Minutes of Proceedings
Date: 05 December 2013
Venue: Room 21
1.1 Apologies were received from Trevor Reaney, who was unable to attend due to illness, and from Louise Mason. The SARC Chair welcomed Gary Currie from NIAO to the meeting.
2. DECLARATION OF INTERESTS
2.1 There were no declarations of interests.
3. MINUTES OF THE PREVIOUS MEETING
3.1 The minutes of the SARC meeting held on 1 October 2013 were approved without amendment.
4. MATTERS ARISING
4.1 Paragraph 4.3
It was noted that Business Case guidance was still being developed and that Directors had been tasked with reviewing and updating existing Business Cases over £25k by 31 January 2014.
4.2 It was noted that all other actions arising from the SARC minutes of 1 October 2013 were now complete.
5. EXTERNAL QUALITY ASSURANCE REVIEW OF THE INTERNAL AUDIT FUNCTION
5.1 Michael Watson, Head of Audit, Governance and Risk Services, Craigavon Borough Council, joined the meeting and Brian Moreland and Eddie Kelly left the meeting.
5.2 Mr Watson thanked SARC members for the opportunity to undertake the external quality assurance review. He advised that the principal aim of the assignment was to review the adequacy and effectiveness of the Internal Audit unit and comment on the internal audit arrangements in place in line with the Public Sector Internal Audit Standards (PSIAS) and relevant professional standards as required by the Chartered Institute of Internal Auditors.
5.3 He had found evidence of a well-motivated and co-operative team, representing 60 years of collective experience; a clear focus on continuous improvement; a well-managed section, where sufficient weight is given to a risk-based approach to the development of operational planning; and effective use of technology to plan, execute and report audits. Reports are clear, well written and conclusions are evidence based. There is evidence of linkages between internal audit recommendations and corporate risk management.
5.4 Evidence established from interviews and file reviews were used to form an opinion as to the level of compliance of the unit with each of the 11 Standards. Six were assessed as fully compliant and five as generally compliant.
5.5 As PSIAS only came into operation in April 2013 and many of the standards apply to activities that will happen later on in the year, the overall opinion is that Internal Audit within the NI Assembly is generally compliant. With the implementation of the recommendations from both the Internal and External Quality Assurance reviews, there is a high likelihood that the Internal Audit unit could become fully compliant.
5.6 SARC members thanked Mr Watson for his presentation and for undertaking the review.
5.7 SARC members discussed the implementation schedule and agreed that any evaluation of the Head of Internal Audit post by the Clerk/Director General should include feedback from the Chair of SARC. It was agreed that a composite implementation schedule, including Internal Quality Assurance and Business Efficiency Programme recommendations, would be shared with SARC members by correspondence.
ACTION: HUGH WIDDIS
5.8 Mr Watson then left the meeting, and Mr Moreland and Mr Kelly re-joined the meeting.
6. INTERNAL AUDIT ACTIVITY / ASSURANCE
6.1 Brian Moreland advised that seven Internal Audit reports have been issued in final form during the period 1 April to 15 November 2013; four received a substantial assurance rating, two were assessed as being satisfactory and one was limited:
Review of Members’ Expenses - Satisfactory
Review of Legal Services - Substantial
Review of Risk Management - Satisfactory
Review of Public Accounts Committee - Substantial
Review of Independent Financial Review Panel - Substantial
Review of Building Services - Limited
Review of DG’s Office - Substantial
6.2 The final report in respect of the review of the Director General’s Office was issued on 15 November 2013. Seven recommendations were made for management’s consideration; two at risk rating 2 and the remaining five at risk rating 3.
Recommendations were made in respect of records of decisions taken, responses to Assembly Questions, and the staffing levels in the DG’s Office. The assurance level for this audit was substantial.
6.3 A draft report in respect of the Education Service audit was issued on 5 November 2013, with a total of 17 recommendations. Of these, four were assessed as risk rating 2 and the remaining 13 were rated at 3.
Recommendations were made to enhance control in a number of areas including the functionality of the booking system, the development and approval of the Education Outreach Strategy and contract management training. The assurance level for this audit is satisfactory.
