Audit & Risk Committee
Terms of Reference
It is a condition of funding and the Post 16 Audit Code of Practice that Richmond upon Thames College Corporation establish an Audit Committee.
The ACOP states that the Audit Committee must advise the Board on the adequacy and effectiveness of the Board’s assurance framework. In addition, the Audit Committee advises and supports the Board in explaining, in its annual accounts, the measures taken to ensure it has fulfilled its statutory and regulatory responsibilities.
The UK Corporate Governance Code (the Code) states that:
‘The board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems’
The Richmond upon Thames Corporation Board meets these obligations through the establishment of the Audit and Risk Committee under these Terms of Reference.
- External Auditor – Is the appointed Financial Statements and Regulatory Auditor
- Internal Auditor – is the appointed Internal Audit Services Auditor
- Funding auditor – is the Funding agency or an auditor appointed by the funding agency to audit the funding provided to Richmond upon Thames College.
The Audit and Risk Committee is established by the Board of Richmond upon Thames College. The Committee receives delegated authority from the Board to the Committee as set out in these Terms of Reference. The purpose of the Committee is to support the Board in monitoring the adequacy of the organisation’s corporate governance and control systems through:
- offering objective advice on issues concerning the risk, control and governance of the College and assurances provided by internal and external audit and other processes
- challenging constructively the executive in order to ensure the best possible decisions and achieve value for money in the light of the available evidence.
1. Membership and Operation
1.1 The Committee shall comprise of a minimum membership of three, a majority of who must be governors. The Committee should include individuals with an appropriate mix of skills and experience to allow the Committee to discharge its duties effectively; collectively, members of the Committee should have recent, relevant experience in risk management, finance and assurance.
1.2 The internal auditors (where appointed) shall be entitled to attend and speak at all meetings of the Committee, but not to vote, as shall the external auditor and funding auditor (where appointed) where business relevant to them is being discussed. Senior management should also be invited to attend meetings of the Committee, particularly where their area of responsibility is under discussion, and shall be entitled to attend and speak at such meetings but not to vote.
1.3 The Committee may invite the Corporation’s advisers or other third parties to attend meetings of the Committee as appropriate. Such persons shall not have a vote but shall be entitled to speak at the meeting.
1.4 Members of staff may sit on the Committee provided they do not have significant executive, management, financial or budgetary responsibilities, subject to clause 1.5 below.
1.5 In order to maximise the Committee’s independence and objectivity, the Committee must not adopt an executive role and the following people shall not be eligible to sit on the Committee:
1.5.1 Those with executive responsibilities at senior level including the CEO/Principal; Director of Finance; Head of Finance or any other member of staff from the College Leadership Team.
1.5.2 Members of a Finance & Resources Committee (should it exist) of the Corporation or equivalent;
1.5.3 The Chair of the Corporation;
1.5.4 Governors who have significant interests in Richmond upon Thames College;
1.5.5 Any other person the Committee believes is not sufficiently independent to enable them to undertake the duties and responsibilities delegated to the Committee by the Board.
1.6 The members and Chair of the Committee will be appointed by the Corporation Board.
1.7 The quorum for the meetings of the Committee shall be 3.
1.8 The Head of Governance shall act as Clerk to the Committee.
1.9 The Committee will meet at least three times per year. The internal, external or funding auditor may request a meeting of the Committee if they consider that one is necessary and the Committee will endeavour to comply with such request.
1.10 The Committee shall be entitled, whenever it is satisfied that it is appropriate to do so, to go into confidential session and (subject to the rules as to quoracy set out above) to exclude any, or all, participants and observers, except the Head of Governance. The committee will meet with the internal, external and Funding Auditors without management present prior to/immediately following each Committee meeting that they attend.
1.11 The Committee has authority to investigate any activity it deems to be within its terms of reference. The Committee shall be granted rights of access to obtain all the information and explanations it considers necessary, from whatever source, to fulfil its remit. This may include access to members of the staff and governors of the Corporation, and consultation with the internal, external and funding auditors directly.
