board of management meeting of audit committee · audit committee requires at least one member to...
Post on 22-Sep-2020
2 Views
Preview:
TRANSCRIPT
BOARD OF MANAGEMENT
Meeting of Audit Committee Meeting to be held
on Tuesday, 24 May, 2016 at 1.30pm
A.16.2.01 Resignations and Appointments A.16.2.02 Apologies for absence
A.16.2.03 Any additional Declarations of Interest including specific Items on Agenda A.16.2.04 Minutes of Meeting of Audit Committee held on 23 February 2016 *
A.16.2.05 Matters Arising/Action Sheet from Meeting of Audit Committee held on 23 February
2016 *
A.16.2.06 Minutes of Joint Meeting of Audit and Finance and General Purposes Committee
held on 24 November 2015 *
A.16.2.07 Internal Audit Progress Report: 2015/2016 *
A.16.2.08 Internal Audit Reports:
Procurement and Creditors / Purchasing *
Budgetary Control *
Follow Up Reviews *
A.16.2.09 External Audit - Annual Audit Plan for the 2015/16 Audit *
A.16.2.10 External Auditor Appointment from 2016/17 * Reserved Items: A.16.2.11 Reserved minutes of Joint Meeting of Audit and Finance and General Purposes
Committees held on 24 November 2015 *
A.16.2.12 Evaluation of Auditors:
(i) Internal
(ii) External
A.16.2.13 Date of Next Meeting of Audit Committee: Schedule of meetings 2016-17 to be
agreed.
* papers attached ~ papers to follow
DRAFT
1
BOARD OF MANAGEMENT
AUDIT COMMITTEE
Minutes of Meeting held on Tuesday 23 February 2016
at 1.30pm in the Board Room Present: Mr B Hope (Convener) Mr C Sanders Mrs A Templeton Mrs D Newton In attendance: Mrs A Lindsay Mr S Inglis (Henderson Loggie) Ms A MacDonald (Audit Scotland) Ms F Newcombe (Clerk) Mrs E Melton (Minutes) Mr Hope welcomed everyone to the meeting.
ACTION DATE A.16.1.01 Resignations and Appointments 1.1 Mrs Newton was welcomed as a new member of the
Audit Committee.
A.16.1.02 Apologies and Absence 2.1 Apologies for absence were received from Mr Ash Major
and Mrs Megan Palmer-Abbs.
A.16.1.03 Any additional Declaration of Interest including
specific items on the Agenda
3.1 There were no additional declarations of interest. A.16.1.04 Minutes of meeting held on 24 November 2015 4.1
It was agreed that Agenda item 7.1 be amended to: The programme for 2015/2016 includes:
Business Development /Research Procurement (including credit purchasing, petty
cash and Purchase Cards, and Partnership working.
Mr Sanders proposed and Mr Hope seconded that the Minutes be accepted as a true record, with the above amendment.
Clerk to the Board
Next meeting
A.16.1.05 Matters Arising/Action Sheet from Meeting held on 24
November 2015
DRAFT
2
ACTION DATE 5.1 6.3 Achieved
1.1 Achieved 1.3 Achieved
A.16.1.06 Internal Audit Progress Report: 2015/16 6.1 Internal Audit schedule progressing as planned. A.16.1.07 Internal Audit Reports: 7.1
Three internal audit reports were discussed:
7.2 Partnership Working:
The outcome of this report was Good with no recommendations.
Student Support The report highlighted weaknesses around the introduction of the Highlands and Islands Association. While it is recognised that HISA is still in development, there were several areas of weakness identified with no clear benefit established.
7.2 Business Development There has been significant progress since the previous internal audit however several points of action remain incomplete. The follow-up review will be scheduled in September 2016.
A.16.1.08 Annual Report of the Audit Committee 2014/15 8.1
Mr Hope informed the Committee that this report was now an annual requirement of the Regional Strategic Body as agreed through the Financial Memorandum. In future years this report will be drafted by the Director of Finance for consideration by the Audit Committee in November for presentation for approval to the Board in December. Discussion was held on the future content of the report.
Clerk November Meeting
A16.1.09 Reserved minutes of Joint meeting of Audit and
Finance and General Purposes Committees held on 24 November 2015
9.1
The Minutes were not accepted as a true record. Ms MacDonald and Mrs Lindsay will amend the Minutes for approval at the next meeting.
Ms MacDonald and Mrs Lindsay
Immediate
Board Evaluation The Board evaluation was discussed. Mr Sanders, Mrs
Templeton and Mr Hope will meet to plan forward progress.
Clerk to the Board
Immediate
DRAFT
3
ACTION DATE A.16.1.10 Date of Next Meeting – 24 May 2016 The meeting closed at 15.30 hrs
Audit Committee – 23 February 2016
1
ACTION SHEET/MATTERS ARISING FROM AUDIT COMMITTEE MEETING HELD ON 23 FEBRUARY 2016
ACTION DATE A.16.01.04 Minutes of meeting held on 24 November 2015 4.1 It was agreed that Agenda item 7.1 be amended to: the programme for 2015/2016
includes: Business Development Research Procurement including credit purchasing, petty cash and Purchase Cards and Partnership working.
Mr Sanders proposed and Mr Hope seconded that the Minutes be accepted as a true record, with the above amendment.
Clerk Next Meeting
A.16.1.08 Annual Report of the Audit Committee 2014/15 8.1 Mr Hope informed the Committee that this report was now an annual requirement of the
Regional Strategic Body as agreed through the Financial Memorandum. In future years this report will be drafted by the Director of Finance for consideration by the Audit Committee in November for presentation and approval to the Board in December. Discussion was held on the future content of the report.
Clerk
November meeting
A.16.1.09 Reserved minutes of Joint meeting of Audit and Finance and General Purposes
Committees held on 24 November 2015.
9.1 The minutes were not accepted as a true record. Ms MacDonald and Mrs Lindsay will amend the Minutes for approval at the next meeting.
Ms MacDonald and Mrs Lindsay
Immediate
Board Evaluation The Board evaluation was discussed. Mr Sanders, Mrs Templeton and Mr Hope will meet
to plan forward progress. Clerk Immediate
DRAFT
Audit Committee 24 November 2015 KMM Emboldened paragraphs, decisions taken
1
BOARD OF MANAGEMENT
JOINT AUDIT and FINANCE & GENERAL PURPOSES COMMITTEE
Minutes of Meeting held on
Tuesday 24 November 2015 at 2.00pm in the Board Room
Present: Mr B Hope (Convener) Mr C Sanders Mrs A Templeton Mr A Major Mrs Palmer-Abbs Mr A Campbell Dr Hutt Mr J Bodman Prof P Maher Mr S Russell In attendance: Mrs A Lindsay Mr S Inglis (Henderson Loggie) Ms A MacDonald (Audit Scotland) Mrs K Matthews (Minutes) Mr Hope welcomed everyone to the meeting, especially members of the F & GP, Ms MacDonald and Mr Inglis. Due to the joint nature of the meeting it was agreed to change the order of business.
ACTION DATE A.15.3.12 External Audit: Audit Scotland 2014/2015 12.1 This item is reserved and the minute is held in
confidence.
(Comfort Break 15.00 – 15.10 hrs) A.15.3.06 Internal Audit: Annual Report 2014/2015 6.1 Mr Inglis spoke to the Annual Report highlighting
paragraphs as follows.
6.2 1.10 – No significant issues identified, however some areas had been identified which would benefit from the formalisation of existing practices to fully comply with the New Code of Good Governance.
6.3 1.11 - Following discussion it was agreed that the word ‘over-claimed’ would be amended to reflect the fact that this was within the financial year.
Mr Inglis Immediate
DRAFT
Audit Committee 24 November 2015 KMM Emboldened paragraphs, decisions taken
2
ACTION DATE In response to questioning, Mr Inglis confirmed that there had been no indication in the in-year information provided that would have fore-warned the auditors of the issue. It was confirmed that the provision of real time accounts to budget holders will ensure more accurate budget control.
6.4 1.12 - Business Development/Research. A Commercialisation Strategy has been completed and a further review of this area is included in the internal audit programme for 2015/2016.
6.5 1.13 – Opinion. Mr Inglis stated that, notwithstanding the paragraphs stated above, College has the “proper arrangements in place to promote and secure value for money.”
6.6 Corporate Governance – At the time of audit College was reviewing and updating Standing Orders, the Constitution, Code of Conduct, Declarations etc to ensure compliance with the new Code of Good Governance for Scotland’s Colleges. The audit provided the Board and management a sound base to ensure full compliance to include this within the Statement of Corporate Governance and Internal Control.
6.7 The Committee agreed that January would be the optimum time to undertake an annual evaluation of the effectiveness of Board.
6.8 Corporate Planning - It had been agreed that a review of corporate planning arrangements should be delayed until after the appointment of the new Principal
A.15.3.07 Internal Audit : Annual Plan 2015/2016 7.1 Included in the programme for 2015/2016 are:
Business Development/Research Procurement (including credit purchasing, petty
cash and Purchase Cards), and Partnership working.
7.2 Mr Hope thanked Mr Inglis for his reports and the assurances given
Dr Hutt, Mr Campbell, Mr Russell and Prof Maher left the meeting at 15.40 hrs
Mr Hope requested Mrs Lindsay to remain. The meeting resumed at 15.50 hrs. A.15.3.1 Resignations and Appointments 1.1 The resignation of Mr Gerrard was noted, with Mr Hope
especially appreciative of the support Mr Gerrard had provided over the years he had been a co-opted member of the Audit Committee. Mrs Croydon was requested to
DRAFT
Audit Committee 24 November 2015 KMM Emboldened paragraphs, decisions taken
3
ACTION DATE write to Mr Gerrard offering the Board’s thanks for his service.
Mrs Croydon Immediate
1.2 Mrs Lindsay advised that the Terms of Reference of the Audit Committee requires at least one member to have recent relevant financial or audit experience. The resignation of Mr Gerrard has left the Committee without such a member.
1.3 Mrs Croydon was requested to determine if any of the current Board applicants have any financial expertise and to inform Mr Major as soon as possible.
Mrs Croydon
Immediate
A.15.3.2 Apologies for Absence 2.1 There were no apologies for absence. A.15.3.3 Any additional Declaration of Interest including
specific items on the Agenda.
3.1 There were no additional declarations of interest. A.15.3.4 Minutes of Meeting held on 26 May 2015 4.1 Mr Sanders proposed and Mr Hope seconded that the
Minutes be accepted as a true record
A.15.3.5 Matters Arising/Action Sheet from Meeting held on
26 May 2015
5.1 There were no matters arising. A.15.3.08 Internal Audit 8.1 (i) SUMS Report and Action Plan 2014/2015:
Mr Inglis confirmed that the Henderson Loggie Audit Certificate had been submitted to the SFC on 8 October 2015 with reasonable assurance that the FES return contains no material mis-statement.
8.2 (ii) Student Support Funds Report 2014/2015: Mr Inglis confirmed that Henderson Loggie were able to certify all fund statements for the year, and submit to appropriate bodies, without reservation.
8.2.1 It was noted that a significant sum had been awarded to one student for taxi travel, however on investigation this was not considered unreasonable in the circumstances.
8.2.2. Mrs Palmer-Abbs suggested that Mrs Lindsay may be able to access addition travel funding from the Community Planning Partnership.
Mrs Lindsay
For Noting
8.3 (iii) SFC Student Support Fund Return 2014/2015: Return and Audit Certificate submitted.
8.4 (iv) EMA Return 2014/2015: Return and Audit Certificate submitted
DRAFT
Audit Committee 24 November 2015 KMM Emboldened paragraphs, decisions taken
4
ACTION DATE A.15.3.09 Care Inspectorate College Nursery Audit Report
(April 2015)
9.1 Mr Hope thanked Mrs Lindsay for including this report in the Audit papers, the contents of which were noted. It was overall an excellent report. Mr Sanders requested assurance that the HR matter had been resolved.
A.15.2.10 Long Term Agenda Planning 10.1 No additional agenda items. A.15.2.11 Date of Next Meeting – 24 February 2016 The meeting closed at 16.25 hrs
Moray College UHI
Internal Audit Progress Report
2015/16 Annual Plan
24 May 2016
1
Internal Audit Progress Report May 2016
Progress with the annual plan for 2015/16, finalised in November 2015, is shown below. Where appropriate follow-up of action plans will be
undertaken and reported in future.
Audit Area
Planned
reporting
date
Report status Report
Number
Overall
Conclusion
Audit
Committee Comments
Annual Plan 2015/16 November
2015
Draft 12/11/15
2nd Draft 17/11/15
Final 24/11/15
2016/01 N/A 24/11/15
Student Support February
2016
Draft 16/02/16
Final 16/02/16
2016/02 Satisfactory 23/02/16
Budgetary Control May 2016 Draft 13/05/16
Final 18/05/16
2016/05 Requires
Improvement
24/05/16
Procurement and Creditors /
Purchasing
May 2016 Draft 11/05/16
Final 18/05/16
2016/06 Requires
Improvement
24/05/16
Business Development /
Research
February
2016
Draft 17/02/16
Final 18/02/16
2016/03 Satisfactory 23/02/16
Partnership Working February
2016
Draft 15/02/16
Final 16/02/16
2016/04 Good 23/02/16
Credits Audit November
2016
Student Support Funds Audit November
2016
2
Internal Audit Progress Report May 2016
Audit Area
Planned
reporting
date
Report status Report
Number
Overall
Conclusion
Audit
Committee Comments
EMA Audit November
2016
Follow-Up Reviews May 2016 Draft 11/05/16
Final 18/05/16
2016/07 N/A see
comments
24/05/16 21 Fully implemented or No longer
relevant
10 Partially implemented
13 Little or no progress
3 No opportunity to implement
47 in total
Moray College UHI
Procurement and Creditors / Purchasing
Internal Audit Report No: 2016/06
Draft Issued: 11 May 2016
Final Issued: 18 May 2016
LEVEL OF ASSURANCE
Requires Improvement
Moray College UHI – Procurement and Creditors / Purchasing
Page No.
Section 1 Overall Level of Assurance 1
Section 2 Risk Assessment 1
Section 3 Background 1
Section 4 Scope, Objectives and Overall Findings 2
Section 5 Audit Approach 3
Section 6 Summary of Main Findings 3
Section 7 Acknowledgements 4
Section 8 Action Plan 5 - 13
Level of Assurance In addition to the grading of individual recommendations in the action plan, audit findings are assessed and
graded on an overall basis to denote the level of assurance that can be taken from the report. Risk and
materiality levels are considered in the assessment and grading process as well as the general quality of the
procedures in place.
Gradings are defined as follows:
Good System meets control objectives.
Satisfactory System meets control objectives with some weaknesses present.
Requires
improvement System has weaknesses that could prevent it achieving control objectives.
Unacceptable System cannot meet control objectives.
Action Grades
Priority 1 Issue subjecting the College to material risk and which requires to be
brought to the attention of management and the Audit Committee.
Priority 2 Issue subjecting the College to significant risk and which should be
addressed by management.
Priority 3 Matters subjecting the College to minor risk or which, if addressed, will
enhance efficiency and effectiveness.
Content
1
Moray College UHI – Procurement and Creditors / Purchasing
Requires
improvement System has weaknesses that could prevent it achieving control objectives.
This review focused on the controls in place to mitigate the following risks on the Moray College UHI’s Risk
Register:
Impaired reputation with stakeholders (risk rating: medium);
Exposure to internal fraud (risk rating: medium);
Exposure to external fraud (risk rating: low); and
Qualification of statutory accounts by auditors (risk rating: low)
As part of the Internal Audit programme at Moray College UHI (‘the College’) for 2015/16 we carried out a
review of the College’s arrangements surrounding procurement and non-pay expenditure. Our Audit Needs
Assessment, completed in November 2011, identified this as an area where risk can arise and where Internal
Audit can assist in providing assurances to the Board of Management and the Principal that the related
control environment is operating effectively, ensuring risk is maintained at an acceptable level.
