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Corporate Audit Committee
Chair’s Report to the Principal Accounting
Officer for 2008/09
August 2009Corporate Audit Committee | Chair’s Report to the Principal Accounting Officer 2008/09
Contents
Page
Introduction 1
Terms of Reference 1
Corporate Audit Committee Membership 1
Relationships with other Ministry of Justice Audit Committees 2
Corporate Audit Committee activity and the main matters arising 2
Corporate Audit Committee Assurance Statement 7
Acknowledgements 7
Terms of Reference 8
Value for Money Reports 9
iiChair’s Report to the Principal Accounting Officer 2008/09 | Corporate Audit Committee
Introduction
As Chair of the Ministry of Justice’s Corporate Audit Committee, I am pleased to
present my annual report, which has been produced in line with current Treasury
guidance. The Corporate Audit Committee (the Committee) is a sub-committee of
the Ministry of Justice’s Corporate Management Board.
The Committee’s primary purpose is to provide support and advice to the Ministry of
Justice’s Principal Accounting Officer in the effective discharge of his responsibilities
for governance, risk management and internal control. The Committee acts in an
advisory capacity and has no executive responsibilities.
This report covers the Committee’s activity over the twelve-month period to July 2009.
Terms of Reference
The Committee’s Terms of Reference are shown at Annex A. The Terms of Reference
follow the guidance provided in the Treasury’s Audit Committee Handbook, which
defines the policy principles for Audit Committees in central government bodies. The
key messages from each Committee meeting are made available on the Ministry of
Justice intranet.
Corporate Audit Committee Membership
The Committee’s membership is currently composed as follows:
Anne Bulford Non-Executive member of Corporate
Management Board and Audit Committee Chair
James Turner Independent external member
Jane Tozer MBE Independent external member
James Turner (Independent External Member) completed his term of appointment
in July 2009. The Committee wishes to record its appreciation for the valuable
contributions that James has made during the course of his appointment.
Planned changes to the future membership of the Committee provide for direct
representation from the Access to Justice Group and the NOMS Agency. This will
significantly improve the Committee’s overall spread of business knowledge and its
capacity to provide robust advice and assurances to the Principal Accounting Officer
and the Board.
Regular attendees at the Committee meetings were:
Marco Pierleoni Director General, Finance & Commercial
Tracy Barker Head of Finance Accounting
Corporate Audit Committee | Chair’s Report to the Principal Accounting Officer 2008/09
Alan Rummins Head of Internal Audit
Derek Darnell Deputy Head of Internal Audit
Eddie Fitzgerald Corporate Risk and Assurance
Paul Keane National Audit Office (NAO)
Aileen Murphie National Audit Office (NAO)
Nick Bateson National Audit Office (NAO)
Relationships with other Ministry of Justice Audit Committees
Arrangements have operated to share information and matters of common interest
and applicability between the Chair of the Corporate Audit Committee and the
Chairs of other Audit Committees within the Ministry of Justice. This included a
meeting of the Chairs of the Ministry of Justice’s Audit Committees in December
2008. The meeting provided a forum to focus on matters related to the Performance
and Efficiency Programme, implementation of the International Financial Reporting
Standards, new arrangements for reporting on Information Assurance risks, the
Ministry of Justice’s Business Model, new Government Internal Auditing Standards
and changes to External Audit arrangements.
Corporate Audit Committee activity and the main matters arising
The Committee met in October 2008 and February, March and July 2009. At these
meetings, the Committee continued to exercise a robust challenge function and to
demand the highest levels of performance and accountability from those reporting to it.
Standing items reviewed at each meeting included Governance and Risk
Management, Corporate Finance, Internal Audit and National Audit Office external
audit and value for money studies. In addition, senior managers were invited to attend
meetings to assist on matters escalated to the Committee by the auditors and/or of
specific interest or relevance to the discharge of the Committee’s responsibilities. In
the period covered by this report, attendance included the Director-General NOMS,
Information Director, Head of Knowledge Management and Information Strategy and
representatives from Human Resources.
Ministry of Justice Accounts
The Committee has scrutinised and questioned management on the 2008/09
Consolidated Resource Accounts, Judicial Pensions Scheme Accounts, Court Funds
Office White Paper Accounts (Parts A and C) and the 2007/08 Official Solicitor and
Public Trustee Stewardship Accounts. As part of this process, it specifically reviewed
any disclosures made in Statements on Internal Control and any issues raised in the
external auditors’ report to those charged with governance.
