1. Constitution
1.1 The Board hereby resolves to establish a Committee of the Board to be known as the Audit Committee (The Committee). The Committee is a non-executive Committee of the Board and has no executive powers, other than those specifically delegated in these terms of reference.
2. Authority
2.1 The Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees as directed to cooperate with any request made by the Committee. The Committee is authorised by the Board to obtain legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.
3. Membership
3.1 The Committee shall be appointed by the Board from amongst the Non-Executive Directors of the Trust and shall consist of not less than three members.
4. Quorum
4.1 A quorum shall be two members. One of the members will be appointed Chair of the Committee by the Board. The Chairman of the organisation shall not be a member of the Committee.
5. Attendance
5.1 The Director of Finance and appropriate internal and external audit and counter fraud representatives shall normally attend meetings. The Directors responsible for assurance will attend the Committee to present the assurance framework. However, at least once a year the Committee should meet privately with the external and internal auditors.
5.2 The Chief Executive should be invited to attend and should discuss at least annually with the Audit Committee the process for assurance that supports the Annual Governance Statement. He or she should attend when the Committee considers the draft internal audit plan and the annual accounts. All other Executive Directors should be invited to attend, particularly when the Committee is discussing areas of risk or operation that are the responsibility of that Director.
5.3 The Director of Finance’s secretary shall be secretary to the Committee and shall attend to take minutes of the meeting and provide appropriate support to the Chair and Committee members.
6. Frequency
6.1 The Committee must consider the frequency and timing of meetings needed to allow it to discharge all of its responsibilities. The external auditors or Head of Internal Audit may request a meeting if they consider that one is necessary.
7. Governance, risk management and internal control
7.1 The Committee shall review the establishment and maintenance of an effective system of integrated governance, risk management and internal control, across the whole of the organisation’s activities (both clinical and non-clinical), that supports the achievements of the organisations objectives.
7.2 In particular, the Committee will review the adequacy of:
- All risk and control related disclosure statements (in particular the Annual Governance Statement, together with any accompanying Head of Internal Audit Statement, external audit opinion or other appropriate independent assurances, prior to endorsement by the board
- The underlying assurance processes that indicate the degree of achievement of corporate objectives, the effectiveness of the management of principal risks and the appropriateness of the above disclosure statements
- The polices for ensuring compliance with relevant regulatory, legal and code of conduct requirements and related reporting and self-certification
- The policies and procedures for all work related to fraud and corruption as required by the counter fraud functional standards in line with NHS Counter Fraud Authority requirements, which requires that all NHS foundation trusts take the necessary action to adhere to Standards for NHS Providers in relation to countering fraud, bribery and corruption.
7.3 In carrying out the work the committee will primarily utilise the work of Internal Audit, External Audit and other assurance functions, but will not be limited to these sources. It will also seek reports and assurances from Directors and managers as appropriate, concentrating on the over-arching systems of integrated governance, risk management and internal control, together with indicators of their effectiveness.
7.4 This will be evidenced through the Committee’s use of an effective Assurance Framework to guide its work and that of the audit and assurance functions that report to it.
8. Financial reporting
8.1 The Audit Committee shall monitor the integrity of the financial statements of the Trust and any formal announcements relating to the Trust’s financial performance.
8.2 The Committee should ensure that the systems for financial reporting to the Board, including those of budgetary control, are subject to review as to completeness and accuracy of the information provided to the Board.
8.3 The Audit Committee shall review the annual report, quality accounts and financial statements before submission to the Board, focusing particularly on:
- The wording in the Annual Governance Statement and other disclosures relevant to the terms of reference of the Committee
- Changes in, and compliance with, accounting policies, practices and estimation techniques
- Unadjusted mis-statements in the financial statements
- Significant judgements in preparation of the financial statements
- Significant adjustments resulting from the audit
- Letter of representation
- Qualitative aspects of financial reporting
- External audit’s recommendation on the quality accounts.
9. Internal audit
9.1 The Committee shall ensure that there is an effective internal audit function that meets mandatory Public Sector Internal Audit Standards and provides appropriate independent assurance to the Audit Committee, Chief Executive and Board.
9.2 This will be achieved by:
- Consideration of the provision of the internal audit service, the cost of the audit and any questions of resignation and dismissal
- Review and approval of the internal audit strategy, operational plan and more detailed programme of work, ensuring that this is consistent with the audit needs of the organisation as identified in the Assurance Framework
- Considering the major findings of internal audit work (and management’s response), and ensuring coordination between the internal and external auditors to optimise audit resources.
- Ensuring that the internal audit function is adequately resourced and has appropriate standing within the organisation
- An annual review of the effectiveness of internal audit.
10. External audit
10.1 The Committee shall review the work and findings of the external auditors and consider the implications and management’s responses to their work. This will be achieved by:
- Consideration of the appointment and performance of the external auditors, as far as the rules governing the appointment permit
- Discussion and agreement with the external auditors, before the audit commences, of the nature and scope of the audit as set out in the annual plan, and ensuring coordination, as appropriate, with other external auditors in the local health economy
- Discussion with the external auditors of their local evaluation of audit risks and assessment of the Trust and associated impact on the audit fee
10.2 Review of all external audit reports, including the report to those charged with governance, agreement of the annual audit letter and the quality accounts report before submission to the Board and any work undertaken outside the annual audit plan, together with the appropriateness of management responses.
11. Other assurance functions
11.1 The Audit Committee shall review the findings of other significant assurance functions, both internal and external to the organisation, and consider the implications for the governance of the organisation.
11.2 These will include, but will not be limited to, any reviews by Department of Health arm’s length bodies or regulators/ inspectors (for example, the Care Quality Commission, NHS Litigation Authority, etc.) and professional bodies with responsibility for the performance of staff functions (for example, Royal Colleges, accreditation bodies, etc.).
11.3 In addition, the Committee will review the work of other committees within the organisation whose work can provide relevant assurance to the Audit Committee’s own scope of work. In particular, this will include the Patient Safety and Quality Standards Committee and any risk management committees that are established.
12. Counter fraud
12.1 The Committee shall satisfy itself that the organisation has adequate arrangements in place for countering fraud and shall review the outcomes of counter fraud work.
13. Management
13.1 The Committee shall request and review reports and positive assurances from directors and managers on the overall arrangements for governance, risk management and internal control.
13.2 The Committee may also request specific reports from individual functions within the organisation (for example, clinical audit) as they may be appropriate to the overall arrangements.
14. Other matters
14.1 The minutes of Audit Committee meetings shall be formally recorded by the Secretary to the Committee and submitted to the Board. The Chair of the Committee shall draw to the attention of the Board any issues that require disclosure to the full Board, or require executive action.
14.2 The Committee will report to the Board at least annually on its work in support of the Annual Governance Statement, specifically commenting on the fitness for purpose of the Assurance Framework, the completeness and ‘embeddedness’ of risk management in the organisation, the integration of governance arrangements and the appropriateness of the evidence compiled to demonstrate fitness to register with the CQC and the robustness of the processes behind the quality accounts.
14.3 The Committee shall be supported administratively by the Secretary to the Committee, whose duties in this respect include:
- Agreement of agendas with Chair and attendees and collation of papers
- Taking the minutes
- Keeping a record of matters arising and issues to be carried forward
14.4 The Committee will seek further support from the Trust Company Secretary on matters such as:
- Advising the Committee on pertinent issues/areas
- Enabling the development and training of committee members
15. Review
15.1 The terms of reference of the Committee shall be reviewed when required, but at least annually and recommend any changes to the Board of Directors.