Minutes of Proceedings

SECRETARIAT AUDIT AND RISK COMMITTEE (SARC)

WEDNESDAY, 20 JUNE 2018 at 2.00 PM

ROOM 106, PARLIAMENT BUILDINGS

Present: 

Jim Brooks, Chairperson
Derek Martin

In Attendance:       

Lesley Hogg, NIA
Rodney Allen, NIAO
Tara Caul, NIA
Richard Stewart, NIA
Paula McClintock, NIA
Eddie Kelly, NIA
David Johnston, NIA, Secretary

Opening/Review

The meeting commenced at 2.07 pm.

1. Apologies

Apologies were received from Jim Wells MLA; Brian Moreland, Head of Internal Audit; and Dr Gareth McGrath, Director of Parliamentary Services, who is currently on secondment.  SARC members again sent their best wishes to Brian, and noted that Eddie Kelly had been successful in a temporary promotion competition for the Head of Internal Audit post.

2. Declarations of Interest

There were no declarations of interest.

3. Minutes of Previous Meeting

Minutes of the previous meeting held on 16 May 2018 were approved without amendment.

4. Matters arising

It was noted that two action points have been completed, with the 2018-19 Internal Audit & Resource Plan to be revisited, once the scope of planned audits has been considered over the summer.

5. Internal Audit Activity / Assurance

Eddie Kelly gave SARC members an update on Internal Audit activity since the SARC meeting on 16 May 2018.

The Follow-Up Report on the Review of iTrent (Payroll) was issued on 11 June 2018.  The successful implementation of the original recommendations resulted in the assurance level being raised to Substantial.

The SARC Chairperson raised a number of queries and was reassured by officials’ responses in relation to consideration of outsourcing payroll, self -service facilities and the extent of overtime payments.

Eddie advised that a number of audits are in progress.  A draft report has been issued in respect of the Internal Audit of PECOS; fieldwork on the Review of Members’ Expenses has been completed and the report is being drafted; Internal Audit is in the process of addressing some outstanding issues in respect of the Review of Secretariat Travel and it is anticipated that the draft report will issue shortly; and Terms of Reference for the review of Outreach have been drafted, with fieldwork due to commence in late June.   

As discussed at the May SARC meeting, the 2018-19 Internal Audit Plan and resources will be critically reviewed by the Audit Manager and the Director of Legal, Governance and Research Services, and discussed at SMG over the summer. SARC members considered that a number of other factors, such as the tone of the Accounts; the solid policy basis; and the Northern Ireland Audit Office’s opinion, would feed into the overall year-end opinion on assurance and noted that the 2018-19 Internal Audit & Resource Plan will be revisited at the October SARC meeting.

Eddie informed SARC members that the overall level of assurance for the period 1 April 2018 to 20 June 2018 is Satisfactory.  This is predicated on the results of the previous 12 months and emerging findings from current reviews that have not yet been reported in final version.

The SARC Chairperson indicated that the provision of a Satisfactory assurance by the Head of Internal Audit is an integral part of SARC’s work and asked Eddie Kelly to confirm that he was content to continue to provide assurance in light of reduced staffing resources. Eddie responded that he was content at the moment but that Tara Caul and he would be reviewing this issue when they were reviewing the Internal Audit Plan over the summer.

Lesley Hogg said that it was also important to take into account the reduced activity level in the Secretariat as normal parliamentary activity was not taking place and almost 140 Secretariat staff were redeployed.

No whistleblowing cases have been reported to Internal Audit to date this year and no cases of fraud have been identified by, or reported to, Internal Audit since the last SARC meeting.

Eddie advised that the next meeting of the inter-parliamentary Heads of Internal Audit group is scheduled to take place on 28 and 29 June in Cardiff.  The draft agenda includes quality assurance, information security and Members’ expenses.

6. Financial Assistance for Political Parties (FAPP) Scheme 2016

SARC members noted the Financial Assistance for Political Parties (FAPP) Scheme 2016 audit report from PricewaterhouseCoopers, which contained   one recommendation relating to Finance Office guidance to Parties.

7. Audit Recommendations Schedule

SARC members considered the updated schedule. It was noted that implementation of four recommendations awaits political developments, leaving eight recommendations currently “in progress”.  SARC members continue to view implementation as very important and were pleased with the good progress that had been made and maintained in this area.

In relation to an audit recommendation resulting in a review of gifts and hospitality guidance by the Finance Office, the SARC Chairperson suggested to officials that the setting of a time limit for declarations had proven to be effective in other organisations.

8. Corporate Risk Register

SARC members noted the changes made to the contents of the Corporate Risk Register since the May 2018 SARC meeting. Following the annual SMG Self Evaluation, the Clerk/Chief Executive, Directors and Governance Officer met on 4, 15 and 29 May 2018 to discuss the definition of risk and the current recording of Corporate Risks, and this had resulted in a significant revision of the contents of the Corporate Risk Register, with headline risks more closely aligned to an “event or uncertainty”.  SARC members welcomed the revisions, resulting in a clearer and more focused Corporate Risk Register.

9. Procurement Activity Report

Tara Caul gave SARC members an overview of the Assembly Commission’s procurement activity in the 2017-18 financial year.  The Procurement Office advises on procurements up to £30k and leads on those greater than £30k.

In 2017-18, the Procurement Office completed five Assembly Commission competitive tenders, with three contracts exceeding the EU tender threshold. All competitions were fully compliant with the relevant Regulations and were awarded without legal challenge or formal complaint.  The Procurement Office also availed of two Crown Commercial Services frameworks and two NI Civil Service framework contracts.  During the year, three Single Tender Actions over £30k were approved.

