAL
AUDIT
PLANS
Paper B
The Committee reviewed and was content with the risk driven methodology utilised in
taking forward the preparation of the Strategic and Annual Internal Audit Plans noting that
Internal Audit was satisfied that it was appropriate for the University to be classified as
“risk defined”. The robust process to identify potential audit assignments was also noted
and that the proposed plans took full cognisance of the risks identified in the University
Risk Register and those of Colleges, Support Groups and subsidiary companies. The
Committee was assured that these processes resulted in the overall plans being adequate to
provide it with the necessary information to comment on the University’s internal control
environment; it noted that the Risk Management Committee provided additional
assurances on the actions being taken to mitigate identified risks. The liaison with
External Auditors in preparing the Strategic and Annual Internal Audit Plans was also
noted.
It was confirmed that in scoping audit assignments there was an expectation that the audit
would cover any value for money issues and make recommendations accordingly. Specific
value for money assignments had historically been difficult to identify but the Audit
Committee however, was assured by the University’s Value for Money policy and the
Annual Report prepared by CMG and presented to the Committee. The Committee
further noted that an assignment on Roslin had been included in the 2008/2009 Plan and
that issues associated with pensions had been debated at the last Finance and General
Purposes Committee and proposals would be coming forward to the October meeting of
Court on this matter.
The Audit Committee endorsed the Internal Audit Plans and agreed to recommend to
Court approval of the Strategic Audit Plan 2009/2012 and the Annual Internal Audit Plan
2009/2010 based on Internal Audit’s planning methodology. The Audit Committee
further asked that the terms of reference for the Internal Audit Service be revised to reflect
recent Scottish Funding Council guidance on audit arrangements and that a paper be
brought to its next meeting on this matter.
The External Auditors did not take part in discussion on items 4 and 5 detailed below.
4
EXTERNAL AUDITOR’S FEES
Paper C
The Committee considered the proposed KPMG fees for the 2008/2009 audit and noted
that although the uplift was above the retail price index it was in accordance with the fees
structure agreed as part of the recent tender process.
The Audit Committee was content to recommend to Court acceptance of the fee proposals
for the 2008/2009 external audit.
5
EXTERNAL AUDIT – PERFORMANCE REVIEW
Paper D
It was noted that this was the first formal appraisal process undertaken in order to comply
with the guidance contained in the CUC Handbook for Members of Audit Committees in
Higher Education Institutions. The Director of Finance and the Chief Internal Auditor, as
requested at the last meeting of the Audit Committee, had drafted a succinct paper on the
effectiveness and performance of External Audit based on the headings suggested within
the CUC Handbook. The Audit Committee agreed that the commentary provided under
each of the headings was accurate, appropriate, and fair and concurred with members’
views. It was noted under ‘Audit Communications’ that there did not appear to be a
formal process within KPMG for it to seek views from its clients on its performance.
The Audit Committee was content that the attached document reflected the performance of
External Audit: it asked that KPMG now be invited to offer any reaction to the appraisal if
it wished and, in particular, to comment on how it sought feed back on the quality and
effectiveness of their service from their clients. The Committee would consider these
comments at its next meeting and then report to Court.
It was noted that the appraisal of Internal Audit would be undertaken at its October
meeting.
6
UPDATE OF UNIVERSITY RISK REGISTER
Paper E
The Committee noted that this was the University’s high level Risk Register which was
supported by detailed Registers at College, Support Group, School and departmental
levels. The revised University Risk Register had been considered by the Risk
Management Committee, the Central Management Group and the Finance and General
Purposes Committee and was brought here for further comment prior to the document
being presented for approval by Court at its meeting on 22 June 2009. The revisions to the
document had taken account of the current challenging financial environment, additional
risks now identified and previous risks now no longer relevant such as the outcome of the
RAE 2008. The top three major risks now focussed around future funding streams, staff
terms and conditions and the management of the consequences of these two risks. The
remaining items on the Risk Register had been updated as appropriate.
The Committee welcomed this comprehensive document and commended the risk
management process within the University. The Committee welcomed the intention of the
University to undertake detailed financial scenario planning over the summer and
suggested this should also be referred to in risk 1. It further suggested that it may be
appropriate to review the likelihood of a pandemic flu which was currently recorded as
‘rare’. External Audit confirmed that the University’s approach to risk management and
its Risk Register was consistent with the approach being taken forward by the rest of the
sector.