Ensuring that there are robust procurement rules and procedures is important to ensure that the College is
purchasing goods and services that represent best value while ensuring compliance with the Procurement
Reform Act Scotland which started to come into force from 18 April 2016. The College’s Financial
Regulations cover key areas relating to procurement within the College and include sections relating to:
authorisation and control of capital expenditure; authorisation and control of revenue expenditure; order
book and payments; and contracts and tendering. Supporting these are more detailed Financial Procedures.
Staff from the UHI Procurement Shared Service visit the College regularly and provide staff with
procurement guidance and training.
Most College expenditure is processed through PECOS, electronic purchase order raising, authorisation and
receipting software. All PECOS purchase orders are interfaced into the finance system, Symmetry,
overnight. When invoices are received by Finance they are checked against purchase orders and if they can
be matched then they are processed in Symmetry, ready for payment in the next payment run. Some
invoices are received without a purchase order, and these must be authorised before they are directly input
into the finance system. Other expenditure is made by cheque, internet banking transfer, direct debit,
purchase card or via petty cash.
1. Overall Level of Assurance
3. Background
2. Risk Assessment
2
Moray College UHI – Procurement and Creditors / Purchasing
This audit focused on the systems of internal control in place within Finance, and in Curriculum Directorates
and Support Services, for the ordering of goods and services and the payment of invoices. This included
purchases made through petty cash and purchase cards.
We also considered whether the procurement strategy followed and procedures in place support best value
purchasing across the College in relation to non-pay spend.
The table below notes each separate objective for this review and records the results:
Objective Findings
The objectives of the audit were to
ensure that:
1 2 3 Actions
already
planned No. of Agreed Actions
1. Procurement procedures support best value
purchasing in relation to non-pay spend. Requires
Improvement 0 0 0
2. Procurement procedures are appropriate
for all levels of expenditure and are
complied with throughout the College.
Requires
Improvement 0 0 0
3. The risk of unauthorised and excessive
expenditure is minimised. Requires
Improvement 0 1 0
4. All liabilities are fully and accurately
recorded. Good 0 0 0
5. All payments are properly authorised,
processed and recorded. Satisfactory 0 0 1
6. Appropriate controls are in place over the
amendment of standing supplier data on the
finance system.
Satisfactory 0 0 2
Overall Level of Assurance Requires
Improvement
0 1 3
System has weaknesses that could
prevent it achieving control objectives
4. Scope, Objectives and Overall Findings
3
Moray College UHI – Procurement and Creditors / Purchasing
From discussions with Finance staff, and a sample of budget holders in Curriculum Directorates and Support
Services, we established what procurement strategies, procedures and monitoring arrangements were in
place within the College. These were then evaluated to establish if they followed recognised good practice.
Specifically, we sought to establish whether the procurement procedures ensured that areas of high spend
across the College were monitored appropriately, identified opportunities for pooling of expenditure in
order to achieve best value, and ensured that joint purchasing arrangements available to the College were
utilised where appropriate.
We documented controls in place within the purchasing / payments system through interviews with Finance
staff and sought to establish whether the expected key controls were in place by reference to standard
control risk assessment templates. We also performed compliance testing where considered necessary to
determine whether key controls were working effectively, including selecting a sample of items of
expenditure from the financial ledger and testing to ensure compliance with the College’s Financial
Regulations and Procedures.
Strengths
The College uses the UHI Shared Procurement Service, which gives College staff access to
knowledgeable procurement personnel for advice and training, and the College has access to a range
of procurement tools and procurement purchasing frameworks;
The PECOS purchase ordering, authorising, and receipting system provides a robust and efficient way
for controlling expenditure; and
Purchasing cards, petty cash, direct debits and cheques have appropriate authorisation processes in
place.
Weaknesses
Not all expenditure was procured through an APUC (Advance Procurement for Universities and
Colleges) Framework Agreement where these appeared to be available for goods and services
selected for testing and, where relevant, evidence of quotes obtained is not routinely retained on
PECOS. Maintenance contracts require to be tendered through the Public Contracts Scotland (PCS)
tender portal. These issues had already been identified by the College and the UHI Shared
Procurement Service will be working with College staff in the near future to identify areas of non-
compliance and determine future procurement action required;
Non-PECOS expenditure only requires one signature to authorise it, and BACS and internet banking
payments only require one person to process these, which does not allow for adequate segregation of
duties;
Checks over changes in bank account details which are done prior to each major payment run are not
always kept on file and do not show the period to which they relate; and
New supplier forms are not always completed and the new supplier form does not require
justification of the new supplier to be detailed.
6. Summary of Main Findings
5. Audit Approach
4
Moray College UHI – Procurement and Creditors / Purchasing
We would like to take this opportunity to thank the staff at the College who helped us during the course of
our audit visit.
7. Acknowledgements
5
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 1: Procurement procedures support best value purchasing in relation to non-pay spend.
The College is a member of APUC (Advance Procurement for Universities and Colleges) which provides procurement support and guidance for the Further and
Higher Education sector. In addition the College is part of the UHI Procurement Shared Service which gives access to a shared procurement resource and it
provides a procurement staff member who is based in the College for a minimum of three days every fortnight and is contactable via phone or email while off site.
This staff member’s remit is to provide support and guidance to the College on all levels of procurement, to manage any tender activity over £20,000 and to support
the College with policy development and training for staff on procurement related topics.
The Procurement Reform Act Scotland started to come into force from 18 April 2016. Under this there is no legal requirement for the College to have a
procurement strategy, although there is one in place, and the College is planning to refresh its three year Procurement Strategy and support this with an annual
Forward Contracting plan. The College’s Financial Regulations and procurement thresholds have been amended to meet the new requirements and these and other
Procurement Reform Act Scotland requirements have been communicated to budget holders through senior management and budget holder training sessions in
April 2016.
A contracts register has been created using APUC’s ‘Hunter’ database and a four year non-pay spend analysis has been completed with high risk areas highlighted to
senior management. A range of procurement tools are used by the College including the Public Contracts Scotland (PCS) Quick Quote (in order to receive quotes
for goods and services from a range of suppliers in a short timeframe) and PCS Tender systems. The PECOS purchase ordering system also has some direct links to
approved suppliers’ purchasing websites.
The College’s Financial Procedures state that: ‘If the items required can be purchased from our preferred suppliers (under a Framework Agreement) then the
appropriate supplier must be used.’ The Financial Procedures define the preferred suppliers as APUC suppliers, which have already been vetted by APUC. Part of
the UHI Procurement Shared Service remit is to promote regional collaboration with the other Academic Partners and public authorities. Since August 2015 the
College has participated in collaborative opportunities for insurance and a new finance system which have delivered savings. Purchasing cards (credit cards with the
ability to only make purchases of certain goods and services) are in use to reduce purchasing administration.
As part of the audit we met with four budget holders (the Head of Estates, ICT Officer, and two curriculum budget holders) and discussed their use of framework
suppliers. It was noted that there were some areas, particularly in Estates, where the procurement tools available were not being used. However all staff
interviewed were aware that they now needed to work with the UHI Procurement Shared Service staff to ensure compliance with the Procurement Reform Act
Scotland going forward. As work is planned in this area no recommendation has been raised.
8. Action Plan
6
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 2: Procurement procedures are appropriate for all levels of expenditure and are complied with throughout the College
New Financial Regulations and Financial Procedures came into force from March 2016 and set out quote and tender requirements that vary depending on the
value of purchases. These are:
£0-£5,000 (VAT exclusive): items to be purchased from the College’s preferred suppliers (under an APUC Framework Agreement in which case APUC
will have already tendered and negotiated the prices and appointed the best value suppliers) where possible, or otherwise one quote is required, however
purchasers must have regard to value for money in making purchases. The previous Financial Regulations (pre-March 2016) required that for amounts up
to £5,000 (VAT inclusive) every effort should be made to ensure the best value supplier was used with use of preferred suppliers where possible. From a
review of a sample of seven purchase orders (POs) raised between £0 and £5,000 in value, four related to goods and services that appeared to be
available through an APUC Framework Agreement. A framework supplier had only however been used in one instance;
£5,001-£49,999 (VAT exclusive): three quotes (preferably using the quick quote facility from Public Contracts Scotland (PCS) with quotes retained on
PECOS / PCS or use of a framework supplier. The previous Financial Regulations (pre-March 2016) required that for amounts from £5,000 to £30,000
(VAT inclusive) there were quotes from a minimum of three suppliers or from the PCS quick quote facility. From a review of a sample of eight POs
raised between £5,001 and £49,999 in value, seven related to goods and services that appeared to be available through an APUC Framework Agreement.
A framework supplier had only however been used in three instances. We also noted that evidence of quotes obtained was not routinely retained on
PECOS. We were advised by the Assistant Accountant that, as part of the Procurement Reform Act Scotland changes coming into place, going forward
Finance will be actively checking that this documentation is retained on PECOS and / or the College’s network drive. As action is planned no
recommendation has been raised regarding this;
>£50,000 (VAT exclusive): a tender must be undertaken using the PCS tender portal. The previous Financial Regulations (pre-March 2016) required that
for amounts over £30,000 (VAT inclusive) formal tenders must be invited from a minimum of three suppliers on the PCS tender portal. We noted from
discussion with the Head of Estates that there were 14 maintenance contracts that had not been tendered through the PCS tender portal (although prices
had been obtained from a small number of suppliers) however we were advised that he will be working to ensure that these are tendered when the
existing contracts come to an end. There were no individual expenditure items over £50,000 between 1 August 2015 and 14 April 2016, when audit
testing was carried out; and
Expenditure over EU thresholds requires special EU compliant processes to be followed. There were no such items during the period.
We consider that the procurement procedures are appropriate for all levels of expenditure, however as discussed above there has not been full compliance
with these. As staff are working to ensure compliance no recommendation has been raised.
7
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 3: The risk of unauthorised and excessive expenditure is minimised.
There is a range of ways that expenditure is processed.
PECOS
The PECOS electronic purchase order raising, authorisation and receipting software is used for the majority of College purchases. Staff are set up as PO raisers
and / or authorisers on the system. A PECOS requisitioner raises a PO on PECOS, including value, description, supplier and expenditure coding (for the finance
system). This is routed to an authoriser on PECOS (based on the cost centre the expenditure is coded to) for approval. Once approved Finance then review
this and send out the PO to the supplier. When the goods are received in or the services are provided these must be receipted on PECOS. All receipted POs
are interfaced to the finance system overnight. Invoices are then matched by Finance to POs, and if these match then the invoice is then processed for payment
in the Finance system.
We discussed the list of approvers (by cost centre) with the Assistant Principal, who considered that the approvers on PECOS as at 14 April 2016 were
appropriate.
From a sample of 15 PECOS transactions between 1 August 2015 and 14 April 2016 we found that these were appropriately raised, approved and receipted, and
invoices were within the original PO or amended / extra PO.
Non-PECOS
There are a number of expenditure items that are not processed via PECOS. These include:
a) Invoices input directly into Symmetry, and not being approved on PECOS:
b) Direct Debits
c) Cheques
d) Internet banking transfers
e) Purchasing cards
f) Petty cash
8
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 3: The risk of unauthorised and excessive expenditure is minimised (Continued)
Observation Risk Recommendation Management Response
Non-PECOS (Continued)
a) Finance staff can directly input invoices into Symmetry which would feed
through into a payment run. The key mitigating controls in place to reduce the
risk of fraudulent invoices being input are:
reviews by the Assistant Accountant of invoice batches prior to posting
into Symmetry, including checking of a sample;
reviews of changes to bank account details since the previous payment run
(which mitigates against staff setting up fictitious suppliers or changing the
bank account details of existing suppliers in order to perpetrate a fraud);
and
budgetary control is the key control that should identify any significant
unauthorised or excessive expenditure such as where there could be
existing fictitious suppliers (from prior to when bank account changing
checks were put in place). This only highlights expenditure after it has
been made and relies on budget holders to actively review their budget
reports.
We reviewed five non-PECOS expenses between 1 August 2015 and 14 April
2016 and noted that:
Only one person was required to sign-off the invoice, which does not
provide sufficient segregation of duties; and
Two of the expenses should have had POs raised according to the
Financial Regulations’ requirements but did not. These related to
expenditure on projects that were externally funded. The Assistant
Principal advised that these were late invoices relating to a historic project
and that similar expenditure would not be likely to recur. As a result no
recommendation has been raised.
Expenditure may
be processed with
only one staff
member involved
which increases the
risk for fraudulent
transactions
R1 Ensure that all
non-PECOS
expenditure items
have two staff sign-off
off on these.
Agreed point and will ensure
all non-PECOS invoices have
two signatures.
To be actioned by: AFO /
Budget Holder
No later than: June 2016
Grade 2
9
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 3: The risk of unauthorised and excessive expenditure is minimised (Continued)
Non-PECOS (Continued)
b) Direct Debit:
All direct debits must be authorised prior to setting up by at least two staff.
c) Cheques
A cheque authorisation form must be signed by two staff with supporting documentation provided.
d) Internet Banking Payments
An authorisation form is required to be signed by two staff, with supporting documentation retained.
e) Purchasing Cards
There are restrictions placed on purchasing card use which limit what they can be used to purchase, and maximum credit amounts are set which we consider
are appropriate.
f) Petty Cash
Finance must approve amounts put into floats and the amounts involved are small.
Objective 4: All liabilities are fully and accurately recorded.
Processes in place are adequate to ensure that invoices that are processed into Symmetry (or interfaced from PECOS into Symmetry and matched to an invoice
on Symmetry as ready for payment) are shown in trade creditors. There is a quarterly accrual done for management accounts purposes for any approved POs
that are waiting to be matched to invoices to ensure that all committed expenditure is included. Online bluQube budgetary control reports that budget holders
can review include approved commitments.
10
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 5: All payments are properly authorised, processed and recorded.
Observation Risk Recommendation Management Response
We reviewed the payments controls in place and noted the following:
BACS payments
A sign-off authorisation sheet is required to be filled in and one member of staff
is required to upload the payment file (into a secure network folder) and then
another uses BACS software to process the payment. We noted that although
in practice there is required to be two staff involved there is no electronic
segregation of duties, meaning that one person could potentially upload an
unauthorised payment file and pay this which could lead to fraudulent payments
being made. The Assistant Accountant was not aware of there being any
maximum transaction limit on the BACS software.
There are twice monthly payment runs for suppliers. We tested all 18 such
payment runs between 1 April 2015 and 19 April 2016 and noted that all
payment batch forms were signed-off as required.
Internet Banking Payments
There is a form that is required to be completed setting out details of the
payment, which must be authorised and supported with appropriate
documentation. Although two staff are physically required to sign-off the form
only one person is required to process the payment on the internet banking
software.
There were approximately 80 internet banking payment transactions between 1
August 2015 and 14 April 2016 and we tested 10 of these to ensure there was
appropriate authorisation and we noted no issues.
Unauthorised
transactions may
be made from the
College’s bank
account which may
not be able to be
recovered.
R2 Implement
electronic segregation
of duties on BACS and
internet banking
software.
We have considered the way
forward and will implement
the electronic segregation of
duties on BACS and internet
banking payments and, in the
absence of a relevant staff
member to this process, the
Director of Finance will be the
second person to ensure the
two steps are implemented.
To be actioned by:
Assistant Accountant /
Accounting Technician
No later than: July 2016
Grade 3
11
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 5: All payments are properly authorised, processed and recorded (Continued)
Petty cash payments
Each petty cash expenditure item is required to be individually authorised on a form and signed by a staff member in the area concerned and a Finance staff
member. Total petty cash expenditure between 1 August 2015 and 29 February 2016 was £898 (70 transactions). We tested 10 items and noted no issues with
the authorisation of these.
Purchase card payments
Each monthly purchase card item is required to be described on a monthly purchase card log, and this log must be signed-off by the individual concerned and
their line manager, and accompanied with required documentation. Total purchase card expenditure between 1 August 2015 and 7 April 2016 on the 11
purchase cards was £98,543 (742 transactions). We tested 10 transactions and noted that they were adequately authorised and supported with documentation.
12
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 6: Appropriate controls are in place over the amendment of standing supplier data on the finance system.
