GATESHEAD COUNCIL INTERNAL AUDIT SERVICE AUDIT CHARTER Definition of Internal Audit The Councils Internal Audit Service

e has adopted the CIPFA Code of Practice for Internal Audit in Local Government 2006 definition of Internal Audit. Internal Audit is an assurance function that primarily provides an independent and objective opinion to the organisation on the control environment by evaluating its effectiveness in achieving the organisations objectives. It objectively examines, evaluates and reports on the adequacy of the control environment as a contribution to the proper, economic, efficient and effective use of resources. Statutory Role, Objectives and Responsibilities The overall Strategy of Internal Audit is to deliver a risk-based audit plan in a professional and independent manner. To provide the Council with an opinion on the level of assurance it can place upon the internal control environment, and to make recommendations for continuous improvement in this area. The Internal Audit Service is an assurance function established by the Council under the requirements of the Accounts and Audit Regulations 2006. Delegated responsibility to maintain an adequate and effective internal audit of the Councils accounting records and control systems rests with the Strategic Director, Finance and ICT. The Internal Audit Service is a managerial control primarily responsible for objectively examining, evaluating and reporting upon the adequacy of the internal control environment as a contribution to the proper economic, efficient and effective use of resources. The principal objective of the Internal Audit Service is to assist all levels of management in delivering the objectives of the Council and its associated bodies, through the assessment of exposure to risk and the continuous improvement of the control environment. To this end the Internal Audit Service is required to review, appraise and report upon: The soundness, adequacy and application of accounting, financial and other operational controls. The extent of compliance with established policies, plans and procedures, statute and regulations.

 The extent to which the Councils assets and interests are properly accounted for and safeguarded from losses of all kinds including fraud, corruption, other offences, waste, extravagance, inefficient administration, poor value for money or other cause. The suitability and reliability of financial and other operational information. The economy, efficiency and effectiveness with which resources are utilised. Whether operations are being carried out as planned and objectives and goals are being met. The investigation of instances of fraud and irregularities. Scope, Planning and Conduct of Audit Activity The scope of the Internal Audit Service activity allows for unrestricted coverage of the Councils control environment, which includes all of its operations, resources, services and responsibilities in relation to other bodies. The Chief Internal Auditor, in consultation with the Strategic Director, Finance and ICT, other Strategic/Group Directors and Heads of Service will have the freedom to determine the priorities for Internal Audit Service activity. The Chief Internal Auditor will carry out a systematic review and evaluation of all aspects of the internal control environment, in line with the Code of Practice, through consideration of the Councils risk register and consultation with Strategic/Group Directors, Heads of Service and the Audit Commission. This enables the Chief Internal Auditor to prepare a three-year risk-based strategic plan, covering all areas of the Council, to provide purpose and direction in this process. Each year the three-year Audit Strategy will be updated and an annual operational audit plan prepared based upon the risk-based strategic audit plan and consultation with Heads of Service within the Council. The Strategy and the broad content of the plan, and progress against it, will be reported to the Audit Committee. Arrangements are in place with Group/Strategic Directors, Heads of Service, the Senior Insurance and Risk Officer and the Service Improvement Manager to inform Internal Audit of changes in Council systems and procedures on an ongoing basis. The Internal Audit Service will perform the planned audit work in accordance with the CIPFA Code of Practice for Internal Audit in Local Government 2006 and the prescribed procedures outlined within the Councils Internal Audit Manual. Auditors will carry out their duties in compliance with the Code and the ethics detailed within it. These have four principles (integrity, objectivity, competence and confidentiality) and set a minimum standard of performance and conduct.

