Audit Committee ToR - NHS North Somerset

Appendix 3Audit CommitteeTerms of ReferenceAuthor(s):Lead Clinician (ifappropriate):In consultation with:Deborah Hayman Director ofGovernancen/aTo be read inassociation with:Standing OrdersRatified by:BoardIssue/Ratification date: September 2011Review date:At first meetingAmalgamation of the 3 PCT terms ofreferenceIf you require this document in a different format, please telephone0117 900 2632Page 1 of 8

1. Constitution1.1 The Board hereby resolves to establish a Committee of theBoard to be known as the Audit Committee (The Committee).The Committee is a non-executive committee of the Board andhas no executive powers, other than those specifically delegatedin the Board’s Scheme of Delegation and these Terms ofReference.2. Purpose2.1 These Terms of Reference are based on the prescribed nationalmodel and reflect reports published by the Cadbury Committee,the Combined Code and published guidance and best practiceof the private and public sector. They reflect the particularnature of Audit Committees in the NHS and the growing role ofthe Committee in developing integrated governancearrangements and providing assurance that NHS bodies are wellmanaged across the whole range of their activities.3. Authority3.1 The Committee is authorised by the Board to investigate anyactivity within its terms of reference. It is authorised to seek anyinformation it requires from any employee and all employees aredirected to co-operate with any request made by the Committee.The Committee is authorised by the Board to obtain outsidelegal or other independent professional advice and to secure theattendance of outsiders with relevant experience and expertise ifit considers this necessary.3.2 The Committee may establish such sub-committees and taskgroups it feels necessary in order to undertake its role.4. Membership and Meeting Arrangements4.1 MembersThe Committee shall be appointed by the Board from amongstthe Non-Executive directors of the PCT and shall consist of notless than three members.The Chair of the PCT shall not be a member of the Committee.4.2 ChairThe Chair shall be appointed by the NHS AppointmentsCommission.Page 2 of 8

4.3 Vice ChairThe Vice Chair shall be elected by the Committee for a period ofup to four years.4.4 Period of MembershipThe maximum period of appointment shall be four years or asdetermined by the NHS Appointments Commission. Membersmay stand for reappointment at the end of each four-year term.Members may resign office at anytime by giving the CommitteeChair one months notice.4.5 Frequency of MeetingsMeetings shall be held not less than three times a year. TheExternal Auditor or Head of Internal Audit may request ameeting if they consider that one is necessary.4.6 QuorumA meeting of the Committee shall be quorate when there are aminimum of two members (to include the Chair or Vice Chair)present.4.7 DeputiesThere will be no deputies.4.8 VotingThe Committee Chair shall determine whether any matter shouldbe put to the vote for a decision. Voting will normally be effectedby a show of hands and the outcome of the vote recorded in theminutes of the meeting.4.9 Attendance at MeetingsMembers shall attend a minimum of 2 meetings each year.The Director of Finance and appropriate Internal and ExternalAudit representatives shall normally attend meetings. A localCounter Fraud representative may attend where required.Annually, at a minimum, the Committee should meet privatelywith the External and Internal Auditors.Page 3 of 8

The Chief Executive and other executive directors should beinvited to attend, but particularly when the Committee isdiscussing areas of risk or operation that are the responsibility ofthat director.The Chief Executive will be invited to attend, at least annually, todiscuss with the Audit Committee the process for assurance thatsupports the Statement on Internal Control.The Committee shall invite the attendance, in an advisorycapacity, of any person with specialist knowledge in respect toany matter under consideration.4.10 SecretariatThe Committee shall be supported administratively by theTrust Secretary, whose duties in this respect will include:Agreement of agenda with Chairman and attendees andcollation of papersTaking the minutes & keeping a record of matters arising andissues to be carried forwardAdvising the Committee on pertinent areasProvide appropriate support to the Chairman and committeemembers4.11 Reporting5. DutiesThe minutes of the Committee will be submitted to the Board.The Chair of the Committee shall draw to the attention of theBoard any issues that require disclosure to the full board, orrequire executive action.The Committee will report to the Board annually.The duties of the Committee can be categorised as follows:5.1 Governance, Risk Management and Internal ControlThe Committee shall review the establishment and maintenanceof an effective system of internal control, across the whole of theorganisation’s activities (both clinical and non-clinical), thatsupports the achievement of the organisation’s objectives.Page 4 of 8