Bank Account Changes
Where a supplier advises the College that they have changed their bank account a change authorisation form must be completed, the change verbally confirmed
with the supplier, and there is a check that the change has been made correctly on Symmetry. We tested a sample of five bank account changes between 1
August 2015 and 14 April 2016 and noted that all had appropriate forms and evidence.
The Assistant Accountant reviews a report showing changes in bank accounts before each twice monthly payment run and, when a member of senior management
signs-off the payment run, if there are any changes in bank details in that run then the documentation is attached for checking.
Observation Risk Recommendation Management Response
When there is a twice monthly payment run we noted that the changes in bank
account report referred to above is not always printed-off (we were advised
that it is not printed if there are no entries on it) and this report does not show
the period that it covers.
The bank account
changes report may
not be complete,
allowing
unauthorised
changes to bank
accounts to go
unnoticed which
could be used to
facilitate fraudulent
payments.
R3 Ensure the
payment run report is
always printed out and
shows the dates of the
report.
Agreed that the report should
be printed each time a
payment run is produced and
it has a date stamp on it.
To be actioned by:
Assistant Accountant
No later than: June 2016
Grade 3
13
ABC Li88888mited Audit Report Moray College UHI – Procurement and Creditors / Purchasing
Objective 6: Appropriate controls are in place over the amendment of standing supplier data on the finance system (Continued).
Observation Risk Recommendation Management Response
New Suppliers
When there is a new supplier there should be a completed new supplier form.
We tested a sample of 10 new suppliers between 1 August 2015 and 14 April
2016 and noted that four did not have a completed new supplier form, although
one was an APUC approved supplier and one had an email justifying the setting
up of the supplier. We also noted that the form used did not include a section
to justify the use of the new supplier.
New suppliers may
be set up when
existing framework
suppliers are in
place. New
supplier details may
not be correct.
R4 Update the
new supplier form to
ensure there is a
justification for the
new supplier, and
ensure that all new
suppliers have a new
supplier form
completed.
Partially agreed. Some of the
new supplier checks are done
in the Symmetry system as we
tried to reduce paper but we
will ensure paperwork will be
completed each time and add
a line in for justification as to
why a new supplier is
required.
To be actioned by: AFO &
Assistant Accountant
No later than: June 2016
Grade 3
Moray College UHI
Budgetary Control
Internal Audit Report No: 2016/05
Draft Issued: 13 May 2016
Final Issued: 18 May 2016
LEVEL OF ASSURANCE
Requires Improvement
Moray College UHI – Budgetary Control
Page No.
Section 1 Overall Level of Assurance 1
Section 2 Risk Assessment 1
Section 3 Background 1 - 2
Section 4 Scope, Objectives and Overall Findings 2 - 3
Section 5 Audit Approach 4
Section 6 Summary of Main Findings 4
Section 7 Acknowledgements 5
Section 8 Action Plan 6 - 17
Level of Assurance In addition to the grading of individual recommendations in the action plan, audit findings are assessed and
graded on an overall basis to denote the level of assurance that can be taken from the report. Risk and
materiality levels are considered in the assessment and grading process as well as the general quality of the
procedures in place.
Gradings are defined as follows:
Good System meets control objectives.
Satisfactory System meets control objectives with some weaknesses present.
Requires
improvement System has weaknesses that could prevent it achieving control objectives.
Unacceptable System cannot meet control objectives.
Action Grades
Priority 1 Issue subjecting the College to material risk and which requires to be
brought to the attention of management and the Audit Committee.
Priority 2 Issue subjecting the College to significant risk and which should be
addressed by management.
Priority 3 Matters subjecting the College to minor risk or which, if addressed, will
enhance efficiency and effectiveness.
Content
1
Moray College UHI – Budgetary Control
Requires
Improvement System has weaknesses that could prevent it achieving control objectives.
This review focused on the controls in place to mitigate the following risks on the College’s Risk
Register:
Impaired reputation with stakeholders (risk rating: medium);
Not achieving non-core income targets (risk rating: high);
Exposure to internal fraud (risk rating: medium);
Failure to maintain a balanced budget (risk rating: high); and
Loss of financial sustainability (risk rating: medium).
As part of the Internal Audit programme at Moray College UHI (‘the College’) for 2015/16 we carried
out a review of the College’s arrangements surrounding budgetary control.
It was established on 18 June 2015 that the College had requested a draw down from the Scottish
Funding Council (SFC) on its Further Education (FE) funding which was in excess of its available funds by
£568,430. The College was unable to repay the funds at that time requiring a cash advance from the
University of the Highlands and Islands to meet its financial commitments. A full independent
investigation was carried out by an external consultant into the circumstances giving rise to the over-
claim and the College’s financial position. Management advised that it was established that the main
reason that the College had run out of funds was that budgets were not revised once it became
apparent that Higher Education (HE) student numbers had not been met, which impacted on College
income. Certain new budgetary control practices and protocols have been introduced, which were
subject to review as part of this audit.
Budgets are set through discussion between Finance staff and budget holders based on historic costs
along with relevant known or expected changes. The budget is approved by the Board and then loaded
into the College’s finance system, Symmetry.
Most purchases require a purchase order to be raised and authorised by separate staff on the College’s
procurement software, PECOS. Finance staff review all authorised PECOS orders to ensure there is
sufficient budget in place and, if so, the purchase order is sent to the supplier. There is a daily interface
between PECOS and Symmetry to bring across information about purchases. Some expenditure, such
as that made on purchase cards and utility bills paid by direct debit, are directly input into the
finance system but require appropriate authorisations.
1. Overall Level of Assurance
3. Background
2. Risk Assessment
2
Moray College UHI – Budgetary Control
Budget holders have access to information on their actual and budget non-staffing expenditure on
bluQube, an on-line reporting tool linked to the finance system. Staffing figures are centrally monitored
by Finance, and extra posts require authorisation by a member of the Senior Management Team and
extra staff hours require authorisation by a Director. The Assistant Accountant has quarterly meetings
with budget holders to monitor commercial income and non-staffing expenditure against budget, and
from these discussions changes may be made to forecast income and expenditure figures.
This audit looked at the College’s new budgetary control practices and protocols. It also specifically
considered budget monitoring procedures in place centrally and within a sample of Curriculum
Directorates and Support Services, and also cash flow reporting to senior management and the Board,
and the Scottish Funding Council.
The College’s budgeted income for 2015/16 is £12.274 million, and with budgeted staff costs of £9.036
million and other costs of £3.171 million, this gives a budgeted operating surplus of £67,000. The
management accounts at 31 January 2016 showed a forecast surplus of £145,000 for the year to 31 July
2016, whereas the management accounts to 31 March 2016 now show a forecast deficit of £167,000, an
adverse change of £312,000. The main reasons for the forecast deficit were:
forecast income not materialising, including £128,000 of forecast Project income (offset by £25,000
of forecast expenditure, a net £103,000 adverse variance) and £112,000 of Education contract /
non-fundable activity income;
an ESF clawback of £80,000 from 2014/15 not being included in the budget;
professional fees and memberships now being forecast as £96,000 over budget for the year to 31
July 2016; land & buildings maintenance £65,000 over budget; and plant & equipment, fixtures &
fittings, licences £68,000 over budget; and
the use of depreciation ‘cash’.
Offsetting the above negative variances were a number of positive variances, the main one being a
£181,000 increase in FE and HE fees due to higher student numbers than predicted.
The College is also forecasting a negative cash balance at 31 July 2016 of £156,094.
Although progress has been made with implementation of the College’s new budgetary control practices
and protocols there remains further work to be done to ensure that they are fully implemented and
effective. As noted above, the latest set of management accounts available at the time of our audit
indicated that the College was forecasting a deficit for the year to 31 July 2016 and a negative cash
balance at that date. Discussion with the Assistant Principal indicated that action was being taken to
address this position and, as a safety net, the College has arranged a £250,000 overdraft facility.
3. Background (Continued)
4. Scope, Objectives and Overall Findings
3
Moray College UHI – Budgetary Control
The table below notes each separate objective for this review and records the results:
Objective Findings
The objectives of the audit were to
ensure that:
1 2 3
Actions
already
planned
No. of Agreed Actions
1. Budgets are controlled in
accordance with the Financial
Regulations and Procedures.
Requires
Improvement 0 2 4
2. Budget setting is linked to corporate
and operational planning processes
and budgets are revisited when plans
change or funding targets are not
achieved.
Requires
Improvement 0 1 0
3. Information is available to
management in Curriculum
Directorates and Support Services
which is up-to-date and in a format
that can be easily understood.
Satisfactory 0 0 0
4. Budget holders have the necessary
skills for managing budgets. Good 0 0 0
5. Budget variations are reported and
acted upon. Satisfactory 0 0 0
6. There is accurate cash flow
reporting. Satisfactory 0 0 0
7. Senior management and the Board
regularly review the College’s
overall financial position.
Satisfactory 0 1 0
8. Improvements made to the
budgetary control framework in
2015/16 have been effective.
Satisfactory 0 0 0
Overall Level of Assurance Requires
Improvement
0 4 4
System has weaknesses that could
prevent it achieving control objectives.
4. Scope, Objectives and Overall Findings (Continued)
4
Moray College UHI – Budgetary Control
Finance staff and a sample of budget holders in Curriculum Directorates and Support Services were
interviewed, and reports reviewed, to determine current working practices in budget monitoring, and
the information and training provided to budget holders.
The processes used to prepare cash flow reports for senior management and the Board, and the
Scottish Funding Council were determined through discussion with Finance staff and review of
supporting working papers. We also established and reviewed the budget monitoring information
provided to the College Senior Management Team and Board.
Strengths
The College has a budgetary control framework in place which includes: budget setting and
approval; information being provided on non-staffing expenditure on bluQube for budget holder
monitoring; quarterly meetings between Finance and budget holders where income and non-
staffing variances from budget are reviewed; central review of staffing expenditure; and regular
budget reporting to the Principal’s Planning Group and the Finance and General Purposes
Committee;
Budget holders interviewed advised that the information they were provided with was up-to-date
and in a format that allowed them to review figures (using a drill down functionality) and
understandable;
Budget holders had sufficient skills and training in order to manage their budgets; and
The cash flow forecasting and reporting processes led to sufficiently accurate closing cash
balances being forecast.
Weaknesses
From review of management accounts there continues to be negative variances in some
expenditure categories, due to a mix of unexpected items, expenditure estimates not being
accurately budgeted for when setting the budget and accounting adjustments relating to previous
years;
Commercial income budgets were set without detailed supporting calculations for the numbers of
students or courses. Furthermore, when income was reviewed in meetings between Finance staff
and budget holders the forecast income figures were also estimated without supporting
calculations. Without detailed support for the budget or forecast income there is a greater risk
that these figures will not be accurate;
Although information is provided to the Finance and General Purposes Committee we considered
that the variance commentary provided could be improved and that the information provided
should be reviewed to determine whether this is the most appropriate to meet the needs of the
Committee; and
A number of areas for improvement were noted relating to greater documenting of procedures
and formal compliance with the Financial Regulations and Procedures.
6. Summary of Main Findings
5. Audit Approach
5
Moray College UHI – Budgetary Control
We would like to take this opportunity to thank the staff at the College who helped us during the
course of our audit visit.
7. Acknowledgements
6
Moray College UHI – Budgetary Control
Objective 1: Budgets are controlled in accordance with the Financial Regulations and Procedures.
The College’s Financial Regulations and Financial Procedures set out the main requirements for budgetary control, covering both revenue and capital budgets. This includes responsibilities of budget holders and senior staff, approval of budgets by the Finance and General Purposes Committee and Board, and requirements for budget holders to
manage their budgets. The Financial Procedures require that budget holders will have access to budget reports, Finance staff will meet at least quarterly with budget holders, the Principal’s Planning Group will receive monthly budget monitoring information, and the Finance and General Purposes Committee will receive budget monitoring
information quarterly.
Observation Risk Recommendation Management Response
We reviewed whether the budgetary control requirements of the Financial Regulations and Procedures had been met
through review of documentation and discussion with staff. From this we noted that:
The Director of Finance is required to have budgets communicated to all budget holders as soon as
practicable following their approval by the Board of Management and no later than 1 August of the financial
year to which they apply. We found that non-staffing expenditure budgets could be obtained by budget
holders from the bluQube reporting software, but budgeted income figures were not confirmed with budget holders; and
The Director of Finance is responsible for providing regular updates in respect of all major capital
expenditure to the Finance and General Purposes Committee. We noted that this was not being done.
Budget holders may not be sure of their budgeted income
figures.
There may not be adequate overview of capital expenditure without regular updates to the
Finance and General Purposes Committee.
R1 Ensure that all budget holders are
provided with their full budgets at the start of the
academic year.
Implemented.
To be actioned by: Assistant Accountant
No later than: Done
Grade 3
R2 Provide updates on major capital
expenditure during the year, and on all capital
expenditure at least at the end of the year, to the
Finance and General Purposes Committee.
Capital expenditure is included on the balance sheet which is included in the
management accounts pack but will ensure a section is added to the commentary with
more detail.
To be actioned by: Assistant Accountant
No later than: Next quarterly accounts.
Grade 3
8. Action Plan
7
Moray College UHI – Budgetary Control
Objective 1: Budgets are controlled in accordance with the Financial Regulations and Procedures (Continued)
Observation Risk Recommendation Management Response
From discussion with the Assistant Principal it was noted that all ICT
spend should be approved by the ICT Officer to ensure that it is compatible with the College’s systems and the most appropriate for
use within the College. We noted that this was not formally set out within the Financial Regulations or Procedures.
ICT equipment
may be purchased that is not
appropriate or incompatible with College systems.
R3 Amend the Financial
Regulations or Procedures to require all ICT purchases to be
approved by the ICT Officer prior to any orders being placed.
Will amend the Financial Procedures and
Regulations to reflect existing practices.
To be actioned by: Assistant Accountant
No later than: To be Approved by Finance and General Purposes Committee
in June 2016
Grade 3
8
Moray College UHI – Budgetary Control
Objective 1: Budgets are controlled in accordance with the Financial Regulations and Procedures (Continued)
Observation Risk Recommendation Management Response
The Financial Regulations and Procedures provide a good budgetary
control framework, however there could be more detailed budgetary control procedures in place providing further information such as:
Budget setting – need for a formal budget setting timetable to be set annually; need for budget holder meetings with Finance which consider budgetary implications of College or departmental
operational plan items; the requirement for detailed commercial income calculations to be provided to support budgeted
commercial income; and set out how budget holders should be informed of finalised budgets;
Budget monitoring – information about areas budget holders should be monitoring (such as income and consumables) and ways for doing this, and information about the quarterly meetings
with Finance (including their purpose, how actions from these should be documented and followed-up, and what to do in the
event of unexpected variances being noted in these);
Reforecasting – details of how and when reforecasts will be done and reported; and
Capital budgeting – formal process for setting, reviewing, approving and reporting on the capital budgets.
The revenue and
capital budgetary control framework
may not be as robust as it could be without
detailed procedures in
place.
R4 Within the Financial
Procedures provide more detail about the budget setting,
monitoring, reforecasting and capital budgeting processes.
Will amend the Financial Procedures and
Regulations to reflect existing practices.
To be actioned by: Assistant Accountant No later than: To be Approved by
Finance and General Purposes Committee in June 2016
Grade 3
9
Moray College UHI – Budgetary Control
Objective 1: Budgets are controlled in accordance with the Financial Regulations and Procedures (Continued)
Observation Risk Recommendation Management Response
We reviewed the budget setting process used in 2015/16 and from this we noted
that:
Discussions between Finance and budget holders had been held to identify what budget figures should be. We noted that after these discussions some
budgets were cut without consultation and we were advised that this was not standard practice and will not be repeated in future.
After budget figures had been set these were collated using a spreadsheet and then reviewed at a College wide level. As the initial overall budget
figure (a budgeted deficit of £129,000) was considered unacceptable a further budget was prepared and taken to the Board in September 2015
which showed a budgeted surplus of £67,000.
