Minutes of Proceedings

Meeting adjourned on Friday 17 June 2016 reconvened at 12.30 pm.

1. APOLOGIES

1.1 Apologies were received from Gareth McGrath, Paula McClintock and Brian Moreland.

2. DRAFT FINAL REPORT TO THOSE CHARGED WITH GOVERNANCE

2.1 A revised Draft Final report to those charged with Governance, reflecting the issues raised in discussion at the SARC meeting on 17 June 2016, was considered by SARC members. A number of very minor amendments are still to be made, and Louise Mason drew attention to the section on "Unadjusted misstatements or uncertainties arising from the audit" and a query relating to the service costs of the Members' Pension Scheme. Audit work on a number of minor review points is due to be completed by Wednesday 22 June, and the Accounting Officer is content to sign the Letter of Representation. SARC members appreciated the work done and were content with the revised wording.

3. ANNUAL REPORT AND ACCOUNTS

3.1 Richard Stewart presented the latest version of the Annual Report and Accounts 2015-16. The wording of the Governance Statement now reflects the comments of the NI Audit Office and SARC members raised in discussion at the SARC meeting on 17 June 2016. SARC members were content with the revised wording. Subject to a few minor final changes, SARC members were content for the Accounting Officer to sign the Accounts.
ACTION: TREVOR REANEY

4. INTERNAL AUDIT ACTIVITY / ASSURANCE

4.1 Eddie Kelly reported that five Internal Audit reports have been issued in draft or final form since the SARC meeting on 22 March 2016.

Final Internal Audit reports:
• Review of Corporate Governance – Satisfactory;
• Review of Specified OCE Payments – a consultancy engagement rather than an assurance review; and
• Review of Business Office – Substantial.

Draft Internal Audit reports:
• Review of Members' Expenses – Satisfactory; and
• Review of Committee for Regional Development – Unacceptable.

The final reports will be issued following receipt of management's responses to the recommendations made.

4.2 Follow–up audits have been completed and reports issued in respect of:

Review of Accounts Payable – assurance raised to Substantial;
Review of Social Media – assurance raised to Substantial;
Review of Accounts Preparation – assurance remains Substantial;
Review of Support Services – assurance raised to Substantial; and
Review of Ethics - assurance remains Satisfactory.

Follow-up work has been completed on the review of the Northern Ireland Business Trust (NIABT) support provided by the Assembly. The report is being held pending the consideration of associated matters.

4.3 The final report on Corporate Governance was issued on 15 June 2016 with a total of seven recommendations, three at risk rating 2 and four at risk rating 3. All recommendations were accepted and Internal Audit arrived at a satisfactory level of assurance. Recommendations have been made in respect of the introduction of a requirement for the Director of Corporate Services/Finance Director to hold a professional accountancy qualification in conformance with Managing Public Money (NI); the development of KPIs in line with the development of the next corporate plan; the formalisation of arrangements in relation to the prioritisation and authorisation of competing funding bids; further development of the assurance framework; an annual review of SMG terms of reference; the development of a register of interests for senior management; and the recording of details of corporate risks escalated to the Assembly Commission.

4.4 The final report on the Review of Specified OCE Payments was issued on 27 May 2016. This review was commissioned by the Clerk/Chief Executive in response to some issues raised by the Independent Financial Review Panel. The review and report were advisory – as opposed to assurance-based – therefore formal recommendations and an assurance level were not made as part of the review. The review did, however, offer an opinion on the specified payments under review and suggested actions for the Clerk/Chief Executive to consider. Conclusions included that there is a clear disconnect between the Handbook and Determinations on the recovery of expenditure in respect of one aspect of research or administrative assistance. Internal Audit suggested that the payments made should not be categorised as overpayments, and therefore recovery action was unwarranted. To ensure that this interpretation was valid, it was recommended that the Accounting Officer should seek a legal opinion on the relevant payments, and that, given the high-profile controversy over OCE payments, the issue was significant enough to record in the 2015/16 Governance Statement. The Clerk/Chief Executive confirmed that the matter was now fully addressed in the Governance Statement and that following receipt and consideration of legal opinion and associated guidance, he was content that recovery was not appropriate in this instance.

4.5 The final report on Review of Business Office (Plenary Section) was issued on 10 June 2016 with four recommendations, all at risk rating 3. All recommendations were accepted and Internal Audit arrived at a substantial level of assurance. Recommendations were made in respect of consistency in the practice of using administrative checklists; central oversight of email distribution lists; enhancing version controls by extending practice in naming and dating documents to plenary briefs; and best practice in storing passwords and codes. The assurance rating for this audit is substantial.

4.6 The draft report in respect of the Review of Members' Expenses 2015/16 was issued on 17 May 2016. A total of five recommendations have been made, two at risk rating 2 and three at risk rating 3. Recommendations have been made in respect of compliance with the Determinations by requiring Members to complete declarations of connected persons in respect of all Members' staff; retention of clear records of rental valuations on the rental files; retention of appropriate annotation to provide a management trail of decisions relating to the processing of queried or non-routine payments; delegation of responsibility for carrying out trend analysis to the operational level, with results being reported to the Deputy Head of Finance and escalated if necessary; and ensuring that payments are only made to suppliers for which the MLA has completed a declaration of associated persons. The level of assurance for this assignment is satisfactory.

4.7 The draft report on the Review of Secretariat support for the Committee for Regional Development was issued on 10 March 2016 and was referred to at the previous SARC meeting. The final report will be issued on receipt of the management response. The assurance rating for this audit is unacceptable. The report will be considered at the next SARC meeting.

