ARAC minutes - 8 June 2021

Present

Chair's welcome

The Chair welcomed everyone present to the meeting.

Apologies

Nick Bennett, Audit Partner and Nicola MacKenzie, Manager, Azets and Julie Taylor, Internal Audit Manager, Scottish Government submitted apologies. 

Declaration of interest

There were no new declarations of interests.

Minutes of the previous meeting, matters arising and audit log

ARAC considered the draft minutes from its meeting on 2 March 2021 and approved these as an accurate record of the meeting subject to two minor corrections.

ARAC considered the matters arising and audit action logs.  CN confirmed that SHR’s Management Team discussed risk at a recent meeting and took account of ARAC feedback on risk R7.  SW reported that Audit Scotland plans to publish a refreshed Code in July 2021. 

ARAC also discussed Best Value and noted due to other priorities and a busy agenda in September CN proposes to cover this in December.  IM confirmed that a formal Best Value review is not a statutory duty and JM explained that some other organisations do not elect to have a programme of Best Value reviews.  JM advised ARAC to consider if the review approach is adding value.  IM explained that SHR’s operating plan sets out that Best Value review work will be carried out if resources become available or it becomes a greater priority to do so.  ARAC discussed the important assurance best value brings, agreeing the approach could be simplified and draw from existing work.  

SW reported that she recently met with the new OSCR Audit Committee Chair.  She explained that she will work with RH to reach out to other regulatory public body audit committee chairs. 

CN reported that workforce planning has paused due to other priorities.  She explained that when it resumes, she will take account of work to return to the office and future working approaches.  IM confirmed that External Audit are likely to seek an update on the related outstanding recommendation, but explained that it is important SHR considers this work in the context of the pandemic recovery, including the impact of a more flexible approach to working locations.  ARAC noted the update.  It agreed that recruitment is a priority and noted that staff shortages are occurring across other organisations as highlighted by Internal Audit strategy papers. 

Action: SW & RH to reach out to Audit Committee Chairs in other regulatory Scottish public bodies. 

Internal Audit Update

JM reported that Internal Audit work has completed all planned work for 2020/21.  He highlighted the Internal Audit Strategy and Charter and confirmed that the updates would not significantly impact SHR.   JM also highlighted the development of the Internal Audit Directorate and embedding of Head of Counter Fraud. 

JM reported on a review of Scottish Government’s sponsorship approach with public bodies, which is due to report in October 2021.  He explained that this will involve surveys and interviews with some public bodies and offered to share the commissioning documentation with MC. 

JM reported on the transformation of Scottish Government’s shared services functions, including those received by SHR.  IM updated ARAC on current issues with HR services.  JM explained that while Internal Audit welcomes the current investment and transformation it will be presenting an emerging reasonable audit opinion to Scottish Government (subsequently confirmed and noted by Scottish Government Audit and Assurance Committee on 21 June 2021).

JM also highlighted Internal Audit’s latest bulletin and the Scottish Government’s risk management guide.   He reported that the comprehensive guidance is applicable to the core Scottish Government and is not a mandatory approach for public bodies such as SHR.  ARAC noted the detailed guidance, agreeing while it was not proportionate for SHR in terms of resources, there were elements it should consider, when SHR next reviews its own strategy in December 2021. 

JM reported that based on all cumulative range of internal audit work with SHR during 2020/21 he is providing a substantial assurance opinion, which is the highest available and he explained that not all clients receive this opinion.   ARAC welcomed the audit opinion and thanked both the SHR staff and the Internal Audit team.  

JM introduced the report on recruitment of statutory Managers and reported a substantial audit opinion.  He explained that there are no recommendations, but a small number of possible improvement opportunities were highlighted.  ARAC discussed the three-yearly cycle for refreshing the pool of statutory managers. It also noted arrangements in place to appoint managers.

ARAC discussed SHR’s experience of Scottish Government’s shared services.  IM explained SHR Board had noted the variation in arrangements across services. There are no formal agreements in place for HR and Finance services, there is a Memorandum of Understanding (MoU) with Internal Audit and a Terms of Service with ITECS.

ARAC noted that SHR’s current experiences of pressures on services are similar to the situation for other service users.  MC explained that the forthcoming transformation programme for shared services is unlikely to lead to individual agreements and instead is focussed on the entire service provision.  JM confirmed that the Scottish Government understands the scale of issues.  He encouraged SHR to influence the ongoing review.  ARAC noted that MC also receives certificates of assurance from Scottish Government and that all feeds into the governance statement in SHR’s annual report & accounts. 

 Action: JM to share Scottish Government’s risk review commissioning documentation with MC.

Risk Management

CN presented SHR’s risk register to ARAC.  She confirmed that the register was last considered by SHR’s Board during May 2021 and that Management Team will consider it again on 10 June 2021.  She highlighted updates to the register since ARAC last considered it.  CN confirmed that Management Team is keeping Risk R7 under review in the context of ongoing recruitment. 

Assurance Map

CN presented SHR’s assurance map.  She explained that ARAC requested reviews every six months and that following the last one, a note had been added around delay to the Best Value review.   ARAC considered the map and discussed:

• read across to SHR’s risk register, agreeing risk R7 should be incorporated;
• layout, asking CN to review the headings;
• tie up with the Corporate plan, noting there may be a minor tweak needed to ensure read across is accurate; and
• development and use by SHR, noting that other organisations take a range of different approaches. It welcomed potential for a future discussion with the Internal Audit to explore other approaches. 

Actions:

• CN to refresh the map layout, incorporate risk R7 and check read across with SHR’s Corporate Plan.
• Internal Auditors to discuss approaches to assurance maps with IM and CN.

AOB

Agenda Planner: ARAC considered the agenda planner. It agreed to consider risk management, taking account of Scottish Government’s guidance in December 2021.  It noted that risk management is reviewed annually with a more comprehensive review every three years. 

Audit: CN confirmed preparations are ongoing for External Audit work at the end of June 2021.

DONM

7 September 2021