SECRETARIAT AUDIT AND RISK COMMITTEE (SARC)
WEDNESDAY 2 DECEMBER 2009
ROOM 29, PARLIAMENT BUILDINGS
Members:
Alan McQuillan , Chairperson
Colm McKenna
Attendees:
Trevor Reaney, NIA
Stephen McCormick, NIAO
Brian Moreland, NIA
Richard Stewart, NIA
Glenda Grant, NIA
Georgie Campbell, NIA (agenda items 10 & 11)
David Johnston, NIA, Secretary
1. APOLOGIES
1.1 Apologies were received from Carmel Hanna MLA.
2. DECLARATIONS OF INTERESTS
2.1 No interests were declared.
3. MINUTES OF LAST MEETING
3.1 The draft minutes of the meeting held on 9 September 2009 were approved without amendment.
4. MATTERS ARISING
4.1 Paragraph 4.1
Colm McKenna undertook to pass on any comments on previous audit reports to the Head of Internal Audit.
ACTION: COLM McKENNA
4.2 Paragraph 4.2
Alan McQuillan underlined the need to make sure that effective support is given to the Assembly Members’ Pension Scheme Trustees and that risks are managed appropriately. Richard Stewart reported that the HR Office is currently considering a number of options for the ongoing administration requirements of the Members’ Pension Scheme and that a paper will be presented to the Trustees for consideration at their next meeting, due to be held in January 2010. Trustee training is also under way.
4.3 Paragraph 4.5
Trevor Reaney outlined the work undertaken by the Assembly Commission on Members’ pay, pensions and financial support which had culminated in a report with 38 recommendations, approved by the Commission on 11 November 2009. The report had been due to be debated by the Assembly on 30 November 2009 but had been withdrawn from Assembly Business at short notice.
Changes to the NI Act 1998 to enable the establishment of an independent body to determine MLA salary levels are proceeding at Westminster, and it is expected to be completed by April 2010. An Assembly Bill would then need to proceed, so realistically the establishment of an independent body and completion of its first report could be at least 18 months away.
The Commission will now need to decide on how to proceed on the governance issues, possibly through a new Members’ Financial Services Handbook, to include revised audit arrangements, coming into effect on 1 April 2010.
4.4 Paragraph 4.7
Richard Stewart reported that little progress had been made on the development of an electronic Gifts and Hospitality register due to the absence of the Head of Finance. It was agreed that the register would be an agenda item at the next SARC meeting.
ACTION: DAVID JOHNSTON
5. NIAO AUDIT STRATEGY: IFRS SHADOW ACCOUNTS
Stephen McCormick outlined the NIAO’s Audit Strategy in relation to the Assembly’s International Financial Reporting Standards (IFRS) Shadow Accounts. He reported that work on considering the adjustments resulting from the conversion of the accounts to IFRS had gone smoothly and was due for completion by 18 December 2009. It was noted that a small adjustment might be required for Employee Benefits but that otherwise NIAO was satisfied with progress and felt that the risks involved were well controlled. Alan McQuillan stated that he was assured by this update.
Colm McKenna undertook to share work on comparators and wording with the Director of Resources and the Head of Finance with a view to producing an explanatory note.
ACTION: COLM McKENNA
5.2 Discussion ensued on the variations in the valuations of Ormiston House as obtained from Land and Property Services and Commercial valuers. It was noted that a recent valuation by Agents commissioned as part of the process to sell the site was significantly below that from Land and Property Services used in compiling the Annual Accounts. It was agreed that a number of factors might underpin this, including movement in the property market and the different assumptions underpinning the valuations. Officials undertook to consider the issue further with Land and Property Services.
ACTION: TREVOR REANEY / RICHARD STEWART
Stephen McCormick stated that he was satisfied with how the Assembly, as an organisation, had managed its risks. Richard Stewart informed SARC that a set of interim IFRS accounts for 2009/10 would be produced in advance of the year end.
6. INTERNAL AUDIT ACTIVITY / ASSURANCE
6.1 Brian Moreland reported that final reports have been issued in respect of the OFMDFM Committee audit, the audit of Business Travel and the review of Information Security.
6.2 A draft report in respect of the audit of HR Recruitment was issued during week commencing 23 November 2009, and Internal Audits are currently under way in the External Liaison Unit and the Speaker’s Office. Work is well under way on a number of the audits currently being undertaken by Deloitte.
