Attachment 5
Creation of terms of Reference for the Audit Committee
PURPOSE OF REPORT
To recommend the appointment of an audit committee, agree its membership and terms of reference.
RECOMMENDATIONS
· That the Board agrees to the appointment of an audit committee.
· That the Board agrees the attached terms of reference.
· That the Board agrees to the following membership:
o Chair Ian Hayes
o Members 1. David Crepaz -Keay
2. Peminder Paul
3. Barrie Taylor (also to be appointed to the Remuneration committee)
o Attendance 1. Laura McMurtrie, Chief Executive
2. Director of Finance
RESOURCE IMPLICATIONS
None as a result of this report.
CORPORATE OBJECTIVES MET
· Developing the organization.
PRESENTING DIRECTOR TO THE BOARD
Laura McMurtrie, Chief Executive
ORIGINATING AUTHOR
Martin Geary, Interim Director of Finance
AUDIT COMMITTEE
Terms of Reference
1. Title: AUDIT COMMITTEE
2. Purpose:
The purpose of the Audit Committee is to verify that there is a systematic and comprehensive review of corporate governance and to provide an independent and objective view on the effectiveness of internal controls.
3. Reports to:
The Audit Committee reports to the Commission
4. Functions:
The functions of the committee can be categorised as follows:
Internal Control and Risk Management
The Committee shall review the establishment and maintenance of an effective system of internal control and risk management. In particular, the Committee will review the adequacy of:
• all risk and control related disclosure statements, together with any accompanying Head of Internal Audit statement, prior to endorsement by the Commission
• the structures, processes and responsibilities for identifying and managing key risks facing the organisation;
• the policies for ensuring that there is compliance with relevant regulatory, legal and code of conduct requirements as set out in the Controls Assurance.
• the operational effectiveness of policies and procedures;
• the policies and procedures for all work related to fraud and corruption.
Internal Audit
• To consider the appointment of the internal audit service, the audit fee and any questions of resignation and dismissal;
• To review the internal audit programme, consider the major findings of internal audit investigations (and management’s response), and ensure co-ordination between the Internal and External Auditors;
• To ensure that the Internal Audit function is adequately resourced and has appropriate standing within the organisation.
External Audit
• consider the appointment of the External Auditor, as far as the Audit Commission’s rules permit;
• discuss with the External Auditor, before the audit commences, the nature and scope of the audit, and ensure coordination, as appropriate, with other External Auditors in the local health economy;
• review External Audit reports, including value for money reports and annual Audit letters, together with the management response
Financial Reporting
Review the annual financial statements before submission to the Commission, focusing particularly on:
• changes in, and compliance with, accounting policies and practices;
• major judgemental areas; and
• significant adjustments resulting from the audit.
5. Authority
The Committee is authorised by the Commission to investigate any activity within its terms of reference.
It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.
The Committee is authorised by the Commission to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.
6. Membership
The Committee shall be appointed by the Commission from amongst the Commissioners and shall consist of not less than 3 members.
A quorum shall be 2 members.
7. Attendance
The Chief Executive, the Director of Finance, the Head of Internal Audit, and a representative of the External Auditors shall normally attend meetings.
However, attendance will be agreed, prior to the meetings, with the Chairman of the Committee. At least once a year the Committee may wish to meet with the External and Internal Auditors, without any executive director present.
8. Meetings
Frequency Meetings shall be held not less than three times a year. The External Auditor or Head of Internal Audit may request a meeting if they consider that one is necessary.
9. Reporting mechanisms
The minutes of Audit Committee meetings shall be formally recorded and submitted to the Commission
10. Review
The functioning of the Remuneration Committee will be reviewed twelve months from commencement.
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Chair
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Date
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Date of Review