The budget setting process was largely based on the 2014/15 forecast income and expenditure, as amended for known or expected changes,
which was considered reasonable. However we noted that the budget for some areas, such as Estates and ICT, where there are existing planned
maintenance contracts or software licences in place, should be set using this information. Due to the release of deferred income against Estates
expenditure in previous years not being taken into consideration when setting the 2015/16 budget the full cost of maintenance was not reflected in
the 2015/16 budget which has led to overspends in this area.
Commercial income figures were estimated by budget holders however
these should be backed up with detailed lists of planned courses and dates for these, and student numbers and income per student for each. The latest available management accounts (to 31 March 2016) show a forecast
outturn to 31 July 2016 for Education contracts / non-fundable activity income and Projects income of £112,000 and £208,000 below budget
respectively. There has been no Project income in the year and the position has been made worse by an £80,000 ESF clawback relating to
previous years.
Without the use of
detailed income and expenditure analysis in
setting the budget there is the risk that
budgeted figures are not as accurate as they
might be, which could lead to adverse budget variances and cash flow
issues.
R5 When setting
the ICT and Estates budgets ensure that
detailed lists of Estates planned maintenance
contracts and ICT software licences and
other contracts are used to assist with this.
Implemented during the setting of
16/17 budget.
To be actioned by: Budget holders / Assistant Accountant
No later than: Done
Grade 2
R6 Ensure that
there are detailed breakdowns supporting budgeted commercial
income figures. These figures should be
reviewed by Finance for reasonableness and
should form the basis for monitoring actual income
against budget during the year.
Accepted. We will request these
from budget holders to better monitor and control income and expenditure forecasts.
To be actioned by: Budget
holders / Assistant Accountant
No later than: Commencing August 2016
Grade 2
10
Moray College UHI – Budgetary Control
Objective 2: Budget setting is linked to corporate and operational planning processes and budgets are revisited when plans change or funding
targets are not achieved.
The College’s Strategic Plan is supported by a College Operational Plan, and individual departments may have their own operating plans which link into the priorities
set out on the College Operational Plan. When setting budgets (which is done generally in April – June for the following academic year), the financial implications of
any strategic objectives and operational plan activities should be factored into the budgets. We noted that this is not a formal process, but were advised that budget
holders would be aware of what they were planning to do and look for further funds for any operational plan activities when meeting with Finance to set budgets for
the following year.
Observation Risk Recommendation Management Response
Reforecasts
Every quarter the Assistant Accountant meets with budget holders to review budget variances and identify any areas where at the year-end the income or
expenditure is likely to differ from the original budget. This process is used to inform the ‘Forecast’ figures on the management accounts. We noted that the
reforecasting process places reliance on budget holder estimates, and that there are no detailed calculations provided to justify the forecasts. This could affect the
accuracy of the in-year reforecasts. We noted that there were significant movements in forecast income between the January 2016 and March 2016
management accounts, with significant fluctuations in categories (the Education contracts / non-fundable activity income category had a £80,000 adverse
movement, and the Project income category had a £128,000 adverse movement between these sets of management accounts). This would indicate that there is a need for more rigour in setting income budgets, and being more prudent when
setting these.
Reforecast figures may not be accurate leading
to the year-end outturn being inaccurate and
potentially leading to cash flow problems.
R7 Ensure that at quarterly budget holder
meetings with Finance that detailed analysis of
income is provided, taking the figures
provided at budget setting time and updating
these for actual income secured and specific
future activity planned. A prudent approach should be taken when setting
and forecasting income.
Accepted. We will request these from budget holders to better
monitor and control income and expenditure forecasts.
To be actioned by: Budget
holders / Assistant Accountant
No later than: Commencing August 2016
Grade 2
11
Moray College UHI – Budgetary Control
Objective 3: Information is available to management in Curriculum Directorates and Support Services which is up-to-date and in a format
that can be easily understood.
Based on discussions with eight budget holders (from a total of 23 budget holders), we noted that the bluQube budget monitoring reports were adequate to
review non-staff expenditure against budget, and that information was up-to-date and in a format that was easily understood. Reports showed, by category: the
actual expenditure; budget; commitments (goods and services ordered but where the invoice was still to be received); and available funds (budget less actual
expenditure and commitments). Budget holders could also drill down into figures to get detailed expenditure listings and also export this to Excel where they
could further analyse figures. These reports could be improved by including an accurate phased budget (rather than the current phasing based on 1/12 of the full
year’s budget) and by having the names of budget codes in the reports (rather than just the budget code). However the College is moving to new Tech1 finance
software, along with other UHI partners, in the near future which will have different budget monitoring reports, and the Assistant Principal hopes that more
accurately phased budgets will be implemented in the future. As a result no recommendation has been raised regarding this matter.
Staff costs are reviewed by the Assistant Accountant when preparing the quarterly management accounts and the Assistant Principal also obtains payroll
information which they review. We noted that there was a small variance of £69,000 in staffing costs in the most recent management accounts available at the
time of finalising this audit (to 31 March 2016) which indicates that this is being managed tightly. The Assistant Principal advised that in terms of FTE staff
numbers the College is 1½ FTE below the number used in the budget.
Budget holders can request commercial income figures from Finance as these were not available on bluQube reports. However commercial income was
monitored at the quarterly meetings between Finance and budget holders. We were advised that in future budget holders will regularly get actual and budgeted
income figures on a spreadsheet after the quarterly meetings along with notes of any actions arising (which will be documented on the spreadsheet). As it is
planned to provide income figures to budget holders on a regular basis no recommendation has been raised regarding this.
Objective 4: Budget holders have the necessary skills for managing budgets.
From discussions with eight budget holders in both Curriculum Directorates and Support Services (covering the Head of Estates, the ICT Officer, Assistant
Principal and five staff responsible for budgets in curriculum areas) it was noted that all of those interviewed considered that they had the necessary skills for
managing their budgets, either through having received specific budget holder training or from on the job experience of the budget monitoring processes.
We were advised that staff were required to attend mandatory training on the use of bluQube in September 2015 and we noted that 20 of the 23 budget
holders were on the list of staff who received this training. The mandatory training included an on-screen presentation showing how bluQube worked, along
with a presentation by Finance staff setting out key information about: the updated budgetary control framework; the use of petty cash; purchasing cards (which
work similar to credit cards but have restrictions on what types of expenditure can be made on them); travel and subsistence; and information about how
PECOS should be used. We were advised that the remaining three budget holders will receive training in due course.
12
Moray College UHI – Budgetary Control
Objective 5: Budget variations are reported and acted upon.
Monitoring reports on bluQube only show funds remaining, which makes it difficult for staff to know whether they may be spending too much too soon. However
the reports used at the quarterly meetings between Finance and budget holders have actual and budget year-to-date figures and a variance. Although the budget
is only phased on a pro rata basis (number of months passed divided by 12, multiplied by the full year budget) which may not appropriately reflect the spending
patterns in the year, this at least provides a benchmark to identify variances at an early stage and consider whether corrective action is required. As set out under
Objective 3 above it is planned that these spreadsheets will be sent out to budget holders after budget meetings in future.
We noted from a review of the latest available management accounts (to 31 March 2016) that, in addition to the variances in income noted under Objective 1
above, there were some significant variances on expenditure item categories, such as professional fees and memberships now being forecast as £96,000 over
budget for the year to 31 July 2016; land & buildings maintenance £65,000 over budget; and plant & equipment, fixtures & fittings, licences £68,000 over budget
although these are partially offset by positive variances. Overall, expenditure to 31 July 2016 is forecast to be £122,000 over budget. From discussion with the
Assistant Principal we are aware that the variances are a mix of unexpected items, budgets being set too low for Estates costs (refer Objective 1 above) and
accounting adjustments relating to previous years. As noted under Objective 6 below, action has been taken to cut £90,000 from the non-staffing budget for the
remainder of the year.
13
Moray College UHI – Budgetary Control
Objective 6: There is accurate cash flow reporting.
Consideration of cash balances and cash flows are important to ensure that the College has sufficient funds to pay all its obligations as they fall due while
minimising its cash balances as required.
At the start of every month a Scottish Funding Council (SFC) Monthly Cash Flow Forecast Return is required to be completed. This sets out the forecast
expenditure for that month as well as analysing actual expenditure and closing cash balances for the previous month. We reviewed the forecast monthly closing
cash balance on the Returns from August 2015 to February 2016 against the actual closing cash balance and noted that there were variances fluctuating between
-£222,000 and +£372,000, with a minimum monthly closing bank balance noted of £193,000. We reviewed the reasons for fluctuations of more than £200,000,
which included bursary and supplier payments being lower than forecast and delays in receiving income, and consider these explanations were adequate.
In addition to SFC cash flow reporting there is cash flow reporting provided to the Finance and Resources Committee.
We noted from our review of the cash flow forecast as at 5 May 2016 that there is a forecast negative cash balance of £156,094 at 31 July 2016. This was
discussed with the Assistant Principal during the audit who advised that action was being taken to address this position. The forecasted expenditure includes a
£40,000 contingency and a further £90,000 has been cut from the non-staffing budget. It is also hoped that the College will receive further ESIF monies. As a
safety net the College has arranged a £250,000 overdraft facility.
14
Moray College UHI – Budgetary Control
Objective 7: Senior management and the Board regularly review the College’s overall financial position.
Principal’s Planning Group (PPG)
The PPG consists of the Principal, Assistant Principals, Associate Directors of Curriculum and Quality, the Director of Finance (who is currently on long term
leave), the Head of Human Resources and the Head of Marketing and External Relations. The PPG is the most senior executive body within the College, with key
financial responsibility for sustainability, risk management, value for money and internal control.
At the monthly PPG meetings there is an income and expenditure report (showing actual year-to-date, phased budget and full year budget figures) and a commercial
activity income analysis showing for individual areas the actual and budgeted income and variances. These reports had some comments against these to explain
reasons for variances and the reports are considered adequate for the PPG.
Finance and General Purposes Committee
We reviewed the quarterly management accounts pack provided to the Finance and General Purposes Committee and noted that it included:
income and expenditure report showing actual and budget to date, and forecast outturn and full year budget;
analysis of surplus / deficit and variance against phased budget by cost centre;
analysis of payroll cost and variance against phased budget by cost centre; and
commentary providing information about the variances.
15
Moray College UHI – Budgetary Control
Objective 7: Senior management and the Board regularly review the College’s overall financial position (Continued)
Observation Risk Recommendation Management Response
From our review of the management accounts presented to the December 2015 and
March 2016 Finance and General Purposes Committee meetings (management accounts to October 2015 and January 2016 respectively) we noted that:
The variance commentary could have been more insightful, providing more reasons for variances (such as due to budget phasing, increased expenditure for certain reason(s), or increased expenditure which would be offset by increased
income);
Short notes on major variances could be included next to each line on the income and expenditure statement (rather than only on the variance commentary);
A greater level of reforecasting could be done (this is linked R7 above); and
There was limited benefit in having payroll cost centre analysis and cost centre deficit / surplus analysis unless there was commentary on the major variances.
It may be difficult
for Board members to fully understand
variances from budget and provide
appropriate scrutiny unless there is
adequate information.
R8 Review the
information provided to the Finance and
General Purposes Committee with a view
to providing more insightful variance
commentary and more information about major risks such as not
meeting income targets. The Finance and
General Purposes Committee should also
consider whether all of the current information
provided is useful and whether further or
different information would be beneficial.
There has been a significant
improvement in 15/16 of what has been provided and accepted and
will provide more detail going forward. There is lengthy
discussions of the detail at the meetings but accept that need
additional information in the commentary.
To be actioned by: Assistant Accountant
No later than: Next quarterly
accounts.
Grade 2
16
Moray College UHI – Budgetary Control
Objective 8: Improvements made to the budgetary control framework in 2015/16 have been effective.
At the 22 September 2015 meeting of the Finance and Resources Committee the Assistant Principal outlined eight actions that were planned or had been
implemented to try to improve budgetary control. These focused on managing expenditure, although the PPG action also covers income. We have also made
some recommendations about strengthening budgetary control over commercial income earlier within our report (see R6 and R7).
Below we have set out the eight actions and provided our findings against each
Item Status Audit finding
The Symmetry Finance System has been enhanced
to provide budget holders with up-to-date and
easily accessible budget information. This had not
been available last session.
Implemented From discussion with budget holders and review of the bluQube reporting
software, information is now available for budget holders that is up-to-date
and easily accessible.
All budget holders are undertaking compulsory
budget training which will provide training on the
use of the upgraded system. Training on budget
monitoring and control will also include a
reassertion of the new internal budget control
rules now in place.
Partial As set out in Objective 4 above, 20 of the 23 budget holders attended one
of the compulsory training sessions. The training included details of the new
internal budget control rules in place.
Full spend analysis has been undertaken and as a
consequence of this spending profiles have been
reduced.
Implemented From discussion with budget holders they advised that they undertook a full
spend analysis with Finance staff to identify potential budget savings.
Processes around petty cash and purchase card
usage have also been reviewed to tighten control
with new centralised purchasing processes in place
limiting certain purchases including travel,
accommodation, books, etc.
Implemented There are 11 purchasing cards (which work similar to credit cards but have
restrictions on what types of expenditure can be made on them) in place.
The Assistant Accountant advised that these have now been tailored to
need. We noted that an email had been sent to the credit card provider
asking them to change the types of expenditure each card had the ability to
be used for.
There are three petty cash floats in place and as expenditure was not
significant no testing was done in this area.
17
Moray College UHI – Budgetary Control
Objective 8: Improvements made to the budgetary control framework in 2015/16 have been effective (Continued)
Item Status Audit finding
Routine meetings between Finance staff and
budget holders are scheduled to address any issues
and more closely monitor spend.
Implemented We noted that meetings had taken place in November 2015 (for the
October 20115 management accounts) and February / March 2016 for the
January 2016 management accounts). We reviewed the listings of meetings
held and noted that there were some staff who did not have a record of a
meeting taking place however the Assistant Accountant said that, with the
exception of two instances where meetings were still being planned,
meetings had been held but the schedule had just not been updated to
reflect this.
Increased usage of our online procurement system
PECOS.
Partial The Assistant Accountant said that this action was made up of two
components:
a) greater use of framework agreements - this is an ongoing area for action
to educate staff to use procurement frameworks and further training is
planned.
b) greater use of PECOS (rather than purchase cards or petty cash) – see
comments above.
Authority protocols for various levels of spend
have been introduced with some budget spend
now having to be authorised at a higher level in
the organisation.
Outstanding We were advised that changes have been planned but still have to be
implemented in this area.
Monthly updates to be presented at PPG to
consider variances against budget.
Implemented These updates are being provided.
Moray College UHI
Follow-Up Reviews
2015/16
Internal Audit Report No: 2016/07
Draft Issued: 11 May 2016
Final Issued: 18 May 2016
Moray College UHI – Follow Up Reviews
Content
Page No.
1. Management Summary 1
Introduction and Background 1
Objectives of the Audit 1
Audit Approach 1
Overall Conclusion 1 - 3
Acknowledgements 3
Appendices
Appendix I Updated Action Plan – Curriculum 4
Appendix II Updated Action Plan – Budgetary Control / General Ledger 5 - 6
Appendix III Updated Action Plan – Follow-Up Reviews 7 - 16
Appendix IV Updated Action Plan – Health and Safety 17 - 24
Appendix V Updated Action Plan – Corporate Governance 25 - 37
Appendix VI Updated Action Plan – Post Project Review –
Alexander Graham Bell Centre 38 - 39
Appendix VII Updated Action Plan – 2014/15 Student Activity Data 40
1
Moray College UHI – Follow Up Reviews
1. Management Summary
Introduction and Background
As part of the Internal Audit programme at Moray College UHI (‘the College’) for 2015/16 we
carried out a follow-up review of the recommendations made in the following Internal Audit reports
issued during 2014/15:
2015/02 – Curriculum;
2015/03 – Budgetary Control / General Ledger;
2015/04 – Follow-Up Reviews;
2015/05 – Health and Safety;
2015/06 – Corporate Governance;
2015/07 – Post Project Review – Alexander Graham Bell Centre; and
2015/08 – 2014/15 Student Activity Data.