6.3 Draft reports are expected shortly in respect of the audits of Faster Closing, Data Protection, Provision of telephones, voicemail, mobile phones etc and AP1 payments. Work on the audit of Managing Attendance is ongoing.
6.4 The final report in respect of the audit of the OFMDFM Committee was issued on 29 September 2009. A total of 21 recommendations were made, of which two were allocated risk rating 1, 12 risk rating 2 and the remaining 7 were given risk rating 3.
Brian Moreland advised that this was the first audit on the procedural side of the Assembly and the main issues raised include the introduction of notional budgets to encourage effective financial management, approval at Director level for the purchase of gifts, the use of meeting checklists and clear records of management checks.
The assurance level for this assignment was satisfactory.
6.5 The final report on the audit of Business Travel was issued on 29 October 2009. 12 recommendations were made, two of which were risk rating 1, 3 were rated risk rating 2 and the remaining 7 were rated 3.
Brian Moreland advised that the main findings from the audit relate to the physical security of procurement cards and rail tickets, the receipt of authorisation forms before travel and the production of job instructions.
This assignment was given a satisfactory assurance rating.
6.6 The Information Security review was undertaken with the assistance of the Head of the Information Systems Office and the Information Standards Officer. The final report issued on 18 November 2009.
13 recommendations have been made, with six allocated risk rating 1, a further six rating 2 and the final recommendation risk rating 3.
Brian Moreland advised that the main findings include the need for an information management strategy for the Assembly, consideration of the information risks in each Directorate and the requirement for enhanced system access controls.
The overall assurance rating for this exercise was limited. However, Internal Audit has noted that measures are already being put in place to improve controls.
SARC noted that this was a situation that the management team had largely inherited and that significant efforts were in hand to address the risk and problems. Trevor Reaney reported that while the overall volume and sensitivity of material held by the Assembly is relatively low level and often in the public domain, there were areas of concern and these are being addressed by a working group chaired by Dr Gareth McGrath, Director of Engagement. An update on the group’s work will be brought to the next SARC meeting.
ACTION: TREVOR REANEY / GARETH McGRATH
6.7 SARC members were content with the recommendations on the above reports, the implementation of which will be monitored on the Outstanding Audit Recommendations schedule.
6.8 Brian Moreland advised SARC that the overall level of assurance remains satisfactory. The outputs from recent assignments will be supplemented by additional follow-ups scheduled for later in the year to provide a balanced view of the level of assurance that has been achieved.
6.9 Brian Moreland informed SARC that the external supplier (Deloitte) is currently working through a number of assignments. The current contract allows for two additional audits to be performed, and the Head of Internal Audit is due to discuss arrangements for this shortly with the Procurement Office.
6.10 Brian Moreland reported that no further Freedom of Information requests have been received in relation to Internal Audit.
6.11 Brian Moreland advised SARC that the next meeting of the Inter-Parliamentary Head of Internal Audit Group is due to be held in London around January /February 2010. All those attending this group have found the meetings to be useful and the exchange of information regarding the approach taken by the Internal Audit units in parliamentary bodies has been particularly helpful in respect of issues such as Members’ expenses and information management.
6.12 Brian Moreland advised that consultancy support continues to be offered by Internal Audit to various business areas of the Assembly. This has included ongoing advice to the Genesis Team and to HR on the options available for Audit Committee arrangements in respect of Members’ pensions.
6.13 On staffing, Brian Moreland advised that the Audit Manager is due to take up post in early January 2010. Trainee Auditor, Carla Campbell, has enrolled with the Institute of Internal Auditors and will begin formal tuition in December towards the Practitioner-level qualification (PIIA). All staff in the unit continue to attend relevant training courses in respect of continuing professional development and more general training when required.
6.14 Alan McQuillan asked whether the recent leak enquiry would impact on the 2009/10 Audit Programme and the achieving of a satisfactory level of assurance by the year end. Brian Moreland responded that the impact on the overall programme is being assessed in order to focus on high priority areas. In spite of the demands of the leak investigation, a minimal impact on the Audit Programme is anticipated.
