Meetings

ACARAC (02-20) Paper 8 – Joint Working Protocol

8.1        The Committee noted and were content with the Joint Working Protocol.

ACARAC (02-20) Paper 7 – Audit Wales update

7.1        The Chair welcomed Gareth Lucey to the meeting. Gareth highlighted the following to the Committee:

·         that the Wales Audit Office had recently undergone a re-branding and re-naming exercise and should now be referred to as Audit Wales;

·         that work on the 2019-20 audit had been progressing well, and on that basis, the estimate fee was anticipated to be the same as in previous years, barring any unexpected changes;

·         that whilst every effort would be made to honour agreed timeframes for the audit through built-in contingency elements, due to uncertainties around the COVID-19 pandemic this would be under constant review through discussions with Gareth Watts and Nia Morgan; and

·         that the Auditor General would be writing to all audited bodies outlining the changes in the audit process due to the disruption caused by the COVID-19 pandemic.

7.2        In response to a query from the Chair, Gareth Lucey provided assurance to the Committee that effective audit trails would be maintained by Audit Wales when conducting live online sampling of the NAV system as part their audit.

7.3        The Chair thanked Gareth for the update.

ACARAC (01-20) Paper 5 - External Audit update

5.1        The Chair welcomed Gareth Lucey and Ann-Marie Harkin to the meeting. Gareth explained that the External Audit update had been circulated out of committee in December. This had included details of calculation of the audit fee on which the Chair asked for further clarification. Gareth agreed to provide further details out of committee.

5.2        Gareth drew the Committee’s attention to a national study of counter-fraud arrangements across the Welsh public sector. This was in response to a report presented to the Public Accounts Committee (PAC) in June 2019 where proposals by the Auditor General to carry out a more detailed review across 40 public sector bodies in Wales were endorsed. This included the Assembly Commission.

5.3        In response to questions around the confidentiality of any findings, Gareth assured Committee members that, whilst the report would be published and therefore subject to public scrutiny, it would not specifically highlight any issues with the Commission’s arrangements.

5.4        The Chair noted the planned work and that any learning from the study would be considered by the Commission after the report was published.

Action: (5.1) WAO to provide a note on the composition of daily rate costs in relation to audit fees, specifically a breakdown of overheads and costs directly funded.  

ACARAC (01-20) Paper 6 – External Audit strategy 2019-20

6.1        The Committee received an overview of the 2020 Audit Plan from Ann-Marie, noting an estimated cost at the same reduced rate as last year. The audit would follow the usual risk-based approach and based on the assumptions outlined in the plan.

6.2        Ann-Marie also brought the Committee’s attention to personnel changes in the audit team with a new Senior Auditor in place. She also explained that the Assistant Auditor General for Wales would certify the accounts to maintain independence and objectivity as the Auditor General had previously been employed by the Commission.

6.3        It was anticipated that the bulk of the audit work could be completed by the end of May and the findings brought before ACARAC at its June meeting.

6.4        The Committee discussed the scope of the audit in relation to Assembly Members’ offices. Ann-Marie informed the Committee that the they were able to rely on information provided by internal audit and the Members’ Business Support (MBS) team, who regularly conduct site visits to offices. The Committee heard that added assurance would be provided from site visits as part of the review into the Commission’s assets.

6.5        The Chair asked the secretariat to arrange a briefing session for Committee members on the work of the Members’ Business Support (MBS) team and the monitoring of Assembly Members’ expenses.

Action: (6.5) Provide briefing to ACARAC members on the work of Members’ Business Support (MBS) and the monitoring of Assembly Members’ expenses.

ACARAC (05-19) Paper 5 – WAO Update

7.1    The Chair introduced Jon Martin to the meeting, who was attending in place of Ann-Marie Harkin and Gareth Lucey, who had both sent apologies in advance.

7.2    Jon informed the Committee that a review meeting with Nia had identified some minor improvements for the process of auditing next year’s accounts.

7.3    As this meeting was earlier than usual, it was noted that the WAO Audit plan for the upcoming year would be circulated out of meeting when available.