6.4 Mr Moreland advised that during the period 1 April to 15 November 2013 follow-up audits were completed and reports issued in respect of Office Resources (raised to satisfactory from limited), Vacancy Management (raised to substantial from satisfactory), Gifts & Hospitality (remains at satisfactory) and the Commission and Corporate Support Unit (remains at satisfactory). Follow-up audits are currently under way in respect of the Environment Committee, the Assembly Members’ Pension Scheme, Business Continuity, Information Security, Legal Services, the Examiner of Statutory Rules, Research, and the Use of Mobile phones.
6.5 Work is currently in progress in respect of Secretariat Pensions, the Procurement Office, and the Terms of Reference for the audit of Financial Planning are currently being considered.
6.6 Mr Moreland informed SARC that work is currently on target to complete the audit programme as discussed at the October SARC meeting. The Head of Internal Audit has also had discussions with the Director of Clerking and Reporting in respect of the best means to progress work on the audit of the Northern Ireland Legislative Strengthening Trust. Eddie Kelly has returned to Internal Audit and will require some time to finalise his work with the Business Efficiency project. The existing contract with PWC is being used to complete the audit of the Procurement Office.
6.7 The overall level of assurance for the period 1 April to 30 November 2013 remains satisfactory. This assessment is based on the levels of assurance arising from the individual Internal Audit assignments, the action taken by management to implement recommendations and the results of follow-up audits.
6.8 Mr Moreland advised that 86% of the audits completed resulted in either substantial or satisfactory assurance, with the remaining 14% being limited. The overall rate of acceptance of Internal Audit recommendations remains high. All recommendations at risk rating 1 have been accepted, with 93% of those at risk rating 2 and 97% at rating 3 accepted. This represents a marginal improvement since the October SARC meeting.
6.9 SARC members were pleased to note the increase in substantial ratings, as shown in the graphics.
6.10 SARC members suggested that there would be merit in organising a “lessons learned from substantial and satisfactory audits” session, similar to briefings given on occasions by the Comptroller and Auditor General. This could take the form of a semi-formal end of year mop-up session for all senior managers in the Secretariat. In light of the recent fraud notification to the Comptroller and Auditor General, the session could usefully be expanded to include fraud reporting awareness. Officials agreed to work up a proposal.
ACTION: HUGH WIDDIS / RICHARD STEWART / BRIAN MORELAND
6.11 Brian Moreland informed SARC members that the next meeting of the Inter-Parliamentary Head of Internal Audit Group is due to be held in Parliament Buildings, Stormont, on 6 December 2013. The agenda will include issues arising from the initial round of governance statements, auditing arms-length bodies, and Members’ expenses.
6.12 In relation to fraud investigation, Brian Moreland advised that, as a result of the competition for the provision of investigative services, three tenders were received. The evaluation panel has recommended one of the three for appointment and a report was submitted to the Director of Legal & Governance Services from Procurement on 18 November. It was approved on 27 November 2013 and appointment of the successful company should therefore follow shortly.
6.13 In the Business Case and final evaluation for the provision of investigative services for the NIA Secretariat and Members of the Legislative Assembly (MLAs), the cost of the contract was estimated at £165,820 over a period of four years. This estimate was based on assumptions on both revenue cost and staff & project costs. SARC members noted that these figures are estimates only and there will be no actual cost to the NIA over this four-year period unless an incident occurs where it is necessary to call upon the skills of the Service Provider. It was also noted that there is no retention fee associated with the contract.
6.14 No further whistleblowing cases have been referred to Internal Audit since the October SARC meeting.
6.15 It was noted that all members of the Internal Audit unit continue to identify relevant generic and specialist training.
7. “IN PROGRESS” AUDIT RECOMMENDATIONS SCHEDULE
7.1 SARC members noted the continuing high level of implementation of accepted Internal Audit recommendations. SARC members queried whether the 30 November 2013 deadline in respect of Building Services recommendations had been met. Officials advised that a file of documentation had been received from CPD and that it was being analysed to see if it met the Assembly’s requirements. Leslie Cree MLA informed colleagues that he had informally raised the non-production to date of the required paperwork with the Finance Minister.
7.2 In relation to the Business Continuity Planning follow-up audit, which is on-going, SARC members noted the significant progress made to date by officials and hoped that there would be scope to address remaining actions.
