Fraud in schools - some thoughts on the DfE's risk indicator checklist for academies

Allegations, fraud, corruption and bad behaviour have been in the news. A knighted Headteacher was convicted of false accounting and narrowly missed a custodial sentence for false accounting. A free school was being investigated after allegations of irregularities. Derby University was forced to strongly deny claims that it falsified official statistics on graduate employment.

Also this week Times Higher Education carried an article about a Transparency International report which warned financial pressures could impact on ethical standards. Global Corruption Report: Education noted:

The very structure and culture of colleges and universities, as well as the current constraints under which many…operate, can create conditions that facilitate fraud.

This makes it timely to look at the recently published guidance from the Department for Education (DfE ) on fraud. Last month the Education Funding Agency at the DfE issued Fraud Indicators: A checklist for academies (download here).

The Fraud Indicators checklist details “generic” indicators including “personal and organisational motives for fraud, possible weakness of internal controls, transactional indicators and possible methods of committing and concealing fraud”. The DfE suggest that the checklist “may be helpful for use as a checklist where concerns exists that fraudulent activity may be taking place”.

It would be easy to mock the section headed Personal Motives – many organisations would show a red flag on fraud indicators such as “personnel believe they receive inadequate compensation and/or rewards”, “disgruntled employee”, “recent failure associated with specific individual” and “personal animosity or professional jealousy”. Nevertheless these soap opera indicators do highlight that in the fraud triangle motivation and rationalisation sit with opportunity.

Under the heading of Organisational Motives, how many of us have known organisations “experiencing financial difficulty”, burdened by “under unusually tight time deadlines to achieve level of outputs” or having “suffered disappointment/reverses/consequences of bad decisions”.  Still the checklist is right to point to the problems which arise from an all-powerful head and governance which lacks clarity and direction. How many schools are dominated by Heads with Maxwell-sized egos.

Flippancy aside, this is all useful stuff. However, as with all self-assessments, they are treated most seriously by those who are least in need of reflection and criticism.

The checklist sets out what poor policies, procedures and practices look like. The document is fairly comprehensive. One area where the checklist says little is audit. It notes that critical audit reports and obfuscating auditees are fraud indicators. But what about where managers do not put in place robust internal audit arrangements and/or where governors let weak internal audit arrangements persist. The Principal’s PA or a governor without the time and skills to be an internal auditor is never enough.

Also it is worth noting that the checklist focuses on fraud risks internal to academies. There are plenty of external risks – and organisations tend to pay more attention to them (even if, not enough).

So what is my conclusion? If you are a manager, governor, internal or external auditor, spend some time working through the Fraud Indicators: A checklist for academies. If enough academies do treat fraud risks more seriously, academy assets and public funds will be better safeguarded as will the reputation of the sector.

The National Audit Office on risks in academies

Over the summer the National Audit Office published guidance to the external auditors of academies. The guidance, NAO Communication with academy auditors 2013, has been issued as the academies are consolidated into the “group accounts” of the Department for Education – so academy auditors are auditing parts of the DfE.

The guidance will be fascinating for audit anoraks. It will also be of interest to anyone many others including principals, senior managers, governors and ROs/internal auditors. The short guide highlights what the auditors at the NAO worry about.

We … consider, because of the number and variety of providers, there is an inherent risk that across the academies sector there could be material or systemic irregularity, which may be heightened in newly converted academies. Particular areas of concern include:

• Approval from the Secretary of State not being sought for certain transactions above delegated authorities, outlined in the academies financial handbook;
• Fraud or misappropriation of funds, especially at the Trust level in a multi academy trust; and
• The increasing risk that academies with long standing deficits may become insolvent.

Fraud and insolvency are of wider public interest too.

In terms of regularity (i.e. income and expenditure being applied, in all material respects, for the purposes intended by Parliament), the NAO advise:

• There are a number of themes which the auditor should consider when identifying the risk of irregularity. These themes include:
• Misuse of funds by head teachers (i.e. using academy funds for personal gain);
• Governance at multi academy trusts (i.e. oversight of activities of individual academies, or weak controls at the trust level)
• Weaknesses in procurement (i.e. non-compliance with EU procurement rules, or employment/contracting with related parties)

Clearly audit and assurance are vital to keeping academies on the right track – and spotting problems if they do start to go off the rails.

Academies and audit committees: where to start with terms of reference

The Academies Financial Handbook issued last week by the Department for Education nudges Academy Trusts (ATs) towards audit committees but allows other committees to incorporate the role of an audit committee into their remits.

