john.martin@eurocontrol.int audit committees/ audit boards/ external audit presented by john martin...

John.Martin@eurocontrol.int

Audit Committees/ Audit Boards/ External Audit

Presented by John Martin EUROCONTROL

9 June 2009

see general disclaimer – next slide

Benchmarking exercise – Financial Governance

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Questionnaire for International Organisations

Presenter gives no guarantee of the content of the answers and hence this presentation

Questionnaire created and sent by the Internal Audit of EUROCONTROL to Controlling Functions of Int’l. Organisations – Also Coordinated with an Internal Audit Network Group questionnaire – based on answers provided

As a result, I kept the Organisations anonymous This presentation shows the synthesis of the data

from 23 Organisations

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Content of Presentation

Audit Committee Audit Boards External Audit Accounting Standards Discharge

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Participants of the Benchmarking

23 Organisations:

7 EU: EC, ECA, ECB, ETF, S-JU, EIB, European Ombudsman

9 Other “European” Intergovernmental:CERN, CoE, CEB, EPO, EIB, ESA, OSCE,

EUROCONTROL, ESO

7 World-wide Orgs: UNOPS, Interpol, WIPO, WTO, ICRC, IUCN, OECD

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What do I consider to be an Audit Committee?

RIAS defines the purpose of an Audit Committee: RIAS = Representatives of Internal Audit Services in the U.N

"The purpose of an Audit Committee -as an independent advisory expert body - is primarily to assist the governing body, and the executive head of the < U.N.> entity and other multilateral institution as appropriate, in fulfilling their oversight and governance responsibilities, including the effectiveness of internal controls, risk management and governance processes. The audit committee must add value and must strengthen accountability and governance functions; not duplicate them."

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UK Government – HM Treasury Guidance- 5 GOOD PRACTICE PRINCIPLES

AUDIT COMMITTEE ROLE - Support the Governing Board (& Accounting Officer)

MEMBERSHIP Independent & Objective Good Understanding of objectives/priorities of the Organisation

SKILLS – Committee should corporately own an appropriate skills mix to allow it to carry out its function

SCOPE OF WORK – should be defined in Terms of Reference Particular engagement with work of Int Aud, Ext Aud, Fin Reptg

COMMUNICATION – Effective Comms with Board, Head of Int Aud, Ext Aud, and other stakeholders

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Do you have an Audit Committee ? (Y, N, unclear)

YES: 10 NO: 10

Called an Audit Committee: (but seemingly with the functions of an Audit Board): 2

One response said their Finance Committee filled those roles: 1

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Audit Committee ? (Yes, No)

My conclusion: YES: 10 NO: 13

Yes

No

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10 Audit Committees in These Organisations – A 21st Century Phenomonon

0

2

4

6

8

10

12

2000 2003 2004 2005 2006 2007 2008 2009

Number

Cum

10 out of 23 Organisations surveyed have an Audit Committee or Audit Progress Committee

At least 3 more currently considering or taking stepsSo by 2010 the majority of the 23 will have them

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10 Audit Committees – Who does AC report to?

Out of 10 5 report to the Governing

Body /Council 1 reports to the Finance

Committee & Governing Body

2 report to DG/Exec Director

2 report to College of Commisioners/Court member

0

1

2

3

4

5

Gvng

Body

Fin Ctee DG Court

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10 Audit Committees – Role Internal Audit

Out of 10, role re. IA 4 Supervisory 3 provide Advice 3 Review IA

0

1

2

3

4

Supervise Advise Review

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10 Audit Committees - External Audit & RM

Role re External Audit - out of 10 2 Supervisory 2 advise concerning Ext Aud 2 Review Ext Aud 4 have no mandate in regard to

Ext Aud

Risk Management (RM) – out of 10 2 Advise in regard to Risk

Management 8 have no mandate in regard to

RM

0

1

2

3

4

Sup Adv Rvw No mandate

RM role

No RM Role

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10 Audit Committees - Membership

Conclusion: …………it varies

Number of members Min: 3; Max 9; Average 5,6

Internal : External (1:3);(0:4);(3:1); (0:3); (7:2); (3:1); (0:9); (0:4);(1:6); (0:9)

0

2

4

6

8

10

External

Internal

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10 Audit Committees – Members from Gvng Body ?

How many members from the Council / Governing Body Out of the 10 Audit Committees

7 had no Council members (or equivalent) 1 had one Council member 1 had 3 Council members (/ National Representatives) 1 had 6 Council members

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How many have an Audit Board or Court ?

Audit Board/Court Yes 11 (5 EU bodies by ECA)Yes (but called an Audit Ctee) 2

13No 10Total 23

They deal with or the External Audit

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External Audit of the accounts– who does it ?

For 5 EU Institutions – the ECA does the audit (of course except the ECA itself) – 5 out of 23 Organisations

External Audit done by contract with a National Supreme Audit Institutes for - 8 of 23 (some pay but one or two don’t)

Ext Audit done by Firms of auditors (or assistants or Statutory Auditor) for - 8 out of 23

(fees, where reported, between €50k and €500k)-Most < € 200k

Rotation - Many have a requirement in their Regs- but all who answered this question – did it in practice- (except the EU institutions – bound to the ECA)

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Accounting Standards – getting there

IPSAS: 12 (or nearly e.g. EU bodies)

IFRS: 5

Own/Fin Regs: 6

Total 23

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Discharge

Out of 23 organisations: 19 had a process of Discharge 4 didn’t (just approval of the audited statements)

What happens if discharge not given? Out of 19 :

13 were not sure !!! 1 said the Board would resign 5 said there would be / a requirement for re-presentation of the

financial statements/ other limited measures/ new budget approval restricted

CONCLUSION – Is this process out dated ?

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Benchmarking exercise – Financial Governance CONCLUSIONS

3 fundamental conclusions on Financial Governance (1) Trend to form an Audit Committee in last 9 years

Varied organisation, process and mandates

(2) Naming is inconsistent (Audit Board / Audit Committee/ Audit progress Committee)

(3) More organisations moving to Generally Accepted Accounting Standards

Thank you – feel free to contact me