Contents
Report 5 of the 19 Jun 03 meeting of the Audit Panel and summarises the work of the Audit Panel for the year 2002/03.
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Annual report of the Audit Panel
Report: 5
Date: 19 June 2003
By: Treasurer
Summary
The report summarises the work of the Audit Panel for the year 2002/03.
A. Recommendations
- Members are asked to agree the report as representing the Panel’s work over the last year for submission to the Authority.
B. Supporting information
Introduction
1. The Authority has decided that each committee should produce an annual report on its activities. The reports are intended to give a general indication of member performance. They will also provide material for incorporation into the Authority’s published annual report.
Meetings and membership
2. The Audit Panel has met on four occasions during the year at appropriate points in the annual audit cycle.
3. The Panel comprises five members. Sir John Quinton has been Chair of the Panel for the year. Other members have been Eric Ollerenshaw (Deputy Chair), Jennette Arnold and Rachel Whittaker (from 6 September 2002) and there was one vacancy throughout the year. New members have been offered induction training with internal audit.
Responsibilities
4. The Panel fulfils the Authority’s duties in relation to internal and external audit. It has general oversight of the effectiveness of the control systems in operation. The Panel also reviews the Authority’s draft accounts before they are finally approved by the MPA.
Accounts
5. The Panel reviewed the draft final accounts for 2001/02 and agreed drafting amendments. The Panel recommended their approval by the full Authority.
External audit
6. The Panel received the external auditor’s annual audit letter on conclusion of the 2001/02 audit. The external auditor had again qualified the accounts for inadequate provisions for pension and third party liabilities but acknowledged that significant progress had been made in addressing this issue. The external auditor considered that the Authority’s financial position remained ‘fragile’ and that the systems of internal financial control required further improvement. The Panel subsequently received an action plan to address specific points made in the audit letter.
7. External audit reports on specific subjects are generally considered by the committee with the appropriate responsibility. Two reviews have been reported to the Audit Panel, the first on the MPS internal consultancy function, and the second on corporate governance including internal audit.
8. The Panel has agreed the external audit programme and fees for the two audit years 2002/04. In the view of the external auditor the MPA/MPS remains a high risk audit. This is reflected in the level of fee at £1.068 million for the two year period. However he has agreed to the retention of £50,000 of the fee subject to further discussion as to whether the risk level falls during the period.
9. The Panel has responded to consultation from the Audit Commission agreeing the extension of the current external audit arrangements, with the Audit Commission (formerly District Audit) supported by KPMG, until 2004 and has commented on potential arrangements thereafter.
Internal audit
10. The Panel has received progress reports on the internal audit programme for 2002/03 and has considered the Director of Internal Audit’s annual report. The annual report shows a marginal improvement in the overall control assessment but significant progress in areas which have previously been the subject of internal audit review.
11. The Panel has reviewed the internal audit strategy for the next three to five years, which demonstrates how internal audit supports the overall aims and objectives of the MPA and MPS while maintaining its professional standards. The Panel has also approved the internal audit plan for 2003/04.
12. The Panel has been concerned at the inadequate response to some internal audit reports and recommendations. It has focussed particularly on the acceptance and speed of implementation of high risk recommendations. The Chair has expressed the Panel’s concerns in correspondence with the Commissioner. Assurances of improvement have been given and the Director of Internal Audit now has better access to MPS senior management. MPS managers have been invited to attend the Panel to account for delays in taking forward internal audit recommendations.
Anti fraud and corruption strategy
13. The Panel has reviewed and endorsed an anti fraud and corruption strategy comprising a policy statement, code of practice and fraud response plan. On the Panel’s recommendation this was formally adopted by the Authority in January 2003.
Next year
14. In the forthcoming year the Panel will continue to oversee the internal and external audit programmes. Key developments which the Panel will be anticipating are:
- The potential removal of the qualification of the Authority’s accounts
- Evidence of improvement in financial management as assessed by the external auditor and a consequent reduction in his risk rating of the audit
- Continuing improvement in the Director of Internal Audit’s assessment of the adequacy of internal control
- Improved responsiveness to internal audit reports and recommendations.
C. Equality and diversity implications
The Panel addresses equalities aspects if and when they arise in relation to its business.
D. Financial implications
The cost of the Panel’s activities are met within the MPA’s directly managed budget.
F. Contact details
Report author: Peter Martin, Treasurer, MPA.
For information contact:
MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18
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