Objectives of the Audit
The objective of each of our follow-up reviews is to assess whether recommendations made in
previous reports have been appropriately implemented and to ensure that, where little or no
progress has been made towards implementation, that plans are in place to progress them.
Audit Approach
For the recommendations made in the reports listed above we ascertained by enquiry or sample
testing, as appropriate, whether they had been completed or what stage they had reached in terms of
completion and whether the due date needed to be revised.
Action plans from the original reports, updated to include a column for progress made to date, are
appended to this report.
Overall Conclusion
The College has made some progress in implementing the 48 recommendations followed-up as part
of this review with 20 items being ‘fully implemented’ and one ‘no longer relevant’.
The main areas where recommendations have been assessed as ‘partially implemented’ (10
recommendations) or showing ‘little or no progress’ (13 recommendations) are Corporate
Governance (13 recommendations), where some actions have yet to be implemented because there
has been a change in Clerk to the Board, and Health and Safety (4 recommendations) where there
has also been a change in the Health, Safety and Sustainability Officer. Three recommendations from
the previous follow-up review have been assessed as showing ‘little or no progress’ and these are
due to awaiting an update to the College’s Strategic Plan. We would recommend the College
internally follows-up progress made against outstanding actions during the year to ensure that staff
are adequately progressing outstanding actions, and to increase the number of fully implemented
recommendations.
2
Moray College UHI – Follow Up Reviews
Overall Conclusion (Continued)
The recommendations that have been ‘partially implemented’, are showing ‘little or no progress’ or
where there has been ‘no opportunity to implement’ will be subject to follow-up at a later date.
Our findings from each of the follow-up reviews have been summarised as follows:
From Original Reports From Follow-Up Work Performed
Area
Recomm-
endation
Grades
Number
Followed-
Up
Fully
Implemented or
No Longer
Relevant
Partially
Implemented
Little or No
Progress
Made
No
Opportunity
to
Implement
Curriculum
A - - - - -
B 1 1 - - -
C - - - - -
Total 1 1 - - -
Budgetary
Control / General
Ledger
A - - - - -
B - - - - -
C 2 2 - - -
Total 2 2 - - -
Follow-Up
Reviews
High - - - - -
Medium - - - - -
Low 4 3 1 - -
A -
B 5 - 2 3 -
C 1 1 - - -
Total 10 4 3 3 -
Health and Safety
A - - - - -
B 5 3 - 2 -
C 4 2 1 1 -
Total 9 5 1 3 -
Corporate
Governance
A 19 6 6 7 -
B - - - - -
C - - - - -
Total 19 6 6 7 -
Post Project
Review – AGBC
A - - - - -
B 4 1 - - 3
C - - - - -
Total 4 1 - - 3
Student Activity
Data
A - - - - -
B 1 1 - - -
C 1 1 - - -
Total 2 2 - - -
Grand Total 47 21 10 13 3
3
Moray College UHI – Follow Up Reviews
Overall Conclusion (Continued)
The grades, as detailed below, denote the level of importance that should have been given to each
recommendation:
Wylie + Bisset Gradings
High Major weaknesses that the College’s previous Internal Auditors, Wylie+Bisset LLP,
considered needed to be brought to the attention of the Audit Committee and
addressed by senior management of the College as a matter of urgency;
Medium Significant issue or weakness which should have been addressed by the College as soon
as possible; and
Low Minor issue or weakness reported where management may have wished to consider
Wylie+Bisset LLP’s recommendation.
Henderson Loggie Gradings
A Issues which required the consideration of the Board of Management;
B Significant matters which could have been resolved by members of the Senior
Management Team; and
C Less significant matters, which did not require urgent attention but which should have
been followed-up within a reasonable timescale.
Acknowledgements
We would like to thank all staff for the co-operation and assistance we received during the
course of our reviews.
4
Moray College UHI – Follow Up Reviews
Appendix I – Updated Action Plan
Internal Audit Report 2015/02 – Curriculum
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
3.3
Review of Proposed New
Programmes
R1 As part of the approval
process for new programmes
ensure that a detailed costing
exercise is undertaken which
includes an analysis of the income
and costs associated with the
new programme, including
College overheads. A sensitivity
analysis of students enrolled on
the programme and those
attending after the early
retention date should also be
included. Results of the costing
exercise should then be recorded
on Stage 1 initial course approval
forms.
B
The costing template will be
updated to incorporate
current costs and will also
reflect the change from
SUMs to Credits as this
information becomes
available from SFC.
This costing template will be
included within the essential
documentation required for
course approval.
Y
Y
Director of
Finance
Quality
Officer
May 2015
May 2015
The costing template has
been updated to identify
what surplus or deficit a
proposed new programme
will provide, and can be used
to identify break-even levels.
The requirement for a
costing template has been
included on the new course
form.
Fully Implemented
5
Moray College UHI – Follow Up Reviews
Appendix II – Updated Action Plan
Internal Audit Report 2015/03 – Budgetary Control / General Ledger
Para
Ref. Recommendation Grade Original Comments
Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
5.2.2
Budget Variations are
Reported and Acted Upon
R1 Ensure all variances over
an agreed threshold are
highlighted to budget holders on
the monthly Income and
Expenditure Account Activity
reports.
C
Will consider the
practicality of this given
the phasing variances that
always arise between
actual and budget
assumptions.
See
comments
Assistant
Accountant
31 March
2015
Budget holders have been
provided with access to
bluQube budget reports to
show actual spend against
budget. In addition, there are
budget (phased) vs actual year-
to-date reports that are
periodically provided to budget
holders for their review and
these highlight variances.
These are considered adequate
for budget monitoring
purposes.
Fully Implemented
6
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments
Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
11.2
Control Account
Reconciliations
R2 Ensure that all control
account reconciliations are carried
out, reviewed and authorised on a
timely basis.
C
Missing debtors control
was a rare oversight.
Agreed
Assistant
Accountant
Accounting
Technician
Immediate
There is a quarterly
management accounts checklist
which includes the requirement
for debtors, creditors, purchase
card and payroll reconciliations.
The VAT balances are
reconciled at the time of the
quarterly VAT returns. We
sighted that the debtors,
creditors and purchase card
control account reconciliations
had been carried out at the 31
January 2016 quarter-end and
at 31 March 2016, and that the
last two VAT returns had
reconciliations of the general
ledger VAT balance.
Fully Implemented
7
Moray College UHI – Follow Up Reviews
Appendix III – Updated Action Plan
Internal Audit Report 2015/04 – Follow-Up Reviews
Para
Ref. Recommendation Grade Original Comments
Agreed
Y/N
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at January
2015
Progress at April
2016
2014/03 – Publicity and Communications
2.2
Policies and
Procedures
R1 A timetable
for developing the
College Marketing
Strategy, including
internal and external
communication
strategies, should be
drawn up. The
strategy should
contain aims and
objectives that are
clearly linked to the
College’s Strategic
Plan.
B
Yes this was discussed
and agreed. The
Marketing Strategy has
been started and it
links with the Strategic
Plan of the College.
Y
JT
September
2014
This work was dependent
on the proposed re-
structuring of the College
following the
appointment of the new
Principal in August 2014.
The College Strategic
Plan is currently being
updated, along with the
Operational Plan, which
includes an action to
develop a Marketing
Strategy once the
Strategic Plan has been
agreed.
Little or no progress
made
The Strategic Plan
is currently being
worked on and
once completed a
Marketing Strategy
will be drawn up
that is linked to the
Strategic Plan’s aims
and objectives.
Revised
Completion Date:
December 2016
Little or No
Progress Made
8
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments
Agreed
Y/N
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at January
2015
Progress at April
2016
2.2
R2 Ensure that
the required
policies, procedures
and guidance relating
to marketing and
publicity are drawn
up. These should be
communicated to all
staff by methods
such as being
included as part of
the induction
process,
documented in the
Staff Handbook and
made available on
the staff intranet.
B
This is currently
implemented verbally
and staff are aware of
the procedure. This
can be transferred
into a written policy.
It will be placed onto
the website and / or
intranet. Useful for
new staff.
Y
JT
July 2014
This has now been
completed however, still
to be placed on the
intranet and made
available to staff.
Partially implemented
These have still to
be placed either on
the intranet or
another more
appropriate place
for staff to access.
Revised
Completion Date:
Immediate
Partially
Implemented
9
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments
Agreed
Y/N
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at January
2015
Progress at April
2016
2.3
R4 As part of
the future
development of a
Marketing Strategy a
detailed operational
plan should be
developed to
implement the
strategy. This
should be aligned
with the overall
College Strategic
Plan.
B
Link with 2.2.
Y
JT
September
2014
As R1 above.
Little or no progress
made
As R1 above.
Revised
Completion Date:
December 2016
Little or No
Progress Made
10
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments
Agreed
Y/N
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at January
2015
Progress at April
2016
2014/04 – Risk Management / Business Continuity
2.5
Business
Continuity
R1 Review the
Business Continuity
Plan (BCP) for
completeness in
conjunction with
undertaking a risk
analysis to identify
any further risks not
already included
within the BCP.
Also ensure that all
locations are
covered.
B
Review to take place
to incorporate loss of
staff – industrial action
/ pandemic.
BCP to be subject to
desk-top testing.
Agreed
Head of
Estates
31 July 14
Some discussion has been
held between the Head of
Estates and the Head of
HR to determine the
risks to the College as a
result of a significant loss
of staff. The BCP has not
however been updated to
recognise these risks and
the College’s strategy to
mitigate the impact of
such risks.
There has been no testing
of the BCP since the
recommendation was
raised.
Little or no progress
made
This has still to be
done.
Revised
Completion Date:
September 2016
Little or No
Progress Made
11
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments
Agreed
Y/N
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at January
2015
Progress at April
2016
2.7
R2 The ICT
Disaster Recovery
Plan (DRP) and
Estates BCP should
be tested on a
regular basis to
confirm that they are
robust. Although a
full rehearsal may
not be practical or
cost effective,
rehearsal of key
areas of the plans
should be
considered. This
could involve
facilitated scenario
testing followed by a
post-exercise
review. The testing
should ensure all key
staff fully understand
their role in the
recovery process
and training issues
should be addressed
if necessary.
B
Staff development
exercise will be
implemented to
ensure the processes
and roles /
responsibilities are
clearly understood.
The ITU team will be
tasked with the testing
of procedures to
ensure the reliability
of the recovery
instructions.
Agreed
Derek
Duncan
30 Sept 14
During 2014 the College
was affected by a short
power outage and a
significant flood, the latter
of which resulted in a
complete network
shutdown and full
implementation of the
ICT DRP. The DRP was
found to work well and
some lessons were
learned which will be
incorporated into a
future refresh of the
DRP. Regular testing will
be planned going forward.
Partially implemented
The Head of
Estates agreed that
formal testing
should be
undertaken on an
annual basis, which
should
(periodically)
include some
element related to
the ICT Disaster
Recovery Plan. The
Head of Estates
advised that the
first exercise
should be
undertaken by 30
September 2016.
Revised
Completion Date:
30 September 2016
Partial
Implemented
12
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments
Agreed
Y/N
Responsible
Officer
For Action
Agreed
Completion
Date
Progress
previously
reported
Progress at April
2016
2013/03 – Debtors / Income and Cash & Bank
3.4
R5 The Financial
Procedures should be
updated to explain
how the system for
cash collection within
Hair, Beauty and
Complementary
Therapies differs out-
with term time and
staff should be
reminded of the level
of paperwork
expected.
C
This will be added to
the procedures to
consolidate current
practice
Agreed
Accounting
Technician
31/03/2013
Progress at May
2014
No Summer School
programmes have
operated since the
original
recommendation
was raised.
Procedures will be
updated in advance
of any future
Summer School
programmes.
Little or no
progress made
Progress at
January 2015
No change since May
2014.
Little or no
progress made
There are no longer any
summer schools. If this
situation changes in the
future the financial
procedures would be
updated to reflect this.
No Longer Relevant
13
Moray College UHI – Follow Up Reviews
Background Recommendation Priority Original College
Response
Original
Responsibility
/ Timescale
Progress previously
reported (last 2 years
only)
Progress at April 2016
2010/2011 Visit 1 – Review of SAM
1. It was noted from
our review that the
SAM system does not
have full documented
procedures in place.
We understand that
this is a work in
progress as the system
is still changing slightly.
We recommend that
SAM procedures are
completed and
implemented as soon
as possible.
Low
Agreed
S Cruickshank
31 March 2011
Progress at May 2014
The Financial Procedures
will be adapted to cover
relevant areas of the SAM
procedures. This has not
been done to date due to
staff resource issues.
Progress at January
2015
The Financial Procedures
are currently being
refreshed and will include
areas relevant to SAM.
Procedures have now been
put in place.
Fully Implemented
14
Moray College UHI – Follow Up Reviews
Background Recommendation Priority Original College
Response
Original
Responsibility
/ Timescale
Progress previously
reported (last 2 years
only)
Progress at April 2016
2008/2009 Visit 2 – VFM Commercial Activities
3. Database
Software
Background:
We note from our
review that the
College has a contact
management system
called Act 6 that will
be used as a client
database. This has
been installed but is
currently not fully
implemented.
Original
Recommendation:
We recommend that
the College fully
implements the Act 6
database system as
soon as possible.
Findings on Revisit
January 2011:
The Act 6 database
has not been taken
forward at the
moment as the
College are awaiting
news on what
system UHI will use
for their contact
management as this
could lead to an
alternative system
being proposed for
the network.
Recommendation:
We recommend that
the College ensure
that as soon as UHI
have made their final
decision on the
contact management
system that the
College review
implementation of
the chosen system.
Low
Agreed, awaiting UHI
choice of system.
Head of
Marketing &
External
Relations
UHI dependant
Progress at May 2014
UHI database still being
developed. Executive Office has
been working more closely with
Academic Partners to improve
local employer engagement.
Progress at January 2015
UHI Executive Office is
currently working on
implementing the Microsoft
Dynamics cloud based
application in early 2015. Once
embedded the application will
be rolled out across the UHI
partnership later in 2015. The
use of Microsoft Dynamics is
guided by the brief for the CRM
system as noted in the UHI for
Work & Enterprise strategy
document.
Partially implemented
Microsoft Dynamics
now in place. This
allows sharing of
contacts and
customers across the
partnership.
Fully Implemented
15
Moray College UHI – Follow Up Reviews
Background Recommendation Priority Original College
Response
Original
Responsibility
/ Timescale
Progress previously
reported (last 2 years
only)
Progress at January
2015
2009/2010 Visit 2 – IT Systems
2. ICT Strategy
Background:
We note that, while
the College has an ICT
Strategy in place, it is
not split between 1, 3
and 5 year plans for IT
projects.
Original
Recommendation:
We recommend that
the College consider
splitting their ICT
Strategy into 1, 3 and
5 year projects. This
could then be used to
measure projects and
delivery of projects.
Findings on
Revisit January
2011:
Currently
Operational Plans
are developed
annually in line with
College Policy. This
recommendation will
be considered when
the ICT Strategy is
updated which is
currently taking
place therefore we
are unable to test
until the strategy is
complete.
Recommendation:
We repeat our
original
recommendation.
Low
The ICT strategy has
been delayed whilst
the outcome of the
UHI LIS Shared
Services project is
known. This project
will have a significant
influence in the
implementation of ICT
projects and the
College’s ICT strategy.
The consultant’s
report on the LIS
Shared Services
project is due in
February 2011 and
when this report is
published, the ICT
strategy will be
revised and issued.
D Duncan.
UHI dependant
Progress at May 2014
The UHI LIS shared
services project has been
delayed and estimated to
be complete by 1 August
2014. A UHI-wide ICT
Strategy will be developed
by LIS and adopted at that
time.
Progress at January
2015
Further delays to the UHI
LIS shared services project
occurred in 2014. The
project is now being
progressed however there
is no estimated completion
date for this. A UHI-wide
ICT Strategy will be
developed by LIS and
adopted at that time.
Partially Implemented
There is now a UHI wide
shared ICT Strategy 2015-
20 which has been agreed.