The Handbook states:

All ATs must establish either an audit committee or a committee which fulfils the functions of an audit committee (ie it could be an addition to the terms of reference to an existing committee, other than the finance committee, and have an overlapping or fully integrated membership).

The apparent block on combined finance and audit committees may pose a challenge to some ATs. It will not be a surprise who are familiar with audit codes of practice in the college sector.

The audit code of practice introduced for colleges in 2004 (pdf) offers a useful template for setting out the role of an audit committee. Below I have modified its terms of reference to suit an AT:

The Audit Committee will consider matters relating to internal control and auditors. In particular the Committee is to:

• advise the governing body on the adequacy and effectiveness of the Academy Trust’s systems of internal control and its arrangements for risk management, control and governance processes, and securing economy, efficiency and effectiveness (value for money) ;
• review the statement on internal control and make appropriate recommendations to the governing body;
• advise the governing body on the appointment, reappointment, dismissal and remuneration of auditors (both external auditors and internal audit);
• monitor the effectiveness of auditors, including the use of auditor performance indicators;
• ensure effective coordination between auditors;
• ensure that additional services undertaken by the auditors is compatible with the audit independence and objectivity;
• agree the work programme of internal audit including the checking of financial controls, systems, transactions and risks;
• consider the reports of the auditors and, when appropriate, advise the governing body of material controls issues;
• monitor the implementation of agreed audit recommendations;
• ensure that all allegations of fraud and irregularity are appropriately investigated and controls weaknesses addressed;
• recommend the annual financial statements to the governing body for approval
• review the committee’s membership and effectiveness on a annual basis to ensure that it has appropriate skills and relevant experience.

This wording assumes that the Academy Trust refers to its assurance function as internal audit rather than a Responsible Officer. The wording can be tweaked on this and other Academy Trust specifics. Otherwise it can be adopted for a standalone committee or inserted into the terms of reference for another committee.

Internal control and audit committees - the new Academies Financial Handbook

In the past there was a degree of ambiguity about whether academies had to have an audit committee. The 2006 Academies Financial Handbook itself did not require one but it included, as an appendix, a document which did. The 2012 Academies Financial Handbook (AFH) clarifies the situation.

The AFH states the role of the audit committee:

The committee must review the risks to internal financial control at the [academy trust] and must agree a programme of work that will address these risks, inform the statement of internal control and, so far as is possible, provide assurance to the external auditors.

 
The AFH clearly requires that academy trusts (which, of course, includes free schools) must establish “either an audit committee or a committee which fulfils the functions of an audit committee”. Some trusts by virtue of size or nature are expected to have a separately constituted audit committee (i.e. one which does not also function as a finance committee).

Every [academy trust] must have in place a process for independent checking of financial controls, systems, transactions and risks.

Ideally this process should be driven by an audit committee appointed by Governors, but EFA recognises that this may not be a practical position for every [academy trust], especially the smaller ones or ones where there is a limited pool of potential governors to provide the necessary direction. So, EFA has provided for a system which allows some flexibility as to how any particular [academy trust] discharges these requirements.

 All [academy trusts] must establish either an audit committee or a committee which fulfils the functions of an audit committee (i.e. it could be an addition to the terms of reference to an existing committee and have an overlapping or fully integrated membership). The decision will be for Governors and should reflect the size and complexity of the organisation.

EFA's expectations are that that:

All [academy trusts] that are a multi-academy federation must have a dedicated audit committee;

All [academy trusts] with an income of over £10m or capitalised asset value of over £30m should consider having a dedicated audit committee;

All other [academy trusts] may have a dedicated audit committee.

The new Academies Financial Handbook (AFH) moves beyond internal financial controls and risks to internal control more broadly. This makes sense: while financial viability is vital so are other objectives –

The AFH states:

The [academy trust] should have in place sound internal control and risk management processes.

While the AFH talks of internal control and risk, strangely the AFH section on internal control is narrowly focused on matters such as producing annual accounts, preparing contingency plans, obtaining insurance etc.

These things all matter. But tinternal financial control falls short of the concept of internal control developed by the Turnbull Committee for listed companies and adopted by the Treasury for the public sector over a decade ago. "Turnbull" required:

An internal control system encompasses the policies, processes, tasks, behaviours and other aspects of a company that, taken together:

facilitate its effective and efficient operation by enabling it to respond appropriately to significant business, operational, financial, compliance and other risks to achieving the company's objectives. This includes the safeguarding of assets from inappropriate use or from loss and fraud, and ensuring that liabilities are identified and managed;

help ensure the quality of internal and external reporting. This requires the maintenance of proper records and processes that generate a flow of timely, relevant and reliable information from within and outside the organisation;

help ensure compliance with applicable laws and regulations, and also with internal policies with respect to the conduct of business.