The Audit Committee agreed to recommend to Court adoption of the University Risk
Register subject to consideration of the items mentioned above.
EXTERNAL AUDIT
7
EXTERNAL AUDIT PLANNING MEMORANDUM
Paper F
External Audit presented its Audit Plan Overview 2008/2009 which had a strong emphasis
on risk assessment and would be conducted in accordance with international standards on
auditing and be compliant with the relevant guidance issued by the Scottish Funding
Council.
The Committee noted the nine areas of audit emphasis, particularly the inclusion of
Roslin, the capital programme and the EUCLID project. It was further noted that the
levels of materiality were based on KPMG’s current assessment of the risk and control
environment at the University and that lower operational testing thresholds would be
applied depending on the system being reviewed and the assessed level of risk. External
Audit confirmed that the key dates set out in the timetable for the 2008/2009 audit would
be delivered.
The Audit Committee endorsed the proposed External Audit Planning Memorandum to
take forward the 2008/2009 external audit.
8 INTERIM
MANAGEMENT
REPORT
Paper G
The Audit Committee noted that this interim report was the first phase of the External
Audit Plan relating to organisational-wide controls, key financial controls and subsidiary
companies. The Action Plan detailed the issues and recommendations arising from this
initial evaluation none of which were graded as significant, and the Audit Committee was
content with the management responses.
INTERNAL AUDIT
9 INTERNAL
AUDIT
REPORTS
Paper H
The Audit Committee considered the reports on the seven Internal Audit assignments
completed since its last meeting.
Centre for Research Collections
The Committee expressed some concern on the findings of this report while noting that all
the recommendations had been accepted and that appropriate actions were being taken to
address the weaknesses identified. It was noted that the audit had been undertaken at a
time of transition following the relocation of the Centre for Research Collections into the
refurbished accommodation in the Main Library while storage and reading facilities
remained at the library research annex at South Gyle; there was a clear desire to develop
appropriate procedures to take account of the new accommodation. The value of the
material in the care of the Centre for Research Collections was difficult to determine and
the Committee noted that the figure quoted was for insurance purposes.
Capital Projects – intra project communications
The Committee noted that intra project communications were effective and that the
recommendations had all been agreed and appropriate actions were being taken.
Business Cases to Support Capital Projects
It was noted that no recommendations had been made as a result of this audit assignment
and that the procedures being put in place to implement the introduction of the Scottish
Funding Council’s Capital Projects Gateway approvals process were robust.
2007/2008 TRAC Teaching Return Process
The Committee noted that it was not yet mandatory for all institutions in Scotland to
submit a TRAC (Teaching) return (although a TRAC (Research) return was required). In
considering the outcome of the 2007/2008 SFC’s benchmarking exercise on the TRAC
Teaching returns, it should therefore be noted that not all Scottish institutions had
submitted a teaching return.
The Audit Committee noted the findings of the other audit reports which had recorded no
significant areas of concern.
10
INTERNAL AUDIT FOLLOW UP REVIEWS
Paper I
The outcome of the six follow up reviews was noted and that recommendations had been
actioned in all cases except one. The Audit Committee was content with the progress in
respect of this remaining recommendation.
11
INTERNAL AUDIT PROGRESS REPORT
Paper J
The Committee noted that the 2008/2009 Audit Plan was 80% advanced after 43 weeks
and that the complexity of the intellectual property assignment might require resource
input from next year’s plan; work was continuing to complete the assignment on Roslin.
The Audit Committee further noted that the Internal Audit Service had been unsuccessful
in its bid to secure commercial business with Jewel and Esk College. The information on
income arising from the Internal Audit Service’s current commercial contracts was
welcomed and the Committee asked that this be provided on an annual basis including an
analysis of audit days. It was noted that the income had allowed specialist advice to be
purchased and overall had resulted in a profit of £22k over the five years to date; the
Committee would continue to monitor the position.
FOR INFORMATION
The External Auditors did not take part in discussion on item 12 detailed below.
12 BRITISH
UNIVERSITIES
DIRECTORS’ GROUP (BUFDG) 2009 AUDIT Paper K
SURVEY
The Committee noted that the survey confirmed the strong position of KPMG as a
provider of external auditor services within the sector and the value for money of the
University’s Internal Audit Service.
13
DATE OF NEXT MEETING
The next meeting will be held on Thursday, 1 October 2009 at 5.30 pm in the Lord
Provost Elder Room, Old College.