7.4    In response to questions from Aled on the audit fee calculations, Jon indicated that the WAO would provide a note out of Committee on this.

Action: WAO Audit Plan to be circulated to Committee members out of meeting, along with a short note of how the annual audit fee is compiled

ACARAC (04-19) Paper 4 – WAO update report

4.1 This report had been covered in item 3; the WAO had nothing further to add.

ACARAC (03-19) Paper 9 - WAO opinion for 2018-19

8.1        Gareth Lucey confirmed that the WAO had not identified any material issues during their audit of the Commission’s accounts and that there were no uncorrected misstatements. The audit was substantially complete and the WAO were expecting to propose an unqualified, clean audit opinion. Gareth and Ann-Marie expressed their thanks to Nia and her team for their co-operation during the audit process which had once again run smoothly.  

ACARAC (02-19) Paper 7 – Joint working Protocol

4.4        Both Gareth Lucey and Gareth Watts agreed that the current protocol remained relevant and up to date. They updated the Committee on how they had complied with the protocol over the past 12 months.    

ACARAC (02-19) Paper 6 – WAO update

4.1        Gareth Lucey presented his update paper and advised that the proposed audit fee would remain the same as last year pending internal verification.

4.2        He confirmed the completion of the initial planning work in February and March. The final audit would commence on 13 May and any issues would be reported to the Committee in due course.   

4.3        The Committee were encouraged with the progress of the audit work and welcomed the fixing of the fee at last year’s rate. 

ACARAC (01-19) Paper 7 - WAO update

5.1     Ann-Marie thanked Nia and her team for accommodating the trainee accountant who was grateful for the opportunity.

5.2     The interim audit was due to be started that week and Ann-Marie assured the Committee that issues around internal communications between audit teams would be resolved.

Action

-        (5.2) Bob and Ann-Marie to discuss the approach to auditing the Commission’s accounts.

ACARAC (05-18) Paper 7 - WAO update

ACARAC (05-18) Paper 8 - 2019 audit plan

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8.1        Gareth Lucey confirmed that there was no outstanding work from the 2017-18 audit.  He would shortly confirm the final out-turn, which was likely to be below the initial estimate (post-meeting: final cost is £57,255, £703 below Audit Plan estimate).   

8.2     The 2019 Audit Plan had been shared and discussed with officials previously. Initial planning meetings had taken place and the audit approach and provisional timings remained fundamentally unchanged. The audit team would remain unchanged and Gareth anticipated being able to confirm the fee early in 2019.

8.3     As the new Auditor General for Wales was an employee of the Commission for part of 2018-19, the Assistant Auditor General would certify the Commission 2018-19 financial statements. 

8.4     The WAO outlined some key changes to the International Financial Reporting Standards (IFRS) over the next two financial years, including the introduction of IFRS 9 (financial instruments) and IFRS 15 (revenue from customer contracts) in 2018-19.  The introduction of IFRS 16 (leases) had already been reported to the Finance Committee (FC) and the Committee agreed that Nia Morgan should inform the FC of the delay, with the effective date moving from 2019-20 to 2020-21.       

8.5     The Committee encouraged the WAO and the finance team to continue to exploit additional efficiency benefits of the NAV finance system for the external audit of the Assembly Commission’s financial statements.

Action

-        Nia Morgan to inform the Finance Committee of the delay in the implementation of IFRS 16 (leases).  

ACARAC (04-18) Paper 4 -  WAO update

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4.1     The WAO confirmed that no matters had arisen since the June meeting and that they continued to propose an unqualified audit opinion for the Commission.

4.2     The WAO would work with the Finance team to address a few minor points raised at the lessons learned meeting. Consideration would also be given to accelerating processes to allow presentation of the statement of accounts earlier next year, although it was recognised that the Pension timetable may not allow for this. This would be reported back to the Committee in order to inform its forward work programme. 

4.3     The WAO would inform the Committee of any delays caused by further investigations into the drawing down of funds from the Welsh Consolidated Fund for payment of the Standards Commissioner, although Ann-Marie was confident that any delay would not impact on the signing of the accounts.

