The role of Internal Audit in the charities sector

The role of Internal Audit in helping boards with their governance responsibilities has been growing in importance and influence in recent years in Ireland and internationally. At a time of global economic uncertainty and heightened geo-political sensitivities, charities and NGOs as well as major corporates and public sector organisations have increasingly been relying on their Internal Audit functions to help identify risks, improve the management of manage control systems and underpin operational performance.

Internal Audit’s remit is a wide-ranging one: it provides Boards with assurance on an organisation’s risk management effectiveness, internal controls and governance processes. In essence that means Internal Auditors help organisations to manage the wide range of risks facing them before they become a problem, including for example: corruption and fraud risks; security risks; health and safety risks; and risks related to non-compliance with regulation.

For many charities and NGOs, particularly those operating in challenging or unstable environments, the importance of this is clear. So how can boards make sure that internal audit is able to do its job properly?

Internal Audit occupies a unique position within organisations. In order to provide effective oversight, it must be at the heart of the organisation, so that it can fully understand what’s really happening internally.

In practice this means working both alongside an organisation’s key operation teams, as well as with any central compliance functions, to ensure that strengths and weaknesses are identified, assess whether internal controls are fit for purpose and functioning correctly and ensure that appropriate strategies to monitor and mitigate risk are developed.
However, at the same time, it must also remain impartial and detached from the management hierarchy, so that its opinions are independently and objectively formed and communicated.
Internal Audit’s primary duty is to act as eyes and ears for the Board, to which it should be accountable, usually via the audit committee. In providing “assurance” to the Board, Internal Audits’ job is to exercise critical analysis to tell it like it is, not how the organisation would like it to be. Boards need to know that their Internal Audit team feels empowered to ask tough questions and challenge assumptions.

With this in mind, it is critical that Heads of Internal Audit have direct and open communication lines with Board members so that any concerns about the management of risk within the organisation can be raised, evaluated and dealt with. So it is encouraging to see that in Ireland it is becoming the norm for HIAs to report to the Chair of the Audit Committee, rather than to an executive director, typically the Chief Financial Officer, as was once common. More than two-thirds (68%) are now doing so, according to our latest annual Governance and Risk Survey.

Internal Audit’s role as a vital check and balance to an organisation’s operations and governance has arguably never been greater. Charities and NGOs today face a wide range of strategic and operational risks. Failure to anticipate and manage these correctly could be hugely damaging – not least to the good reputation on which all such organisations rely. The unique perspective, the critical insight and oversight that Internal Audit provides, are vital weapons in a Board’s armoury to defend against risk and help their organisations get to achieve their goals.

Directors’ responsibilities: Books of Account and Filing Requirements

Company Directors have a number of responsibilities in relation to maintaining books of account and filing certain documents with the registrar of companies. Below are excerpts from the ODCE’s booklet on the principle duties and powers of Company Directors in relation to maintaining books of account and main filing responsibilities which are worth taking note of:

Company Directors have a duty to Maintain Proper Books of Account:

Proper books of account should:

  • Correctly record and explain the transactions of the company;
  • At any time, enable the financial position of the company to be determined with reasonable accuracy;
  • Enable the company’s directors to ensure that the balance sheet and profit and loss account comply with the Companies Acts
  • Enable the accounts to be readily and properly audited

 

Company Directors also a responsibility for filing certain document with the registrar of companies:

  • Annual return
  • Change of registered office
  • Notice of increase in nominal (authorised) capital
  • Change of director and/or secretary or of their particulars
  • Declaration that a person has ceased to be a director or secretary
  • Notice that a person holding the office of director or secretary has died
  • Nomination of a new annual return date
  • Notification of the creation of a mortgage or charge
  • Memorandum of satisfaction of charge
  • Ordinary resolution
  • Special resolution

Click here for the full ODCE booklet.

Business leaders more likely to become trustees after volunteering

A survey conducted by a UK based charity has found that business leaders who volunteer are more like to become trustees after.

