Supporting Guidance for the Terms of Reference of the AEAC

ADMINISTRATIVE MATTERS

Introduction
The Administration Estimate Audit Committee (“The Audit Committee”) was established in 15 May 2000 by the House of Commons Commission (“The Commission”), following a recommendation in the Review of Management and Services of the House of Commons by a team led by Mr Michael Braithwaite.

Remit
The Audit Committee pursues its objectives and fulfils its responsibilities on behalf of the Commission and, as it deems appropriate, shall draw any matters arising within these terms of reference to the attention of the Commission.

Membership
The membership of the Committee shall be:

• 3 MP members, including:
 - A Member of the House of Commons Commission
 - A Member of the Finance & Services Committee
• 3 External Members, appointed by the Commission

The Chairman shall be appointed by the Commission from amongst the external members of the Committee.

A quorum will be three, with a minimum of one MP Member and one External Member. External members shall declare their independence as appropriate.

In attendance will normally be:

Accounting Officer
Director of Finance
Director of Internal Audit
Representative of the external auditor
The Committee may invite other managers and staff to attend the Committee meetings, for all or part of the meetings, as they require.

The Private Secretary to the Clerk of the House will act as Secretary to the Committee.

Ability
With the agreement of the Accounting Officer, the Committee has the ability to investigate any activity within its Terms of Reference and request the co-operation and attendance of any employee of the House Service.  The Committee may request independent professional advice, if it considers this necessary to meet its objectives and responsibilities. Committee members should have confidential access, if required, to the Accounting Officer, Officers of the House and the external auditor.

Meetings
The Committee will usually meet four times a year, one of which will be dedicated to a review of the annual Resource Accounts.  Additional meetings can be called by the Chairman.

At least once a year the Chairman should meet privately with the Director of Internal Audit and a representative of the external auditor.

Reporting
The Committee will report annually, the report to be published with the Commission’s Annual Report, and will be considered by the Accounting Officer in his preparation of the Annual Governance Statement.

A report of the Committee’s meetings will be sent to the Accounting Officer, the Commission and the Management Board.

Minutes of Committee meetings will be published on the Parliamentary website once confirmed by the Chairman.

Committee Effectiveness
The Committee will periodically review its own effectiveness and report the results of this to the Accounting Officer.

EXTENDED RESPONSIBILITIES
This sets out in more detail how the Committee will meet its responsibilities.  The main responsibilities in the Terms of Reference are set out in bold, and then succeeded by a more detailed exposition.

Governance, Risk Management and Internal Control
The Committee is responsible for monitoring governance, risk management and internal control (“the system of internal control”).  This monitoring will include:

The effectiveness of the design and operation of the system of internal control
The development and operation of the system of risk management, in accordance with the overall risk management policy
The level and range of assurances on the management of risks
The adequacy and implementation of proposed management actions to improve the effectiveness of internal controls

The monitoring will be achieved by:

Reviewing any updates to the Risk Management Policy
Receiving periodic updates on both the system of risk management (from the Risk Management Facilitators) and the individual management of risks (from a rotating plan of Directors and Senior Managers)
Reviewing the results of the annual internal audit of risk management and the management’s responses to the work
Reviewing the results of internal and external audit work, that relate to areas of internal control, and assess the adequacy of management responses
Reviewing the level and effectiveness of the implementation of management actions in response to audit recommendations
Reviewing the level of assurance provided over the identification, assessment, management and monitoring of key risks.
Reviewing the level of Internal Audit focus on key risks in its work plans and activities
Reviewing the assurance arrangements regarding contracted out services, and services which are shared with the House of Lords, including through joint meetings where appropriate.

Reviewing the effectiveness of:
          - The internal control and governance framework
          - Internal financial and management reporting
          - Anti-fraud and whistleblowing policies
          - Information security.

Reviewing compliance with regulatory requirements.

Annual Resource Accounts
The Committee is responsible for reviewing the annual Resource Accounts before their submission to the Accounting Officer.  This review to include:

any significant changes in the accounting policies or treatments
major financial reporting judgements or estimates
consistency of the Annual Governance Statement 
resolution of any matters raised by the external auditor
significant adjustments resulting from the audit by the external auditor

This review will be achieved by:

Detailed examination of the draft accounts, including disclosures, and a briefing from the Director of Finance on the major pertinent issues.

Consideration of any proposed changes in accounting policies and practices, together with an understanding of the possible impact that each option might have on the Resource Accounts, prior to the production of draft accounts.

Consideration of the draft Annual Governance Statement and opportunity to comment on its consistency with the annual report of the Committee and its understanding of the operation of the system of internal control and the disclosure of any significant internal control issues

Consideration of any issues raised by the external auditor or matters unresolved from their external audit of the Resource Accounts, or where there may be disagreements with management.

Review of adjustments resulting from the external audit and management’s response to ensure that the issue will not be repeated.

Internal Audit
The Committee is responsible for the monitoring of the work of the internal audit service.  This includes:

Involvement in the appointment of the Director of Internal Audit and the audit partner
Agreement to the annual internal audit plan and monitoring of progress
Consideration of the results and findings from internal audit work and the adequacy of management responses
Consideration of the Director of Internal Audit’s annual report and opinion

This oversight will be achieved by:

Involvement in the recruitment of any Director of Internal Audit, whilst noting that the final decision rests with management

Involvement in any tender process for the audit partner.

Opportunity to contribute to the formulation of the internal audit plan, through suggestions of areas for audit review and discussion around the scope of audit assignments, and locus to comment on whether the internal audit function is adequately resourced and meets professional standards.

Opportunity to agree the adequacy of the annual internal audit plan and any future work programmes, ensuring that they link into the work of the House of Lords, external auditor and other assurance providers.

External Members receiving copies of each internal audit report issued and considering the results and management responses, to ensure that risks highlighted have adequate plans to mitigate them appropriately.  The External Members to recommend if reports should be considered by the full Committee.

Review of a progress report from the Director of Internal Audit at every Committee meeting and consideration of any issues raised, in particular; any changes to the plan; progress to date and resource implications; particular findings raised by the internal audit service.

Review of the draft Head of Internal Audit Opinion and Annual Report and consideration of its consistency with the Committee’s own understanding and provision of advice to the Accounting Officer on the implications of this work for his Annual Governance Statement.

External Audit
The Committee is responsible for monitoring and reviewing the work of the external audit.  This includes:

Recommendations on the appointment and scope of work of the external auditor
Consideration of the external audit strategy
Consideration of the results of external audit work, including any reports to those charged with responsibilities for governance, and of the adequacy of management responses
Consideration of any representations made by management to the external auditor
An annual review of external auditor’s independence and effectiveness

These responsibilities will be achieved by:

Involvement in any process relating to the appointment of an external auditor and agreement on the scope of any engagement
Review of the draft Audit Strategy, after it has been discussed with management, and discussion on any issues and risks raised
Review of any progress report from representative of the external auditor and consideration of any issues raised, particularly in relation to the system of internal financial control
Review of any reports on completion of the external audit, in particular any report to those charged with governance and summaries of issues arising from the external audit

Committee effectiveness
The Committee will periodically review its own effectiveness and report the results of this to the Accounting Officer.

This review will be achieved by:

The completion of an appraisal against a best practice checklist and review of the results, facilitated by a third party.

 

Further information

The House of Commons Estimate Audit Committees leaflet (PDF PDF 887 KB) provides a quick guide to the work and membership of the Committee.