Minutes of Proceedings

SECRETARIAT AUDIT AND RISK COMMITTEE (SARC)
TUESDAY, 18 JUNE 2019 at 2.00PM
ROOM 106, PARLIAMENT BUILDINGS

Present: 
Jim Brooks, Chairperson
Derek Martin
Jim Wells MLA

In Attendance:       
Lesley Hogg, NIA
Rodney Allen, NIAO
Tara Caul, NIA
Gareth McGrath, NIA
Richard Stewart, NIA
Paula McClintock, NIA
Eddie Kelly, NIA
Ashleigh Mitford, NIA

Opening/Review

The meeting commenced at 2.11pm.

1. Apologies

Apologies were received from Brian Moreland, Head of Internal Audit.

2. Declaration of Interests

Jim Wells declared an interest as a trustee of the Northern Ireland Assembly Members Pension Scheme.

3. Minutes of Previous Meeting

Minutes of the previous meeting, held on 15 May 2019, were approved without amendment.

4. Matters Arising

It was noted that the action point from the meeting on 15 May 2019 had been completed.

5. Internal Audit Activity Update

Eddie Kelly provided an update on Internal Audit activity since the SARC meeting on 5 February 2019.

Eddie advised SARC that a number of final and follow-up reports had been issued since the February meeting, as set out in Table 1 and Table 2 of the update report, included in the SARC papers. He then presented a summary of each report.

The Review of the Administration of the Assembly Members Pension Scheme (NI) 2016 Report was issued on 25 March 2019 and contained 2 recommendations, both of which were accepted by management.  Eddie gave an overview of the recommendations and advised SARC that the assurance level was satisfactory.

The Review of Members Expenses 2018-19 (Interim) Report was issued on 29 May 2019 and contained 2 recommendations, both of which were accepted by management. Eddie summarised the recommendations and reported that the assurance level was satisfactory.

Jim Wells highlighted the finding that window displays in constituency offices were non-compliant with the Independent Financial Review Panel’s (“the IFRP’s”) Assembly Members (Salaries and Expenses) Determination (Northern Ireland) 2016 (“the 2016 Determination”) and the serious and unreasonable financial consequences for Members of such a breach. He stated that Assembly Commission officials should exercise discretion when breaches such as this were identified, by drawing the breach to the attention of the Member and allowing them to rectify it, rather than formally reporting the matter.

Assembly Commission officials quoted the relevant provisions of the 2016 Determination, explained the role of the Secretariat in the implementation of the 2016 Determination and the fact that there was no scope to set aside, ignore or amend the rules set by the IFRP. Lesley Hogg explained that the legal status of the 2016 Determination was equivalent to secondary legislation and that until such times as the rules were amended, Assembly Commission officials had a duty to implement them. Jim Brooks confirmed that it was the role of Internal Audit to report any such findings identified during its work.

Eddie provided an overview of the Review of Compliance with GDPR Report, issued on 29 May 2019. He stated that the assurance level was substantial and that 2 recommendations had been made and accepted by management. Eddie presented a summary of the recommendations.  Jim Brooks noted that the organisation had implemented the regulations well. He emphasised the importance of ensuring that local procedures are put in place by business areas before a return to normal Assembly business, when the volume of work will increase.

Eddie provided an overview of the Follow-up Review of the Roof Project Report, issued on 22 May 2019, and reported that the assurance level had been raised to substantial. Jim Brooks stated that this was a good result for what was a major capital project.

Eddie provided an overview of the Follow-up Review of Corporate Governance, issued on 30 May 2019, and informed SARC that the assurance level had been raised to substantial. 

Derek Martin stated that both follow-up reports reflected that management took recommendations from Internal Audit seriously and congratulated everyone involved in their implementation.

Eddie briefed SARC on work that was ongoing, namely:  the reviews of Support Services, Legal Services Office and Planned and Reactive Maintenance, and final testing in respect of Members Expenses (2018-19). 