If you plug in academy in place of company, that is highly relevant to good governance and management. It is also far more wide-ranging than contingency plans and insurance policies. It is about staff and pupil safety, academic performance, inspection grades, legal compliance, equality and diversity, and many other objectives.

So what should academies be doing if they should be thinking about controls and risks beyond the financial?

Academies need to ensure that audit committee review not only the risks to internal financial control but also the risks to delivery of all critical objectives. In performing that review, they should be directing the Responsible Officer or the internal auditor (or whatever the assurance function is called) to evaluate controls and test controls in those critical areas. At new academies with immature financial processes, much of the work will be around payroll and purchasing. As academies get better established, non-financial systems will get more attention and financial ones less.

The path from local authority control to independence has been trod before. In the 1990s over 400 further education colleges went that way. Many survived. Some lived on within merged institutions. A few merged or closed after failure – sometimes in scandal. For those of us working with colleges then and now, there were lots of interesting case studies and good practice and not-so-good practice.

Audit committees and internal audit contributing (or not) to internal control were part of the reason why colleges succeeded (or not).

"Turnbull" was an issue for colleges then. Now it should be a challenge for academies. Taking the AFH and going further – rigorous review of both financial and non-financial risks with audit committees pushing that agenda.

Audits and risks: the new Funding Agreement for sixth form colleges

The Education Funding Agency’s new Funding Agreement for sixth form colleges is a strange beast. It is clearly a slimmed down version of the 2006 Learning and Skills Council’s variant. But in slopping parts off, there seem to be some strange and perhaps unintended consequences.
In the 2006 Financial Memorandum colleges were instructed:

The College must ensure that it has an effective policy of risk management (including appropriate insurance arrangements). The College’s risk management arrangements should consider the key principles given in LSC guidance.

In a far more uncertain and hazardous environment, the 2012 Agreement does not utter a word to sixth form colleges on risk management. As established and largely mature organisations, I would hope they will carry on managing risks and enhance their arrangements.

While the words on risk management are omitted from the 2012 Agreement, oddly the wording on internal remains unchanged. So where the 2006 Memorandum states:

The governing body shall appoint an audit committee and arrange to provide for internal and financial statements audit, including regularity audit, in accordance with the LSC’s Audit Code of Practice and any other directions drawn up and published by the LSC in consultation with colleges. Any mandatory requirements under the LSC Audit Code of Practice shall be a condition of funding under this financial memorandum.

The 2012 Agreement states:

The Governing Body shall appoint an audit committee and arrange to provide for internal and financial statements audit, including regularity audit, in accordance with the Joint Audit Code of Practice and any other directions drawn up and published by the EFA in consultation with SFC. Any mandatory requirements under the Joint Audit Code of Practice shall be a condition of funding under this Funding Agreement.

Some mistake surely?

Only today, the Education Funding Agency reminded sixth form colleges that they did not have to make provisions for internal audit from August 2012. (Of course, any sensible college will await the Agency’s guidance before making use of this new flexibility.)

The end is nigh: the internal audit requirement for Sixth Form Colleges

So we finally know what we kind of knew before: the government (via the Education Funding Agency) wants to relieve Sixth Form Colleges (SFCs) of the mandatory requirement to have an internal audit service. This is not a surprise as the SFC sector was on a promise from Lord Hill. A consultation period end in June and then in August it will be up to governors on SFC corporations whether they need internal auditors

As the typical SFC has an annual income of around £10m, the end of the internal audit requirement does make some sense.

Over four years ago, I blogged here:

The re-arrangement of [the LSC into] agencies might, on a brighter note, lead to a re-think of audit for colleges. (But I doubt it.) I would query whether the smallest colleges – particularly the smaller sixth form colleges – need their own internal audit service. These colleges often have a total income of a few million and limited non-core activities. They are quite different from Newcastle College with its £150 million income.

The smaller colleges are little different from the schools that they compete with for staff and students. They are arguably less exposed to risk than small housing associations who are not obliged to have their own internal audit.

While the internal audit requirement is going, the Education Funding Agency nudges SFCs as it:

recognises that in many areas of both the public and private sectors it is accepted good practice to have Internal Audit.