4.8 Eddie Kelly reported that the Audit Plan, agreed at the March meeting, is now under way. Fieldwork on the Review of Data Protection Act compliance has been completed. The draft report is scheduled to issue shortly. A review of Voluntary Exit Scheme administration is currently in progress. The draft report will be issued on completion of field work. A review of SARC support provided by the Legal & Governance Directorate commenced in June 2016.

4.9 Eddie Kelly informed SARC that the overall level of assurance for the period 1 April to 21 June 2016 is satisfactory.

4.10 With the results of the final assignments from the 2015/16 Internal Audit Plan known, the overall level of assurance for that year can now be confirmed as satisfactory and all audits were completed in accordance with the Public Sector Internal Audit Standards (PSIAS). As for previous years, 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.

4.11 No whistleblowing cases have been reported to Internal Audit to date this year.

4.12 As reported at the March meeting, a file has been passed to the Public Prosecution Service in respect of a case of which SARC is aware. Another case has been referred to PSNI, and SARC members have been briefed. To date, this investigation has not been allocated within PSNI. SARC will be kept informed of progress on this matter.

4.13 The Independent SARC member requested that a separate line for cases of suspected fraud, similar to that for Whistleblowing, be included in future activity reports.
ACTION: EDDIE KELLY

4.14 The Accounting Officer and SARC members thanked Eddie for his work in producing the Internal Audit Activity and Assurance Report in the absence of the Head of Internal Audit.

5. "IN PROGRESS" AUDIT RECOMMENDATIONS SCHEDULE

5.1 SARC members sought and received assurance in relation to a recommendation update relating to mileage rates. Members noted the continuing high level of implementation of accepted Internal Audit recommendations, with 14 recommendations currently "in progress".

6. RTTCWG 2015 AUDIT RECOMMENDATIONS SCHEDULE

6.1 SARC members noted the action taken to complete the one remaining recommendation in the Report to those charged with Governance 2015.

7. OUTSTANDING AUDIT RECOMMENDATIONS SCHEDULE

7.1 SARC members noted the nil return.

8. CORPORATE RISK REGISTER

8.1 SARC members noted the changes made to the contents of the Corporate Risk Register since the SARC meeting on 22 March 2016, including a risk cause and response relating to significant change in Commission and Secretariat leadership. Members were pleased that the Corporate Risk Register is shown to be a living document, subject to regular review by SMG.

9. STEWARDSHIP STATEMENTS (at 31 March 2016)

9.1 The Clerk/Chief Executive drew attention to the entry in the Director of Legal and Governance Services' Stewardship Statement relating to a resource shortage in the area of Information Standards and advised that possible solutions were being actively considered. SARC members discussed and noted the contents of the Stewardship Statements as at 31 March 2016, commenting that they found them to be useful documents and of great assistance to SARC in assessing levels of risk.

10. REVIEW OF CONTRACTING ACTIVITY

10.1 Richard Stewart gave SARC members an overview of the Review of Contracting Activity, highlighting the fact that the number of transactions in 2015-16 was down by around 24% and spend was reduced by some £3.5m on the previous year, with a very high level of wholly compliant transactions. Richard confirmed that a Contract workflow system is in place and that policy and processes are in place and followed in any instances where Single Tender Actions are required. SARC members commented on the 15 Procurement cards currently in use and urged Secretariat officials to keep the need for these under review. SARC members received assurance that approved expenditure and actual expenditure are monitored under the Business Case policy and the Decision Authorisation System (DAS).

10.2 The delegation of procurements with a whole life cost of under £30k was noted by SARC members, but they sought assurance that officials involved in such procurements are required to complete a Declaration of Interests form.
ACTION: RICHARD STEWART

11. AUDIT REPORT ON FAPP SCHEME

11.1 SARC members noted the contents of the external audit, carried out by PricewaterhouseCoopers, of the Northern Ireland Assembly Financial Assistance for Political Parties Scheme 2015. The Clerk/Chief Executive advised that the recommendations would be monitored and reported along with the other audit recommendations considered by SARC.
ACTION: DAVID JOHNSTON

12. A.O.B.

12.1 In relation to the HM Treasury's Audit and Risk Assurance Committee Handbook, issued in March 2016, SARC members requested a report indicating Secretariat compliance with the two new chapters of guidance on Whistleblowing and Cyber Security for the next SARC meeting.
ACTION: DAVID JOHNSTON

12.2 As this was the Clerk/Chief Executive's last SARC meeting before retirement, Trevor Reaney thanked Colm and Bernard, and former SARC members Alan McQuillan and Douglas Bain, and the various Commission SARC representatives, for their help, guidance and support during his eight years as Clerk/Chief Executive. Trevor also thanked the NI Audit Office staff and Secretariat staff. In particular, he recorded his appreciation of the input of Brian Moreland, Head of Internal Audit, and his team. SARC's work had resulted in a significant improvement in Corporate Governance across the organisation.

12.3 Colm McKenna thanked Trevor for his support over the years. The attendance of the SARC Chair at Assembly Commission meetings had been most beneficial, giving a helpful overview of the business of the Assembly. Colm paid tribute to the improvements that Trevor had brought about in Corporate Governance and Risk Management, embedding a culture of accountability. Colm conveyed SARC's best wishes to Trevor for his retirement.

13. DATE OF NEXT MEETING

13.1 The next meeting of SARC will be held on Wednesday 5 October 2016 at 3.00 pm.