Audit Committee Minutes 23 April 2020

Minutes of the Extraordinary meeting of the Cardiff University Audit Committee held on Thursday 23 April 2020 by Skype, at 16:00.

Present:

Mr Michael Hampson (Chair), Mr Paul Benjamin, Mr Dónall Curtin, Dr Janet Wademan and Ms Agnes Xavier-Phillips.

In attendance:

Professor Colin Riordan, Mr John Britton, Mr Jason Clarke, Mr Ian Davies, Ms Clare Eveleigh, Ms Alison Jarvis, Ms Faye Lloyd, Ms Julia Lofthouse, Ms Alex Payne (Minute-taker), Ms Claire Sanders, Mr Richard Walters, Mr Robert Williams, and Ms Wendy Wright.

795 Preliminaries

Noted

795.1        that Jason Clarke and Ian Davies, representatives of PricewaterhouseCoopers (PwC), the External Auditors, were welcomed to the meeting - this was the first meeting attended by Jason Clarke, Audit Partner;

795.2        that Claire Sanders, Interim Chief Operating Officer (COO), and Julia Lofthouse, Interim Deputy Secretary and General Counsel, were welcomed to their first meeting of the Committee.

796 Declarations of Interest

No declarations of interest were received.

797 Progress Report 2019-2020 Audit Programme

Received and considered for decision paper 19/562B, ‘Progress Report 2019-2020 Audit Programme’. Faye Lloyd, Head of Internal Audit, was invited to speak to this item.

Noted

797.1        that at the in camera on the 23 March 2020 the Committee agreed to pause the commencement of new audit work for a period of one month to allow the institution to invoke the Covid-19 major incident plan;

797.2        that this approach had been discussed with HEFCW who had confirmed that this position was acceptable subject to agreement by the Audit Committee;

797.3        that impact of the major incident on the annual audit opinion was highly likely due to the number of unimplemented recommendations from the Tracker and the continuance of low assurance reports;

797.4        that the major incident had severely affected the internal audit programme and made related work vulnerable;

797.5        that in the opinion of the Head of Internal Audit none of the audits which had been placed on hold were sensitive although it was noted that the latest version of the Risk Register was yet to be reviewed;

797.6        that it was confirmed that the audits that had been placed on hold would be revisited in quarter one of the next audit programme (2020/2021);

797.7        that the Risk Register had been extended by seven COVID-19 related themes, and work has been undertaken by the Professional Services Board (PSB) to review the risks and transition to a continuing Risk Register, incorporating these new themes;

797.8        that once this work has been completed it was intended that the Register would be updated weekly and reviewed by the PSB and the University Executive Board (UEB) on a regular basis;

797.9        that it could be more appropriate to extend the pause to the planned programme by six weeks rather than the proposed four weeks to provide for the next review to take place at the Committee’s meeting on 10 June 2020;

797.10      that the meeting acknowledged the likelihood of an impaired annual audit opinion and invited the various senior stakeholders to consider what steps could be taken to secure the best possible outcome;

Resolved

797.11      that the planned audit programme would be paused for an additional six weeks, until the next scheduled meeting of the Committee on the 10 June 2020, and HEFCW informed accordingly (and receipt of the correspondence requested);

797.12      that re-prioritisation of the annual plan of work for 2019/2020 as presented was agreed, with a potential reduction in audit days delivered to 422;

797.13      that the Interim COO and Chief Financial Officer (CFO) and other relevant stakeholders consider steps to be taken to secure the best possible outcome in respect of the annual audit opinion.

798 Discussion Points for Internal Audit Reports

Received and considered for debate paper 19/563B, ‘Discussion Points for Internal Audit Reports’. Faye Lloyd, Head of Internal Audit, was invited to speak to this item.

798.1 IT Continuity: Limited Assurance Report

Noted

.1 that this report had been included for information only and that full consideration of it would be given at the June meeting of the Committee with the Director of IT in attendance.

798.2 Data Quality Management: Adequate Assurance Report

Noted

.1 that the Committee is required to provide assurance to Council in respect of the quality of data returns made to regulators and report on how data are delivered to external organisations;

.2 that meetings of the Data Information Management Oversight Group (DIMOG) have recommenced thus strengthening institutional oversight of this activity.

799 COVID-19 impact on Welsh universities: Proposed actions from HEFCW

Received and considered for debate paper 19/564B, ‘Covid-19 impact on Welsh Universities proposed actions from HEFCW’. John Britton, Director of Strategic Planning and Governance, was invited to speak to this item.

Noted

799.1        that there had been significant consultation across the sector in Wales regarding the easing of regulatory requirements;

799.2        that although a formal extension had yet to be announced, it was possible that the deadline for submission of annual audited accounts would be extended from 1 December 2020;

799.3        the reference made in the report to regulatory issues of ‘material effect’ and the need to maintain regular dialogue with HEFCW and other regulators;

Resolved

799.4        that an update on the report be presented to all future meetings until further resolution.