2Chair’s Report to the Principal Accounting Officer 2008/09 | Corporate Audit Committee
The Committee recommended that:
• the Consolidated Resource Accounts should be signed subject to satisfactory
conclusions of the matters raised by the National Audit Office with particular
regard to NOMS, whose accounts had not been finalised at the time of the
Audit Committee on 8 July. In reviewing the Statement on Internal Control, the
Committee asked for disclosure of two additional significant control issues in
relation to criminal legal aid means testing and the quality, accuracy and reliability
of management information. These were carried forward to the final version of the
Statement on Internal Control.
• the Judicial Pension Scheme Accounts should be signed. The Committee
agreed with the auditor’s recommendation that the arrangements for the
scheme governance should be reviewed and appropriate action on the outcome
implemented before the next set of accounts are produced for 2009/0.
• the Court Funds Office Part A and C Accounts should be signed by the Accountant
General of the Supreme Court. For next year, these Accounts will transfer to the
remit of the Access to Justice Audit Committee, which will follow-up on issues
raised in the 2008/09 external and internal auditors’ reports.
2007/08 Returning Officers’ Expense Accounts
The Committee was disappointed that these accounts, covering a number of previous
UK and European elections, were again qualified in 2008; having been qualified by
the National Audit Office on an annual basis since 2002. The Committee reviewed
the 2007/08 Accounts for the Returning Officers’ Expenses, focussing on the
findings identified mid-year by internal audit and the issues leading to qualification.
The Committee noted actions that had been taken to address the failures of some
Returning Officers to submit claims. The Committee recommended that the accounts
should be signed, but is continuing to require firm assurances that appropriate and
robust action is being taken to clear outstanding Returning Officer accounts and to
avoid future accounts’ qualification.
International Financial Reporting Standards
In common with central government, the Ministry is changing the basis on which
it accounts, from UKGAAP (UK Generally Accepted Accounting Principles) to IFRS
(International Financial Reporting Standards). From 2009/0, all statutory accounts
(including 2008/09 comparative figures), budgets and estimates will be produced
on an IFRS basis. The Committee has been regularly briefed on progress to achieve
Trigger Points set by the Treasury. The Committee has noted the extensive amount of
accounting work involved in making this transition and has expressed serious concern
about the level of investment required in relation to the perceived value added by the
change. While it is recognised that IFRS must be implemented within the Treasury
time scales, the Committee welcomes the National Audit Office assurances that it
acknowledges the scale of the task and will work with the Ministry of Justice to find
pragmatic and proportionate solutions to any difficulties that surface.
Corporate Audit Committee | Chair’s Report to the Principal Accounting Officer 2008/09
Information Assurance and Data Protection
The Committee received presentations in October 2008 and March 2009 on
progress being made following the central Government Data Handling review and
on the report to be made to the Cabinet Office. The Committee also examined and
endorsed the Information Sub-Committee’s Annual Assessment of Information Risk,
in support of the Principal Accounting Officer’s Statement on Internal Control. The
Committee endorses the Ministry’s overall approach as being correct but agrees
with the Information Sub-Committee’s assessment that it is not yet fully effective in
practice. The Committee also agrees that further work is needed on specific issues
i.e. data handling by third party suppliers, personnel records, shared drives and data
use by the judiciary, and to embed principles into business as usual. As part of this
process, it agrees with the need to improve the clarity and consistency of approach
across the delivery chain, and very importantly to:
• effect a shift towards proactive Information Assurance forward strategy planning
rather than reactive data handling policy
• manage risk corporately and consistently
• embed culture change and building capacity
• address areas identified through the Information Assurance maturity model.
The Committee agrees that it is essential that the above is based on a strong
corporate vision for data handling and a forward action plan to achieve it, which the
Information Sub Committee has already determined at high level. The Corporate
Audit Committee will attach a high priority to gaining sound assurance on progress
being made over the next twelve months.
Control and Risk Issues
Following its briefing on a review on the Ministry of Justice’s compliance with the
Corporate Governance Code, the Committee agrees that a high priority needs to be
given to defining the accountabilities and relationships with its diverse range of Arms
Length Bodies.