Audit committees at SFC will need some help in determining how to respond post-requirement. What does that nudge mean for them? I am sure that auditors and others will have their own views on what their potential and actual clients should do. More independent support and advice would be welcome too.

While I generally welcome “freedoms and flexibilities” I have some concerns over the end of the Financial Management and Control Evaluation (FMCE) self-assessment. For most SFCs the FMCE was completed in summary form annually and in full triennially. Something less “tick box” was definitely needed. The Education Funding Agency proposes:

Instead, the EFA will take formal assurance from the Corporate Governance Statement included within SFCs’ annual financial statements. Whether or not SFC’s continue to use the return as an aide memoire for their own management purposes is a matter for individual colleges to decide.

How often do SFCs or other organisations depart materially from boiler-plate wording in the Corporate Governance Statements? Not often enough. Maybe  audit committees will now spend more time drafting and considering these Statements.  But I am a little doubtful.

I hope that the Sixth Form Colleges Forum will provide support in this and other areas as SFC respond to this brave new world.

Is fraud rocketing? Even if it isn’t, what should you do about it?

Last week Public Finance was reporting that levels of fraud rocketed during 2010. There is plenty of media coverage of fraud. This week I joined in tweeting a link to a
blog about Portsmouth University and MacIntyre Hudson’s survey of public sector fraud.

It is worth emphasising that the Public Finance’s report was based on KPMG’s Fraud Barometer which tracks fraud cases in UK Crown Courts. So detected fraud is “soaring” – is actual fraud up?

Recessions, credit crunches, austerity, etc have a tendency to expose financial chicanery. Just ask Max Madoff. I am sure that Bob Maxwell would agree.

To borrow a great quote from Warren Buffett and use it in a different context:

It's only when the tide goes out that you learn who's been swimming naked.

Of course, total – detected and undetected – fraud may be up too – in line with media coverage. For example, some of the squeezed middle may resort to white collar crime in hard times. Media coverage may even have a copycat effect – MPs are not the only ones who may be susceptible to the feeling that if colleagues’ snouts are in the trough, they should no be missing out. Experts point to need, opportunity and justification driving fraud - "others doing it" offers a self-justification for some.

Organisations should treat the fraud threat seriously. They should ensure that internal audit allocate sufficient days to fraud detection using IT tools as well as addressing fraud risks as an integral part of other audit reviews.

Armchair auditors and their weapons in the war on waste

Last week I heard a local authority Head of Internal Audit refer to Eric Pickle’s army of “armchair auditors” as “nutters”.

I looked the term up on The FreeDictionary. “Nutter” is a slang term for:

“A crazy or eccentric person.” or
“An enthusiast; a buff” or
A part of the male anatomy.

This made me think as I am interested in issues of public finance and mental health.

I suspect that those who want to scrutinise records of public spending may be slightly eccentric. Perhaps this is only a matter of degree – these armchair auditors choose to do their stuff for free unlike professional auditors.

I do think that there is potential in “armchair auditors”. Look at the creation of a huge encyclopedia online from the crowd-sourcing endeavours of those who right and edit articles using wiki technology.

Technological mashups might offer them an impressive arsenal. In the UK Mysociety introduced a range of tools for improving democratic accountability: They work for you; FixMyStreet; Whatdotheyknow. These got taken up by the last government with its No 10 petitions site.

In September Dan Herbert in Public Finance surveyed what the current government’s “data-sharing revolution” had prompted. It is worth looking at some of the tools he refers to. Some – like wheredoesmymoneygo.org - provide interesting information for tax payers on how public funds are spent but this is not really raw material for armchair auditing. Others set out more detail – such as Spotlight on Spend and Armchair Auditor – but not really enough to give any armchair auditors scope to drill down to provide either comfort or concern.

As the Reluctant Armchair Auditor on The Guardian’s Datablog noted last week:

For this to work in the way envisaged, councils must put out a lot more information and in a format that can be used by anyone. There has to be sufficient context to enable anyone reading the information to understand what is being bought and why. Then you can have a sensible discussion about whether the spending makes sense or is value for money. We can then deal with the material figures not the trivial ones which cause most of the negative publicity.

Of course, it is early days. The army of “armchair auditors” may have a long march ahead of them. But it is vital that government – local and national – provide assistance in terms of useful data in helpful formats.

Internal audit in a new world for local authorities

Today I attended CATs - Cipfa’s Audit Training in the Midlands – as someone who more than dabbles in internal audit and sits on an audit committee. The session started with a overview of internal audit and governance by Robin Pritchard, Professor of Internal Audit at Birmingham City University. Professor Robin stressed the importance of stakeholders in governance and hence for internal audit.