7.3 SARC members noted the series of revised implementation dates in relation to IS Office recommendations. They asked that officials re-examine the implementation dates currently shown in the schedule to ensure that they are realistic and achievable.
ACTION: JOHN STEWART
8. RTTCWG 2013 AUDIT RECOMMENDATIONS SCHEDULE
8.1 SARC members noted the encouraging level of implementation to date of recommendations contained in the Report to those charged with Governance 2013. SARC members were content that recommendations already implemented be excluded from the remaining 2013 monitoring schedules.
9. OUTSTANDING AUDIT RECOMMENDATIONS SCHEDULE
9.1 SARC members noted the nil return.
10. EXTERNAL AUDIT STRATEGY FOR 2013/14
10.1 Gary Currie gave SARC members an overview of the NIAO’s planned audit strategy in relation to the Northern Ireland Assembly’s Financial Statements for 2013/14, and SARC members considered the strategy’s contents. Gary outlined NIAO’s approach to the audit and the significant risks identified: Members’ expenditure; Procurement; Pension provision; and Ormiston House. However, SARC members queried whether Ormiston House was a financial risk, given that associated losses had been reflected annually in the Accounts.
Other risk factors identified are the new payroll system, and possible disruption to financial systems because of relocation due to roof repairs.
SARC members commented that they had not been previously made aware of any potential disruption to financial systems; they also commented on the fact that the NIAO team was totally new to the Assembly’s accounts but were pleased to hear that the team had already met with the Finance Office.
11. SARC 2014/15 OBJECTIVES
11.1 SARC members discussed the contents of SARC’s objectives for 2014/15. Draft wording is to be provided and agreed by correspondence.
ACTION: DAVID JOHNSTON / SARC MEMBERS
12. CORPORATE RISK REGISTER
12.1 SARC members noted the minor changes made to the contents of the Corporate Risk Register since the October SARC meeting. SARC members mentioned potential risks associated with various staffing issues, the Purchase-to-Pay system and the Integrated Workplace Management System.
SARC members requested that they have the opportunity to view Directorate Risk Registers annually.
ACTION: DAVID JOHNSTON / DIRECTORS
13. STEWARDSHIP STATEMENTS
13.1 SARC members noted the contents of the Stewardship Statements as at 30 September 2013. In relation to non-compliance highlighted by the Director of Corporate Services, SARC members suggested that either the policies be changed or that compliance be ensured. The SARC Chair welcomed the fact that all Directors now have appropriate controls in place.
14. MANAGEMENT ACCOUNTS
14.1 SARC members noted the Management Accounts to end October 2013, including the underspend for the year to date. SARC members queried whether the forecast outturn for the year should be included in these reports. Members were advised that the final column of the table is a forecast of the likely expenditure for the year.
15.1 The SARC Chair reported that, at the Assembly Commission meeting on 20 November 2013, he had had the opportunity to report on governance matters to Commission members without Secretariat officials being present. He had been asked by a member of the Commission, given SARC’s responsibility to provide governance advice to the Commission, to advise on the view that the Commission is anti-democratic.
SARC members, having reviewed the SARC Terms of Reference, considered the matter and were of the view that the Commission is similar to a Board of Directors with a £50 million budget, with SARC’s role being to advise Commission members and the Clerk/Director General on matters of corporate governance.
However, SARC members were agreed that they have no role in relation to determining the make-up of the Commission, which is clearly articulated in the Northern Ireland Act 1998 and Standing Orders, and that any proposed changes are for debate and decision on the Floor of the House. The SARC Chair undertook to report back to the member.
ACTION: COLM McKENNA
15.2 The contents of DAO (DFP) 09/13 in relation to remuneration and travel & subsistence payments to non-executive appointees were discussed. Paula McClintock undertook to provide further information to the Independent Chair and member on this issue.
ACTION: PAULA McCLINTOCK
16. DATE OF NEXT MEETING
16.1 It was agreed that the next meeting of SARC would take place on Thursday 10 April 2014 at 2.00pm in Parliament Buildings.
16.2 It was agreed that SARC would meet on Tuesday 20 May 2014 at 4.00 pm to consider the Interim Accounts. (Independent member to chair).
16.3 It was also agreed that a full SARC meeting, including consideration of the Annual Accounts, would be held on Thursday 19 June 2014 at 2.00 pm