4.4     The Chair welcomed the positive working relationship between officials and the auditors which was reciprocated by officials.

4.5     The Committee agreed that the Accounting Officer should sign the 2017-18 financial statements.

Action

Nia to keep the Committee up to date on the issue of drawing down funds from the Welsh Consolidated Fund for payment of the Standards Commissioner.

ACARAC (03-18) Paper 8 – WAO opinion for the FY 2017-18

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3.1     This item was brought forward as Ann-Marie Harkin had requested to leave the meeting early. 

3.2     Ann-Marie and Gareth Lucey reported the Auditor General’s intention to issue an unqualified audit report on the financial statements. One minor recommendation was identified from the 2017-18 audit work, relating to fully depreciated assets on the Commission’s fixed asset register. The recommendation, to carry out a review of these assets, had been accepted and was due to be implemented by September 2018.

3.3     The WAO confirmed that the audit had been very efficient and effective and agreed to consider how efficiencies resulting from the quality and immediacy of information produced by the new finance system might be reflected in future audit fees. 

3.4     The audit was nearly complete from the WAO’s perspective apart from the final Assembly Members’ Pension Fund figures which could result in minor changes.

3.5     The WAO thanked Nia Morgan and her team for the professional and helpful way this audit had been managed, especially as they had also been dealing with a new system and a HMRC audit during the same period. They also referred to assurances they had been able to take from the internal audit work.      

3.6     Nia welcomed the comments from the WAO and reiterated the importance of the strong working relationship that exists between them and the Commission. She was disappointed to receive one recommendation but assured the Committee that this would be implemented during the summer recess. The Committee noted that the ambitious self-imposed target of a 0.5% underspend had been narrowly missed by 0.1% due to an overestimation of certain accruals.

3.7     The Finance team had experienced some teething problems with the new system but Nia assured the Committee that these were mainly around matching purchase orders rather than fundamental issues.    

Overall, the Committee were pleased with the smooth production of the accounts and were satisfied with the explanation received on the severance payments and the additional information received relating to the direct charge payments of the Auditor General Wales and the Public Service Ombudsman. The Committee encouraged officials to ensure that communication between the Commission and the Senior Salaries Review Body (SSRB) improved to avoid such discrepancies in the future. 

ACARAC (02-18) Paper 17

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17.1     The Committee noted that no substantive changes had been made to the Joint Working Protocol and that the agreed actions were in hand.

17.2     Gareth Lucey confirmed that the WAO is itself required to meet international standards. The WAO has an internal quality assurance review regime as well as being subject to external reviews by the Quality Assurance Department of the Institute of Chartered Accountants in England and Wales (ICAEW).

ACARAC (02-18) Paper 16

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16.1     Gareth Lucey presented the WAO’s update report. Interim visits that had taken place in January ahead of the 2017-18 audit which was due to formally start on 21 May.

16.2     The Committee agreed it was helpful to receive a breakdown of the WAO fee.

16.3     Gareth Watts confirmed that agreement had been reached with the WAO and Welsh Government regarding the treatment of the Auditor General for Wales’ salary and that this had been documented.

ACARAC (01-18) Paper 4 – WAO audit update

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5.1        Gareth Lucey presented an update on behalf of the Wales Audit Office (WAO). The 2016-17 accounts were fully closed with a reduction of £5,221 in the estimated fee. An update on initial findings in the 2017-18 audit would be presented to the Committee in April. The fee for the 2017-18 audit was still under formal review by the Auditor General. The Chair requested a breakdown of the fee to demonstrate job roles of individuals involved in the audit process. 

5.2        The team were also working on a briefing for the Finance Committee in relation to its inquiry into the budget profiling of the Remuneration Board’s Determination. Further discussions were necessary with the WAO technical team and the advice being drafted by Ann-Marie would outline the WAO’s view of the advantages and disadvantages of the Assembly’s current and proposed approaches.       

5.3        The team had also met with Gareth Watts to discuss the content of the 2017-18 Internal Audit plan, and any other areas where Gareth’s work could provide reassurance to WAO’s financial audits.