The Ministry of Justice’s arrangements for managing risk have been regularly reported
to the Committee; this has included reviewing the results of annual self-assessments
and the in-depth examination of selected corporate risks. The Committee agrees
with the Head of the Ministry’s Corporate Risk & Assurance Team’s opinion that
good progress continues to be made but that scope remains for improved and more
consistent embedding of risk management as part of the day to day management of
business operations.
The Committee has gained assurance that appropriate action has been taken to clear
the significant control issues reported in the 2007/08 Statement on Internal Control.
Improved progress reporting to the Committee has been instituted and the pace of
progress on implementation of agreed action has been challenged, where necessary.
Chair’s Report to the Principal Accounting Officer 2008/09 | Corporate Audit Committee
The National Audit Office completed a study on events that led to the reduced scope
of the NOMS programme to establish an IT system to support the concept of end to
end offender management. The National Audit Office Report (which drew, in part, on
findings from last year’s internal audit review) was published on March 2009 and
was taken by the Public Accounts Committee on 6 May 2009. The Public Accounts
Committee was critical of the lack of project management, poor cost monitoring
and lack of guidance and oversight. There are clear lessons to be learnt from this
programme, which serves to underline the potential exposures that IT and other
programmes face e.g. the Performance and Efficiency Programme. The Committee
strongly underlines the need to reduce the risk of failure for current and future
projects and programmes through consistent application of arrangements for robust
programme control and regular senior management oversight.
The National Audit Office have provided regular briefings on the progress and
outcome of their other Value for Money Studies undertaken over the past twelve
months – to include those listed at Annex B. The Committee’s future work schedule
will allow for more detailed review of selected studies, particularly where these have
wider implications for the conduct of the Ministry’s business.
At the request of the Principal Accounting Officer, the National Audit Office
conducted a review on the action taken on recommendations made in a sample
of National Audit Office and Public Accounts Committee reports to the Ministry
over the past four years. The findings and recommendations made by the National
Audit Office in this report were fully accepted by the Ministry and the Committee
has instigated improved reporting arrangements to gain continuing assurance
that appropriate action is being taken to implement and clear recommendations.
The Committee have extended these arrangements to include priority one
recommendations made by internal audit. In taking these improved arrangements
forward, internal audit has an important role in providing assurance to the
Committee that recommendations are implemented and for escalating to its
attention any significant failings that are identified e.g. inadequate pace or progress.
The Committee has been briefed on action to deal with issues raised by the
HMCS external auditors and National Audit Office in their 2007/08 and 2008/09
management letters on the management and control of HMCS bank accounts. The
Committee has been provided with assurances that these accounts were not subject to
fraudulent transactions or irregular activity and will be progressively shut down. There
are, however, some problems with timely bank reconciliations and the HMCS Audit
Committee are monitoring action being taken to resolve this. In the wider context,
the Committee is aware of the Government Banking Programme, which will result in
major reductions in the number of bank accounts held throughout the Ministry.
The Committee expressed serious concern about the number of staff salary overpayments
through administrative failures and the length of time taken for their recovery or write-off.
The Committee has sought assurance from Human Resources that improvements will
continue to be made to the prevention and recovery of salary overpayments. Although
Corporate Audit Committee | Chair’s Report to the Principal Accounting Officer 2008/09
individual errors are not significant in themselves, the Committee has expressed its view
that a continuing pattern of errors may constitute a significant control issue for future
disclosure in the Statement on Internal Control. The Committee has also asked internal
audit to follow-up on the implementation of recommendations made following a recent
internal audit and to report the outcome to the next Committee meeting.
Channels for reporting outside the management chain
“Whistleblowing” has remained a topical subject of interest to the Committee. The
Committee received a presentation from Human Resources’ managers on the latest
policy launched in July 2008 and has received details of the small number of reported
cases. The Committee agrees with the overall policy but considers there is scope for
improving the accessibility of Nominated Officers. This has been raised with Human
Resources and, as a solution, it has been proposed that a Non-Executive member of
the Committee could be made a designated Nominated Officer.
Internal Audit
The Committee reviewed and endorsed internal audit strategies and plans for the
central Ministry of Justice and has received regular reports on the outcome of audit
work and recommendations made. At its meeting on 8 July it reviewed and endorsed
the Head of Internal Audit’s 2008/09 annual opinion and report. During its review,
the Committee considered information on cases of internal fraud reported to the
Treasury. The Committee has asked for more detailed information on the underlying
causes and reasons for the reported cases of fraud at its next meeting in October
2009. The Committee will also consider the outcome of the Ministry’s latest fraud
risk assessments, which are collated by internal audit.