The report which was compiled by Pilotlight looks at what motivates the business community to volunteer in the charity sector and showed that 87% of the 134 respondents were more interested in becoming charity trustees after volunteering. Furthermore, two-thirds said that volunteering had increased their desire to donate.

Commenting on the findings, CEO of Pilotlight Gillian Murray said “85 per cent of business leaders in our survey said they had improved their coaching skills after working with charities and have a much better understanding of the charity sector as well.

The survey results demonstrate that a carefully managed approach to skills-sharing allows the time–poor, skills rich professional to engage with charities in an effective and meaningful way.”

Source: Civil Society

Don’t miss our CEO & Chairs Training on Dec 1st

Our annual CEO and Chairs Training day is taking place on the 1st of December 2014 in Dublin 2. This training fills up quickly so please be sure to book early to avoid disappointment. For further information of to book a place, please contact Eva Gurn at eva@boardmatchireland.ie or call the office on 01-671 5005.

The performance of any not-for-profit organisation is underpinned by the relationship that exists between the CEO and Chair. The training explores this critical Management/Governance interface, and is relevant to both seasoned practitioners and those just stepping up to the top job.

The full-day training course is delivered by Governance expert Dorothy Dalton. Dorothy is editor of the UK-based Governance magazine and a prominent figure in the area of good governance training. Throughout her career, Dorothy has advised several leading national charities on their governance structures and has published a number of short books on the area of good governance in the charity sector. Click here to visit her website.

 

Price: 325 euro per organisation which includes lunch.

Location: Arthur Cox, Earlsfort Terrace Dublin 2.

Time: 9:30am to 4:15pm

 

Main topics will include:

  • Roles and expectations of Chairs and trustees
  • Ensuring trustees fulfil their governance role
  • Refreshing the Board and finding new trustees
  • Case study of where things went wrong
  • Developing a learning organisation

 

CEO and Chair Training Timetable

9.30am Registration and coffee

10.00am Introductions

Roles and expectations of chairs and trustees

  • the chair’s leadership role
  • what the chair cannot do – limitations on the chair’s role
  • respecting the collective authority and responsibility of trustees

Ensuring trustees fulfil their governance role:

  • trustees’ role and the chair’s relationship with trustees
  • the three key strands of governance: corporate/ fiduciary; strategic and impact

11.30am Coffee break

11.45am Refreshing the board and finding new trustees

  • providing support to and ensuring new trustees become effective as quickly as possible
  • ensuring trustees address the right issues: why it is important to get the right agendas
  • making informed decisions: ensuring the board gets the information it needs for good governance
  • chair/CEO relationship including: ensuring trustees can hold the chief executive to account without meddling in management

1.15pm Lunch

2.00pm Case study of where things went wrong – tackling difficult/sensitive situations and learning from others’ mistakes.

Delegates split into groups to decide how best to lead the charity in the case study out of its difficulties

3.15pm Tea and coffee

3.30pm Developing a learning organisation – why reviewing performance is important even at board level:

  • appraising the chief executive’s performance
  • reflecting on the chair’s performance
  • the board collectively reflecting on its performance

4.15pm End

Governance Code Workshops

Wexford
Wednesday November 5th 3-5pm in the Raheen Family Resource Centre, Clonroche.
Please contact Lynda Stacey at rfcmanager@gmail.comfor booking info.

Dublin
Wednesday November 12th 6-8 pm (registration from 5.30pm) in Clogher Road Sports Centre, Dublin 12. Organised by the Rathmines-Pembroke Community Partnership.
Please contact Richard Costello, richard@rpcp.ie for further information.

Limerick
Friday November 14th 9am – 2pm as part of a wider agenda seminar organised by the Limerick Volunteer Centre in the South Court Hotel.
Please contact Paul Moriarity at paul@volunteerlimerick.ie for further information.

Monaghan
Tuesday November 18th at 7 pm in Corcaghan Community Centre (between Monaghan and Cootehill) Organised by the Monaghan Community Forum.
Please contact: Dara Mac Gabhann dmacghabhainn@monaghancoco.ie for further information.