The final outturn in respect of the 2018-19 Internal Audit Plan was presented by Eddie, followed by a progress report covering the first quarter of the 2019-20 Internal Audit Plan.

Jim Brooks said that he welcomed the final outturn report and that this was a very positive development in demonstrating the governance of the Internal Audit Unit. Jim stated that this report, along with the resource plan and the retrospective report of Internal Audit coverage presented at the May 2019 SARC meeting, added to the assurance that SARC derives from Internal Audit activity.

Eddie concluded the audit activity update by stating that the overall level of assurance for the period 1 April to 18 June 2019 was satisfactory.

Eddie then provided an overview of the Internal Quality Assessment Review that he had recently concluded.  He explained that the conclusion of the self-assessment was that Internal Audit was in general conformance with the Public Sector Internal Audit Standards. He informed SARC that the review had highlighted several areas for development and that he had produced a Continuous Improvement Plan to provide a focused approach to implementation of the identified action points.  He advised that the actions included a refresh of the Internal Audit Charter and the development of the Internal Audit Strategy.

Derek stated that he was pleased to see the report and that it reflected well on the work of the Internal Audit Unit.

Jim Brooks summarised the work carried out and stated that this provided the level of assurance needed by SARC.

Eddie explained next steps in relation to the External Quality Assurance Review, scheduled for autumn 2019, to be carried out by the Head of Internal Audit of the Welsh Assembly.

Eddie stated that there had been no cases of whistleblowing or fraud reported to the Internal Audit Unit this year. He finished by notifying SARC that the Inter-Parliamentary Heads of Audit Group has been tentatively scheduled for September 2019 in the Isle of Man and that an update will be provided at the next meeting.

Jim Wells raised a number of queries in relation to the organisation’s readiness to resume normal Assembly business in relation to staff and budgets.  Lesley Hogg provided an overview of the activities that had been undertaken by management to retain readiness, balanced with effective use of resources.  There was discussion around staffing in relation to existing vacancies and the speed at which redeployed staff could be recalled. Lesley explained that it would be necessary to consider, prioritise and reallocate resources where necessary, and that the Secretariat would do everything possible to facilitate a return to normal business at short notice.  It was acknowledged that specialist technical skills, such as IS skills, are likely to be more challenging to obtain.   Lesley stated that business areas are mindful of the talks process and continue to review plans for resumption of normal Assembly business.

Jim Wells said that the last return to normal Assembly business was very smooth. Richard Stewart said that a return to normal Assembly business would be initially very challenging and this was the case last time the Assembly returned from suspension.  He clarified that the current Assembly budget was based on reduced levels of activity and that, in the event of a return to normal Assembly business, a revised budget would be required in advance of seeking adequate funding from Westminster.  Richard explained the process and procedures required to secure this business as usual budget.

6. Audit Recommendations Schedule

SARC considered the updated schedule. It was noted that implementation of 3 recommendations awaited political developments, leaving 10 recommendations currently “in progress”.

Jim Brooks welcomed the action taken by management to implement audit recommendations.  He emphasised that it is crucial for organisations to carefully track the implementation of audit recommendations.

Derek agreed and said that the implementation dates for the “in progress” recommendations were reasonable and that this was a solid performance.

7. Corporate Risk Register

SARC noted the June 2019 Corporate Risk Register.  Ashleigh Mitford provided an overview of key changes since it was last considered by SARC.

Ashleigh said there were no new risks and no changes to the scoring of the existing risks. She summarised the revisions, made during the June review, explaining that these provided clarification of wording or reflected the latest position in relation to root causes, risk responses or additional actions.

Jim Brooks described the Corporate Risk Register as mature and welcomed that it was responsive to change and reflected the ongoing work to maintain a state of readiness for a return to normal Assembly business.  He observed that the combination of EU Exit, and a potential return of Members and redeployed staff, would be difficult to manage.