Minute of the Meeting of the Audit Committee
held at 5.30 p.m. on 1 October 2009
A
in the Lord Provost Elder Room, Old College
Present:
Ms G Stewart (Convener)
Mr D Bentley
Professor S Monro
Ms A Richards
Mr M Sinclair
Professor A Smyth
In attendance:
Mr M D Cornish, The University Secretary
Mr N Paul, Director of Corporate Services
Mr J Gorringe, Director of Finance
Mr A Digance, Assistant Director of Finance
Mr H McKay, Chief Internal Auditor
Mr B Wood, Internal Auditor
Mr M Rowley, KPMG, External Auditor Director
Mr S Reid, KPMG, Director
Dr K Novosel, Head of Court Services
1
MINUTE OF THE MEETING HELD ON 11 JUNE 2009
Paper A
The Minute of the meeting held on 11 June 2009 having previously been circulated was
approved as a correct record.
2 MATTERS
ARISING
2.1
Internal Audit terms of reference
Paper B
It was noted that a review of the current terms of reference of the Internal Audit Service
had been undertaken in order that they reflected the recent changes to the guidance on
audit arrangements issued by the Scottish Funding Council and the replacement of the
previous Code of Audit Practice with a statement within the mandatory requirements of
the Financial Memorandum, and to ensure that they were consistent with current best
practice as determined by internal auditors’ international professional standards 2009.
The Committee further noted the terms of reference covered all the topics within the
internal audit model terms of reference set out in the CUC’s Handbook for Members of
Audit Committees in Higher Education Institutions although the format was different.
The Audit Committee endorsed and commended approval to Court of the revised terms of
reference subject to a number of suggested amendments.
(Court approved version
attached).
FOR DISCUSSION
3
AUDIT COMMITTEE SCHEDULE
Paper C
The Audit Committee schedule for meeting topics in 2009/2010 was approved.
1
4
EXTERNAL AUDIT PERFORMANCE REVIEW – FOLLOW UP (CLOSED)
Paper D
At its last meeting the Audit Committee had undertaken a review of the performance of
external audit based on a paper prepared by the Director of Finance and the Chief Internal
Auditor based on their observations under the headings suggested in the CUC’s Handbook
for Members of Audit Committees in Higher Education Institutions. There had been an
outstanding issue under audit communications which External Audit had been asked to
provide further information and input in respect of the formal process undertaken by
KPMG to seek the views of clients on its performance.
The Committee was content with the current two methods employed: debriefing process at
end of each audit year; and formal meeting between client and independent KPMG
Auditor with the proviso that given the contract arrangements with KPMG that the formal
client service review be carried out within the next 2 to 3 years and that a wide range of
members of the University community and Audit Committee be asked to participate. It
was felt that discussion along these lines was more helpful than developing a set of Key
Performance Indicators (KPIs) or participating in an on-line client feedback survey.
The Audit Committee was satisfied with the overall performance of the External Auditors.
5
INTERNAL AUDIT PERFORMANCE REVIEW
5.1
Internal Audit Quality Assurance Benchmarking Exercise
Paper E
The Audit Committee noted that this was the third quality assurance benchmarking
exercise undertaken using an evidence based self-assessment toolkit developed by the
Higher Education Funding Council for England (HEFCE) in 2007. This year the exercise
was undertaken by a five-way reciprocal peer review group of heads of internal audit
services. The methodology, which was quite widely employed across the UK, was
explained in detail including the various checks and balances utilised and the formal
signing off procedures thus providing the Audit Committee with assurance on the
robustness and validity of the results. The exercise was undertaken on a voluntary basis
and could not be assumed to be repeated annually, but if it was repeated it was agreed that
fuller detail of the methodology should be provided to underpin the Committee’s
continued confidence in it.
The Committee noted that the exercise confirmed the high standard of internal audit
services provided to the University as demonstrated by the evidence-based peer review
group assessment and that the service was achieving best professional practice in five of
the six themes evaluated and good professional practice in the sixth.
5.2
Internal Audit Performance Evaluation Questionnaires
Paper F
For many years an evaluation of the views of managers whose activities had been the
subject of an internal audit review has been undertaken by means of a questionnaire
managed independently of the Internal Audit Service. The report is included within the
Internal Audit Annual Report and was provided here in a separate format as part of the
information to assist the Committee with its annual determination of the performance of
internal audit. The Chief Internal Auditor also provided information on results from
previous years which demonstrated an upward trend in the levels of satisfaction.