This has a five year
investment plan setting out
what is planned to be done
each year.
Fully Implemented
16
Moray College UHI – Follow Up Reviews
Background Recommendation Priority
Original
College
Response
Original
Responsibility /
Timescale
Progress previously
reported (last 2 years
only)
Progress at January
2015
2010/2011 Visit 2 – Sustainability
1. We note from our
review that the
current College
Strategic and
Operational Plan does
not contain any
relevant section on
environmental
sustainability.
We would
recommend that
when the plan is
next reviewed a
section is included
on environmental
sustainability at the
College.
Low
Agreed
Principal
10/11 Plan
update.
Progress at May 2014
There have been no
amendments to the Strategic
Plan to include environmental
sustainability. This will be
considered during the
development of the next
Strategic Plan later in 2014.
Progress at January 2015
This is currently being
considered as part of the
development of the Strategic
Plan 2015-2017, which is
expected to be finalised in
mid-2015.
Little or no progress made
The post of Health, Safety
and Sustainability Officer
was filled in March 2016.
The Head of Estates and
the Health, Safety and
Sustainability Officer have
attended a sustainability
course.
Work on the new College
Strategic Plan is now
underway, due to be
completed in Summer 2016
and environmental
sustainability will be
considered as part of this
work.
Revised Completion
Date: Summer 2016
Partially Implemented
17
Moray College UHI – Follow Up Reviews
Appendix IV – Updated Action Plan
Internal Audit Report 2015/05 – Health and Safety
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
1.3
Policies and Procedures
R1 Copies of the health and
safety policy statement should be
displayed in prominent positions
throughout the College where
staff, students and visitors can
easily read it.
B
Policy Statement was
reviewed at the time of the
audit.
To be submitted to the H&S
Committee (01/06/15),
Building Committee
(02/06/15) & Board
(23/06/15) for ratification.
Y
Health and
Safety Officer
31/07/15
It was noted that health and
policy statements were on a
number of noticeboards
throughout the main
campus, including at the
reception.
Fully Implemented
18
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
1.7
R2 Revise the format of the
Short Term Health and Safety
Management and Risk Control
Systems Action Plan to ensure
that actions meet the SMART
criteria.
C
Timescales for completing
the short term action plan
are contingent on
identification, engagement
and consultation with
College Health and Safety
Coordinators.
Y
Health and
Safety Officer
01/06/15
There has been a change in
staffing (the previous Health
and Safety Officer left and a
new Health, Safety and
Sustainability Officer started
in March 2016). The
Health, Safety and
Sustainability Officer plans
for the Action Plan format
to be revised by 30
September 2016.
Revised Completion Date:
30 September 2016
Little or No Progress
Made
19
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
1.8
R3 Consider developing an
extended action plan which
includes all recommendations
raised in the British Safety
Council report that are not
already included in the Short
Term Health and Safety
Management and Risk Control
Systems Action Plan.
Alternatively, the review of the
Integration Plan / Road Map
should be a standing item on the
agenda of the Health and Safety
Committee meetings.
B
The Short Term Action Plan
is predicated on the BSC
report and incorporates the
Integration Plan / Road Map.
The Integration Plan will be
placed on the Health and
Safety Committee Meeting
Standing agenda.
Y
Health and
Safety Officer
liaising with
the Directors,
Head of
Sections and
Health and
Safety
Coordinators
01/06/15
The review of the
Integration Plan / Road Map
is now a standing item on
the agenda of the Health
and Safety Committee
meetings.
Fully Implemented
20
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
2.4
Risk Identification and
Assessment
R4 Ensure that risk
assessments for the Beechtree
restaurant kitchen and training
kitchen are reviewed, updated
and signed off as part of the
normal planning cycle prior to
the start of the academic year.
B
Y
Health and
Safety Officer
liaising with
the Associate
Director of
Technology
and
Humanities
01/07/15
This is ongoing with the risk
assessments for the
Beechtree restaurant
kitchen and training kitchen
in the old risk assessment
format having been gathered
in and the Health, Safety and
Sustainability Officer advised
that an Administration
Assistant will update these
onto the new forms by June
2016
Revised Completion Date:
June 2016
Little or No Progress
Made
21
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
2.4
R5 Ensure that risk
assessments are updated
timeously to reflect any changes
made to the risk environment,
including changes to procedures,
equipment and staff.
B
Y
Health and
Safety Officer
liaising with
the Directors,
Head of
Sections and
Health and
Safety
Coordinators
31/08/15
The Health, Safety and
Sustainability Officer advised
that risk assessments are
updated as required for any
changes. The
recommendation was raised
due to there being a
significant rearrangement of
the training kitchen without
any updating of the risk
assessments and there have
been no similar changes
within the College since the
original report.
Fully Implemented
2.4
R6 Ensure that a consistent
approach to completing Risk
Assessments is adopted across
the College.
C
Standardisation and
consistent approach is
contingent on identification,
engagement and
consultation with College
Health and Safety
Coordinators (work in
progress).
Y
Health and
Safety Officer
liaising with
the Directors,
Head of
Sections and
Health and
Safety
Coordinators
31/08/15
All College risk assessments
are being updated to the
latest risk assessment
format on a rolling basis.
Revised Completion Date:
August 2016
Partially Implemented
22
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
2.4
R7 Checking of risk
assessments should be added to
the Hazard Checklists used
when undertaking internal
Health and Safety inspections.
C
Y
Health and
Safety Officer
15/07/15
The checking of risk
assessments has been added
to the Hazard Checklists
used in health and safety
inspections.
Fully Implemented
23
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
2.4
R8 Consider establishing a
Health and Safety Working
Group consisting of Health and
Safety co-ordinators and the
Health and Safety Officer to act
as a forum for discussion of
Health and Safety arrangements
across the College and to
identify areas of good practice.
B
Work in Progress at time of
Audit. The
recommendation was
incorporated into the Draft
Health and Safety
Procedures Manual, (1)
Section 2 H & S
Organisation and
Responsibilities and (2)
Section 3 General
Arrangements for
Management and Control of
Health and Safety Systems.
To be submitted to the H&S
Committee (01/06/15)
Building Committee
(02/06/15) & Board
(23/06/15) for ratification.
The 1st Meeting requires to
be convened after 15th
August 2015 on return of
Lecturing from Summer
Break.
Y
Health and
Safety Officer
liaising with
the Directors,
Head of
Sections and
Health and
Safety
Coordinators
15/09/15
Although this has not been
implemented the
recommendation is
considered as being of
benefit to College staff
involved with health and
safety. However how this is
implemented in practice
needs to be considered.
The Head of Estates and
Health, Safety and
Sustainability Officer are
considering this but it may
be that College staff
involved in health and safety
could meet on a six monthly
basis to receive ongoing
training and to discuss any
health and safety issues.
Revised Completion Date:
August 2016
Little or No Progress
Made
24
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
5.1
Incident / Accident
Recording and Reporting
R9 Staff should be reminded
of the need to report near
misses in order that the H&S
Officer is made aware of
potential areas of risk. The use
of ‘quick’ reporting cards should
be considered.
C
Near misses are reported
using the current College
Accident / Incident Report
Form. This report should
be submitted to H&S ASAP.
The importance of reporting
Near misses to be
highlighted to all staff and
students through the
introduction of safety flashes
displayed on the College E–
Boards (Marketing), Screen
Savers (ICT) and MC Staff /
Student E-Mails.
Y
Health and
Safety Officer
liaising with
the Directors,
Head of
Sections and
Health and
Safety
Coordinators
31/08/15
The Health, Safety and
Sustainability Officer has
emailed staff reminding them
of the need to report near
misses.
The use of ‘quick’ reporting
cards was considered but it
was decided not to
implement these.
Fully Implemented
25
Moray College UHI – Follow Up Reviews
Appendix V – Updated Action Plan
Internal Audit Report 2015/06 – Corporate Governance
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
Vario
us
Standing Orders
Amend the College’s Standing Orders to:
R1.1 refer to the Board being collectively
responsible for setting, demonstrating and
upholding the values and ethos of the College.
(Code provision A.1)
R1.2 include that the Board must appoint one of
the independent non-executive members to be the
senior independent member to provide a sounding
board for the Chair and to serve as an
intermediary for the other board members and the
Clerk to the Board when necessary. It should also
state that the senior independent member (or
Vice-Chair) should also be available where contact
through the normal channels of Chair, Principal, or
Clerk to the Board has failed to resolve an issue or
for which such contact is inappropriate. (Code
provision A.12)
A
Recommendations
R1.1 to R1.8 are
implicit within
current practice,
but will be
incorporated into
the review of the
Standing Orders to
provide explicit
statements that
comply with the
Code of
Governance.
Y
Clerk
1 August 2015
The Standing Orders were
updated in June 2015. We
reviewed these and noted
these do not cover R1.1
adequately.
In addition, regarding R1.8 the
process for the student
elections was not set out in
the standing orders.
The Clerk to the Board has
drafted revisions to the
Standing Orders for these two
items but these still have to be
approved.
Revised Completion Date:
June 2016
Partially Implemented
26
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
Vario
us
Standing Orders (Continued)
R1.3 refer to the Board being accountable to
students and to other stakeholders (including the
public, employers and its local community) for the
provision of appropriate, high quality education
that enhances social and economic well-being, and
also being accountable to the Regional Strategic
Body. (Code provision C.1)
R1.4 refer to the Board being responsible for
ensuring that the college meets its ethical and legal
obligations to its staff. (Code provision C.17)
Amend the College’s Standing Orders to
R1.5 formally set out that the Board Chair is:
responsible for leadership of the Board and
ensuring its effectiveness in all aspects of its
role;
responsible for setting the Board’s agenda and
ensuring that adequate time is available for
discussion of all agenda items, particularly
strategic issues; and
Required to promote a culture of openness
and debate by encouraging the effective
contribution of all board members and
fostering constructive relations between
board members. (Code provision D.1)
See above
27
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
Vario
us
Standing Orders (Continued)
R1.6 include reference to the whole Board
being collectively responsible and accountable for
all Board decisions, and that Board members must
make decisions in the best interests of the College
as a whole rather than selectively or in the
interests of a particular group. (Code provision
D.3)
R1.7 include the role and responsibilities of the
Chair, Principal, Clerk to the Board and the
individual Board members. (Code provision D.5)
R1.8 set out that the Board is responsible for
ensuring appropriate arrangements are in place for
the conduct of student elections to select the two
student members to the Board and in the Standing
Orders, or another formal document, this process
should be formally set out. (Code provision D.18)
See above.
28
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
C.2
Accountability
R2 Ensure that the Declarations of Interest
are updated on a regular basis and that the
Register of Interests is disclosed on the College
website.
A
Declarations for
current members
are in the process
of being updated.
Y
Clerk
30 June 2015
This has yet to be undertaken
but it is planned the
Declarations of Interest form
will be sent out to Board
members before the end of
May 2016, after which the
Register of Interests will be
published on the College’s
website.
Revised Completion Date:
June 2016
Little or No Progress Made
29
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
C.3
R3 Include in the Audit Committee’s Annual
Report to the Board the information required by
its Terms of Reference, or if this is no longer
considered appropriate, then amend the Terms of
Reference.
A
Information relating
to administrative
matters will be
included in the
Audit Committee’s
annual report to
the Board.
Y
Clerk
23 June 2015
At the 23 February 2016 Audit
Committee a draft 2014/15
Audit Committee report to
the Board was discussed.
However this has not gone to
the Board and does not
provide all the information in
the Audit Committee’s Terms
of Reference.
Terms of Reference of Audit
Committee to be reviewed.
This will inform the next Audit
Committee Annual Report.
Revised Completion Date:
June 2016
Little or No Progress Made
30
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
C.3
R4 Committee Chairs should ensure that
Board committees are fulfilling their Terms of
Reference through meetings and structures, and
that each Committee should choose how to do
this. This may be through a formal schedule of
what reports will be presented to each of the
committee meetings over the course of a year or
through periodic review by the Committee of how
they are covering everything in their Terms of
Reference.
A
Matrix of reports
and documents to
be drawn up and
approved by each
Board Committee.
Y
Clerk /
Committees
1 August 2015
Work has still been done to
take this forward.
Revised Completion Date:
June 2016
Little or No Progress Made
C.7
R5 The Board should delegate to either the
Audit Committee or Finance and General Purposes
Committee the responsibility for risk management
which is set out in its Standing Orders.
A
Responsibility
regarding risk
management will be
incorporated into
the remit for the
appropriate
Committee.
Y
Clerk
1 August 2015
The Finance and General
Purposes Committee Terms
of Reference include the
requirement to consider and
advise the Board about the
College’s approach to risk
management.
Fully Implemented
31
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
C.7
R6 The Board should consider how to define
its risk appetite in conjunction with the Senior
Management Team.
A
To be defined
within the Strategic
Plan and approved
by Board.
Y
Principal
23 June 2015
This is still to be done
however it is envisaged that
this will take place either in
conjunction with developing,
or after finalising, the Strategic
Plan.
Revised Completion Date:
October 2016
Little or No Progress Made
Vari-
ous
Audit Committee Terms of Reference
Include in the Audit Committee’s Terms of
Reference:
R7.1 the requirement to provide assurance to
the Board regarding governance, internal control
and risk management and to engage with financial
reporting issues. (Code provision C.10)
R7.2 that the role of the College executive is to
attend meetings at the invitation of the Committee
Chair and to provide information for particular
agenda items and that the Chair of the Board must
not be a member. (Code provision C.11)
R7.3 that the Audit Committee may sit privately
without any non-members present for all or part
of a meeting if they so decide. (Code provision
C.12)
A
Recommendations
R7.1-R7.3 will be
defined within the
Audit Committee’s
Terms of
Reference, as in
line with existing
practice.
Y
Clerk
23 June 2015
The Audit Committee’s Terms
of Reference have been
amended to incorporate these
requirements.
Fully Implemented
32
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
C.14
Financial and Institutional Sustainability
R8 Amend the Scheme of Delegation to
ensure that approval of the College’s annual budget
is reserved for the Board.
A
The Scheme of
Delegation will be
revised to reflect
existing practice.
Y
Clerk
1 August 2015
The Scheme of Delegation has
been amended so that the
annual budget approval is
reserved for the Board.
Fully Implemented
C.14
R9 Ensure that once the Financial
Memorandum with the UHI is signed that the
College’s Financial Regulations and Finance
Procedures are updated for relevant requirements
of the Scottish Public Finance Manual.
A
The Financial
Regulations and
Finance Procedures
to be updated once
the Financial
Memorandum has
been approved.
Y
Director of
Finance
1 August 2015
The Financial Regulations and
Procedures have still to be
updated for the requirements
of the Scottish Public Finance
Manual. There is the potential
for internal audit to be
involved to assist the College
in doing this.
These will be submitted to the
Finance and General Purposes
Committee in June 2016.
Revised Completion Date:
June 2016
Little or No Progress Made
33
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
C.16
R10 Board members should receive formal
training and documentation setting out their
responsibilities under charity legislation.
A
Documentation
outlining
responsibilities
under charity
legislation to be
drawn up and
signed by Board
members.
Y
Clerk
1 August 2015
This has still to be undertaken
and will be done once the new
Board has been recruited and
inducted.
Little or No Progress Made
D.2
Effectiveness
R11 Draw up a detailed skills matrix based on
the skills, experience and knowledge that is
considered necessary for the Board to possess
collectively.
A
Skills matrix to be
drawn up to
identify collective
skills, experience
and knowledge.
Y
Clerk /
Nominations
Committee
1 August 2015
A list of essential, desirable
and beneficial skills has been
drawn up. However a matrix
setting out all the Board
members and their skills, and
any gaps, has yet to be
prepared.
Revised Completion Date:
Immediate
Partially Implemented
34
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
D.7
Principal and Chief Executive
R12 Consideration should be given to how
students and staff might contribute to the
Principal’s recruitment process.
A
Schedule for
interview process
to be investigated
with external
agencies.
Y
Clerk / Chair
1 August 2015
The Assistant Principal advised
that during the recent
appointment of the Principal
the selection process included
students and staff with
applicants being involved in
round robin groups including
senior staff, other staff and
students. Each group
completed a form to
summarise their observations
and this feedback was
considered in the
appointments process.
