Rother District Council
Agenda Item:
Report to
-
Cabinet
Date
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19 July 2004
Report of the
-
Chief Executive
Subject
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Reference from Resources Overview and Scrutiny
Committee
The Resources Overview and Scrutiny Committee, on 14 June 2004, considered a
report on Audit Services - Internal Audit Charter and the minute and
recommendation relating to this item are reproduced below.
Recommendation: It be RESOLVED that the Internal Audit Charter, attached at
Appendix 1, be approved and adopted.
R9.
AUDIT SERVICES – INTERNAL AUDIT CHARTER
In accordance with both the Accounts and Audit Regulations 2003 and also
the Code of Practice for Internal Audit in Local Government on the United
Kingdom (The CIPFA Code) the Council was required to formally define the
purpose, authority and responsibility of Internal Audit. The proposed Charter,
modelled on the CIPFA Code was required to include the following:
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Consistency with the CIPFA Code.
Establish Internal Audit’s responsibilities and objectives.
Confirm its reporting lines and relationships within the Authority.
Define its organisational independence.
Embrace the control environment of the Council.
Enable the Head of Audit to deliver an audit opinion based on the results
of audit reviews and related work.
Confirm Internal Audit’s right of access to all records, assets, personnel
and premises and its authority to obtain such information and explanations
as it considers necessary to fulfil its responsibilities.
It was noted that the adoption of the Internal Audit Charter would have no
financial implications and was in essence formalising the Internal Audit
service within the Council on a professional basis.
Derek Stevens
Chief Executive
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Appendix 1
ROTHER DC INTERNAL AUDIT CHARTER
Introduction
1. The main determinant of the effectiveness of Internal Audit is that it is seen to be
independent. To ensure this, Internal Audit will operate within a framework that
allows:
 Unrestricted access to senior management.
 Reporting in its own name.
 Segregation from line operations.
2. Every effort will be made to preserve objectivity by ensuring that all audit members
of staff are free from any conflicts of interest and do not undertake any non-audit
duties, with the exception of leading the Council on Risk Management, Corporate
Governance, other high-priority duties and the exigencies of the service.
3. All Internal Audit activity is carried out in accordance with the Council’s Financial
Procedure Rules, with specific authority for the Internal Audit contained in Section
L and Risk Management aspects contained in Section K.
4. The existence of Internal Audit does not diminish the responsibility of
management to establish systems of internal control, as set out in Financial
Procedure Rules - Section K, to ensure that activities are conducted in a secure,
efficient and well-ordered manner.
Objectives of Internal Audit
5. As an independent appraisal function within the authority, the primary objective of
Internal Audit is to objectively examine, evaluate and report upon the adequacy of
the control environment as a contribution to the proper, economic, efficient and
effective use of resources. In addition, the other objectives of the Service are to:
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Support the Director of Resources and/or the Head of Finance to discharge
duties as Proper Officer
Contribute to and support the Finance Service’s objective of ensuring the
provision of, and promoting the need for, sound financial systems
Support the corporate Risk Management and Corporate Governance
processes by leading and advising managers on Risk Management and
supporting the work of the Risk Management and Corporate Governance
group
Provide an internal consultancy service giving advice and consultancy work to
all Services relating to new activities, areas of concern or major system
changes
Location of Internal Audit
6. Internal Audit is a discrete Service and is located within the Resources
Directorate, under the direction of the Director of Resources.
Scope of Internal Audit
7. The scope of Internal Audit allows for unrestricted coverage of the authority’s
activities and unrestricted access to all records and assets deemed necessary in
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the course of the audit. In addition, Internal Audit, through the Head of Audit
Services where he/she deems necessary, will have unrestricted access to:
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The Chief Executive
Chairman/Vice Chairman of Resources Overview & Scrutiny Committee
Cabinet
Members
Individual Directors and Heads of Service
All authority employees
Internal Audit Responsibility
8. The main areas of Internal Audit responsibility within the authority are to:
a. Review, appraise and report on:
 The extent to which the assets and interests are accounted for and
safeguarded from loss.