The Audit Committee welcomed this report demonstrating the value placed on the work of
Internal Audit within the University.
2
5.3
Appraisal of Internal Audit Service
Paper G
In line with the process undertaken with appraisal of External Audit, the Committee had
previously agreed that a paper be drafted by the University Secretary, the Director of
Corporate Services and the Director of Finance reviewing the performance of the Internal
Audit Service, based on guidance for evaluation of internal audit services issued by the
CUC. It was noted that this review was undertaken using the then extant terms of
reference for the Internal Audit Service.
The Audit Committee welcomed the paper and concurred with its generally very positive
comments. In respect of the reporting of audit assignments the Committee asked that
consideration be given to providing a more focussed reporting of the main issues while
appreciating that exception reporting was not always appropriate and that detailed
information was often helpful. It was suggested that succinct summary information
allowing easy comparison across reports may be an appropriate approach. The comments
on developing value for money reporting were also supported.
In summary, the Audit Committee was very satisfied with the overall performance of the
Internal Audit Service as demonstrated by these three very favourable reports and the
Committee had found the process of review helpful in taking forward the work of the
Committee.
6
DRAFT CORPORATE GOVERNANCE STATEMENT
Paper H
There having been no change in the SFC’s requirements, there was no significant change
in the draft Governance Statement to that approved for the 2007/2008 Accounts. The
document was brought here for comment prior to further consideration by the Finance and
General Purposes Committee and Court and was written as if being presented to the Court
meeting on 14 December 2009 along with the Accounts.
The Committee endorsed the draft Corporate Governance Statement for onward
consideration by Court.
7
VALUE FOR MONEY REPORT
Paper I
The Central Management Group (CMG) at its last meeting had reviewed and commended
this report to the Audit Committee which set out value for money activities initiated by
CMG or by other parts of the University during 2008/2009. The items had been submitted
by colleagues within Colleges and Support Groups and highlighted the breadth of
activities being undertaken to improve economy, effectiveness and efficiency. The
External Auditors welcomed this very comprehensive document.
It was noted that all the significant projects had been taken forward following approval of
business cases which included analysis of achievable cost savings. The Committee
welcomed the section on teaching and research noting that the concept of value for money
was now firmly embedded across the University. It was noted that the review of support
activities was well under way and conclusions would be presented in 2009/2010. The
Strategic Plan 2008/2012 and the aligned annual planning process and the work of various
committees and groups most importantly the Estates Advisory Group, in respect of capital
projects, all ensured that value for money activity was taken forward within a structured
framework, with monitoring undertaken through Court and its Committees and the annual
review of this Report and the Balanced Scorecard.
The Audit Committee approved this report which would form part of its Annual Report to
3
provide assurances to Court on the area of value for money.
INTERNAL
AUDIT
8
INTERNAL AUDIT ANNUAL REPORT
Paper J
The new mandatory requirements associated with the Financial Memorandum which
replaced the previous Code of Audit Practice do not specifically require the production of
an Annual Internal Audit Report. However it does state that it would be useful to follow
the guidance contained within the CUC’s Handbook for Members of Audit Committees in
Higher Education Institutions which does encourage the production of such a report to be
presented to Court. The Audit Committee supported the view that an Annual Internal
Audit Report be prepared.
The Committee formally noted and endorsed the report which provided a positive internal
audit opinion on the adequacy and effectiveness of the University’s arrangements for risk
management, control, and governance.
9
INTERNAL AUDIT REPORTS
Paper K
The Audit Committee considered the reports on 8 Internal Audit assignments completed
since its last meeting.
Intellectual Property
It was noted that this assignment had taken longer than initially planned and that the
recommendations were mainly in respect of the need to reconcile two systems to ensure
that all income expected was being correctly received; there was no indication of any
untoward transactions and External Audit confirmed that its work to date had not
identified anything material. All the recommendations were being taken forward.
Integration of the Roslin Institute with the University of Edinburgh
The report provided assurances on the significant progress towards integrating the finance
and HR systems of the Roslin Institute and the University, much of which centred around
management change issues. The recommendations were all being taken forward and many
had already been completed.
Management and Collection of Student Fees
The process required Registry and Finance to work together to ensure the correct
collection of fees based on the decisions of the Fees Strategy Group. The Committee noted
the incident of waived fees inappropriately authorised by the School of Veterinary Studies
and the challenges of the devolved University structure. The recommendations were all
being taken forward.