Actions

-      WAO to share a breakdown of the 2017-18 audit fee to demonstrate job roles of individuals involved in the audit process.

ACARAC (05-17) Paper 16 – WAO audit update

ACARAC (05-17) Paper 17 – 2018 audit plan

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13.1     Matthew Coe presented an update document on the WAO’s work to date and the detail of the 2018 audit plan.  He assured the Committee that there was no outstanding work from the 2016-17 audit and that a detailed handover would take place with the new member of the audit team. 

13.2    The Committee welcomed both documents.  They queried why the audit fee was not yet ratified.  Matthew confirmed that this was still going through the internal approval process and would be shared with the Committee as soon as it was available.

Oral update

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5.1        This item was covered under item 4.

ACARAC (03-17) Paper 13 – WAO update on 2016-17

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10.1    Ann-Marie Harkin expressed her thanks, on behalf of her team at the WAO for the support and co-operation they had received from the Finance team and other Commission staff.  The Chair thanked the WAO for early presentation of the Financial Statements Report (ISA260) and Management Letter.  Ann-Marie confirmed that this was a straightforward audit with a high quality set of accounts and confirmed that there were no matters arising from their audit work and no significant matters to discuss.

10.2    The Chair recognised the excellent quality of the accounts, reflected by the ISA260: there were no uncorrected misstatements, no material internal control weaknesses and no recommendations arising.  Also, there were no outstanding actions from 2015-16.  The Committee praised all involved in the audit process, especially Nia and her team.  

10.3    Nia thanked everyone for their comments and advised that there would be additional focus on forecasting spend in future years. 

Oral item 

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8.1        Both Matthew, Nia and Gareth agreed that their working relationship was effective and would continue to be open and transparent.   

ACARAC (02-17) Paper 9 – Update report

7.1     Matthew Coe introduced the WAO update report. The proposed fee was slightly higher than the previous year but included some contingency which may not be required if the audit work continued smoothly. The interim work was proceeding without any major issues identified.  

7.2     The Committee then discussed the results of the WAO benchmarking exercise of public sector annual reports and governance statements which had been incorrectly scored for the Commission. The WAO, Nia and the Committee agreed the revised scoring.  The WAO would share best practice identified from the exercise and would also advise on plans to repeat such exercises in the future.

7.3     Nia was pleased with the continuity of the WAO audit team, particularly given the added pressures of implementing the new finance system. She informed the Committee that there were no concerns about the capacity of the team to maintain a smooth audit process. 

Action

-         WAO to advise of plans to repeat the benchmarking exercise for annual reports and governance statements with other public bodies and share best practice ideas with the Assembly Commission.

External Audit 

5.0     Item 5 – Update from WAO  

ACARAC (01-17) Paper 6 – update paper 

5.1        Ann-Marie Harkin and Matthew Coe confirmed that the outstanding recommendation in the 2015-16 Management Letter had been resolved.  The interim audit had not identified any issues as yet. 

5.2        The 2016-17 audit fees were discussed and the WAO agreed to inform the Committee following their internal moderation process.  The audit team have recommended a fee reduction due to the quality of the accounts and the assistance provided by the Commission.

5.3        The Chair queried the WAO’s scoring of the annual report in the comparison exercise they had carried out with other public sector organisations.  In his view, several criteria were not applicable and the Commission’s overall rating should have been higher.  

5.4        The WAO agreed that the scoring matrix should have been thoroughly checked for accuracy before being sent to Nia and that WAO communications on the purpose and methodology of the exercise could be improved.  Nia and the WAO will discuss the scoring and share good practice outside of the meeting. 

5.5        Whilst the Committee welcomed the principles behind the comparison exercise, they urged the WAO to ensure that future such exercises were carefully constructed and communicated.

Actions 

-         WAO to share approved annual fee with ACARAC. 

-         Nia Morgan and Ann-Marie Harkin to reassess scoring of Annual Report and highlight areas for improvement and best practice.

