Internal Audit - Ministerial Response - 5 November 2014

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

1

The Chief Executive should, by the end of February 2015, submit a report to the PAC explaining how the Corporate Management Board has prioritised the achievement of a robust corporate risk management framework.

T&R

Accept

The Chief Executive will provide a report to  the  Public  Accounts  Committee  as requested.

The Audit Committee have been provided with a quarterly update as to the progress of the Risk Management Project. The final Risk Management Project Report will be presented  to  the  Corporate  Management Board in December 2014, and to both the Council  of  Ministers  and  the  Audit Committee in January 2015.

End of February 2015

2

The Chief Internal Auditor must apply a fully risk-based approach to the development of the Internal Audit Plan 2015, as per the commitment made in the updated Internal Audit

T&R

Accept

Although the 2014 Internal Audit plan was prepared on a risk basis, the Audit Plan was presented in a strategic format rather than  a  risk-based  format.  Internal  Audit agrees  with  both  the  Comptroller  and Auditor General and the Public Accounts Committee  with  regard  to  this recommendation.

Internal Audit has already documented a

End of December 2014

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

Charter.

planning methodology in the Internal Audit manual that reflects the recommendations made  by  the  Comptroller  and  Auditor General, and is following this methodology for  the  preparation  of  the  2015  Internal Audit Plan. The draft 2015 Audit Plan will be  presented  to  the  Treasurer,  Chief Executive  and  Audit  Committee  for approval  in  December  2014,  as  required under  the  Audit  Committee  Terms  of Reference. This will include detail of the planning process and the links to both risks (Recommendation 6 in the C&AG report) and the requirements of Article 36 of the Public  Finances  (Jersey)  Law  2005 (Recommendation 11  of  the  C&AG report).

3

The Chief Minister and the Chief Executive should, within 6 months, give serious consideration to the matter of whether the Chief Internal Auditor should continue to report to the Treasurer of the States and, if deemed appropriate, lodge au Greffe' a suitable amendment to the Public Finances (Jersey) Law 2005

CMD

Accept

The  Chief  Minister  and  Chief  Executive will review the reporting lines of the Chief Internal  Auditor  as  recommended,  to ensure that appropriate reporting lines are established for the Chief Internal Auditor. The outcome of the review will provide the level of independence required to ensure that the Chief Internal Auditor can fulfil the role covering all aspects of the States of Jersey Internal Audit function without the potential of conflict arising.

In  the  intervening  period,  the  Chief Internal  Auditor  currently  has  a  formal dual  reporting  line  to  both  the  Chief Executive  and  Treasurer;  in  addition  to continuing  to  have  an  independent reporting line to the Chairman of the Audit Committee. This is to both promote and protect independence.

End of March 2015

4

The Chief Executive, the Treasurer of the States and the Chief Internal Auditor should, within the next 3 months, revisit the definition of the Board and Senior Management Team in the Internal

CMD/ T&R

Accept

PSIAS include a specific requirement that the  Internal  Audit  Charter  and  Audit Committee  Terms  of  Reference  refer specifically  to  the  board'  and  senior management  team';  and  define  the relationship with Internal Audit with both the board' and senior management team'. Appendix I reflects the current governance structure  of  the  States  of  Jersey  in comparison to the UK. The definition as defined  by  PSAIS  and  role  of  the  UK

End of December 2014

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

Audit Charter to ensure that they adequately reflect the role and accountability of Internal Audit in the context of the complex governance arrangements of the States.

equivalent  board'  and  senior management team' cannot in its' entirety be reflected in the current States of Jersey governance  structure,  however  Internal Audit  agree  with  Public  Accounts Committee that the roles need to be clearly defined.

In response to Recommendation 2 in the Comptroller and Auditor General's report on  Internal  Audit,  the  Chief  Internal Auditor has already reviewed and updated the  Internal  Audit  Charter  and  Audit Committee Terms of Reference to ensure that  the  definitions  of  the  board'  and senior  management  team'  reflected  the current  governance  arrangements  of  the States of Jersey. Both updated documents were presented to the Audit Committee on 12th May 2014.

The current structure in relation to the role and  reporting  structure  of  the  Audit Committee  shall  be  reviewed  and,  if changes  are  made,  the  Internal  Audit Charter  shall  be  updated  to  reflect  the definitions  of  "board"  and  "senior management team" if appropriate.

In  addition,  the  Audit  Committee considered  its  Terms  of  Reference  at  a workshop facilitated by the PwC (external auditors)  on  14th  July  2014.  The  Audit Committee Terms of Reference reflecting the  outcome  of  the  workshop  were presented to the Audit Committee on 13th October  2014,  and  comments  have  been received  by  the  Audit  Committee,  and these  will  be  reflected  in  the  Audit Committee Terms of Reference which will be  presented  in  the  Audit  Committee meeting (December 2014) for approval.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

Paragraph 3.5 of the report recommends that the definition of the role of the Public Accounts Committee within the Audit Charter should refer to Standing Order 132(1)(c), which allows the Public Accounts Committee to initiate reviews on topics other than those on which the Comptroller and Auditor General has reported.

T&R

Accept

The Internal Audit Charter is presented and approved by the Audit Committee annually as  required  in  the  Audit  Committee's Terms of Reference.

It  is  important  that  the  Internal  Audit Charter  defines  the  role  with  respect  to Internal  Audit  relationships,  including those  with  the  Audit  Committee,  Public Accounts  Committee  and  Scrutiny.  In addition  to  defining  the  relationship between  Internal  Audit  and  the  Public Accounts  Committee,  the  Internal  Audit Charter  will  be  updated  to  incorporate Standing Order 132(1)(c).

End of December 2014