Procurement 2008/2009
The new Scottish Procurement Policy Handbook was being fully implemented within the
University.
Staff On-Call Arrangements
There were some issues around control and consistency which were being resolved.
Expenditure Authorisation
The Committee endorsed the recommendation to review the Delegated Authorisation
Schedule noting that there was no evidence of any improprieties.
4
The Audit Committee noted the findings of the other audit reports which had recorded no
significant areas of concern.
10
INTERNAL AUDIT FOLLOW UP REVIEWS
Paper L
The Committee noted that all the recommendations of the three follow up reviews had
been fully actioned.
11
INTERNAL AUDIT PROGRESS REPORT
Paper M
Progress towards completing the 2008/2009 plan was noted and that the 2009/2010 plan
was 16% advanced after 6 weeks. Two assignments as previously reported had
significantly overrun: Intellectual Property and the Roslin Institute. The Committee was
satisfied with progress to date.
12
VOLUNTARY SEVERANCES (CLOSED)
Paper N
The detailed contents of the paper were noted.
EXTERNAL AUDIT
13
EXTERNAL AUDIT PROGRESS REPORT
The External Auditor confirmed that work was on-going in respect of the subsidiary
companies and that no issues had so far arisen that required to be raised with the
Committee. Work on the Accounts would be commencing the week beginning 5 October
2009.
FOR INFORMATION/FORMAL APPROVAL
14
DATE OF NEXT MEETING
The next meeting will be held on Monday, 23 November 2009 at 5.30 pm in the Lord
Provost Elder Room, Old College.
5
University of Edinburgh
Internal Audit
Terms of Reference
Mission
To provide the Principal and the Court, normally through the Audit Committee, with an
independent, objective assurance and consulting service designed to add value and improve
the University’s operations. To help the University accomplish its objectives by bringing a
systematic, disciplined approach to evaluating and improving the effectiveness of risk
management, control and governance processes.
Authority
Internal Audit has the Court’s authority to access all documents, records, personnel and
physical properties which it considers relevant to audit assignments and necessary to fulfil its
responsibilities. There is an obligation on all staff to provide all necessary assistance.
Scope of Work
The scope of Internal Audit covers all the financial and other management control systems,
identified by the audit needs assessment process. It includes all the activities in which the
University and its subsidiaries have a financial interest, including those not funded by
Scottish Funding Council (SFC). This includes all the University's operations, resources,
staff, services and responsibilities to other bodies although does not extend to the assessment
of the academic process.
The scope includes review of controls, including investment procedures that protect the
institution with regard to organisations such as subsidiaries or associated companies, students’
unions, and collaborative ventures or joint ventures with third parties.
Objectives
Internal Audit employs a risk-based systematic and disciplined approach to evaluating and
improving the effectiveness of risk management, control and governance processes by
assessing the:
• Alignment of organisational objectives with the University’s mission;
• Identification, evaluation and management of business risks;
• soundness, adequacy and application of the internal control systems;
• reliability and integrity of financial and operational information;
• economy, effectiveness and efficiency of operations (VfM);
• safeguarding of assets from fraud, irregularity or corruption, and
• compliance with laws, regulations, contracts and established policies, procedures
and good practice.
Page 1
Internal Audit is responsible for:
• agreeing a long term audit strategy with the Audit Committee, based upon an
audit needs assessment of all University activities;
• agreeing a risk-based annual audit plan with the Audit Committee and
communicating the agreed plan to appropriate senior management;
• carrying out the agreed work in line with appropriate professional standards;
• providing assurances, opinions and making recommendations to improve
processes and systems where appropriate;
• following up recommendations made to evaluate action taken;
• reporting to the Audit Committee and the Principal any significant business risks,
serious control weaknesses, significant fraud or other major control breakdown;
• reporting through Audit Committee to Court for resolution, any specific activities
where Internal Audit believe that an unacceptable level of residual risk may have
been accepted by senior management;
• complying with requests for information from the Principal, Audit Committee,
External Audit or SFC’s Governance and Management: Appraisal and Policy
Directorate;
• liaising with External Audit and the SFC;
• maintaining communication with senior figures in the University and outside
bodies;
• offering consulting services of an advisory nature without assuming management
responsibility or jeopardising achievement of the audit plan;
• developing and maintaining a quality assurance and improvement programme
including internal and external assessments and providing performance measures
to demonstrate effectiveness of the Internal Audit service;
• maintaining adequate & appropriate training and professional development;
• producing an annual report for the Audit Committee, giving an opinion of the
University’s arrangements for risk management, control and governance; and
• helping to keep the Audit Committee informed of perceived best practice.