Fully Implemented
D.9
R13 Review the process for setting personal
performance measures for the Principal, and
monitoring, reviewing and recording these, and
provide a detailed description of how this should
be carried out within the Standing Orders. As part
of this the Board should consider how the views of
staff and students could be gathered.
A
Investigate current
practice within the
sector and draw up
procedure for
approval by the
Board which
includes
opportunity for
views of staff and
students.
Y
Clerk / Chair
1 August 2015
The Board Chair has been in
discussion with other college
Chairs and the Colleges
Development Network to
identify best practice but this
has still to be completed.
Partially Implemented
35
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
D.10
R14 Develop a more detailed formal procedure
for setting the remuneration of the Principal and
consider what information could be gathered from
staff and students which could be linked into the
Principal’s remuneration setting process.
A
Investigate current
practice within the
sector and draw up
procedure for
approval by the
Board which
includes
opportunity for
views of staff and
students.
Y
Clerk / Chair
1 August 2015
The Board Chair has been in
discussion with other college
Chairs and the Colleges
Development Network to
identify best practice but this
has still to be completed.
Partially Implemented
D.17
Board Member Appointment, Induction and
Training
R15 Develop and document a formal and open
procedure to be used for the recruitment and
selection of new non-executive board members
which incorporates relevant Ministerial and
Strategic Regional Body guidance on Board
appointments.
A
Documentation
and procedure
already developed
by UHI FE Regional
Board will be
implemented.
Y
Clerk
Complete
The UHI has prepared
requirements for the approval
of new Board members which
clearly set out the
requirements to be
undertaken. The Ministerial
Guidance on Board
Appointments is directly
referred to for any
appointments.
Fully Implemented
36
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
D.20
R16 Ensure all Board members have their
training needs discussed and identified, with follow
through to ensure appropriate training is
undertaken. The Clerk to the Board should also
keep records of training undertaken.
A
Training needs
analysis to be
undertaken for
Board members to
be undertaken and
recorded.
Y
Clerk /
Nominations
Committee
1 August 2015
This has yet to start and will
be undertaken when the new
Board are in place.
Little or No Progress Made
D.22
R17 Develop a robust annual self-evaluation
process for the Board and its committees.
A
Process for self-
evaluation to be
developed and
approved by Board.
Y
Clerk /
Nominations
Committee
1 August 2015
Considerable work has been
undertaken on developing a
self-evaluation process and
this has to be reviewed and
approved by the Board.
Revised Completion Date:
June 2016
Partially Implemented
D.23
R18 Implement a formal process for evaluating
the effectiveness of the Board Chair and the Chairs
of Board committees.
A
Process for self-
evaluation to be
developed and
approved by Board.
Y
Clerk
1 August 2015
Considerable work has been
undertaken on developing an
evaluation process and this has
to be reviewed and approved
by the Board.
Revised Completion Date:
June 2016
Partially Implemented
37
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Comments
Agreed
Responsible
Officer
For Action
Agreed
Completion
Date
Progress at April 2016
Secti
on6
Post-16 Education (Scotland) Act 2013
R19 Ensure the Board formally approves the
revised Board Constitution.
A
Approval of Board
Constitution to be
formally recorded.
Y
Clerk
23 June 2015
The Board approved the
revised Board Constitution at
its meeting on 23 June 2015.
Fully Implemented
38
Moray College UHI – Follow Up Reviews
Appendix VI – Updated Action Plan
Internal Audit Report 2015/07 – Post Project Review – Alexander Graham Bell Centre
Para
Ref. Recommendation Grade Original Comments
Agreed
Responsible
Officer
Agreed
Completion
Date
Update at April 2016
3.2
Key Recommendations
R1 Draw up a capital
projects framework setting out
the key governance and
management arrangements for
future large capital projects.
B
Agreed, and in particular
internal structures,
organisation and document
control.
Y
Principal
This would be
implemented as
part of next
significant capital
project.
There have been no further
capital projects which would
require this.
No Opportunity to
Implement
3.3
R2 When grant funding is
received identify the procedural
and documentation
requirements of the funders and
put in place processes, including
checking procedures, to ensure
funders requirements are
complied with and adequate
records are kept.
B
Agreed in relation to
procurement procedures, in
particular those processes
that link to ERDF or other
sources of funding.
Y
Director of
Finance
This would be set
out clearly at the
initiation stage of
the next relevant
capital project.
There have been no further
capital projects which would
require this.
No Opportunity to
Implement
39
Moray College UHI – Follow Up Reviews
Para
Ref. Recommendation Grade Original Comments
Agreed
Responsible
Officer
Agreed
Completion
Date
Update at April 2016
3.4
R3 Ensure that Business
Case objectives include, as well
as qualitative measures, a set of
SMART (Specific, Measurable,
Achievable, Relevant and Time-
bound) quantitative measures.
B
Business case objectives
were developed with the
involvement of consultants,
NHS and HIE however
these changed over time,
particularly under various
funding models.
Y
Principal
This would be set
out clearly at the
initiation stage of
the next relevant
capital project.
There have been no further
capital projects which would
require this.
No Opportunity to
Implement
3.4
R4 Set up robust tracking
mechanisms to measure all
targets set out in the AGBC’s
ERDF approved funding
application.
B
This is a challenge due to
targets submitted, and relies
upon planning and
monitoring by the
Alexander Graham Bell
Centre Leadership Group
comprising NHS, HIE,
College and other
stakeholders.
Tracking mechanism set up
by Project Officer but
requires greater integration
into work of Group.
Y
Principal
This is ongoing
through the life
of the project (10
years) and is the
key work of the
Alexander
Graham Bell
Centre
Leadership
Group.
A spreadsheet for recording
progress against targets has
been produced and is
updated on an ongoing basis.
Fully Implemented
40
Moray College UHI – Follow Up Reviews
Appendix VII – Updated Action Plan
Internal Audit Report 2015/08 – 2014/15 Student Activity Data
Para
Ref. Recommendation Grade Original Comments Agreed
Responsible
Officer
Agreed
Completion
Date
Progress at April 2016
2.2.1
Allocation of SUMs to
Courses
R1 Ensure that claims for
infill programmes are based upon
the value of the units listed on
the discrete course record and
not based upon a default tariff.
C
The Administration Officer
undertook a review of the
infill programmes during the
SUMS Audit. The MIS
section will take on board
this recommendation and
will remove all infill
programme defaults to
ensure claim is against the
value of units.
Y
Stuart
Cruickshank
October 2015
The system defaults have
been removed so the system
only calculates these now
based on module bookings.
Fully Implemented
2.3.3
&
2.3.4
Additional Educational
Support Needs
R2 College staff should be
reminded of the importance of
ensuring that PLSPs are produced
for all DPG18 students and
contain the required information
and evidence of review during the
year.
B
The MIS section will take on
board this recommendation.
Administration Officer to
meet with course teams to
ensure all PLSPs are
produced as per the SFC
guidelines.
Y
Stuart
Cruickshank
October 2015
College staff have been
reminded of this.
Fully Implemented
University of the Highlands and Islands Moray College Annual Audit Plan 2015/16
Prepared for Moray College UHI
May 2016
Key contacts Anne MacDonald, Senior Audit Manager amacdonald@audit-scotland.gov.uk Edward Stansfeld, Senior Auditor estansfeld@audit-scotland.gov.uk
Audit Scotland Business Hub 15, 3rd Floor South Marischal College, Broad Street Aberdeen
AB10 1AB Telephone: 0131 625 1500 Website: www.audit-scotland.gov.uk
Audit Scotland is a statutory body set up in April 2000 under the Public Finance and Accountability (Scotland) Act 2000. We help the Auditor General for Scotland and the Accounts Commission check that organisations spending public money use it properly, efficiently and effectively (www.audit-scotland.gov.uk/about/).
Anne MacDonald, Audit Scotland is the appointed external auditor of Moray College for the period 2011/12 to 2015/16.
This report has been prepared for the use of Moray College UHI and no responsibility to any member or officer in their individual capacity or any third party is accepted.
The information in it may be used by the Auditor General in support of her wider responsibilities, including reporting to the Scottish Parliament.
Contents
Summary ................................................................. 3
Responsibilities ...................................................... 4
Audit Approach ...................................................... 5
Audit issues and risks ........................................... 8
Fees and resources ................................................ 11
Appendix 1: Planned audit outputs ..................... 13
Appendix 2: Significant audit risks ..................... 14
Summary
Moray College UHI Page 3
Summary Introduction 1. This report summarises the key challenges and risks facing Moray
College UHI and sets out the audit work that we propose to undertake in the 2015/16 audit. This is the final year of our five year audit appointment. The Assistant Auditor General is currently concluding a procurement process for the appointment of public sector auditors for the next five year cycle. The college is in the process of being advised about its new external auditor.
2. Our audit is focused on the identification and assessment of the risks of material misstatement and irregularity in Moray College UHI’s financial statements.
3. Our plan reflects:
the risks and priorities facing Moray College UHI
current national risks that are relevant to local circumstances
the impact of changing international auditing and accounting standards
our responsibilities under the Code of Audit Practice as approved by the Auditor General for Scotland
issues brought forward from previous audit reports.
Summary of planned audit activity 4. Our planned audit work in 2015/16 includes:
an audit of the financial statements and provision of an opinion on whether:
- they give a true and fair view of the state of affairs of Moray College UHI as at 31 July 2016 and its income and expenditure for the year then ended
- the accounts have been properly prepared in accordance with the Further and Higher Education (Scotland) Act 1992, the 2015 Statement of Recommended Practice: Accounting for Further and Higher Education, the Accounts Direction issued by the Scottish Funding Council, and the Government Financial Reporting Manual.
a review of Moray College UHI’s governance and performance arrangements in a number of key areas including: internal controls; the adequacy of internal audit; and the college’s supporting arrangements for the preparation of its annual statement of corporate governance and internal control.
Responsibilities
Page 4 Moray College UHI
Responsibilities 5. The audit of the financial statements does not relieve management
or the Audit Committee, as the body charged with governance, of their responsibilities.
Responsibility of the appointed auditor 6. Our responsibilities, as independent auditor, are established by the
Public Finance and Accountability (Scotland) Act 2000 and the Code of Audit Practice, and guided by the auditing profession’s ethical guidance.
7. Auditors in the public sector give an independent opinion on the financial statements. We also review and report on the arrangements within the audited body to manage its performance, regularity and use of resources. In doing this, we aim to support improvement and accountability.
Responsibility of the Board of Management 8. It is the responsibility of the Board of Management for Moray
College UHI to prepare the financial statements in accordance with the Accounts Direction. This means:
acting within the law and ensuring the regularity of transactions by putting in place appropriate systems of internal control
maintaining proper accounting records
preparing financial statements timeously which give a true and fair view of the financial position of the college as at 31 July 2016 and its expenditure and income for the year then ended
preparing a report by the Board of Management (referred to as a strategic report in the 2015 SORP) to accompany the financial statements and a statement of corporate governance and internal control
confirming that the annual report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for stakeholders to assess the strategies adopted by the board, its performance and financial position.
Format of the accounts 9. The financial statements should be prepared in accordance with the
Further and Higher Education (Scotland) Act 1992, the 2015 Statement of Recommended Practice: Accounting for Further and Higher Education (the 2015 SORP), the Accounts Direction issued by the Scottish Funding Council as well as the Government Financial Reporting Manual (FReM).
10. The 2015 SORP was approved in March 2014. While 2015/16 will be the first reporting year, comparative figures for 2014/15 and a restated opening balance sheet at 1 August 2014 will be required. In addition, the new SORP changes the name and layout of the primary financial statements.
Audit Approach
Moray College UHI Page 5
Audit Approach 11. Our audit approach is based on an understanding of the
characteristics, responsibilities, principal activities, risks and governance arrangements of Moray College UHI. We also consider the key audit risks and challenges in the further education sector generally. This approach includes:
understanding the business of Moray College UHI and the associated risks which could impact on the financial statements
assessing the key systems of internal control, and establishing how weaknesses in these systems could impact on the financial statements
identifying major transaction streams, balances and areas of estimation and understanding how Moray College UHI will include these in the financial statements
assessing the risks of material misstatement in the financial statements
determining the nature, timing and extent of audit procedures necessary to provide us with sufficient audit evidence as to whether the financial statements are free of material misstatement.
12. We have also considered the sources of assurance which will make best use of our resources and allow us to focus audit testing on higher risk areas of the financial statements. The main areas of
assurance for the audit come from planned management action. Planned management action being relied on for 2015/16 includes:
early preparation of a template for the financial statements reflecting the requirements of the new SORP including restated figures, updated accounting policies and any additional disclosure notes
evidence of board members consent for disclosure of all salary information required for disclosure in the remuneration report
early discussion with the North East Scotland Pension Fund to obtain the necessary information to comply with pension accounting requirements including comparative figures.
comprehensive closedown procedures for the financial statements accompanied by a timetable setting out clear responsibilities for provision of accounts and working papers
delivery of unaudited financial statements to agreed timescales with a comprehensive working papers package
completion of the internal audit work programme for 2015/16
a letter of management representation on key areas of the financial statements.
13. Auditing standards require internal and external auditors to work closely together to make best use of available audit resources. Internal audit is provided by Henderson Loggie. We seek to rely on the work of internal audit wherever possible and, as part of our planning process, we carried out an early assessment of the internal audit function and concluded that we could place reliance on their work. Overall, we concluded that the internal audit service operates
Audit Approach
Page 6 Moray College UHI
in accordance with relevant Public Sector Internal Audit Standards (PSIAS) which enables us to take assurance from their documentation and reporting procedures.
Materiality 14. Materiality can be defined as the maximum amount by which
auditors believe the financial statements could be misstated and still not be expected to affect the decisions of users of financial statements. A misstatement or omission, which would not normally be regarded as material by amount, may be important for other reasons (for example, the failure to achieve a statutory requirement or, an item contrary to law). In the event of such an item arising, its materiality has to be viewed in a narrower context; such matters would normally fall to be covered in an explanatory paragraph in the independent auditor’s report.
15. We consider materiality and its relationship with audit risk when planning the nature, timing and extent of our audit and conducting our audit programme. Specifically with regard to the financial statements, we assess the materiality of uncorrected misstatements both individually and collectively.
16. Based on our knowledge and understanding of Moray College UHI we have set our planning materiality at £125,000 (1% of gross expenditure).
17. We set a lower level, known as performance materiality, when defining our audit procedures. This is to ensure that uncorrected and undetected audit differences do not exceed our planning
materiality. This level depends on professional judgement and is informed by a number of factors including the:
extent of estimation and judgement within the financial statements
nature and extent of prior year misstatements
extent of audit testing coverage.
18. For 2015/16, performance materiality has been set at £38,000. We will report, to those charged with governance, all misstatements identified which are greater than £6,000. In line with auditing standards, amounts below this threshold need not be reported.
Reporting arrangements 19. The college is required to submit audited accounts to the Scottish
Funding Council by 31 December 2016.
20. Matters arising from our financial statements audit will be reported and discussed with management. We will provide an independent auditor's report to the Board of Management and the Auditor General that the audit of the financial statements has been completed in accordance with applicable statutory requirements.
21. After completion of the audit, we will provide the Board and the Auditor General with an annual report on the audit containing observations and recommendations on significant matters which have arisen during the course of the audit.
22. Exhibit 1 highlights the key dates for the Audit Committee taking account of submission requirements.
Audit Approach
Moray College UHI Page 7
Exhibit 1: Annual Accounts audit timetable – key dates
Key stage Proposed Dates
Planned approval of annual accounts by Audit Committee and Finance and General Purposes Committee
November 2016 (tbc)
Planned approval of audited annual accounts by the Board of Management
December 2016 (tbc)
Independent auditor’s report signed By 31 December 2016
23. Matters arising from our audit will be reported on a timely basis and will include agreed action plans. Draft management reports will be issued to the Assistant Principal to confirm factual accuracy. A copy of all final agreed reports will be sent to the Principal, Assistant Principal, Internal Audit and Audit Scotland's Performance Audit and Best Value Group.