Tara informed SARC that the Procurement Office is conducting a review of the below £30k delegated procurements and this will be completed in June 2018.  The report covers approximately 60 below £30k quotations, including 29 under £5k, and SMG will be considering the outcome of the review in due course.

SARC members welcomed the production of the Procurement Activity Report, which they found useful and informative.  The SARC Chairperson highlighted that with 5.2 FTE staff in the Procurement Office and an influenceable spend of £4.8m, the Procurement Office needed to make significant annual savings to justify this level of resource.  He did, however, acknowledge the other benefits that a Procurement Office brings, such as unbundling, encouraging competition and avoiding serial purchases.  He stated that Procurement is an area of interest.

10. Draft 2017-18 Report to those charged with Governance

Rodney Allen apologised for the late availability of the draft 2017-18 Report to Those Charged with Governance and gave SARC members an overview of the new format report. It is proposed that the Comptroller and Auditor General will certify the 2017-18 financial statements with an unqualified audit opinion, without modification. 

Rodney advised that the net effect of adjustments on the statement of financial position was £401,000.  There were no other uncorrected misstatements.  A number of suggestions had been made to improve narrative disclosures and to ensure completeness of the disclosures required under FReM. 

During the audit, internal controls, accounting systems and other procedures had been reviewed to the extent considered necessary for the effective performance of the audit. Two recommendations had been made – a Priority rating 2 in respect of DAS references and contract links, and a priority rating 3 in relation to the Fixed Asset Register.

Under “Other Matters of Interest”, the NI Audit Office suggested, in relation to the fact that SARC had taken a decision in 2016 to continue using four assurance rating classifications in their Internal Audit reports, rather than adopting three assurance ratings as outlined in DAO (DoF) 07/16, that it would be timely to consider if this position should be maintained as it is inconsistent with the approach adopted by the NICS Group Internal Audit and Fraud Investigation Service and other public sector Internal Audit Bodies.

Rodney Allen said that maintaining the four assurance rating classifications requires testing to a higher standard of audit.  Lesley Hogg stated that it was an interesting conversation because reducing to a three-point assurance rating classification could also call into question the need to make and indeed implement further control recommendations if a Satisfactory assurance rating was received.

SARC members reiterated their decision of 16 May 2018 to continue using the four assurance classifications.

The NI Audit Office noted that this year, for the first time, the Commission had issued a request that all parties complete a Financial Assistance for Political Parties (FAPP) scheme 2016 declaration form to confirm that all expenditure claimed under the scheme was incurred wholly, exclusively and necessarily for the authorised purposes.  All parties, with the exception of one, submitted a signed declaration. The NI Audit Office considered that this procedure enhanced the Commission’s governance arrangements and it is important to ensure completeness of declarations.

SARC members received the draft 2017-18 Report to Those Charged with Governance with thanks and commented that the External Audit opinion was very helpful to SARC and, along with the work of Internal Audit, the results showed a high degree of professionalism within the organisation.

11. Draft Assembly Annual Report and Accounts 2017-18

Paula McClintock gave SARC members an update on editorial changes to the Accounts since the draft version was presented to SARC in May, including minor amendments to the Governance Statement. 

The SARC Chairperson received responses to a number of technical queries on the Accounts and welcomed the excellent tone of both the Report and the Accounts and that this was a very strong reflection on the management of the organisation.

The SARC Chairperson raised the issue of going concern and asked whether this had been considered by the NI Audit Office.  Rodney Allen explained that the Assembly Commission was in existence and legally constituted and that going concern had been tested against accounting standards.

SARC members congratulated the staff involved in producing a professional set of Accounts and recommended that the Accounting Officer signs the Annual Report and Accounts 2017-18 by Friday 22 June 2018, for subsequent certification by the Comptroller and Auditor General by 26 June 2018.

Action: Lesley Hogg to sign the Resource Accounts 2017-18 by Friday 22 June 2018.

12. Fraud Prevention & Anti-Bribery Policy and Response Plan

SARC members considered the contents of the Fraud Prevention & Anti-Bribery Policy and Response Plan which was agreed by SMG on 25 April 2018 and noted that the documents had been updated to reflect best practice and to enhance arrangements in relation to any investigations.

SARC members welcomed the very comprehensive documents and stressed the importance of the policy and response plan being embedded through training.  Officials advised that all staff were required to complete an on-line verification that they have read the policy, and that a mandatory on-line training programme for staff will be introduced over the summer, to be repeated every two years.

13. Risk Management Strategy

SARC members noted two amendments resulting from SMG’s annual review of the Risk Management Strategy – that the Corporate Risk Register will be reviewed quarterly at SMG (previously monthly review by correspondence by SMG and quarterly review at SMG) and that Directorate Risk Registers will continue to be reviewed monthly. These will in future be copied to the Governance Officer each month.  As there will no longer be a monthly review by correspondence of the Corporate Risk Register, Directors will be responsible for escalating, by exception, significant risks to the attention of SMG as they arise and in advance of the next scheduled quarterly review of the Corporate Risk Register at SMG.  SARC also noted that Risk Appetite had been reviewed and left unchanged.

SARC members welcomed the clear strategy, which reflects current risk theory and best practice, and contains clearly defined roles and responsibilities.

14. Key Guidance from Department of Finance

SARC members noted the three FD letters that had been issued by the Department of Finance since the May 2018 SARC meeting.

15. AOB

The Chairperson noted that the Governance Officer, David Johnston, was due to retire in August 2018 and that this was his last SARC meeting after 10 years as SARC Secretary.  SARC thanked David for his diligence and professionalism and his input to SARC meetings and governance arrangements over the years and wished him well for the future.

16. Date of Next Meeting

The next SARC meeting will take place on Wednesday 17 October 2018.

The meeting ended at 3.34 pm.