Audit Committee
1. Constitution
1.1 The Audit Committee is a committee of the Board of the Learning and Skills Network (“LSN”).
1.2 This document sets out the terms of reference under which the members of the Audit Committee will carry out their duties.
1.3 The Committee’s terms of reference may be amended at any time by the Board.
1.4 The Committee may from time to time investigate, discuss or review matters outside its terms of reference if required to do so by the Board.
2. Aims
2.1 The Audit Committee assists the Board by reporting to it on the integrity and regulatory compliance of the financial statements of LSN; the effectiveness of LSN’s internal controls, risk management and compliance systems and the independence and performance of the internal and external auditors.
3. Authority
3.1 The Committee is authorised by the Board to seek any information it requires from any employee of LSN in order to perform its duties.
3.2 In connection with its duties the Committee is authorised by the Board to obtain, at LSN’s expense, any appropriate external legal and other professional advice.
3.3 The Committee’s responsibilities extend to any wholly owned subsidiaries of the LSN.
3.4 The Committee has delegated authority to approve the remuneration of the external and internal auditors subject to the annual reappointment by the Board.
4. Membership
4.1 The members of the Audit Committee shall be appointed by the Board.
4.2 The committee will consist of no fewer than 3 board members, and others with appropriate skills and expertise of whom at least 1 is external and independent of the charity and at least one of the members shall have recent and relevant financial experience. External co-opted members may speak and otherwise take part in the meeting on a consultative basis but are not normally eligible to stand as Chairman of the Committee.
4.3 Only members of the committee have the right to attend committee meetings. However, other individuals such as the chairman of the board, chief executive, finance director, and other directors may be invited to attend all or part of any meeting as and when appropriate in an advisory capacity. Staff may be asked to withdraw from the meeting when representatives from the internal or external auditors are in attendance.
4.4 The external auditors will be invited to attend all meetings of the committee.
4.5 Appointments to the committee shall be for a period of up to three years, which may be extended for two further three year periods, provided the director remains independent.
4.6 The Board shall appoint the Committee Chairman who shall be a Board Member. In the absence of the Committee Chairman and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting.
5. Secretary
5.1 The Company Secretary or their nominee shall act as the Secretary of the Committee.
6. Quorum
6.1 The quorum necessary for the transaction of business shall be 2 members one of whom shall be a Trustee. A duly convened meeting of the committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the committee.
7. Frequency of meetings
7.1 The committee shall meet not less than twice a year and at such other times as may be required
8. Notice of meetings
8.1 Meetings of the committee shall be called by the Secretary of the Committee at the request of any of its members or at the request of external or internal auditors if they consider it necessary.
8.2 Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the Committee, any other person required to attend and all other non-executive directors, no later than 5 working days before the date of the meeting. Supporting papers shall be sent to Committee Members and to other attendees as appropriate, at the same time.
8.3 Meetings of the Committee may be held by teleconference or videoconferencing, or any other means that enables all Committee Members to participate at the same time.
9. Minutes of meetings
9.1 The secretary shall minute the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance.
9.2 The secretary shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly.
9.3 Minutes of Committee meetings shall be circulated promptly to all members of the Committee and, once agreed, to all members of the Board, unless a conflict of interest exists.
10. Duties
The Committee shall:
10. 1.1 review the Annual Report and Accounts and the statements to be included in the trustees’ report before their submission to the Board focusing particularly on;
- any changes in accounting policies and practices;
- significant adjustments arising from the audit;
- compliance with accounting standards;
- the clarity of disclosure in the financial reports; and
- all material information presented with the financial statements, such as the operating and financial review and the corporate governance statement.
10. 2.1 review the effectiveness of the charity’s internal controls and risk management systems;
10. 2.2 consider the process of LSN’s high-level risk assessment, including major financial and other risk exposure, and discuss with management and the external auditors ,as appropriate, the steps taken to monitor and mitigate such risks;
10. 3.1 review arrangements by which staff may , in confidence, raise concerns about possible wrongdoing in matters of financial reporting or other matters to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow up action;
10. 3.2 review LSN’s procedures for detecting fraud;
10. 4.1 oversee the relationship with the internal and external auditors including considering and make recommendations to the Board in relation to:
- the selection process, appointment (including terms of engagement) and re-appointment of the company’s internal and external auditors;
- the resignation or dismissal of the auditors and investigation of the issues leading to a resignation and decision whether any action is required;
- the independence and objectivity of the auditors taking into account professional and regulatory requirements and the relationship with the auditor as a whole, and where the auditor supplies or starts to supply a substantial volume of non-audit services to LSN, the nature and extent of such services, seeking to balance the maintenance of objectivity and value for money;
- the auditor’s compliance with professional guidance on the rotation of audit partners, the level of fees paid by the company compared to the overall fee income of the firm, office and partner and other related requirements;
- the auditors’ qualifications, expertise and resources and the effectiveness of the audit process which shall include a report from the auditor on their own internal quality procedures and advising the Board on any changes that ought to be made to their terms of engagement;
10.4.2 approve the audit fee of the internal and external auditors and that the level of fees is appropriate to enable an adequate audit to be conducted;
10.4.3 review and assess the annual internal and external audit plan before the audit commences and ensure that they are consistent with the scope of the audit engagement;
10.4.4 review any representation letter(s) requested by the external auditor before they are signed by the Board;
10.4.5 review all reports to the Audit Committee from the internal and external auditors;
10.4.6 review the contents of the External Auditors’ Management Report along with the management’s written response and the findings of the external audit with the external auditor including:
- a discussion of any major issues which arose during the audit;
- any accounting and audit judgments
- levels of errors identified during the audit;
10.4.7 review and monitor the implementation of any recommendations from the internal and external auditors which are accepted by the Committee;
10.4.8 meet the internal and external auditors at least once a year, without management being present, to discuss their remit and any issues arising from the internal and external audits carried out. In addition, the partners in charge of the internal and external audits should have direct access to the Chairman of the Committee;
10.5.1 seek to ensure co-ordination with the activities of the internal and external auditors
10.6.1 consider the major findings of internal investigations and management’s response and to monitor any approved complaints procedures.
11. Reporting Responsibilities
11.1 The Committee Chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities to ensure that the Board is aware of matters that may significantly impact on LSN.
11.2 The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
11.3 The Committee shall provide an annual report on its activities to the Board.
Reviewed May 2009
Approved by the Board on 16 June 2009