24. All annual audit reports produced are published on Audit Scotland's website www.audit-scotland.gov.uk
25. Planned outputs for 2015/16 are summarised in appendix 1.
Quality control 26. International Standard on Quality Control (UK and Ireland) 1
(ISQC1) requires that a system of quality control is established, as part of financial audit procedures, to provide reasonable assurance that professional standards and regulatory and legal requirements
are being complied with and that the independent auditor’s report or opinion is appropriate in the circumstances. The foundation of our quality framework is our Audit Guide which incorporates the application of professional auditing, quality and ethical standards, and the Code of Audit Practice issued by Audit Scotland and approved by the Auditor General for Scotland. To ensure that we achieve the required quality standards, Audit Scotland conducts peer reviews, internal quality reviews and external quality reviews and has been subject to a programme of external reviews by the Institute of Chartered Accountants of Scotland (ICAS).
27. As part of our commitment to quality and continuous improvement, Audit Scotland will periodically seek your views on the quality of our service provision. We do, however, welcome feedback at any time and this may be directed to the engagement lead, Anne MacDonald.
Independence and objectivity 28. Auditors appointed by Audit Scotland must comply with the Code of
Audit Practice. When auditing the financial statements auditors must also comply with professional standards issued by the Financial Reporting Council and those of the professional accountancy bodies. These standards impose stringent rules to ensure the independence and objectivity of auditors. Audit Scotland has in place robust arrangements to ensure compliance with these standards including an annual ‘fit and proper’ declaration for all members of staff. The arrangements are overseen by the Assistant Auditor General, who serves as Audit Scotland’s Ethics Partner.
Audit issues and risks
Page 8 Moray College UHI
29. Auditing and ethical standards require the appointed auditor to communicate any relationships that may affect the independence and objectivity of audit staff. In significant cases we would change the audit team, however where there are potential issues that are not fundamental to the delivery of the audit, we advise the senior finance officer of the circumstances and of the steps we have taken to manage this. We are not aware of any such relationships pertaining to the audit of Moray College UHI.
Audit issues and risks 30. Based on our knowledge, discussions with staff, attendance at
committee meetings and a review of supporting information we have identified the following main risk areas for Moray College UHI. We have categorised these risks into financial statement issues and risks and wider dimension risks. The risks which require specific audit testing are detailed below and summarised in Appendix 2.
Financial statement issues and risks 31. 2015 SORP: The 2015 Statement of Recommended Practice
applies to colleges from 2015/16. While 2015/16 is the first reporting year, comparative figures for 2014/15 and a restated opening balance sheet at 1 August 2014 will be required. Some of the significant presentation changes arising from implementation of the new SORP are summarised below:
The SORP brings college accounts into line with International Financial Reporting Standards and consequently, there are significant changes in the primary statements. These include the combining of the income and expenditure account and the statement of total recognised gains and losses into a single statement of comprehensive income, and changes to the cash flow statement.
The Operating and Financial Review will be replaced by the Strategic Review which should present a realistic appraisal of the college’s financial position and forward plans.
Fees and resources
Moray College UHI Page 9
Fixed assets will change their name and be known as property, plant and equipment, with separate disclosure of assets held for sale and investment property.
revenue recognition rules will result in most capital grants being credited to the statement of comprehensive income rather than to deferred capital grants on the balance sheet. Deferred capital grants were previously recorded on the balance sheet and their subsequent release to the income and expenditure account will no longer occur. Grants will be treated under three categories, each potentially with its own accounting policy i.e. capital grants for land, other capital grants and revenue grants..
Financial instruments, such as cash holdings, debtors, creditors and loans and their associated risks, should be analysed and described more fully in new disclosure notes.
A holiday pay accrual is required, using the methodology developed last year, and based on accurate holiday data to be gathered at the year end.
Pension fund accounting has changed, with removal of the exemption from full disclosure for multi-employer schemes, such as the Local Government Pension Scheme (LGPS) (see para 35).
The related party definition is wider and includes transactions with institutions on which senior staff hold posts.
32. There is a risk that the college’s financial statements will not comply with the requirements of the new SORP. We will therefore work with the Assistant Principal and her team to confirm that the changes required by the new SORP are implemented accordingly.
33. Remuneration Report: Following reclassification and the application of FReM from 1 April 2014, colleges were required to include a remuneration report in their financial statements for the first time. Across the sector, remuneration reports were generally submitted for audit after the financial statements and required several iterations before they were concluded appropriately. Moray College UHI made use of an exemption provided in the Accounts Direction which enabled the board to withhold its consent to disclose certain salary information in the remuneration report, the only college to do so. It is uncertain if the exemption will be available this year.
34. While the second year should be more straightforward, if planning is not conducted at an early stage, a risk remains that the remuneration report will not be prepared in accordance with SFC guidance and may require significant changes during the audit process. We will confirm that the remuneration report is adequately built into the final accounts timetable.
35. Pension fund accounting: The college has previously accounted for pension contributions to the LGPS as if it were a defined contribution scheme. This means that the liability to pay for future pensions of current staff is not recognised on the balance sheet as required by FRS 102.
Audit issues and risks
Page 10 Moray College UHI
36. Our previous Annual Audit Reports have highlighted that the pension fund actuaries are now generally providing values for assets and liabilities by employer and consequently, the college should implement accounting for pension costs in line with FRS17. So far this has not been done but full compliance is required this year in accordance with the new SORP. There is a risk the audit opinion will be qualified if the college fails to comply with accounting standards.
37. Fair Value Measurement: FReM requires organisations to account for fair value measurement of assets and liabilities in accordance with International Financial Reporting Standard (IFRS) 13. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Examples of assets to which fair value measurement applies include surplus assets, investments held for sale and investment property. The college will require to consider if its existing practices need any adjustment in light of the new standard. We will review valuations to confirm the requirements have been applied accordingly.
38. Fraud Risk: Auditing standards (ISA 240 The auditor’s responsibility to consider fraud in an audit of financial statements) require auditors to consider the possibility of control override to meet financial targets or misrepresent the financial outturn. We have identified that some areas of the college’s financial statements have an element of fraud risk attached, for example:
Income: While Moray College UHI receives a significant amount of funding from the Scottish Funding Council via the regional board, last year it was not easy to agree the annual totals to funding awards. There are also a range of other sources including tuition fees. The complexity of income means there is an inherent risk that it could be materially misstated. The ISA requires auditors to evaluate which types of revenue and grant transactions give rise to such risks. We will therefore design and perform audit procedures to address these matters.
Management override of controls: ISA 240 requires auditors to consider, on all audits, management’s ability to manipulate accounting records and prepare fraudulent or biased financial statements by overriding controls that otherwise appear to be operating effectively. We will therefore design and perform audit procedures which are responsive to the risks identified.
Wider dimension issues and risks 39. Budget savings and financial pressures: The college is
operating in a funding environment which is anticipated to remain tight for some time. There has been close budget monitoring during the year to meet the funding shortfall and minimise the risk of the college having to report another deficit this year. Additional expenditure will however be required following the implementation of pay awards through national collective bargaining.
40. Financial sustainability concerns whether the college has the financial resources to meet current and future operational needs. There are risks that planned income will not be realised and in
Fees and resources
Moray College UHI Page 11
addition, there is currently an absence of senior financial expertise to lead the college through these financial difficulties. It is likely that the college will continue to depend on the UHI Further Education Regional Board’s (FERB) support to provide assurance on its financial sustainability.
41. Code of Good Governance for Scotland’s Colleges: A requirement of the college’s funding agreement is that a Financial Memorandum exists with the FERB. The memorandum covering the new relationship with UHI has yet to be agreed. One of the conditions within the memorandum is that colleges are expected to comply with the principles of good governance as set out in the 2014 Code of Good Governance for Scotland’s Colleges. There is a risk that the Code is breached putting funding at risk. We will review the extent of the college’s compliance with the Code as part of our consideration of the completeness of the statement of corporate governance and internal control.
National performance audit studies 42. Audit Scotland’s Performance Audit and Best Value Group
undertake a programme of studies on behalf of the Auditor General and Accounts Commission.
43. As a matter of routine, we complete an annual data return which is used to inform the content of the annual overview report on Scotland’s colleges published by the Auditor General.
Fees and resources Audit fee 44. In determining the audit fee we have taken account of the risk
exposure of Moray College UHI, the management assurances in place, and the level of reliance we plan to take from the work of internal audit. We have assumed receipt of a complete set of unaudited financial statements and comprehensive working papers package by 26 Septembet (tbc).
45. The proposed audit fee for planning, delivering and reporting on the 2015/16 audit of Moray College UHI is £19,200 (2014/15 £14,980). The 2015/16 proposed audit fee reflects the additional audit work planned this year as a result of:
the requirements of the new SORP including the restatement of prior year balances
accounting for pension costs in accordance with accounting standards
the adverse financial position reported by the college at 31 July 2015 and the subsequent actions to improve the 2015/16 financial position and the college’s overall financial sustainability. This will include a review of financial reporting to the board, progress against financial targets at 31 March 2016, verification of additional income sources and actions taken by the college to improve controls and reduce expenditure.
Fees and resources
Page 12 Moray College UHI
the role of the UHI FERB in providing grant funding to the college and in monitoring/challenging the college’s ongoing financial position.
46. Where our audit cannot proceed as planned through, for example, late receipt of unaudited financial statements or inadequate working papers, a supplementary fee may be levied. An additional fee may also be required in relation to any work or other significant exercises outwith our planned audit activity.
Audit team 47. Anne MacDonald, Senior Audit Manager, Audit Services is your
appointed auditor and your primary contact. Details of the experience and skills of our team are provided in Exhibit 2.
Exhibit 2: Audit team
Name Experience
Anne MacDonald CA, Senior Audit Manager (and certifying auditor)
Anne has many years of public sector experience mainly in local government financial audit.
Edward Stansfeld FCA, Senior ICT Auditor
Edward trained as an auditor in private practice in the early 90s, and then worked in industry for five years. He joined Audit Scotland in 2001 as an IT audit specialist.
Adebayo Ladejobi, Professional Trainee
Adebayo joined Audit Scotland's graduate training programme in October 2015 and is currently working towards his ICAS qualification.
Appendix 1: Planned audit outputs
Moray College UHI Page 13
Appendix 1: Planned audit outputs Planned outputs Date of Audit and Risk
Committee /Board Submission date
for returns to Audit Scotland
Performance Audit
Further Education Sector Overview Report – Data Return N/A By 31 December 2016
Financial statements
Report to Audit Committee – Communication of audit matters to those charged with governance - Annual Report to the Board on the 2015/16 audit
Audit Committee - November 2016 (tbc)
Board – 5 December 2016
By 31 December 2016
Independent auditor's report on the financial statements Audit Committee - November 2016 (tbc)
Board – December 2016 (tbc)
By 31 December 2016
Appendix 2: Significant audit risks
Page 14 Moray College UHI
Appendix 2: Significant audit risks The table below sets out the key audit risks, the related sources of assurance received and the audit work we propose to undertake to address the risks during our audit work. No Audit Risk Management source of assurance Audit assurance procedure
Financial statement issues and risks
1 2015 SORP The new SORP brings college accounts into line with International Financial Reporting Standards (IFRS). There will be changes in the primary statements and a restatement of prior year figures including an opening balance sheet at 1 August 2014.
Key areas for review include the treatment of pensions and deferred capital grants. There will also be changes to accounting policies and the disclosure requirements for financial instruments.
There is a risk that the new requirements are not met.
Early planning meeting with Assistant Principal to confirm expectations from new financial reporting requirements
Early preparation of a template for the financial statements reflecting the requirements of the new SORP including restated figures, updated accounting policies and any additional disclosure notes.
Regular contact with finance department
Update of our working papers checklist highlighting new requirements and ‘problem’ areas from the previous year
Review of revised template for accounts
Agreed timetable for delivery of draft annual accounts.
Appendix 2: Significant audit risks
Moray College UHI Page 15
No Audit Risk Management source of assurance Audit assurance procedure
2 Remuneration Report With 2014/15 the first year a remuneration report was required to be included in the college’s accounts, there were a number of iterations before the information was complete. Unless there is early planning in respect of 2015/16, there is a risk that similar delays may recur.
Early planning meeting with Assistant Principal to confirm expectations
evidence of board members consent for disclosure of all salary information required for disclosure in the remuneration report
Timely liaison with actuaries/pension funds to provide figures.
Regular contact with finance department
Agreed timetable for delivery of draft annual accounts.
3 Pension fund accounting The new SORP makes it mandatory to show potential future pension liabilities on the balance sheet in line with accounting standards. The college should hold early discussions with the North East Scotland Pension Fund to ensure that appropriate disclosures can be made. There is a risk of qualification if the college fails to comply with accounting standards.
Early planning meeting with Assistant Principal to confirm expectations for pension fund accounting
Early discussion with the North East Scotland Pension Fund to obtain the necessary information to comply with pension accounting requirements including comparative figures and an opening position at 31 July 2014.
Regular contact with finance department
Review of FRS 102 calculations provided by the actuary of the LGPS.
4 Fair value measurement The FReM/SORP requires fair value measurement of assets and liabilities in accordance with IFRS 13. There is a risk that valuations are not carried out per the requirements and therefore the value of assets and liabilities are misstated.
Early planning meeting held with Assistant Principal to confirm expectations from new financial reporting requirements.
Regular contact with finance department
Agreed timetable for delivery of draft annual accounts.
Appendix 2: Significant audit risks
Page 16 Moray College UHI
No Audit Risk Management source of assurance Audit assurance procedure
5 Income Grant income sources are complex, with awards from the SFC made via the FERB. There is a risk that total grant income for the year cannot be reconciled to award letters, leading to uncertainty over the correct amount of income to be disclosed.
There are also a number of other sources of income, relating to tuition fees and trading activities. The extent and complexity of income means there is an inherent risk of misstatement in accordance with ISA240.
Award letters issued by the SFC and the UHI Regional Board which state the totals for annual capital and revenue grants and funding awards
Internal audit reviews which assist in providing an opinion on governance arrangements
There are a range of policies and procedures in place to prevent and detect fraud including standing orders and financial regulations
Arrangements for clearing sales ledger control and trading accounts.
We will agree grant income to funding award letters
Detailed substantive testing of income transactions including cut off arrangements
Analytical procedures on weekly, monthly and annual receipts.
6 Management override of controls As stated in ISA240, management in all entities is in a unique position to perpetrate fraud because of its ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively.
Internal audit reviews which assist in providing an opinion on governance arrangements
Regular reconciliations of bank accounts and sub-ledger control accounts with the main ledger
Segregation of duties between those preparing and processing journals
Evidence of regular review of debtor and creditor balances.
Assurances from work carried out by internal audit
Confirmation of purchase ledger balances with suppliers
Testing of journal entries and review accounting estimates for bias
Review of use of control accounts, suspense accounts and deferred income accounts.
Appendix 2: Significant audit risks
Moray College UHI Page 17
No Audit Risk Management source of assurance Audit assurance procedure
Wider dimension issues and risks
7 Budget savings and financial pressures The college has identified funding shortfalls in respect of 2016/17 and beyond. There is a risk that the necessary efficiencies are not secured to maintain financial sustainability. This could undermine the assumption of going concern and lead to inadequate disclosures in the accounts.
Management Accounts and cash forecasts
Reports to the Board of Management
Compliance with the Code of Good Governance
Scrutiny of financial information by the FERB and compliance with the Financial Memorandum.
On-going monitoring of financial plans, assumptions and estimates with a commentary in our Annual Audit Report.
Review and evaluation of actions taken by the college to improve its financial position.
8 Code of Good Governance A condition of the Financial Memorandum with the SFC is the college’s on-going compliance with the Code of Good Governance for Scotland’s Colleges. There is a risk that if the Code is breached, grant conditions and the requirements of funders will not be met.
Updated Governance Manual
Assurances provided by the work of internal audit.
Review of arrangements in place against the Code including self-evaluation work undertaken by the college.
top related