Internal Audit may conduct any special reviews or consulting activities requested by the
Court, the Audit Committee, the Principal, or to support the Fraud & Misappropriation policy,
provided such work does not compromise its objectivity or independence.
Independence
Independence is the freedom from conditions that threaten the ability of Internal Audit to
carry out their responsibilities in an unbiased manner.
To ensure independence and objectivity, Internal Audit will not assume any management
responsibility for development, implementation or operation of systems, however can offer
consulting services of an advisory nature.
Internal Audit will exercise professional judgement to determine the scope of its work and the
communication of its findings.
The Chief Internal Auditor reports functionally to the Audit Committee, through the
Convener, and has direct access to the Principal.
Accountability
The Chief Internal Auditor is accountable to the Principal and the Court through the Audit
Committee for the performance of the Internal Audit service. For administrative and
budgetary purposes, Internal Audit operates within Corporate Services Group.
Page 2
link to page 18 link to page 18
The Chief Internal Auditor will report audit findings to the relevant managers, including the
Principal, and draw the attention of the Audit Committee and management committees to key
issues and recommendations.
Internal Audit will report the feedback of auditees’ to the Audit Committee.
Professional Standards
Internal Audit’s work is performed with due professional care and complies with the
Mandatory Requirements
1 of the SFC’s Financial Memorandum
2 between the Council and
Universities.
Internal Auditors follow professional standards set by the Institute of Internal Auditors as well
as Codes of Professional Practice and Codes of Ethics as stipulated by their individual
Professional Institutes.
Endorsed by the Audit Committee on the 1st October 2009
Approved by the Court at its meeting held on the 19th October 2009
1 The Audit and Accounting Section of the SFC Mandatory Requirements became effective on 14 October 2008.
2 Effective from 1 January 2006.
Page 3
Minute of the Meeting of the Audit Committee
held at 5.30 p.m. on 23 November 2009
A
in the Lord Provost Elder Room, Old College
Present:
Ms G Stewart (Convener)
Mr D Bentley
Professor S Monro
Ms A Richards
Mr M Sinclair
Professor A Smyth
In attendance:
The Principal
Mr M D Cornish, The University Secretary
Mr N Paul, Director of Corporate Services
Mr J Gorringe, Director of Finance
Mr A Digance, Assistant Director of Finance
Mr H McKay, Chief Internal Auditor
Mr M Rowley, KPMG, External Auditor Director
Mr S Reid, KPMG, Director
Dr K Novosel, Head of Court Services
1
MINUTE OF THE MEETING HELD ON 1 OCTOBER 2009
Paper A
The Minute of the meeting held on 1 October 2009 having previously been circulated was
approved as a correct record.
2 MATTERS
ARISING
2.1
Internal Audit terms of reference
Court at its meeting on the 19 October 2009 had approved the revised terms of reference
for the Internal Audit Service as agreed by the Committee on the 1 October 2009.
2.2
Private meetings with External and Internal Auditors
There had been frank and open discussion with External and Internal Auditors including
discussion on the recent audit process and there were no issues which required to be
considered further.
2.3
Membership of Committee
Court at its meeting on the 19 October 2009, on the recommendation of the Nominations
Committee had extended the term of office of Mr Bentley until 31 December 2010; there
would be further consideration of the membership of the Committee early in 2010.
2.4
Regulation of dormant endowment funds
It had previously been reported that the University was seeking to address issues regarding
the capital and interest of dormant endowments by formulating a new Ordinance. This
process was still on-going with detailed discussions being taken forward with the Scottish
Government and the Privy Council to reach a satisfactory conclusion.
3 PRINCIPAL’S
COMMENTS
The Principal provided an overview of the activities of the University for the financial
year ended 31 July 2009, commending the
Reports and Financial Statements and the
surplus achieved, the very high levels of satisfaction with the Internal Audit Service, the
Finance department and risk management processes, the successes in the areas of
commercialisation and research, undergraduate and postgraduate recruitment and the
University’s contributions to climate change research and its reduction in carbon
emissions. The current challenges were noted in particular issues around accountability of
government funds allocated for specific purposes, pension provision and the delivery of
the EUCLID project. In respect of the EUCLID project, the University had acted
expediently when the extent of the difficulties had been identified and it had taken action
to re-scope the project to ensure delivery of the critical systems and functions; the lessons
learned were being taken forward including the development of revised guidance and
templates for major projects within a risk management framework.