7. OUTSTANDING AUDIT RECOMMENDATIONS
7.1 At the September meeting of SARC it had been agreed to bring forward a summary schedule indicating progress towards implementation of Internal and External audit recommendations. This was to include all recommendations accepted by management since the Assembly Secretariat Review. Brian Moreland reported that, due to the time spent on the internal investigation and the unavailability of other Assembly staff, it has not been possible to complete this exercise as planned. The work is ongoing, however, and will be completed before the next meeting of SARC. Alan McQuillan and Trevor Reaney emphasised the importance of having the schedule in place as soon as possible. ACTION: BRIAN MORELAND
8. AUDIT OF EXPENSES AND ALLOWANCES
8.1 Alan McQuillan explained the background to this audit, given the extensive media coverage of Members’ expenses throughout the UK and Ireland. It was agreed that the January 2010 audit would be in keeping with the current guidelines on Members’ expenses and allowances. If the guidelines were to be changed, this would be reflected in future audits, and protocols for audits and the phasing of audits would need to be agreed.
In relation to the audit of 25% of MLAs on expenses and allowances, SARC proposed that 25% should be selected from the total number of each party grouping annually, with one MLA being selected from the smaller one-Member parties, on a random basis, with an Independent member of SARC being present to observe the random selection taking place. Trevor Reaney was asked to bring this proposal to a future Assembly Commission meeting.
It was agreed that Internal Audit would develop options for carrying out future audits against any new rules to be agreed. These would include the scope and depth of such audits and the aim was that they would be agreed in SARC and then discussed with the Commission before implementation.
ACTION: TREVOR REANEY
9. INFORMATION MANAGEMENT
9.1 Brian Moreland updated SARC on the unauthorised release of information relating to Members’ expenses and the resultant internal investigation conducted by Internal Audit. Stephen McCormick and Richard Stewart declared interests as interviewees in the investigation, but the Chair of SARC and the Accounting Officer were content that, given the nature of the update, neither needed to leave the meeting.
9.2 Brian Moreland advised that, from 1 October through to early November 2009, all Internal Audit resources were allocated to this investigation, which involved the analysis of electronic and hard copy information and extensive interviews. Management were informed of progress throughout the investigation, and Internal Audit has noted that a number of measures have already been put in place to reduce the risk of similar incidents.
The investigation, from the Internal Audit perspective, is now complete, and a draft report is with the Accounting Officer for consideration.
9.3 Alan McQuillan and Trevor Reaney expressed their appreciation of the excellent work undertaken by Internal Audit staff during the investigation.
10. STEWARDSHIP STATEMENTS
10.1 The contents of the Stewardship Statements were noted. Stephen McCormick advised that in future it would be better to list controls rather than state “See Corporate Risk Register for current controls” as appeared on a couple of the statements. Alan McQuillan advised that risk owners should be encouraged to have the confidence to identify problems, eg long deadlines, in their Stewardship Statements. Trevor Reaney also indicated that he wished to review the format of Stewardship Statements and extend the assurances provided by Directors to encompass all aspects of their Directorate’s work. ACTION: TREVOR REANEY
11. UPDATED CORPORATE RISK REGISTER
11.1 The revised Corporate Risk Register, including the addition of a new risk on Information Security, was noted. It was agreed that Risk 7 should be reworded and expanded to cover Ormiston House and the Members’ Pension Scheme. In that context it was noted that in extremis there was a potentially significant financial risk associated with the revised valuations but that this was offset by a valuation reserve and by projected current under spends; the risk was therefore controlled. ACTION: RICHARD STEWART
12. ASSURANCE LEVELS: PROPOSED TARGETS
12.1 SARC acknowledged that the focus on the leak inquiry had prevented progress on this issue, and that the Head of Internal Audit will prepare a paper for consideration by the Clerk/Director General on the means by which the overall level of assurance may be driven up. This will be considered at the next SARC meeting. ACTION: BRIAN MORELAND
13. MANAGEMENT ACCOUNTS
13.1 The detailed expenditure report was discussed and noted, along with the issues being addressed in the December Monitoring Round. It was agreed that a summary of the Management Accounts as submitted to SMG would be tabled at future SARC meetings. ACTION: RICHARD STEWART
14. ANY OTHER BUSINESS
14.1 Trevor Reaney tabled DAO (DFP) 05/09, relating to the withdrawal of certain DAO letters.
15. DATE OF NEXT MEETING
15.1 The next meeting of SARC will take place on Wednesday 3 February 2010 at 10.00 am in Room 29, Parliament Buildings. |