800 COVID-19 Related Reporting Issues

Noted

800.1        that PwC indicated a preliminary view on whether there would be reporting issues in respect of the 2019/2020 academic year accounts because of COVID-19;

800.2        that issues emanated from practicalities of completing the audit and collecting evidence, accounting impacts on the Balance Sheet at the reporting date and possible impairments to long-term assets;

800.3        that it is necessary to undertake scenario planning and financial reviews as a component of the going concern review in addition to keeping track of costs and disruption to aid the year end narrative;

800.4        that it would be prudent to discuss how the 2019/2020 statements would be prepared at the Committee’s October 2020 meeting;

800.5        that although there were many variables and unknowns affecting the current year-end position, the impact of the pandemic would be even more serious for the 2020/2021 year-end;

800.6        that the 2020/2021 year-end position would be dependent inter alia on student recruitment and tuition fee income, having regard to understanding how social distancing will affect teaching and other activity;

800.7        that financial scenario planning is being undertaken to model potential outcomes and that cash flow is being reviewed daily to inform such financial planning;

800.8        that Universities UK had submitted to the Treasury a request for a package of support but that the Westminster government’s response was yet unknown;

800.9        [Redacted]

800.10      that caution was required in respect of the year-end position for 2020/2021 as no formal forecasts had been made;

800.11      that Committee required assurance that the position was being mitigated and due heed taken of the risks associated with the major incident;

800.12      that financial scenario planning would be discussed at the Committee’s next meeting;

Resolved

800.13      to consider the preparation required for the 2019/2020 accounts at the meeting scheduled for October 2020;

800.14      that a meeting between the Vice-Chancellor, CFO and members of the Audit Committee be convened to discuss the financial position and reporting on it in advance of the June 2020 meeting;

800.15      to consider financial scenario planning at the meeting scheduled for June 2020.

801 Cardiff Innovation Campus cost increase

[Redacted]

Noted

801.1        [Redacted]

801.2        [Redacted]

801.3        [Redacted]

801.4        [Redacted]

Independent Review of Cardiff Innovation Campus – Terms of Reference

Noted

801.5        [Redacted]

801.6        [Redacted]

801.7        [Redacted]

801.8        [Redacted]

801.9        [Redacted]

801.10      [Redacted]

801.11      [Redacted]

801.12      [Redacted]

Resolved

801.13      that the ToR for the review of the CIC were agreed, subject to receipt of any comments from members of the Audit Committee received by the Chair no later than 28 April 2020;

801.14      that UEB would receive the management response in respect of the Deloitte report in mid-May, to enable the report to be finalised and issued no later than the 22 May 2020;

801.15      that the tender activity should begin as soon as week commencing 27 April 2020, to enable the fieldwork to be completed by early June – in line with the review proposal;

801.16      that in order for Council to be apprised of this matter, this item would be reported to the meeting of Council on the 5 May 2020 by way of production of this minute.

802 External and Internal Audit tender update

Noted

802.1        that a verbal update was received from the CFO in respect of the External Audit contract position, and that it was agreed that the representatives from PwC could remain in attendance for this discussion;

802.2        that due to the current pandemic the Financial Reporting Council had announced that it would permit organisations to extend external audit contracts by up to two years where such contracts would otherwise fall for renewal;

802.3        that of practical concern to the University was the length of time that it could take to appoint a new external auditor and the potential impact of that on the external audit for the 2020/2021 accounts;

802.4        that it was recommended therefore that the PwC contract be extended for a year, to include the 2020/2021 external audit, and that the tender exercise be deferred until late 2020;

802.5        that the CFO had discussed this matter with the Head of Internal Audit, recognising the implications for the internal audit contracts;

802.6        that the Head of Internal Audit advised that it would be beneficial to bring a strategy in respect of internal audit provision to the Committee’s next meeting;

802.7        that firms awarded contracts for internal audit provision would be precluded from tendering for the contract for external audit provision;

Resolved

802.8        that the Committee endorsed the recommendation that PwC’s contract for external audit provision be extended to include the 2020/2021 academic year;

802.9        that the Committee endorsed the recommendation that the tender exercise to seek a new statutory external auditor commence in late 2020 to take effect from the 2021/2022 academic year;

802.10      that a strategy in respect of how to approach the internal audit provision be produced and received for consideration by the Committee at its next meeting;

802.11      that the Head of Internal Audit and the CFO would discuss the issue referred to at min. 802.7 and agree the approach most advantageous to the University.

803 Any Other Business

There were no matters of other business.

In-Camera

An in-camera meeting for members of the Audit Committee and Head of Internal Audit was held immediately following close of business.