FOR DISCUSSION
4
DRAFT REPORTS AND FINANCIAL STATEMENTS FOR YEAR ENDED
Paper B
31 JULY 2009 (CLOSED)
The Audit Committee noted that no accounting practices had changed since last year and
that these Reports and Financial Statements had been prepared in accordance with SORP
2007.
An increased turnover of £592m was recorded demonstrating the continuing underlying
growth of the University with increases in most categories of income; there had been a
reduction in endowment and investment income and a new investment strategy was now
being applied. The income from research grants and contracts was particularly strong and
as grants were awarded over two to three years this would offer some protection should
the University experience reductions from this source of income in future years. Tight
control of expenditure had been exercised during the year with prompt action taken in the
light of the economic position including the introduction of the post review group and
central funding to support voluntary and early retirement; there had been an overall
reduction in staff numbers, particularly in the category of academic and related staff and
salary expenditure reflected the implementation of the previously agreed salary uplift.
The Committee noted that an amendment of an additional £15k was required to the figure
recorded against the pension contributions under the emoluments received by the
Principal. The other significant expenditure categories were noted, particularly the
reduction in library, computer and other academic support services and the increases in
utilities’ costs. The Committee welcomed the modest surplus achieved of £4m which was
a comfortable position for the University.
In respect of the balance sheets, the Committee noted the reduction from the previous year
in endowment asset investments and that there had been some recovery since year end.
The Committee further noted the growth in creditors as a result of the University receiving
advanced payments from funding bodies. There had been previous discussion on pension
liabilities and this was reflected in the balance sheets; the Committee noted the extensive
information in the notes on this matter and the current position in respect of the response
to the initial SBS triennial evaluation. The Group cash flow statement confirmed the
continuing strong financial position of the Group.
The Committee considered the draft Reports and Financial Statements in detail, welcomed
the External Auditor’s Report and unqualified opinion and commended the continuing
financial strength of the University. It agreed to recommend to Court the adoption of the
Reports and Financial Statements for year ended 31 July 2009 subject to consideration of
suggestions made at the meeting, insertion of a statement on disability, amendment to the
Principal’s emolument and correction of any remaining typographical errors.
5
EXTERNAL AUDIT HIGHLIGHTS MEMORANDUM 2008-2009 (CLOSED)
Paper C
The External Auditor indicated that there were no significant matters requiring to be
brought to the attention of the Audit Committee; the external auditing process had been
particularly straightforward and the finance staff involved were to be congratulated. The
sector faced a number of challenges in 2009/2010 and the key risk areas for this
University included future government funding allocations, pension issues, maintaining
research funding sources, the significant capital programme, issues remaining around the
Roslin Institute and the previous discussed position with the EUCLID project. All the
recommendations as set out in the action plan were being addressed and satisfactorily
progressed.
The Committee considered KPMG’s Highlights Memorandum for the year ended 31 July
2009 and was content that it represented a balanced view; in respect of the comments on
the EUCLID project, the actions being taken by the University to minimise risk were
noted and clarification was sought on the funding figures quoted which would be
appropriately adjusted.
6
DRAFT LETTER OF REPRESENTATION AND COMMENTARY (CLOSED)
Paper D
The Committee reviewed the draft Letter of Representation to the External Auditors from
the Principal setting out the responsibilities of the University and Court in connection with
the External Audit of the Reports and Financial Statements. It noted that there had been
previous comment on the phraseology on the Letter of Representation in respect of the
2007/2008 Accounts and KPMG agreed to a slight amendment to the wording in section 4.
It was further noted that the Letter was little changed from that signed in respect of last
year’s Accounts.
The commentary and attached appendices provided assurances to the Committee on the
mechanisms operating within the University which allowed the Letter to be signed off by
the Principal on behalf of the Court.
The Audit Committee was satisfied with the assurances provided in respect of the content
of the draft Letter of Representation and recommended approval of the Letter to Court
subject to the agreed amendment.