External Audit

7.0        Item 7 – Updates from WAO

ACARAC (05-16) Paper 10 – External audit update

ACARAC (05-16) Paper 11 – 2017 Audit Plan

7.1        Ann-Marie Harkin and Matthew Coe presented their update paper and audit plan for 2017.  They summarised the review of the 2015-16 accounts and identified some low level process changes, but nothing of significance.  They also advised that there were no outstanding actions from the 2015-16 ISA260.  

7.2        As the audit approach would remain unchanged, it was likely that the fee would remain static, although it was yet to be agreed.  The Committee was encouraged to hear that the WAO were expecting a smooth audit process as the auditors were experienced and had a good working relationship with the Commission’s Finance team. 

7.3        The Committee questioned the WAO on the omission from their papers of the impending replacement finance system.  The WAO assured the Committee that discussions had taken place with Nia Morgan.  They had identified some capacity issues if the Finance team’s efforts were diverted to work on implementing the system, for example during the transfer of the data.  The Committee would be kept informed of any delays to the audit process.       

Action

-        WAO to circulate confirmation of the fee early in the New Year.

ACARAC (04-16) Paper 5 – ISA 260

4.1        Nia Morgan presented the Committee with the final financial statements for 2015-16, which formed part of the Assembly Commission Annual Report.  She was extremely pleased with the process and thanked her team, especially Donna Davies and Lisa Bowkett for their work.  She also thanked the Wales Audit Office for the on-going dialogue during the audit period, especially when trying to resolve any outstanding issues.

4.2        Committee members praised the professional approach taken to this year’s report.  The review undertaken last year had helped to improve communications and processes.

4.3        Ann-Marie Harkin and Matthew Coe presented the ISA 260 to the Committee.  This document summarised the conclusion to the 2015-16 audit and was required in accordance with statutory auditing standards.  Ann-Marie confirmed that her review of the accounts was complete and she would recommend that the Auditor General for Wales issues an unqualified report.  She commented on the high quality documentation presented to her team, thanked the Finance team for their hard work and also expressed her thanks to Ian Summers.

4.4        Claire thanked the WAO for their open and honest communication, especially on the issues raised last year.  The change in personnel, for both the Assembly Commission and the WAO could have proved detrimental to the audit process, but everyone worked extremely hard to ensure the process was smooth and successful.

4.5        She also wanted to formally thank Gareth Watts for his superb internal audit work and Chris Warner for drafting such a comprehensive Annual Report. 

4.6        Finally, Claire wanted to thank and congratulate Nia and her team for achieving such an outstanding ISA 260 report.  In all her years of being the Accounting Officer, she reflected that this was the best yet.

4.7        From an independent perspective, the Chair was extremely pleased and urged officials and the WAO to build on this progress by looking at ways to make further improvements for next year.

Action

-     The WAO and Assembly Finance team to review the 2015-16 audit process to look at ways to continuously improve on the audit process.

ACARAC (03-16) Paper 7 – WAO NAWC ACARAC update

7.1     Ann-Marie and Matthew informed the Committee that the 2015-16 audit, which had started on 23 May was, subject to final revisions, substantially complete with no significant issues identified so far.  The ISA 260 report, which would be presented at the July meeting, would reflect this unless any significant issues were identified.

7.2     The WAO thanked Nia and her team for their helpful co-operation and noted further improvements in the process, timeliness and standard of documentation being presented this year.    

ACARAC (32) Paper 9 – WAO update

6.1        Matthew Coe introduced an update paper and highlighted some key items for the Committee to consider.  Issues raised during the 2015-16 audit were now all resolved. 

6.2        He confirmed that dates for the main audit of the accounts had been agreed with Nia, although concerns were raised regarding the resource impact of carrying out the pension audit in parallel and with the same audit lead.  Nia and Matthew would discuss this further outside of the meeting to ensure that the timetable is met.

6.3        Matthew confirmed that papers, including the ISA260 would be submitted in time for the meetings in June and July. 

6.4        In relation to the replacement finance system, Matthew suggested officials consider whether input from the WAO, such as observing at project board meetings would be useful to provide further assurance.

Actions

-        Nia Morgan to liaise with WAO on resources for forthcoming audits of accounts and pensions.