As over 90% of the audience at CATs were local authority internal auditors it struck me how they were about to face a tsunami of change. A couple of the speakers touched on cuts and “transformation” in local government. What was not mentioned was the likelihood of new models of local government.

In Lambeth there is the John Lewis Council – a Labour council seeking to become a “co-operative council” by hiving-off functions to mutual organisations and community ownership. Then there are the easyCouncil models with Conservative councils adopting the budget airlines as a template.

Recently there was Suffolk County Council which is developing a vision of an “enabling council” with many activities (and almost all staff) divested. This clearly chimes with the Big Society rhetoric of central government.

In all of this there are new models of local government with a scaled back core and a series of out-sourcing relationships going far beyond past and partial contracting out. Of course thrown into the mix are shared service centres and even shared management teams.

So where are internal audit in all this? Does it shrink? And just look at contract compliance and performance? I suspect that will not be enough.

If governance and internal audit is as much about stakeholders as Professor Robin says, internal audit has a key role. It will need new approaches and skills – probably more training and seminars too.

Ethics – not expenses?

It now seems that the expenses furore has died down. Its effects will be legion. One effect will doubtless be in the audit plans that internal auditors propose and audit committees consider.

Thousands of internal audit days will be devoted to checking the processes for expenses as internal auditors and audit committees will have been unsettled by the Westminster expenses scandals. If anyone needed a reminder of the seriousness of reputational risks, they have had it. (It’s worth noting that the ripples of the expenses row have reached both the BBC and charities.)

Will those internal audit days be well-spent? Definitely, sometimes.

Where expenses policies are poorly worded, inadequately applied and widely disrespected, some lessons may be learned and culprits may be caught. However, I do wonder if elsewhere the internal audit resource might be better deployed looking more widely at the ethical environment of organisations.

How often do internal auditors look at:

1) How a culture of ethical responsibility is fostered across the organisation?

2) How well codes of ethics are agreed, communicated and bought-in to?

3) How responsibility for ethical matters, legal compliance and reputational risk is allocated?

4) How effectively are social, environmental and ethical risks integrated into risk management?

5) How does the board set itself ethical standards (along the lines of the IoD’s Standard for Directors)?

The answer is not very often and maybe not very well. There is a risk that these kind of reviews degenerate into empty tick-boxing.

I am aware that some housing associations have renamed their audit committees as audit and ethics committees. It will be interesting to see if that means more than a nod in the right direction.

Certainly audit committees do need to look at the wider ethical scene rather go searching for duck houses.

One Plus governance issues equals organisational failure

The Office of the Scottish Charity Regulator (pronounced Oscar for those of us south of the border) has issued a report into the collapse of the Scottish charity One Plus: One Parent Familes (no relation of One Parent Families/Gingerbread or its sister charity One Parent Families Scotland). One Plus went down with an overdraft of £2m plus – as well as other debts. OCSR’s case study report found “important lessons”.

The section on governance issues reads like a visit to a chamber of horrors. This is even sadder as the board were interested and enthusiastic.

1) “The Board did not appear to contain adequate skills and independence of thinking to reflect the needs of a multi-million-pound business” - including poor arrangements for recruitment and development, a finance committee that had difficulty meeting, the Board did "not seem capable and willing to hold the previous Chief Executive and Senior Management Team (SMT) to account".

2) “The lack of timely or full financial information being presented to the Board” - including tabled papers, out-of-date and insufficient information.

3) “The scale, skills and leadership of the finance department seems not to have been adequate for the size of charity”.

4) “The apparent lack of independent third party advice sought by the Board” - "The charity and the directors tended not to seek advice nor engage with the external auditors between audits", no internal auditors and no audit committee.

5) "Both the Board and the SMT appear not to have taken responsibility for making decisions to resolve difficulties when they were identified".

The other sections of the report, including those dealing with broader funding issues, are worth a read too.

Its worth noting that the same themes recur in so many organisational failures in the public and third sectors. The sooner those lessons are learnt, the better.

Lies, damned lies and performance management

Last week’s Public Finance magazine carried an interesting article about performance management – yes, really. It included a disturbing statistic: over 70% of recipients in a recent survey admitted to fabricating performance data. (How many of the others didn’t like to admit it?)

We know about perverse incentives, erroneous errors and even issues with performance data to regulators and clients, but this is organisations telling themselves lies.