The Committee will require assurance on compliance with the new Government
Internal Audit Standards that came into effect on April 2009 and will focus on the
need to disclose any areas of significant non-compliance. The Committee will also
ensure it is informed on the outcome of the Treasury’s Internal Audit Transformation
Project (due to report in December 2009) and any implications it may have for the
Ministry’s overall arrangements for internal audit coverage.
External Audit
Representatives from the National Audit Office have attended all of the Committee’s
meetings. The Committee reviewed audit strategies for the audit of the Ministry
of Justice’s accounts, including the key risks highlighted, and has gained assurance
that appropriate action has been taken on external audit management letters. As
indicated above, the Committee has also received regular updates on National Audit
Office value for money studies.
6Chair’s Report to the Principal Accounting Officer 2008/09 | Corporate Audit Committee
Corporate Audit Committee Assurance Statement
The Corporate Audit Committee provides assurance that, during the period of this
report, it fully discharged its responsibilities in accordance with its terms of reference.
The Committee is also satisfied that it is able to provide the Principal Accounting
Officer with assurance:
• on the Accounts it has reviewed subject to the satisfactory conclusions of the
matters raised by the National Audit Office with particular regard to NOMS,
whose accounts had not been finalised at the time of the Audit Committee
meeting on 8 July 2009
• that issues pertinent to the 2008/09 Statement on Internal Control and any
longer term significant control issues that the Committee considers the Principal
Accounting Officer should give attention to are managed appropriately
• on the quality of both Internal and External Audit, their approach to the discharge
of their respective responsibilities, and the reliance that can be placed on their work.
Priorities for the Committee’s attention over the next reporting period include gaining
assurance on:
• the effectiveness of change management, programme delivery controls and
embedded risk management
• further action taken in regard to information assurance and data protection
• effective monitoring, progress and sign off of National Audit Office and Public
Accounts Committee recommendations
• action taken on significant control issues disclosed in the Ministry’s 2008/09
Statement on Internal Control
• action taken to avoid further qualification of the Returning Officers’ Expense Accounts
• clear articulation of the Ministry of Justice’s accountabilities and authorities for its
Arms Length Bodies
• internal audit’s compliance with the new Government Internal Audit Standards and
action on the outcome of the Treasury’s Internal Audit Transformation Programme
Acknowledgements
The Committee is pleased to commend the open and candid relationship that exists
between its members and the Head of Internal Audit, the National Audit Office as
external auditors, the Director General Finance & Commercial, Corporate Finance
representatives and members of Corporate Risk and Assurance Branch.
Anne Bulford
Chair of the Corporate Audit Committee
7Corporate Audit Committee | Chair’s Report to the Principal Accounting Officer 2008/09
Annex A
Corporate Audit Committee - Terms Of Reference
Purpose
The Corporate Audit Committee is an advisory body. It supports the Permanent
Secretary, as Principal Accounting Officer, and the Corporate Management Board
(CMB) in their responsibilities for issues of risk, control and governance by reviewing the
comprehensiveness of assurances on meeting Ministry of Justice assurance needs and
reviewing the reliability and integrity of these assurances. The terms of reference for
the Corporate Audit Committee are informed by the guidance set out in the Treasury
Audit Committee Handbook for Audit Committees in Central Government bodies.
Role and Objectives
The Corporate Audit Committee will advise the Principal Accounting Officer and CMB
on the:
• processes for risk management, control and governance and the Statement on
Internal Control
• accounting policies and accounts for the Ministry of Justice
• planned activity and results of both internal and external audit
• adequacy of management responses to issues identified by audit activity including
external audit’s management letter
• assurances relating to the Ministry of Justice corporate governance requirements
• anti-fraud policies, whistle blowing processes, and arrangements for special
investigation
Membership
• Independent non executive chairman ( Non-Executive Member of CMB)
• Three independent, non-executive members
• Two members will constitute a quorum.
Attendees
• Director General, Finance and Commercial
• Representative from Corporate Finance
• Representatives of the National Audit Office
• Head of Ministry of Justice Internal Audit
• Head of Corporate Risk and Assurance
• Other senior managers on invitation by the Committee for specific issues
8