 The soundness, adequacy and application of internal controls.
 The suitability and reliability of financial and other management data,
including aspects of performance measurement.
b. Investigate all frauds and irregularities (excluding Housing/Council Tax benefit
frauds, which are managed as a separate function).
c. Advise on internal control implications of new systems.
d. Lead the authority, in conjunction with other specialists, and advise officers on
the risk management processes.
Audit Style and Content
9. The primary task of Internal Audit is to review the systems of internal control
operating throughout the authority, and in this will adopt a systems-based
approach to audit. The Head of Audit Services will be required to manage the
provision of a complete audit service to the authority which will include systems,
regularity, computer and contract audit. In discharge of this duty, the Head of
Audit Services will:
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Prepare a rolling three-year strategic risk-based audit plan, translated into
annual plans, in consultation with Directors, Heads of Service and senior
management, for formal ratification by the Director of Resources, the Chief
Executive and the Resources Overview & Scrutiny Committee. The strategic
plan will be regarded as flexible rather than as an immutable expression of
audit policy.
Ensure a system of close supervision of audit work, and maintain a review of
audit files through the supervisory structure.
Ensure a system of computer audit within the authority is implemented and
maintained.
Prepare, for agreement with the Director of Resources and the Chief
Executive, half yearly and annual reports on audit activities and significant
findings and results for presentation to the Resources Overview & Scrutiny
Committee.
10. In order to establish an audit presence and to create sound informal lines of
communication, as much audit work as possible will be done on location.
Internal Audit testing may go beyond the records and adopt a more ‘physical’
approach.
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Audit Resources
11. The staffing structure of the section will comprise a mix of professional audit staff
with sufficient knowledge, skills, experience and professional specialisms to
reflect the varied functions of the section. The current staffing and responsibility
structure is shown below.
12. As far as is practicable, Internal Audit will not participate in the day-to-day
operation of any systems of internal financial control. However, in strict
emergency situations only, audit personnel may be called upon to carry out nonaudit work on a short-term basis.
13. Members of the internal audit service will be expected to contribute to the
general management and conduct of business through membership of working
groups and participation in ad hoc exercises.
Audit Training
14. The Head of Audit Services will carry out a continuous review of the development
and training needs of all audit personnel and will arrange in-service training
covering both internal and external courses.
15. Specific resources will be devoted to specialised training in relation to computer
audit to keep abreast of IT developments.
Audit Reporting
16. All audit assignments and Value For Money studies will be the subject of formal
reports. Draft reports will be sent to the managers responsible for the area
under review for agreement to the factual accuracy of findings.
After
agreement, the Head of Audit Services will issue the report direct to the
responsible Head of Service who must submit a formal reply setting out the
response and an action plan for implementation of the recommendations. The
management summaries for each audit will be included in the formal quarterly
report by the Head of Audit Services, which is issued to the Directors of
Resources and Services, the Section 151 Officer, the Chief Executive and the
Authority’s External Auditors.
Related Documents
17. This document is one of a series that, together, constitute the policies of the
authority in relation to Corporate Governance and anti-fraud and corruption
matters. The other documents are:  Local Code of Corporate Governance.
 Anti-Fraud and Corruption Strategy (incorporating the whistle-blowing policy).
 Code of Conduct for Employees.
 Benefits fraud prosecution policy.
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STAFFING & RESPONSIBILITY STRUCTURE: ROTHER AUDIT SERVICES
Director
of
Resources
Head
of
Audit Services
 Liaison with the
S.151 Officer
 Liaison with Head of
Finance on financial
controls and new
systems
 Liaison with Head of
Technology on new
computer systems
and technology
changes
Principal Auditor
Senior Auditor
Committee/June 2004 Charter
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Support from
Corporate Capacity
Team on Risk
Management and
other matters