2. Notice of Meetings
2.1 Meetings of the Committee shall be convened by the Head of Governance at the request of any of its members if he or she considers a meeting necessary.
2.2 Unless otherwise agreed, notice of each meeting confirming the venue, time and date of the meeting, together with an agenda of items to be discussed, shall be forwarded to each member of the Committee, all other non-executive directors and any other person required to attend, no later than five working days before the date of the meeting.
3. Minutes of Meetings
3.1 The Head of Governance shall minute the proceedings of all meetings of the Committee, including recording the names of those present and in attendance.
3.2 Draft minutes of Committee meetings shall be circulated promptly to all members of the Committee. Once approved, the minutes should be circulated to all other members of the Board unless it would be inappropriate to do so in the opinion of the Chair of the Audit and Risk Committee.
3.3 Final signed copies of the minutes of the meetings of the Audit and Risk Committee should be maintained for the College’s records, in hard and soft copy where possible.
4. Duties and Responsibilities
4.1 To assess and provide the Board with an opinion on the adequacy and effectiveness of the College’s audit arrangements; framework of governance; risk management and control; processes for the effective and efficient use of resources; the solvency of the College paying due regard to the FE Insolvency Act; and the safeguarding of its assets;
4.2 To advise the Board on the appointment, reappointment, dismissal and remuneration of the internal, external and funding auditors and other assurance providers (where appointed), and establish that all such assurance providers adhere to relevant professional standards;
4.3 Advise the Board on the scope and objectives of the work of the internal, external and funding auditors (where appointed);
4.4 To ensure effective co-ordination between the internal, external and funding auditors (where appointed) including whether and the extent to which they are able to rely on each other’s work;
4.5 To establish, in conjunction with Richmond upon Thames management, relevant annual performance measures and indicators, and to monitor the effectiveness of the internal, external and funding auditors (where appointed) through these measures and indicators and to decide, based on this review, whether a competition for price and quality of the assurance services is appropriate;
4.6 To inform the Board of any additional services provided by the internal, external or funding auditors, or other assurance providers.
4.7 The Audit committee must notify ESFA immediately of the resignation of auditors, or in the rare circumstance where the corporation removes the auditors, before the expiry of their term of office. Where auditors have resigned, other than at the end of their agreed term, the audit committee must copy to ESFA an explanation from the auditors. Where the corporation elects to remove the auditors, the audit committee must notify ESFA of these reasons. A change in auditor at the expiry of their agreed term of office does not require notification to the ESFA by the Corporation.
4.8 To consider and advise the Board on the audit strategy and annual internal audit plans for the internal auditors;
4.9 To advise the Corporation on internal audit assignment reports and annual reports and on control issues included in the management letters of the external auditor (including their work on regularity) and the funding auditor, and management’s responses to these;
4.10 Although Corporations are not required to commission internal auditors, having an internal audit service in place, which may be supplemented by specialists in particular areas, is likely to assist audit committees in ensuring they have effectively discharged the requirements above.
4.11 To monitor, within agreed timescales, the implementation of recommendations arising from the management letters and reports submitted any providers of audit and assurance services to the College;
4.12 To consider and advise the Corporation on relevant reports by the National Audit Office (NAO), the Education Skills Funding Agency (ESFA), Office for Students (OfS), other funding bodies and where appropriate, management’s response to these;
4.13 To recommend the annual financial statements to the Corporation for approval. External auditors will present their findings annually at a meeting of the board of governors, which may be a joint meeting with the audit committee.
4.14 The Audit committee must ensure that there is a policy in place for regular retendering of the external audit service. The audit committee should consider the quality of the audit service required as well as the price. Corporations should ensure that the external audit contract is put out to tender at least every 5 years, though for the avoidance of doubt this does not necessarily require a different firm of auditors to be appointed.
4.15 To advise the Corporation, the Executive and the Directors and employees of any subsidiary companies on audit matters relating to the subsidiary companies, as required.