(Before I go on, I should stress that I am a sceptic when it comes to “targets” as reform and performance information as a panacea. But performance information is integral to good governance.)

What can be done? A mature attitude to performance information would be a start – seeing it as a means to an end rather than an end in itself; measuring what matters rather than what is easily measurable.

There is also value in assurance. Boards and managers should ensure that key information systems are reliable. How can they do their job if they are driving with a faulty dashboard?

Larger housing associations have to get certain operational performance information systems verified periodically. Other organisations could get internal auditors to check out performance information systems. Yet in most of the public sector and third sector performance information is just accepted at face value.

Audit committees - some (late) new year's resolutions

I am not having a week of plugging the Audit Committee Institute (sponsored by KPMG). But I would recommend the ACI’s latest quarterly. It carries an article on Ten To-Do’s for Audit Committees in 2008.

A couple of the To-Dos are, in my opinion, less priorities for the audit committees of the public and third sectors. The rest are:

- Be a catalyst for improving risk management and oversight.

- Make sure the CFO (chief financial officer) and the finance team have what they need to succeed.

- Ensure there’s a shared vision for internal audit.

- Encourage (expect) frequent, informal communications with the audit engagement partner.

- Be prepared for a crisis.

- Make sure the full board is aware of the audit committee’s activities and needs.

- Assess the tone at the top and throughout the organisation.

- Take a hard look at the audit committee’s performance.

The article has some suggestions on all of these too.

As I’ve signposted before, there is plenty of useful guidance out there for audit committee members in all sectors.

Some thoughts on audit, governance and regulation in colleges

I have some doubts over the government’s plans to redistribute the role of the Learning and Skills Council among a Young People’s Funding Agency, adult Skills Funding Council, a National Apprenticeships Service and over a hundred local authorities – oops, I almost forgot the sub-regional clusters. What an article in the Guardian dubbed a "quango tango". Camparisons with the fragmentation of British Rail aren't exactly cheery. But let us put to one side issues of joined-up government and managing the transition, what about the implications for the regulation and governance of colleges who deliver so much education and training?

Presumably the “provider assurance” function of the LSC will be split two or more ways. This will be sad as this will be disruptive and risk a fall-out of auditors who do know colleges - even if they can be frustrating at times. Any loss of experience and expertise may result in a nit-picking defensive mentality or a soft-touch approach (as opposed to an effective light-touch). Possibly colleges will get both.

The re-arrangement of agencies might, on a brighter note, lead to a re-think of audit for colleges. (But I doubt it.) I would query whether the smallest colleges – particularly the smaller sixth form colleges – need their own internal audit service. These colleges often have a total income of a few million and limited non-core activities. They are quite different from Newcastle College with its £150 million income.

The smaller colleges are little different from the schools that they compete with for staff and students. They are arguably less exposed to risk than small housing associations who are not obliged to have their own internal audit.

As always there is a need for a cost-benefit analysis.

I am not downplaying the importance of internal control. I certainly think that all colleges should have their own audit committee – which should assess and report to governing bodies how assured they can be that internal control is robust. Whether they get this assurance from internal audit, external audit, healthchecks by consultants, or whatever, should be a matter for them.

Auditors as unsung heroes and the role of audit committees

No one likes auditors – or so it seemed until I read in yesterday’s Guardian that Auditors are unsung heroes.

To be precise, Duncan Campbell-Smith was only really talking about the Audit Commission who audit local government and the NHS (and inspect social landlords). But I’ll claim some credit as I temped in the mid-90s for District Audit!

It is nice for auditors and accountants to get some good press. Their image problems are such that there are even calls for jihad against the profession.

On a serious note, I do think that when – in the aftermath of organisational failure in the private, public or even third sector - the cry goes up of “where were the auditors”, we should also ask about the audit committee who should have been thinking about risk and internal control. Auditors need audit committees to keep them on their toes. In order to do that effectively, audit committees have to know what their own purpose is. Too often they don’t.

Audit committees with added value - the NAO's "top tips"

The National Audit Office has launched a new edition of its Audit Committee Handbook. While it is primarily intended for audit committees of government organisations, other audit committee members may find it useful.

Alongside the Audit Committee Handbook there is a self-assessment checklist and a guide to “adding value”. The latter includes some practices that many audit committees would consider to be fairly routine or standard. However, it does suggest some practices that are less common but would certainly add value such as:

- calling appropriate business heads to meetings to explain how they are delivering on their agreed actions or on risks for which they are responsible; and

- improving communication between audit committee chairs and auditors with meetings outside of the formal committee meetings.