In particular, the Committee will review the adequacy of:5.1.1 all risk and control related disclosure statements (inparticular the Statement on Internal Control) together withany accompanying Head of Internal Audit statement,external audit opinion or other appropriate independentassurances, prior to endorsement by the Board5.1.2 the underlying assurance processes that indicate thedegree of the achievement of corporate objectives, theeffectiveness of the management of principal risks andthe appropriateness of the above disclosure statements5.1.3 the policies for ensuring compliance with relevantregulatory, legal and code of conduct requirements5.1.4 the policies and procedures for all work related to fraudand corruption as set out in Secretary of State Directionsand as required by the Counter Fraud and SecurityManagement ServiceIn carrying out this work, the Committee will primarily utilise thework of Internal Audit, External Audit and other assurancefunctions, but will not be limited to these audit functions. It willalso seek reports and assurances from directors and managersas appropriate, concentrating on the overarching systems ofintegrated governance, risk management, and internal control,together with indicators of their effectiveness.This will be evidenced through the Committee’s use of aneffective Assurance Framework to guide its work and that of theaudit and assurance functions that report to it.5.2 Internal AuditThe Committee shall ensure that there is an effective internalaudit function established by management that meetsmandatory NHS Internal Audit Standards and providesappropriate independent assurance to the Audit Committee,Chief Executive, and Board. This will be achieved by:5.2.1 consideration of the provision of the Internal Auditservice, the cost of the audit and any questions ofresignation and dismissal5.2.2 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 theorganisation as identified in the Assurance FrameworkPage 5 of 8

5.2.3 consideration of the major findings of internal audit work(and management’s response),and ensure co-ordinationbetween the Internal and External Auditors to optimiseaudit resources5.2.4 ensuring that the Internal Audit function is adequatelyresourced and has appropriate standing within theorganisation5.2.5 annual review of the effectiveness of internal audit5.3 External AuditThe Committee shall review the work and findings of theExternal Auditor appointed by the Audit Commission andconsider the implications and management’s responses to theirwork. This will be achieved by:5.3.1 consideration of the appointment and performance of theExternal Auditor, as far as the Audit Commission’s rulespermit5.3.2 discussion and agreement with the External Auditor,before the audit commences, of the nature and scope ofthe audit as set out in the Annual Plan, and ensurecoordination, as appropriate, with other External Auditorsin the local health economy5.3.3 discussion with the External Auditors of their localevaluation of audit risks and assessment of theAuthority/Trust/PCT and associated impact on the auditfee5.3.4 review all External Audit reports, including agreement ofthe annual audit letter before submission to the Boardand any work carried outside the annual audit plan,together with the appropriateness of managementresponses5.4 Other Assurance FunctionsThe Audit Committee shall review the findings of othersignificant assurance functions, both internal and external to theorganisation, and consider the implications to the governance ofthe organisation.These will include, but will not be limited to, any reviews byDepartment of Health Arms Length Bodies orRegulators/Inspectors (e.g. Care Quality Commission, NHSLitigation Authority, etc.), professional bodies with responsibilityPage 6 of 8

for the performance of staff or functions (e.g. Royal Colleges,accreditation bodies, etc.)In addition, the Committee will review the work of othercommittees within the organisation, whose work can providerelevant assurance to the Audit Committee’s own scope of work.This will particularly include the Integrated GovernanceCommittee but it will not involve duplicating the work alreadydone by that board sub committee.In reviewing the work of the Integrated Governance Committee,and issues around clinical risk management, the AuditCommittee will wish to satisfy themselves on the assurance thatcan be gained from the clinical audit function.5.5 ManagementThe Committee shall request and review reports and positiveassurances from directors and managers on the overallarrangements for governance, risk management and internalcontrol.They may also request specific reports from individual functionswithin the organisation (e.g. clinical audit) as they may beappropriate to the overall arrangements.5.6 Financial ReportingThe Audit Committee shall review the Annual Report andFinancial Statements before submission to the Board, focusingparticularly on:5.6.1 the wording in the Statement on Internal Control andother disclosures relevant to the Terms of Reference ofthe Committee5.6.2 changes in, and compliance with, accounting policiesand practices5.6.3 unadjusted mis-statements in the financial statements5.6.4 major judgemental areas5.6.5 significant adjustments resulting from the auditThe Audit Committee will also ensure that the systems forfinancial reporting to the Board, including those of budgetarycontrol, are subject to review as to completeness and accuracyof the information provided to the Board.Page 7 of 8

5.7 Self AssessmentThe Committee will undertake an annual self-assessment asdefined in the audit committee members hand book.6. Approval and Review6.1 These terms of reference were approved by the Board inSeptember 2011.6.2 These terms of reference shall be reviewed at the first meetingof the audit committee and reviewed annually thereafter.Page 8 of 8