8. Financial Assistance for Political Parties (FAPP) Scheme 2016 - Audit Report 2018-19

Paula McClintock provided an overview of the Financial Assistance for Political Parties (FAPP) Scheme 2016 (the Scheme) - Audit Report 2018-19.

Paula explained that audit certificates had been received for each of the political parties that received funding under the provisions of the Scheme in 2018-19. She said that the audit report contained 6 recommendations highlighting a number of areas for potential improvements to internal controls.  Paula said that the recommendations had not been assigned a priority risk rating and that draft management responses and a proposed action plan will be presented to the Assembly Commission for its consideration and approval.

After discussion and questions from SARC members, SARC welcomed the independence of the audit and noted its outcome and associated recommendations.

9. NI Assembly Resource Accounts 2018-19

Paula acknowledged the late circulation of the Accounts the day before and said that there were still some ongoing discussions around disclosures that may mean some further amendments will be made to the draft. 

She said that no changes had been made to the Accounts since SARC’s meeting in May other than editorial changes.  She also said that there had been no changes to statements or figures.  She explained that some commentary had been added around the budgetary position and that a statement had been added to clarify that EU Exit will not affect the Assembly Commission’s Budget.   Paula went on to highlight some changes to the Governance Statement since the May 2019 SARC meeting including a paragraph to reflect the shortage of professional procurement staff in the Procurement Office, governance arrangements for payments to members, remuneration, and the publication of further Internal Audit reports.

Lesley Hogg referred to Note 9.3 ‘other financial commitments’ and informed SARC that this was being reconsidered in light of the relevant Financial Reporting Standard. Jim Brooks stated that this was a technical issue. 

During discussion and questions from SARC members, Jim Brooks said that he was content with the level of assurance and strong financial management of the organisation.  Jim Wells and Derek Martin agreed.   SARC congratulated everyone involved.

Jim Brooks highlighted that he had raised a query with Paula in relation to the General Fund and was content with her response. He stated that he had also raised a query with Paula regarding the fact that the net liability of the Assembly Members Pension Scheme (AMPS) is recognised in the Assembly Commission’s Accounts and whether the Assembly Commission would be responsible for any deficit in the AMPS. Jim advised that Paula had provided him with a very helpful note setting out the nature of the separate legal status of the AMPS and the rationale for the inclusion of the liability in the Assembly Commission’s Accounts.

Jim Wells stated that he was a trustee of the AMPS and that it was one of the very few pension schemes that was in an actuarial surplus and was therefore in a very healthy financial position. He explained that the liability in the Accounts reflected the buy-out cost of an annuity, that in reality was unlikely ever to happen.

Rodney Allen informed SARC that the AMPS Annual Report and Accounts was audited separately by NIAO and that NIAO would be attending a Trustees meeting the following week, to discuss their audit strategy, in respect of the 2018-19 AMPS Accounts.

Jim Brooks suggested that the Assembly Commission should have some oversight of the financial position of the AMPS, since ultimately it was likely that while not legally responsible, the Assembly Commission would have a moral responsibility should the AMPS face financial difficulty. Lesley proposed that Assembly Commission officials could liaise with the AMPS trustees to consider whether annually the trustees could provide the Assembly Commission with a brief report highlighting any funding issues along with a copy of the AMPS Annual Report and Accounts and the latest actuarial valuation.

Action: Richard Stewart to liaise with AMPS trustees regarding whether annually the trustees could provide the Assembly Commission with a brief report highlighting any funding issues along with a copy of the AMPS Annual Report and Accounts and the latest actuarial valuation.

Action: Lesley Hogg to sign the Resource Accounts 2018-19 by 21 June 2019.

Jim Brooks enquired if the Assembly Commission received a copy of the Annual Report and Accounts.Lesley explained that she would be providing an update on their status at the Assembly Commission meeting the following week and that she would include in her report if they were signed by that time.      