Annual Report and policies
4.16 To produce an Annual Report for the Corporation. The Annual Report must summarise the Committee’s activities relating to the financial year under review, including any significant issues arising up to the date of preparation of the report, and any significant matters of internal control included in the management letters and reports from auditors or other assurance providers. It must include the Committee’s view of its own effectiveness and how it has fulfilled its terms of reference. The report must include the Committee’s opinion on the adequacy and effectiveness of the College’s audit arrangements; framework of governance; risk management and control; processes for the effective and efficient use of resources; the solvency of the College paying due regard to the FE Insolvency Act; and the safeguarding of the College’s assets. The Annual Report must be submitted to the Corporation before the Statement of Corporate Governance and Internal Control in the accounts is signed. A copy of the Committee’s Annual Report must be submitted to the relevant funding body with the annual accounts.
4.17 oversee the Corporation’s policies on and processes around fraud, irregularity, impropriety and whistleblowing, and ensure:
• the proper, proportionate and independent investigation of all allegations and instances of fraud and irregularity
• that investigation outcomes are reported to the audit committee
• that the external auditor (and internal auditor if applicable) are informed of investigation outcomes and other matters of fraud, irregularity and impropriety, and that appropriate follow-up action has been planned/actioned
• that all significant cases of fraud or suspected fraud, theft, bribery, corruption, irregularity, major weakness or breakdown in the accounting or other control framework are reported to the ESFA, and other relevant funding authority, as soon as possible
• risks around fraud have been identified and controls put in place to mitigate them.
4.18 To advise the Corporation on the College’s overall risk appetite, tolerance and strategy, taking account of the current and prospective macroeconomic and financial environment and drawing on financial stability assessments such as those published by relevant industry and regulatory authorities.
4.19 Oversee and advise the Corporation on the current risk exposures of the College and future risk strategy. The Committee must review the College Risk Register on a termly basis and the Risk Management Policy & Procedures annually.
4.20 Maintain oversight of the College’s overall risk assessment processes that inform the Corporation’s decision making, ensuring both qualitative and quantitative metrics are used;
4.20.1 regularly review and approve the methodology adopted
4.20.2 regularly review and approve the parameters used for metrics;
4.20.3 set standards for the accurate and timely monitoring of large exposures and certain risk types of critical importance.
4.20.4 review the College’s capability to identify and manage new risk types and new risks.
4.20.5 before a decision to proceed on proposed strategic transactions, including acquisitions or disposals, is taken by the Corporation, advise the Board on due diligence appraisal with a particular focus on risk aspects and implications for the risk appetite and tolerance of the College, and taking independent external advice where appropriate and available;
4.20.6 review reports on any material breaches of risk limits or break down in internal controls and the adequacy of proposed action;
4.20.7 keep under review the effectiveness of the College’s internal financial controls and internal controls and risk management systems and review and approve the statements to be included in the annual report concerning internal controls and risk management.
4.21 Provide qualitative and quantitative advice to the Search Governance & Remuneration Committee on risk weightings to be applied to performance objectives incorporated in executive remuneration.
4.22 Review the adequacy and security of the College’s arrangements for its employees and contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action.
4.23 Review the College’s procedures for prevention and detection of fraud.
4.24 Review the College’s procedures for the prevention of bribery.
4.25 Consider and approve the arrangement for risk management within the College and ensure there are adequate resources and appropriate access to information to enable effective risk management in accordance with the relevant professional standards.
5.1 Consider the development of members and put in place appropriate training to ensure their skills and knowledge are up to date. Where the audit committee identifies a gap in its existing skillset, training and development should be provided to address this in the first instance.
5.2 The Committee shall arrange for periodic reviews of its own performance including periodic self-assessment and external independent review.
5.3 The Committee shall review annually its terms of reference to ensure that it is operating at maximum effectiveness, recommending any changes it considers necessary to the Board for approval.
Approved by Audit and Risk Committee 28 September 2021
Approved by the Board 15 November 2021