7
RISK MANAGEMENT COMMITTEE ANNUAL REPORT
Paper E
The comprehensive report on the activities of the Risk Management Committee was
welcomed and based on these activities the Audit Committee noted the overall view of the
Risk Management Committee that the University had been satisfactorily managing its key
risks during the year ended 31 July 2009. A further post year end risk management and
controls statement would be provided to the next meeting of Court as part of the process to
sign off of the Reports and Financial Statements following consultation with Colleges and
Support Groups on any emerging risks or developments to previously identified risks.
The Audit Committee commended the transparency of the process to identify risks and the
information contained in the risk management annual return. It was further confirmed that
information contained within the assurances map referred to the risks within the
2008/2009 University’s risk Register (version 6) and that a revised Register which
addressed some of the issues raised by the Committee had been approved by Court on the
22 June 2009.
The Audit Committee was content to endorse the Risk Management Annual Report for
onward consideration by the Finance and General Purposes Committee and Court.
8
AUDIT COMMITTEE ANNUAL REPORT
Paper F
The Committee considered and approved its draft Annual Report which would be
presented to Court at its meeting on 14 December 2009 subject to an amendment to one of
the tables within the Internal Audit Annual Report which was attached as an appendix to
the main Report.
9
FRAUD POLICY
Paper G
It was noted that at the last meeting of the Audit Committee the External Audit interim
report had made reference to the need to review the University’s current Fraud Policy.
While noting there was no implication that there were any instances of impropriety in this
University, difficulties in other institutes within the sector had been widely reported and
this highlighted the need to have robust procedures in place. The revised Policy was
based on good practice guidance, particularly templates developed by the Fraud Advisory
Panel.
The Committee welcomed this revised Policy and recommended adoption to Court subject
to consideration and clarification of the roles of the University Secretary and Director of
Human Resources in the implementation of this Policy. It was suggested that
consideration be given to a specific reference to fraud associated with inappropriately
accessing IT systems. It was further noted that the University also had in place a
‘Whistleblowing’ Policy which provided further assurances on the mechanisms available
to individuals to report suspected fraud and malpractice and that areas of suspected
academic fraud (except where financial impropriety was also suspected) were taken
forward through separate procedures.
INTERNAL
AUDIT
10
INTERNAL AUDIT REPORTS
Paper H
The Audit Committee considered the reports on 5 Internal Audit assignments completed
since its last meeting. It welcomed the new format which now included a commentary
sheet with succinct information on the outcome of each assignment in response to the
Committee’s suggestions at its meeting on the 1 October 2009.
Mobile Working
The importance of mobile/home working to contingency planning procedures and
business continuity was noted and the Committee further noted the number of matters
requiring to be considered, including health and safety issues as well as security. All the
recommendations had been agreed and were being actioned. The different timeframe for
taking forward the HR policy review was noted; a number of HR policies were currently
being reviewed and in consultation with unions and other stakeholders, the priority for
each had been identified.
IT Security
It was noted that a revised IT Security Policy would be brought to the next meeting of
Court for approval. All the recommendations in the report were being taken forward.
Full Business Continuity: Operational Readiness in Key IT Risk Areas
The Committee noted that this assignment dealt only with IT specific risk areas and that
all the recommendations had either been satisfactorily addressed or were being actively
taken forward.
Downloading Personal Data to any Device
The exposure to reputation risk should personal data be inappropriately disclosed was
noted as were the legal sanctions and penalties. All the recommendations in the report had
been agreed and were being taken forward.
Main Library Redevelopment Project: Continuity of Service
The incremental approach to taking forward this project was commended and had resulted
in the library being able to continue to deliver satisfactory services to students.
11
INTERNAL AUDIT FOLLOW UP REVIEWS
Paper I
The Committee noted satisfactory progress in respect of the 4 internal audit assignments
reviewed since its last meeting.
12
INTERNAL AUDIT PROGRESS REPORT
Paper J
It was noted that the 2008/2009 Audit Plan was nearing completion and the 2009/2010
plan was 28% advanced after 14 weeks. Both were satisfactory positions.
FOR INFORMATION/FORMAL APPROVAL
13
DATE OF NEXT MEETING
The next meeting will be held on Thursday, 4 March 2010 at 5.30 pm in the Lord Provost
Elder Room, Old College.
Document Outline
- NovoselK20100218Attachment1.pdf
- NovoselK20100218Attachment2.pdf
- NovoselK20100218Attachment3.pdf
- NovoselK20100218Attachment4.pdf