10. Draft Final Report to Those Charged with Governance

Rodney Allen commented that the NIAO audit team had undertaken a rigorous audit and he thanked management for the assistance given.  Rodney acknowledged the late availability of the draft Northern Ireland Assembly Commission 2018-19 Report to Those Charged with Governance (the draft Report) but stated that he would present the contents to members.

Rodney said it is proposed that the Comptroller and Auditor General will certify the 2018-19 financial statements with an unqualified audit opinion, without modification. 

Rodney confirmed the Northern Ireland Audit Office (NIAO) assessment of the Assembly Commission’s operations and control environment, set out in its Audit Strategy, which did not identify any significant risks.

Rodney provided an overview of the 2 audit findings contained in the draft Report.  He began with a Priority 2 rating recommendation regarding financial spending commitments, in particular, an adjustment, relating to the financial commitments in Note 9.3.  Rodney acknowledged that management were to consider this further and said that he did not expect it to impact on the Comptroller and Auditor General’s opinion.

Rodney referred to a Priority 3 rating recommendation in relation to the fixed asset register, that was also noted in the previous year’s report.  Rodney said that NIAO acknowledged the advanced stage of a review that is being undertaken by the Assembly Commission in this regard, but recommended that this be completed as soon as possible.

Under “Other Matters of Interest”, Rodney drew SARC’s attention to the fact that all parties had been asked to complete a signed Financial Assistance for Political Parties (FAPP) Scheme 2016 Declaration Form. The NIAO considered that this procedure enhanced the Commission’s governance arrangements. However, two parties had failed to return a signed declaration form and they should be encouraged to do so.

Lesley clarified that whilst these additional signed declarations had been sought, these were not a requirement of the FAPP scheme and had been introduced as an additional governance layer by the Assembly Commission.

Rodney referred to the draft letter of representation and highlighted that there was nothing unusual contained in it, however consideration around financial commitments in Note 9.3 should be concluded.

After discussion and questions, SARC members received the draft Northern Ireland Assembly Commission 2018-19 Report to Those Charged with Governance with thanks and commented that it presented a very positive position. 

11. Risk Management Strategy

SARC noted the Risk Management Strategy April 2019. Ashleigh provided an overview of the changes that had been made during its annual review.  Jim Brooks said he thought it was a very good document, particularly in its approach to Risk Appetite.  He welcomed the solid updating that had been undertaken.

12. Procurement Activity Report

Tara Caul gave SARC members an overview of the Assembly Commission’s limited procurement activity in the 2018-19 financial year and the status of the staffing of the Procurement Office.  She confirmed that the organisation could now move forward with two major projects that were paused while there were no professional procurement staff available in the Procurement Office. Jim Wells asked if this was a difficult area in which to recruit.  Tara Caul explained that it is a specialised area but she had not recently tested the external market as the vacant AG5 Procurement Manager post had been temporarily filled by using the Interchange process. 

13. National Fraud Initiative Update

Paula provided an update in relation to the National Fraud Initiative. Paula explained that the Finance Office had concentrated on red and amber matches, but its investigations had not identified any issues, despite these matches being identified as high risk.

SARC Members welcomed this outcome and were supportive of the participation in the National Fraud Initiative from an organisational and national point of view.  

14. NAO Cyber Security and Information Risk Checklist - Action Plan Monitor

SARC noted the latest position in relation to the NAO Cyber Security and Information Risk Checklist Action Plan Monitor.

15. Fraud and Bribery Self-Assessment Checklist - Action Plan Monitor

SARC noted the latest position in relation to the Fraud and Bribery Self- Assessment Checklist Action Plan Monitor.

16. Key Guidance from Department of Finance

SARC members noted key guidance that had been issued by the Department of Finance since the February 2019 SARC meeting.

17. AOB

There was no other business.

18. Date of Next Meeting

The date of the next meeting is Wednesday 16 October 2019. 

The meeting ended at 3.55pm.