-        Nia Morgan to consider input from WAO on the replacement finance system project.

ACARAC (31) Paper 9 - External audit update

7.1        Matthew Coe presented a paper outlining current progress of the 2015-16 audit, (including changes to the audit team and the proposed audit fee), follow up on the 2014-15 Management Letter and use of the Fraud Compliance Checklist. 

7.2        Last year, the Fraud Compliance Checklist was completed by the Chief Executive and Management.  Following a review of internal processes, the WAO confirmed that the checklist would be used as an audit tool to support their work and would not therefore be circulated to Management or the committee each year.

7.3        There remained a number of unresolved issues concerning the 2014-15 Management Letter and the WAO agreed to keep the committee informed on the progress of the resolutions.

Action

-        WAO to ensure the Committee are informed of the resolution of all outstanding issues identified in the 2014-15 Management Letter by end of February so that a full position can be presented in April. 

ACARAC (30) Paper 8 – Management Letter 2014-15

7.1        The WAO will liaise with the Commission to confirm the appropriate treatment for both dilapidations and heritage assets.  Ann-Marie confirmed that she was confident that the Management Letter would be circulated with the ISA 260 next year. 

Action

-        WAO to liaise with the Commission to confirm the appropriate treatment for both dilapidations and heritage assets. 

ACARAC (29) Paper 4 – ISA 260 Report 2014-15

6.1        Ann-Marie presented the International Standard on Auditing (ISA) 260 report.  She confirmed that they had received all of the documents from the Assembly Commission on time and thanked Nicola’s team for their assistance.  She informed the Committee that the accounts were unbiased, fair and clear.  The main points she highlighted were:

·           Change of accounting policy for ICT assets.  WAO remain of the opinion that the change in treatment of ICT assets is an accounting policy change requiring a prior year adjustment.  Management’s interpretation of IAS8 is that no prior period adjustment is required.

·           Dilapidation provisions for leased properties. 

·           Pension contributions of Assembly Member Support Staff.

·           Accounting for Assembly Member costs – holiday accrual for support staff.

6.2        The Chair thanked the WAO for highlighting these points.  On the first point, the Committee agreed that change in ICT asset treatment did not constitute a change in accounting policy and were content that the accounts remained unchanged. 

6.3        On the dilapidation point, Nicola added further information supporting management’s view confirming that the Estates and Facilities Management team had produced a 10 year rolling maintenance programme for Tŷ Hywel and that the allocation for improvements in current and future budgets remained manageable.  To provide additional assurance, Nicola would take on board the WAO suggestion to consider gaining an independent view on the condition and maintenance requirements of Tŷ Hywel.  The Committee supported management’s approach.

6.4        On the pension contribution point, Nicola informed the Committee that further discussions would be held with the Remuneration Board to ensure the impact of support staff salary sacrifice was clarified.   The ISA 260 would also be amended to reflect the refund from HMRC was to Assembly Members and not the Assembly Commission.  The Committee supported management’s approach.

6.5        On the final point regarding the accounting for Assembly Member costs, the WAO advised that their enquiries to date meant they were unable to form a clear view on whether an accrual for support staff’s untaken holiday leave was appropriate.  As the potential values were not material, the WAO proposed to accept the current treatment and conclude the matter in 2015-16.  Committee members supported this approach.  In response to a Committee member query, the WAO stated that they could not confirm whether a retrospective adjustment would be necessary when they became clear on the accounting treatment, but they would keep the Committee informed.

6.6        The WAO confirmed that the Letter of Representation should be signed solely by the Accounting Officer and not also by ACARAC.

6.7        The Chair thanked the WAO for their presentation of the ISA 260, and urged Nicola, her team and the WAO to review the 2014-15 audit process to avoid a repeat of the delays experienced.               

Actions

-        Nicola to consider gaining an independent view on the potential dilapidations of leased property. 

-        Nicola to work with the WAO to agree the accounting treatment of Assembly Member costs. 

Next meeting is scheduled for 16 November 2015.  ...  view the full minutes text for item 6