The Internal Audit Service will have no responsibilities over the activities that it audits beyond the furnishing of recommendations and advice to management on associated risks and controls. The existence of the Internal Audit Service does not diminish the responsibility of management to establish systems of internal control to ensure that activities are conducted in a secure, efficient and wellordered way. Audit Reporting All audit assignments will be the subject of formal reports. Draft reports will be issued to the Head of Service and Service Manager responsible for the area under review. Following the agreement of the draft report the Head of Service will complete an action plan specifying the actions to be taken to implement the recommendations. Final reports, with completed action plans will be issued to the relevant Strategic/Group Director and where appropriate, the Strategic Director, Finance & ICT. Management is expected to implement all agreed audit recommendations within a reasonable timescale and each audit will be followed up to assess the extent to which this has happened. In addition, the overall findings of audit work will be reported, by the Chief Internal Auditor, to the Strategic Director, Finance and ICT and the Audit Committee in line with the Code of Practice on a quarterly basis. The Chief Internal Auditors annual report to the latter will contain an opinion on the overall adequacy and effectiveness of the Councils Internal Control Environment based on the work of the Internal Audit Service during the year. This supports the Councils Annual Governance Statement in the Annual Statement of Accounts. In exceptional circumstances, audit reports will be issued directly to the Monitoring Officer (Strategic Director, Legal and Corporate Services) or the Chief Executive and reported to the Audit Committee. Access The Internal Audit Service will have authority to: Enter at all reasonable times any Council premises or land; Have access to all records, documents, correspondence and any other sources of relevant information relating to any financial and other transactions of the Council; Require such explanations believed to be necessary in the course of an audit, concerning any matter; and Require any person to produce cash, stores or any other Council property.

Such rights of access extend beyond the Council to other bodies, including: Organisations to whom the Council has given grants; Organisations with whom the Council contracts; and Partner organisations in any schemes for which the Council has responsibility as accountable body. This will be affected by incorporating these audit requirements into appropriate agreements with external bodies. Independence The main determinant of the effectiveness of the Internal Audit Service is that it is seen to be independent. To ensure this, the Internal Audit Service will operate in a framework that allows direct reporting to the Strategic Director, Finance and ICT and unrestricted access to all senior management, including the Chief Executive, Monitoring Officer and Councillors, including the Chair of the Audit Committee. The Chief Internal Auditor reports on an administrative basis to the Head of Financial Management. Every effort will be made to preserve objectivity by ensuring that all Internal Audit Service employees are free from any conflicts of interest and do not undertake any non-audit duties other than those for the exigencies of the service. Audit Resources and Training Through an assessment of the following: The Councils priorities; The level of risk, taking into account such areas as materiality, complexity, potential for fraud and sensitivity Consultation with senior managers and the Audit Commission; Changes in legislation; The scope of planned external audit work; and The implications of external inspection reports. The Chief Internal Auditor assesses resource requirements and draws up the Audit Plan. The staffing structure of Internal Audit comprises a mix of professional accountant, accounting technician and trainee posts with a mix of specialisms to reflect the varied workload of the service. As far as practical, the Internal Audit Service will not participate in the day-to-day operation of any systems of internal control.

Employees within the Internal Audit Service will be expected to contribute to the general management and conduct of the Councils business through membership of working groups and participation of ad hoc exercises. At the request of the Strategic Director, Finance and ICT, appropriate specialists from other services should be made available to participate in any audit or review requiring specialist knowledge. The Chief Internal Auditor will carry out a continuous review of the development and training needs of all audit personnel and will arrange in-service training covering both internal and external courses. Fraud and Consultancy Work Managing the risk of fraud and corruption is the responsibility of management and Internal Audit does not have responsibility for the prevention and detection of fraud. Internal Auditors will however be alert to the risk and exposures that can allow fraud and will investigate such frauds and irregularities that are identified within the Council. Audit procedures alone, even when performed with due professional care, cannot guarantee that fraud and corruption will be detected. The Chief Internal Auditor has provision in the Audit Plan to allow for the investigation of fraud and Councils Financial Regulations and the Fraud and Corruption Policy require him to be notified of all suspected or detected fraud, corruption or impropriety. The Chief Internal Auditor will assess the potential impact of cases of fraud on the internal control environment. Where resources and skills allow within the Audit Plan, Internal Audit will provide independent and objective services, such as consultancy at the request of management. Consultancy work will be assessed by the Chief Internal Auditor for its impact on the internal control environment. Related Documents This document is one of a series that, together, constitute policies of the Council in relation to anti-fraud and corruption. The other documents are: Constitution Confidential Reporting Code. Fraud and Corruption Policy. Code of Conduct